Managerial Ethics and Social Responsibility-1

Reflect on the assigned readings for the week. Identify what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding.

Also, provide a graduate-level response to each of the following questions:

Describe and give examples of the external forces that shape the relationship between business and society.
Engaging interactively with stakeholders carries a number of potential benefits. Discuss
Supporters of the stakeholder theory of the firm make three core arguments for their position. Define and provide examples of each.

[Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion].

[Your initial post should be at least 450+ words and in APA format (including Times New Roman with font size 12 and double spaced). Post the actual body of your paper in the discussion thread then attach a Word version of the paper for APA review]

[Your post must be substantive and demonstrate insight gained from the course material.]

Chapter 1

The Corporation and Its Stakeholders

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Ch. 1: Key Learning Objectives
1-1 Understanding the relationship between business and society, and how they form an interactive system.
1-2 Considering the purpose of the modern corporation.
1-3 Knowing what a stakeholder is and who a corporation’s market and nonmarket and internal and external stakeholders are.
1-4 Conducting a stakeholder analysis and understanding the basis of stakeholder interests and power.
1-5 Recognizing the diverse ways in which modern corporations organize internally to interact with various stakeholders.
1-6 Analyzing the forces of change that continually reshape the business and society relationship.

Business and society together form an interactive social system1
Business: organizations engaged in making a product or providing a service for profit.
Society: Human beings and the social structures they collectively create.

Business and society together form an interactive social system2
Figure 1.1
Business and Society: An Interactive System
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Business and society together form an interactive social system3
General Systems Theory (GST):
Organisms do not exist in isolation but can only be understood in relationship to their surroundings.
Businesses are embedded in a broader social environment with which they constantly interact.

Purpose of Business
What is the purpose of the corporation?
To whom, or what, should the firm be responsible?

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Shareholder Theory of the Firm1
Sees the firm as property of owners (shareholders).
Owners’ interests take precedence over interests of others.
The purpose of the firm is to maximize its long-term market value and money for its shareholders.

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Stakeholder Theory of the Firm2
Corporations serve a broad public purpose: to create value for society.
Profit is necessary for survival, but is not the only purpose of the firm.
Corporations have multiple obligations and need to consider all stakeholders.

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Shareholder theory and stakeholder theory define the purpose of business differently
Shareholder
Purpose
Owners’Needs and Wants
Share Value
Stakeholder
Purpose
Stakeholders’ Needs and Wants

Three arguments in support of
the stakeholder theory of the firm
Descriptive
realistic description of how companies really work
Normative
Stakeholder management is the right thing to do
Instrumental
stakeholder consideration key for effective corporate strategy

Stakeholders
Stakeholders are persons or groups that affect, or are affected by, a firm’s decisions, policies, and operations.
A stake is an interest in–or claim on–a business.
Stakeholder is NOT the same as stockholder (or shareholder).
Shareholders are just one of several kinds of stakeholders.

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Two Kinds of Stakeholders: Market and Nonmarket
Market stakeholders
Shareholders, suppliers, employees, etc.
They engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services.
Shareholders
Nonmarket stakeholders
Community, government, business support groups, etc.
People or groups who—although they do not engage in direct economic exchange with the firm—are affected by or can affect its actions.
Community
Government
Competitors
Environment

Internal stakeholders are employed by the firm – external stakeholders are not
Internal stakeholders
work “inside” the firm and contribute their effort and skill to everyday operations.
Company
Employees
Managers
External stakeholders
may have important transactions with the firm, but are not on its payroll.
Suppliers
Society
Government
Creditors
Shareholders
Customers

A Firm and Its Stakeholders
Figure 1.2
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Stakeholder Analysis
From Figure 1.3
Stakeholder analysis includes the identification of relevant stakeholders and an analysis of their interests and power.
Who are the relevant stakeholders?
What are the interests of each stakeholder?
What is the power of each stakeholder?
How are coalitions likely to form?

Stakeholder Analysis Question 1
Who are the relevant stakeholders?
Draw market and nonmarket stakeholder maps.
Recognize not all groups are relevant to every situation.
 Examples:
Some businesses sell directly to the public and will not have retailers.
A certain stakeholder may not be relevant to a particular decision/action.

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Stakeholder Analysis Question 2
What are the interests of each stakeholder?
What are the groups’ concerns?
What does the group want/expect from their relationship with the firm?
 Examples:
Shareholders have an ownership interest; they expect to receive dividends and capital appreciation.
Customers are interested in gaining fair value and quality in goods and services they purchase.
Public interest groups advance broad social interests.

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Stakeholder Analysis Question 3
What is the power of each stakeholder?
Stakeholder power is the ability of a group to use resources to make an event happen or to secure a desired outcome.
There are 5 types of stakeholder power:
Voting power.
Economic power.
Political power.
Legal power.
Informational power.

Stakeholder Power Defined
Voting Power
The legal right to cast a shareholder vote.
Economic Power
The ability to grant or withhold transactions with the focal company.
Political Power
Actions taken through legislation, regulations, or lawsuits.
Legal Power
Lawsuits filed against the focal company for harm caused by the firm.
Informational Power
Having access to valuable data, facts, or details.

Stakeholder Analysis Question 4
How are stakeholder coalitions likely to form?
Stakeholder groups often have common interests and will form temporary alliances to pursue these common interests.
Coalitions are very dynamic (can change at any time).
Coalitions are increasingly international.
Internet has enabled coalitions to form quickly, across political boundaries.

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Stakeholder Mapping
Stakeholder map – a visual representation of the relationships among stakeholder interests, power, and coalitions with respect to a particular issue.
A stakeholder map is a useful tool, because it enables managers to quickly see how stakeholders feel about an issue, how coalitions are likely to form, how powerful these coalitions are, and what outcomes are likely.

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Stakeholder Map of SunCal’s Proposed Development
Figure 1.4
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Stakeholder Salience
Salient – stands out from a background, is seen as important, or draws attention.
Stakeholders stand out (i.e., are salient) to managers when they have power, legitimacy, and urgency.

The Corporation’s
Boundary-Spanning Departments1
Boundary-spanning departments (shown graphically in the following slide): departments or offices within an organization that reach across the dividing line that separates the company from groups and people in society.
Building positive and mutually beneficial relationships across organizational boundaries is a growing part of management’s role.

The Corporation’s
Boundary Spanning Departments2
Figure 1.5
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The External Environment of Business is Dynamic and Ever Changing
The purpose of the firm is not simply to make a profit, but to create value for all its stakeholders – a successful business must meet both its economic and social objectives.
Six dynamic forces powerfully shape the business and society relationship:
Changing societal expectations.
Growing emphasis on ethical reasoning and actions.
Globalization.
Evolving government regulations and business response.
Dynamic natural environment.
Explosion of new technology and innovation.

Forces That Shape The Business
And Society Relationship
Figure 1.6
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Accessibility Content:
Text Alternatives for Images

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Business and society together form an interactive social system2
Text Alternative
The image contains a circle labeled society. Within this circle, there is another small circle positioned at the right bottom corner. This circle is labeled business. Six double-ended arrows arise from this circle. One end of each of the arrows points at the label business, and the other end points at the area within the first circle, which is labeled society.
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A Firm and Its Stakeholders
Text Alternative
There are nine circles in this illustration. The largest and most central circle is labeled Business firm.
The remaining circles are labeled as follows:
Nongovernmental organizations.
Governments.
Employees.
Suppliers.
Competitors.
Customers.
Shareholders.
Creditors.
The circle labeled business firm is connected to the following via double-ended arrows:
Employees.
Governments.
Suppliers.
Shareholders.
Creditors.
Customers.
The circle labeled nongovernmental organizations is connected to the following via double-ended arrows:
Employees.
Customers.
Governments.
The circle labeled governments is connected to the following via double-ended arrows:
Nongovernmental organizations.
Business firm.
Competitors.
The circle labeled competitors is connected to the following via double-ended arrows:
Creditors.
Customers.
Governments.
Suppliers.
The circle labeled suppliers is connected to the following via double-ended arrows:
Competitors.
Business firm.
Return to slide containing original image.

Stakeholder Map of SunCal’s Proposed Development
Text Alternative
The sections are labeled one though four clockwise starting at the upper right. On the vertical axis, it shows various stakeholders’ level of power ranging from high at the top to low on the bottom. The horizontal axis shows their position on the issue of SunCal’s proposed development ranging from Oppose on the left to Support on the right.
In the center of the figure overlapping all sections is a circle labeled City Council.
The lower right section number two contains a dotted oval surrounding three smaller circles labeled Unions, Affordable Housing, and Environmental Groups as well as a portion of City Council. This section represents the coalition in support of the project.
The upper left section number four contains a dotted oval surrounding two smaller circles labeled Disney and Local Businesses as well as a portion of City Council. This section represents the coalition in opposition to the project.

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The Corporation’s Boundary Spanning Departments2
Text Alternative
Return to slide containing original image.

It contains a circle labeled corporation. A bigger circle surrounds this structure. The bigger circle is divided into eight sections. Each section contains some content.
In a clockwise manner of appearance, these sections contain data as follows:
The content in the section that is labeled customers reads as follows:
Customer relations:
Customer service.
Total quality management.
Liability lawsuit defense.
Recall management.
The content in the section that is labeled community reads as follows:
Community relations, corporate citizenship:
Corporate philanthropy.
Partners with community-based organizations.
Volunteerism, employee time contributions.
The content in the section that is labeled NGOs, suppliers reads as follows:
Corporate relations, corporate citizenship, corporate responsibility, external affairs:
Environmental scanning.
Stakeholder engagement.
Social reporting and auditing.
The content in the section that is labeled general public reads as follows:
Public relations, media relations, corporate communications:
Public relations.
Brand management.
Image advertising.
Crisis management. The content in the section that is labeled environment reads as follows:
Environment, health and safety, sustainability:
EPA and state environmental compliance.
Internal environmental auditing.
Recycling, take-back.
The content in the section that is labeled employees reads as follows:
Human resources, labor relations:
Communications.
Union negotiations.
OSHA, EEOC, and labor law compliance.
Diversity and family–work programs.
Healthcare.
The content in the section that is labeled government reads as follows:
Public affairs, governmental affairs, government relations:
Public policy.
Lobbying.
Political action.
Trade associations.
Advocacy ads.
Grassroots mobilization.
The content in the section that is labeled shareholders reads as follows:
Shareholder relations, investor relations:
External and internal audit.
SEC filings, compliance.
Communications.
Proxy election management.

Forces That Shape The Business And Society Relationship
Text Alternative
It contains a cloud at the center. This cloud is labeled business and its stakeholders. There are six arrows pointing at this cloud.
In a clockwise manner of appearance, these arrows are labeled as follows:
Evolving government regulation of business.
Globalization.
Explosion of new technology.
Dynamic natural environment.
Changing societal expectations.
Growing emphasis on ethical values.

Return to slide containing original image.

Chapter 2

Managing Public Issues and Stakeholder Relationships

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Ch. 2: Key Learning Objectives
2-1 Identifying public issues and analyzing gaps between corporate performance and stakeholder expectations.
2-2 Applying available tools or techniques to scan an organization’s multiple environments and assessing stakeholder materiality.
2-3 Describing the steps in the issue management process and determining how to make the process most effective.
2-4 Identifying the managerial skills required to respond to emerging issues effectively.
2-5 Understanding how businesses can effectively engage with its stakeholders, what drives this engagement, and the role social media can play.
2-6 Recognizing the value of creating stakeholder dialogue and networks.

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Public Issues
Public Issue: Any issue that is of mutual concern to an organization and one or more of its stakeholders.
Stakeholder Expectations: A mixture of people’s opinions, attitudes, and beliefs about what constitutes reasonable business behavior.

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Public Issues:
Performance-Expectations Gap
Failure to understand stakeholder concerns and to respond appropriately will:
Permit the performance–expectations gap to grow.
The larger the gap, the greater the risk of stakeholder backlash or of missing business opportunity.
Example:
Antibiotics in chicken.

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The Performance-Expectations Gap
Figure 2.1
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Environmental Analysis and Intelligence
Environmental Analysis: A method managers use to gather information about external issues and trends
to develop an organizational strategy that minimizes threats and takes advantage of new opportunities.
Environmental Intelligence: the acquisition of information gained from analyzing the multiple environments affecting organizations.

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Eight Strategic Radar Screens
Figure 2.2
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Competitive Intelligence
The systematic and continuous process of gathering, analyzing, and managing external information about the organization’s competitors that can affect the organization’s plans, decisions, and operations.
With the need to comply with all applicable laws, and to follow the professional standards of fairness and honesty.

The Issue Management Process1
Identify Issue
Anticipating emerging concerns, or “horizon” issues.
Analyze Issue
Organizations must understand how the issue is likely to evolve, and how it is likely to affect them.
Generate Options
Requires complex judgments that incorporate ethical considerations like the company’s reputation.
Take Action
Once an option is chosen, the organization must design and implement a plan of action.
Evaluate Results
Must assess results of the program and make adjustments if necessary.

The Issue Management Process2
Figure 2.4
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Organizing for Effective Issue Management
Part of the organization is mobilized to address a particular emerging issue, it often depends on the nature of the issue itself.
Involve the board of directors and top management levels.
Effective global leadership on public issues requires three basic capabilities:
Understanding of the changing business context.
Ability to lead in the face of complexity.
Connectedness: the ability to engage with external stakeholders in dialogue and partnership.

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Stages in the Business-Stakeholder Relationship
Over time, the nature of business’s relationship with its stakeholders often evolve through a series of stages.
Inactive – Companies ignore stakeholder concerns.
Reactive – Companies act only when forced to do so, and then in a defensive manner.
Proactive – Companies try to anticipate stakeholder concerns.
Interactive –Companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, and trust.

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Drivers of Stakeholder Engagement1
Stakeholder engagement is, at its core, a relationship.
The participation of a business organization and at least one stakeholder organization is necessary.
Engagement: both the company and its stakeholders have:
An urgent and important goal.
The motivation to participate.
The organizational capacity to engage with one another.

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Drivers of Stakeholder Engagement2
From Figure 2.5
Copyright © McGraw-Hill Education. Permission required for reproduction or display.

Company Stakeholder(s)
Goal To improve corporate reputation;
to earn a license to operate;
to win approval of society. To change corporate behavior on an issue of concern.
Motivation Needs stakeholder involvement because of their expertise or control of critical resources. Governmental campaigns,
protest perceived as inadequate to change corporate behavior.
Organizational capacity Top leaders committed to engagement;
well-funded department of external (stakeholder) affairs. Experienced staff;
core group of activists committed to dialogue with business.

The Role of Social Media in
Stakeholder Engagement
Address public issues and engage stakeholders.
Identify and solve problems faster.
Share information better among their employees and partners.
Bring customers’ ideas for new product designs to market earlier.
Platforms to engage with multiple stakeholders, communication has become faster and more effective.

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Stakeholder Dialogue
Business and its Stakeholders come to face-to-face conversations.
Core interest and concerns, common definition of a problem.
Understandings and concerns of all parties.
Invent innovative solutions and implement them.
Example: Merck.

Stakeholder Networks
Addressing public issues by:
working collaboratively with other businesses, concerned persons and organizations in stakeholder networks.
Example: Nike.

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The Benefits of Engagement
Stakeholder organizations bring a number of distinct strengths:
Alert companies to emerging issues.
Give a firm access to information via networking.
Technical or scientific expertise in specific areas.
Better result in the eyes of the public.
Meet the society’s expectations and generate good solutions.
Improve a company’s reputation.

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Accessibility Content:
Text Alternatives for Images

Copyright ©2020 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
The Performance-Expectations Gap Text Alternative
On the left side of the illustration, there is a vertically positioned rectangular box that is labeled performance (social and economic), ranging from high to low. At the bottom of the illustration, there is a horizontally placed rectangular box that is labeled time, with an arrow pointing to the right. There are two lines positioned in the area between the two rectangular boxes. The first line lies on the top and slants upward. This line is labeled expected corporate performance (what stakeholders expect). The second line runs parallel to the box labeled time, and this line slants slightly upward. This line is labeled actual corporate performance (what actually happens). A line arises from the center of the first line, and another line arises from the center of the second line. These two lines converge to point at a rectangular box that is labeled performance–expectations gap. The gap shows the difference between what was expected and what actually happened.
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Eight Strategic Radar Screens Text Alternative
At the center of the illustration, there is content that reads seeking environmental intelligence. Eight double-ended arrows point at this text. There are circles on the other end of these arrows. In a clockwise manner of appearance, these circles are labeled as follows:
Customer environment.
Competitor environment.
Economic environment.
Technological environment.
Social environment.
Political environment.
Legal environment.
Geophysical environment.
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Stakeholder Materiality*
Text Alternative
The y-axis is labeled stakeholder interest, with a range from the bottom to the top indicating low to high interest.
The x-axis is labeled impact on Nestlé, with a range from left to right of moderate to major significance.
Below the x-axis is a key with symbols that are used to represent different types of business concerns including nutrition; rural development; water; environmental sustainability; and our people, human rights, and compliance.
Topics of the types listed above are scattered within the illustration depending on their stakeholder interests and significance to the firm.
From low interest and moderate significance to high interest and major significance, the data reads as follows:
Employee safety, health, and wellness.
Natural resource stewardship.
Animal welfare.
Women’s empowerment.
Water, sanitation, and hygiene.
Fair employment and youth employability.
Food and nutrition security.
Resource efficiency, (food) waste, and circular economy.
Climate change.
Rural development and poverty alleviation.
Responsible sourcing and traceability.
Business ethics.
Human rights.
Responsible marketing and influence.
Food and product safety.
Water stewardship.
Over- and under-nutrition is at the top of the chart.
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The Issue Management Process2 Text Alternative
It contains five circles placed in a circular manner. Each circle is connected to the next via a curved arrow in a never-ending cycle. In a clockwise manner of appearance, these five circles are labeled as follows:
Identify issues.
Analyze issue.
Generate options.
Take action.
Evaluate results.
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