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CHAPTER 1

Social Responsibility FrameworkSocial Responsibility Framework

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Social Responsibility Defined

• Social responsibility– The adoption by a business of a strategic focus

for fulfilling the economic, legal, ethical and philanthropic responsibilities expected of it by its stakeholders

• Businesses should look beyond their self-interests and recognize that they belong to a larger group that expects responsible participation.

What do you believe organizations should be responsible for

accomplishing?

Social Responsibility Defined (cont.)

• Applies to all types of businesses– Small businesses– Large businesses– Sole proprietorships – Multinational corporations

Social Responsibility Defined (cont.)

• Fulfills societal expectations – Provides a return on investment for owners – Obeys the law and regulatory agencies – Acts in a just, fair, and correct manner – Promotes human welfare and good will

Pyramid of Social Responsibility

Social Responsibility Defined (cont.)

• Economic– Maintain profitability

• Legal– Abide by legal and regulatory influence

• Ethical– Ensure just and fair behavior in the workplace

• Philanthropic– Promote human welfare and goodwill

CHAPTER 2

Strategic Management of Stakeholder RelationshipsStrategic Management of Stakeholder Relationships

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Stakeholders

• Those constituents who have a stake in, or claim on, some aspect of a company’s products, operations, markets, industry, and outcomes

• Companies that operate with a stakeholder orientation recognize that business and society are interpenetrating systems, in that each affects and is affected by the other.

Primary Stakeholders

• Groups fundamental to a company’s operation and survival– Customers– Employees– Shareholders– Investors– Suppliers– Government– Community

• Balancing the needs and perspectives of primary stakeholders is a strategic imperative.

Secondary Stakeholders

• Groups that may influence and/or be affected by the company, but are not engaged in economic exchanges with the firm:– Media– Special interest groups– General public

• These groups are not fundamental to an organization’s daily survival.

• They can place significant pressure on a business and therefore, cannot be ignored.

Development ofStakeholder Relationships• Relationships are founded on principles of:

– Trust– Commitment– Communication

• They are also associated with a degree of:– Time– Interaction– Shared expectations

• Companies are searching for ways to develop long-term and collaborative relationships with their customers and business partners.

Social Capital

• An asset, which resides in relationships, that is characterized by mutual goals and trust

• Facilitates smooth internal and external transactions and processes

The Reactive-Defensive-Accommodative-Proactive Scale

CHAPTER 3

Corporate GovernanceCorporate Governance

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Corporate Governance

• Corporate governance is the formal systemof oversight, accountability, and control for organizational decisions and resources.

• Major issues:– Shareholder rights– Executive compensation– Organizational ethics programs– Board composition and structure– Auditing, control and risk management– CEO selection and executive succession plans

Models of Corporate Governance

• Shareholder model– Maximizes wealth for investors and owners – Develops and improves the formal system of

performance accountability between management and the firm’s shareholders

– Makes decisions based on what is ultimately best for investors

– Focuses on aligning investor and management interests

Models of Corporate Governance (cont.)

• Stakeholder model– Considers the interests of employees,

suppliers, government agencies, communities, and other groups with which the firm interacts

– Assumes a collaborative and relationalapproach to business

– Focuses on continuous improvement, accountability, and engagement with internal and external constituents

Issues in Corporate Governance Systems

• Boards of directors– Independence– Quality and experience– Performance

• Shareholders and investors– Shareholder activism– Social investing– Investor confidence

Issues in Corporate Governance Systems (cont.)

• Internal control and risk management– Internal and external audits– Control systems– Risk management

• Financial misconduct • Executive compensation

CHAPTER 4

Legal, Regulatory, and Political IssuesLegal, Regulatory, and Political Issues

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Government’s Influence on Business

• Laws are enforced through the judicial system.– Settles disputes and punishes criminals

• Corporations have the same legal status asa person.– Can sue– Can be sued– Can be held liable for debt

The Rationale for Regulation

• Preventing trusts and monopolies from using their market dominance to negatively manipulate output, pricing, and quality

• Eliminating unfair competition and anti-competitive practices

• Supporting environmental initiatives, equality in the workplace, and product safety

• Protecting consumers and business in e-commerce activities

Global Regulation

• Import barriers– Tariffs and quotas– Minimum price levels– Port-of-entry taxes

• Product quality, safety, distribution, sales, and advertising regulation

• North American Free Trade Agreement (NAFTA)– Eliminates virtually all tariffs on goods produced and traded

between the U.S., Canada, and Mexico• European Union (EU)

– Promotes free trade between member nations

Benefits of Regulation

• Greater equality in the workplace• Safer workplaces• Resources for disadvantaged societal members• Safer products• More information about products• Greater product variety• Cleaner air and water• Preservation of wildlife

Deregulation

• Removal of all regulatory authority• Belief that less government intervention allows

business markets to work more effectively• Many industries have been deregulated.

– Trucking– Airlines– Telecommunications– Electric utilities

• Critics of deregulation cite higherprices and poorer service/quality.

Corporate Approachesto Influencing Government

• Lobbying– Process of persuading public and/or government officials

to favor a particular position in decision making– Takes place directly or through trade organizations

• Political Action Committees– Organizations that solicit donations from individuals and

then contribute to candidates running for political office

• Campaign Contributions– Corporate donations

Seven Steps to Effective Compliance and Ethics Program

• Establish a code of ethics.• Appoint a high-level compliance manager, usually an

ethics officer.• Take care in delegation of authority.• Institute a training program and

communication system.• Monitor and audit for misconduct.• Enforce and discipline.• Revise program as needed.

CHAPTER 5

Business Ethics and Ethical Decision MakingBusiness Ethics and Ethical Decision Making

SOCIAL RESPONSIBILITY AND BUSINESS

FERRELL • THORNE • FERRELL

4TH EDITION

Ethical Issues in Business

• An ethical issue is a problem, situation, or opportunity requiring an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical.

• Ethical issues:• Honesty and fairness• Conflict of interest• Fraud• Discrimination• Information technology

Personal Misconduct in the Workplace

Moral Philosophies

• Consequentialism– A decision is right or acceptable if it helps achieve

the desired results

• Egoism– Maximizing one’s own self-interest

• Utilitarianism– Greatest good for the greatest number of people

• Ethical formalism– Focuses on the rights of the individual

• Justice theory– Evaluations of fairness

Kohlberg’s Model

• People progress through the previous six stages.• Cognitive moral development should be viewed

as a continuum.• People’s moral beliefs and behavior change as

they gain education and experience.• There are universal values by which

people in the highest level of moraldevelopment abide.

Social Needs that Motivate Ethical/Unethical Behavior

• Need for achievement– Preference for goals that are well defined and

moderately challenging

• Need for affiliation– Inclination to work with others in the organization

rather than alone

• Need for power– Desire to influence and control others

Creating an Ethical Climate

• Top managers, employees, and stakeholders must support the philosophy that all organizations have responsibilities that extend beyond legal and economic obligations.

• Members of the organization must be willing to share their values about workplace ethics.

Creating an Ethical Climate (cont.)

• Ethical concerns should be incorporated into strategic planning.

• Management must develop a mechanism for assessing its progress in making ethical decisions that contribute to social responsibility.