SOCIAL RESPONSIBILITY

4
AND BUSINESS
EDITION
TH

FERRELL THORNE FERRELL

CHAPTER 1

SocialResponsibility
Framework

Social Responsibility Defined

Socialresponsibility
Theadoptionbyabusinessofastrategicfocus
forfulfillingtheeconomic,legal,ethicaland
philanthropicresponsibilitiesexpectedofitby
itsstakeholders

Businessesshouldlookbeyondtheirself
interestsandrecognizethattheybelongto
alargergroupthatexpectsresponsible
participation.

Whatdoyoubelieveorganizations
shouldberesponsiblefor
accomplishing?

Social Responsibility Defined (cont.)

Appliestoalltypesofbusinesses
Smallbusinesses
Largebusinesses
Soleproprietorships
Multinationalcorporations

Social Responsibility Defined (cont.)

Fulfillssocietalexpectations
Providesareturnoninvestmentforowners
Obeysthelawandregulatoryagencies
Actsinajust,fair,andcorrectmanner
Promoteshumanwelfareandgoodwill

Pyramid of Social Responsibility

Social Responsibility Defined (cont.)

Economic
Maintainprofitability

Legal
Abidebylegalandregulatoryinfluence

Ethical
Ensurejustandfairbehaviorintheworkplace

Philanthropic
Promotehumanwelfareandgoodwill

SOCIAL RESPONSIBILITY
4
AND BUSINESS
EDITION
TH

FERRELL THORNE FERRELL

CHAPTER 2

StrategicManagementof
StakeholderRelationships

Stakeholders
Thoseconstituentswhohaveastakein,or
claimon,someaspectofacompanys
products,operations,markets,industry,and
outcomes
Companiesthatoperatewithastakeholder
orientationrecognizethatbusinessandsociety
areinterpenetratingsystems,inthateach
affectsandisaffectedbytheother.

Primary Stakeholders
Groupsfundamentaltoacompanysoperationandsurvival
Customers
Employees
Shareholders
Investors
Suppliers
Government
Community
Balancingtheneedsandperspectives
ofprimarystakeholdersisastrategicimperative.

Secondary Stakeholders
Groupsthatmayinfluenceand/orbeaffectedbythecompany,
butarenotengagedineconomicexchangeswiththefirm:
Media
Specialinterestgroups
Generalpublic
Thesegroupsarenotfundamentaltoanorganizationsdaily
survival.
Theycanplacesignificantpressureonabusinessand
therefore,cannotbeignored.

Development of
Stakeholder Relationships
Relationshipsarefoundedonprinciplesof:
Trust
Commitment
Communication
Theyarealsoassociatedwithadegreeof:
Time
Interaction
Sharedexpectations
Companiesaresearchingforwaystodeveloplongtermand
collaborativerelationshipswiththeircustomersandbusiness
partners.

Social Capital
Anasset,whichresidesinrelationships,
thatischaracterizedbymutualgoalsand
trust
Facilitatessmoothinternalandexternal
transactionsandprocesses

The Reactive-DefensiveAccommodative-Proactive Scale

SOCIAL RESPONSIBILITY
4
AND BUSINESS
EDITION
TH

FERRELL THORNE FERRELL

CHAPTER 3

CorporateGovernance

Corporate Governance
Corporategovernanceistheformalsystem
ofoversight,accountability,andcontrolfor
organizationaldecisionsandresources.
Majorissues:

Shareholderrights
Executivecompensation
Organizationalethicsprograms
Boardcompositionandstructure
Auditing,controlandriskmanagement
CEOselectionandexecutivesuccessionplans

Models of Corporate Governance

Shareholdermodel
Maximizeswealthforinvestorsandowners
Developsandimprovestheformalsystemof
performanceaccountabilitybetweenmanagement
andthefirmsshareholders
Makesdecisionsbasedonwhatisultimatelybest
forinvestors
Focusesonaligninginvestorandmanagement
interests

Models of Corporate Governance

(cont.)

Stakeholdermodel
Considerstheinterestsofemployees,
suppliers,governmentagencies,communities,and
othergroupswithwhichthefirminteracts
Assumesacollaborativeandrelational
approachtobusiness
Focusesoncontinuousimprovement,
accountability,andengagementwithinternaland
externalconstituents

Issues in Corporate Governance

Systems
Boardsofdirectors
Independence
Qualityandexperience
Performance

Shareholdersandinvestors
Shareholderactivism
Socialinvesting
Investorconfidence

Issues in Corporate Governance

Systems (cont.)
Internalcontrolandriskmanagement
Internalandexternalaudits
Controlsystems
Riskmanagement

Financialmisconduct
Executivecompensation

SOCIAL RESPONSIBILITY
4
AND BUSINESS
EDITION
TH

FERRELL THORNE FERRELL

CHAPTER 4

Legal,Regulatory,and
PoliticalIssues

Governments Influence on Business

Lawsareenforcedthroughthejudicialsystem.
Settlesdisputesandpunishescriminals

Corporationshavethesamelegalstatusas
aperson.
Cansue
Canbesued
Canbeheldliablefordebt

The Rationale for Regulation

Preventingtrustsandmonopoliesfromusing
theirmarketdominancetonegativelymanipulate
output,pricing,andquality
Eliminatingunfaircompetitionandanti
competitivepractices
Supportingenvironmentalinitiatives,equalityin
theworkplace,andproductsafety
Protectingconsumersandbusinessine
commerceactivities

Global Regulation
Importbarriers
Tariffsandquotas
Minimumpricelevels
Portofentrytaxes
Productquality,safety,distribution,sales,andadvertising
regulation
NorthAmericanFreeTradeAgreement(NAFTA)
Eliminatesvirtuallyalltariffsongoodsproducedandtraded
betweentheU.S.,Canada,andMexico
EuropeanUnion(EU)
Promotesfreetradebetweenmembernations

Benefits of Regulation

Greaterequalityintheworkplace
Saferworkplaces
Resourcesfordisadvantagedsocietalmembers
Saferproducts
Moreinformationaboutproducts
Greaterproductvariety
Cleanerairandwater
Preservationofwildlife

Deregulation
Removalofallregulatoryauthority
Beliefthatlessgovernmentinterventionallows
businessmarketstoworkmoreeffectively
Manyindustrieshavebeenderegulated.

Trucking
Airlines
Telecommunications
Electricutilities

Criticsofderegulationcitehigher
pricesandpoorerservice/quality.

Corporate Approaches
to Influencing Government
Lobbying
Processofpersuadingpublicand/orgovernmentofficials
tofavoraparticularpositionindecisionmaking
Takesplacedirectlyorthroughtradeorganizations

PoliticalActionCommittees
Organizationsthatsolicitdonationsfromindividualsand
thencontributetocandidatesrunningforpoliticaloffice

CampaignContributions
Corporatedonations

Seven Steps to Effective Compliance

and Ethics Program
Establishacodeofethics.
Appointahighlevelcompliancemanager,usuallyan
ethicsofficer.
Takecareindelegationofauthority.
Instituteatrainingprogramand
communicationsystem.
Monitorandauditformisconduct.
Enforceanddiscipline.
Reviseprogramasneeded.

SOCIAL RESPONSIBILITY
4
AND BUSINESS
EDITION
TH

FERRELL THORNE FERRELL

CHAPTER 5

BusinessEthicsand
EthicalDecisionMaking

Ethical Issues in Business

Anethicalissueisaproblem,situation,or
opportunityrequiringanindividual,group,or
organizationtochooseamongseveralactionsthat
mustbeevaluatedasrightorwrong,ethicalor
unethical.
Ethicalissues:

Honestyandfairness
Conflictofinterest
Fraud
Discrimination
Informationtechnology

Personal Misconduct in the

Workplace

Moral Philosophies
Consequentialism
Adecisionisrightoracceptableifithelpsachieve
thedesiredresults

Egoism
Maximizingonesownselfinterest

Utilitarianism
Greatestgoodforthegreatestnumberofpeople

Ethicalformalism
Focusesontherightsoftheindividual

Justicetheory
Evaluationsoffairness

Kohlbergs Model
Peopleprogressthroughtheprevioussixstages.
Cognitivemoraldevelopmentshouldbeviewed
asacontinuum.
Peoplesmoralbeliefsandbehaviorchangeas
theygaineducationandexperience.
Thereareuniversalvaluesbywhich
peopleinthehighestlevelofmoral
developmentabide.

Social Needs that Motivate

Ethical/Unethical Behavior
Needforachievement
Preferenceforgoalsthatarewelldefinedand
moderatelychallenging

Needforaffiliation
Inclinationtoworkwithothersintheorganization
ratherthanalone

Needforpower
Desiretoinfluenceandcontrolothers

Creating an Ethical Climate

Topmanagers,employees,andstakeholders
mustsupportthephilosophythatall
organizationshaveresponsibilitiesthatextend
beyondlegalandeconomicobligations.
Membersoftheorganizationmustbewilling
tosharetheirvaluesaboutworkplaceethics.

Creating an Ethical Climate (cont.)

Ethicalconcernsshouldbeincorporatedinto
strategicplanning.
Managementmustdevelopamechanismfor
assessingitsprogressinmakingethical
decisionsthatcontributetosocial
responsibility.