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CHAPTER 1

Social Responsibility and Business. 4 TH EDITION. FERRELL • THORNE • FERRELL. CHAPTER 1. Social Responsibility Framework. Social Responsibility Defined. Social responsibility

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CHAPTER 1

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  1. Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 1 Social Responsibility Framework

  2. 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.

  3. What do you believe organizations should be responsible for accomplishing?

  4. Social Responsibility Defined (cont.) • Applies to all types of businesses • Small businesses • Large businesses • Sole proprietorships • Multinational corporations

  5. 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

  6. Pyramid of Social Responsibility

  7. 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

  8. Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 2 Strategic Management of Stakeholder Relationships

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. Social Capital • An asset, which resides in relationships, that is characterized by mutual goals and trust • Facilitates smooth internal and external transactions and processes

  14. The Reactive-Defensive-Accommodative-Proactive Scale

  15. Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 3 Corporate Governance

  16. 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

  17. 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

  18. 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

  19. Issues in Corporate Governance Systems • Boards of directors • Independence • Quality and experience • Performance • Shareholders and investors • Shareholder activism • Social investing • Investor confidence

  20. Issues in Corporate Governance Systems (cont.) • Internal control and risk management • Internal and external audits • Control systems • Risk management • Financial misconduct • Executive compensation

  21. Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 4 Legal, Regulatory, and Political Issues

  22. 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

  23. 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

  24. 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

  25. 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

  26. 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.

  27. 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

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

  29. Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 5 Business Ethics and Ethical Decision Making

  30. 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

  31. Personal Misconduct in the Workplace

  32. Moral Philosophies • Consequentialism • A decision is right or acceptable if it helps achievethe 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

  33. 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 whichpeople in the highest level of moraldevelopment abide.

  34. 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

  35. 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.

  36. 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.

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