Chapter 3 Ppt Slides Corp Soc Resp

7/28/2019 Chapter 3 Ppt Slides Corp Soc Resp

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Copyright 2009 Pearson Education, Inc. publishing as Prentice Hall 3-1

Chapter 3

Stakeholders and Corporate

Social Responsibility

Understanding Business Ethics

Stanwick and Stanwick1st Edition


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Ethical Thoughts

A business that makes nothing but money

is a poor kind of business.

Henry Ford, founder of Ford Motor Company


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When is Fair Trade Not Fair Trade?

Fair trade log represents that farmers have

received a fair wage for their work through

the higher prices that were charged for the

product

Fair Trade products are available at 16

national retailers, including Sams Club,

Kroger, Wegmans, Whole Foods Market(www.transfairusaa.org)


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When is Fair Trade Not Fair Trade?

Underlying questions:

Where does the

additional money for

every pound of coffeego?

What about the fixed

rates for pounds of

coffee?

Costa Coffee took

advantage of the Fair

Trade image by

adding 18 cents toevery cup of coffee,

even though fair trade

coffee only cost them

between one and twocents extra per cup


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Stakeholder Theory Development

Berle

all the powers given to a corporation are to be

used to create benefits to the interests of the

shareholders

Argued that managers within a corporation

should consider themselves trustees and

guardians of the investments made by theshareholders


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Dodd:

Not only should the interests of the shareholders be

considered, but corporations also need to recognize

their obligations to the community, to their workers,and to the consumers

Argued that corporations are allowed to become legal

entities because they serve a purpose to the

community instead of just providing opportunities for

financial gain by its owners.


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Friedman

The Social Responsibility of Business is to Increase

its Profits

Argued that in a free market system in which peopleare allowed to own property, the executives of the

company need to be considered as the employees of

the shareholders

Argued that the only social responsibility that amanager has is to ensure that the companys

resources are optimized to enhance the level of

profitability of the firm


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Freeman

Believed a stakeholder was any individual or

group that can impact or be impacted by the

actions of the firm

Definition encompasses any individual or

group that has a vested interest in the

operations of the firm


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Stakeholders

Any group that has a vested interest in the

operations of the firm

Include: employees, suppliers, stockholders,

customers, the government, local

communities, and society as a whole


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Moral Managers

Defines a managers response to

stakeholders three approaches

Immoral

not only does not care how his/her decisions

impact the stakeholders, but the actions are

actively counter to what is the right and ethical

thing to do

Focus only on the goals of the of the company

Considers laws as constants or barriers that are

ignored in the company


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Moral Managers



Amoral

Manager who is considered ethically neutral

Ethical considerations are not contemplated in the

decision making process


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Moral Managers



Moral

Those managers who understand the relevance of

considering ethical issues when they are making

decisions


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Lessons to be learned from

Stakeholder theory from literature1. Corporations are facing increasing pressures

to respond to their stakeholders

2. Corporations have a legal basis for respondingto a wide range of stakeholders

3. Corporations are being led by executives nolonger guided by the principles of theirprofessions

4. Corporations respond to powerful stakeholders

with legitimate, urgent claims5. Corporations can improve the bottom line by

responding to stakeholder concerns


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Identifying Stakeholder

Accountability

Power: the extent to which the organization can

influence or impose its will on the stakeholder

group

Legitimacy: the assumption that the actions ofthe corporation are desirable, proper or

appropriate within the limits of the corporation

Urgency: the degree to which the issues raised

by the stakeholder must be dealt with in a time

sensitive manner


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Stakeholder Impact on

Organization

1. Stakeholders establish expectations (explicit orimplicit) about corporate performance

2. Stakeholders experience the effects of

corporate behaviors3. Stakeholders evaluate the effects of corporatebehaviors on their interests or reconcile theeffects of those behaviors with their

expectations.4. Stakeholders act upon their interests,

expectations, experiences, and evaluations.


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2007 GE Citizenship Report

Our engagement efforts seek to communicatewith a diverse set of stakeholders on mattersthat affect global business. Every year, GE hostshundreds of investor meetings, multi-stakeholder

dialogues and roundtable discussions to solicitfeedback and share insights with non-governmental organizations, industry andfinancial analysts, community leaders,customers, suppliers and employees.

http://www.ge.com/company/citizenship/stakeholder/index.html


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Ford Motor Company

Our stakeholders those who affect Ford or areaffected by us are numerous. A closer look,however, shows that we have sustained,interdependent relationships with several distinct

categories of stakeholders: our employees,customers, dealers, suppliers, investors andcommunities. Also important is our relationshipto "society," including government,nongovernmental organizations (NGOs) and

academia. http://www.ford.com/aboutford/microsites/sustainabilit

y-report-2006-07/relContextStakeholders.htm


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Stakeholder Communications

Vision and mission statements

Open houses

Public service announcements Public newsletters

Town meetings


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Triple Bottom Line Reporting

Expands traditional financial reporting to

include environmental and social reporting


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Stakeholders: Employees

Firm wants to attract, select and retain thebest qualified employees

Corporate culture can provide an

advantage in this selection process Research supports that the more

dissatisfied the employee, the more likely

the employee will engage in unethicalbehavior

See page 41 in text for inconsistentmessages sent to employees


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Stakeholders: Employees

Employees, no matter what rank, should beempowered to do the right thing and become anethical leader.

Treatment of employees considered in severalgovernment regulations: Equal Pay Act of 1963

Title VII of the Civil Rights Act of 1964

Age Discrimination in Employment Act of 1967 Americans with Disabilities Act of 1990

Occupational Safety and Health Act of 1970


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Stakeholders: Suppliers

Many companies want their suppliers todemonstrate the same commitment to ethicalissues that they themselves do.

Example: Intels Suppler Ethics Expectations: The supplier must be in strict compliance with the law The supplier must have respect for competition

The supplier must not have any actual or perceivedconflicts of interest with any other party

Outsourcing assigning a function or task thatwas previously done within a company to anexternal third party


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Stakeholders: Customers

Critical areas in which ethical behavior

must be the norm for customers to support

the business

The manufacturing process

Sales and quotes

Distribution

Customer service


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Stakeholders: Government

Derives from compliance issues

Government has the authority to punish

the firm through fines and possible prison

sentences for employees


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Stakeholders: Local Community

and Society

Focuses on quality of life issues


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Corporate Social Responsibility

The obligation companies have to develop

and implement courses of action that aid

in social issues that impact society

Legal responsibility, fiduciary duty, legitimacy,

and charitable contributions


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Components of CSR

Economic Responsibilities

Based on the underlying foundation of why a firm has

been creates, which is to develop economic value

Firm has a responsibility to use the resourcesavailable to produce goods and services for society

Examples: maximizing earnings per share,

generating a high and consistent level of profitability,

establishing and maintaining a strong competitive

position, operating the firm at a high efficiency level


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Components of CSR

Legal Responsibilities

The laws and regulations that all firms are

expected to abide by as they perform their

daily functions. Examples: operating consistent with

government and legal expectations;

displaying complete compliance with all

regulations


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Components of CSR

Ethical Responsibilities

Change over time because they are based on

expectations of society

Examples: meeting expectations of bothsocial and ethical norms; ability to adapt to

new or evolving ethical and moral norms;

being a good corporate citizen


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Components of CSR

Discretionary Responsibilities

Those responsibilities in which society does not have

a clear message to present to businesses as to what

their courses of action should be

Left in the hands of managers to make the proper

judgment

Examples: giving to charitable organizations;

providing drug treatment programs; providing day

care centers

These are not considered unethical if they do not

participate in these discretionary responsibilities


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Strategic Response to Social

Issues

Varies from firm to firm

Constant debate about who thecorporation should be responsible to and

what the corporation is responsible for Challenge is determining what extent of

responsibility should be to each of

stakeholder groups Feelings of trust and confidence must beestablished with stakeholder groups


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Ten Commandments of Social

Responsibility1. Thou shalt be proactive in taking action to correct

problems before they impact the company

2. Thou shalt seek input from all impacted stakeholdersin any problem that needs to be addressed

3. Thou shalt use industry standards as a benchmark andvoluntarily internally regulate our corporate behavior

4. Thou shalt admit to the public when mistakes havetaken place

5. Thou shalt be active in supporting community socialprograms


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Ten Commandments of Social

Responsibility

6. Thou shalt be active in ensuring environmentalsustainability in the actions of the company

7. Thou shalt be aware of any changes that occurin the corporate social environment

8. Thou shalt establish and maintain a formalcorporate code of conduct

9. Thou shalt be committed to publicly supporting

social causes10. Thou shalt be profitable to financially support

the companys social responsibility agenda


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Benefits from integrating CSR into

Operations

Better risk and crisis management

Good relations with stakeholders and interested

communities

Increased worker commitment

Increased productivity

Reduced operating costs

Enhanced brand value and reputation Long term sustainability for the company and

society


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The Role of Human Rights

Four positive reasons for promoting humanrights:

1. Respecting human rights enhances workerproductivity and management creativity it raises

enterprise profitability2. Promoting rights opens markets

3. Promoting respect for human rights goes hand inhand with development of rule law

4. Promoting respect for human rights is good for acompanys image, both at home and in the hostcountry


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Social Accountability 8000

Certification

Provides a way for companies to ensure thatthey are offering a humane workplace Child labor

Forced labor

Health and safety

Freedom of association and right to collectivebargaining

Discrimination

Discipline

Working hours

Compensation

Management systems


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Questions for Thought

Evaluate the Johnson & Johnson credo byresearching the Tylenol Scare.

When examining the working conditions in

countries other than the United States,what ethically should be done to helpchange these conditions?

When reviewing the notion of humanrights, why would this be considered anethical issue? Explain.


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