Business,

Government
and Society
A Managerial Perspective, Twelfth Edition
Text and Cases
John F. Steiner
Professor of Management
California State University,
Los Angeles
George A. Steiner
Harry and Elsa Kunin
Professor of Business and
Society and Professor of
Management, Emeritus, UCLA
McGraw-Hill
Irwin
Boston Burr Ridge, IL Dubuque, IA New York San Francisco St. Louis
Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City
Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
Table of Contents
Preface x
Chapter 1
The Study of Business, Government,
and Society 1
Exxon Mobil Corporation 1
What Is the Business-Government-Society
Field? 4
Why Is the BGS Field Important to Managers?
Four Models of the BGS Relationship 8
The Market Capitalism Model 8
The Dominance Model 11
The Countervailing Forces Model 14
The Stakeholder Model 15
Our Approach to the Subject Matter 18
Comprehensive Scope 18
Interdisciplinary Approach with a Management
Focus 18
Use of Theory, Description, and Case
Studies 18
Global Perspective 19
Historical Perspective 19
Chapter 2
The Dynamic Environment 20
Royal Dutch Shell PLC 20
Underlying Historical Forces Changing the
Business Environment 22
The Industrial Revolution 22
Inequality 23
Population Growth 25
Technology 28
Globalization 29
Nation-States 30
Dominant Ideologies 32
Great Leadership 33
Chance 33
Seven Key Environments of Business 34
The Economic Environment 34
The Technological Environment 36
The Cultural Environment 37
The Government Environment 39
The Legal Environment 40
The Natural Environment 41
The Internal Environment 41
Concluding Observations 43
Case Study: The American Fur Company 45
Chapter 3
Business Power 53
James B. Duke and the American Tobacco
Company 53
The Nature of Business Power 56
What Is, Power? 56
Levels and Spheres of Corporate Power 57
The Story of the Railroads 59
Two Perspectives on Business Power 62
The Dominance Theory 63
Pluralist Theory 68
Concluding Observations 72
Case Study: John D. Rockefeller and the
Standard Oil Trust 72
Chapter 4
Critics of Business 80
Mary "Mother" Jones 80
Origins of Critical Attitudes toward
Business 83
The Greeks and Romans 83
The Medieval World 85
The Modern World 85
The American Critique of Business 86
The Colonial Era 86
The Young Nation 87
1800-1865 88
vi Table of Contents
Populists and Progressives 90
Socialists 92
The Great Depression and World War II 96
The Collapse of Confidence 97
The New Progressives 99
Global Critics 102
Global Activism 104
Concluding Observations 107
Case Study: A Campaign against KFC
Corporation 108
Chapter 5
Corporate Social Responsibility 117
Merck & Co., Inc. 117
The Evolving Idea of Corporate Social
Responsibility 119
Social Responsibility in Classical Economic Theory 121
The Early Charitable Impulse 121
Social Responsibility in the Late Nineteenth and
Early Twentieth Centuries 123
1950-The Present 125
Basic Elements of Social Responsibility 127
General Principles of Corporate Social
Responsibility 129
Are Social and Financial Performance
Related? 130
Corporate Social Responsibility in a Global
Context 131
Global Corporate Social Responsibility 133
Assessing the Evolving Global CSR
System 141
Concluding Observations 142
Case Study: The Jack Welch Era at General
Electric 143
Chapter 6
Implementing Corporate Social
Responsibility 153
The Bill & Melinda Gates Foundation 153
Managing the Responsive Corporation 156
Leadership and Business Models 157
A Model of CSR Implementation 158
CSR Review 159
CSR Strategy 162
Implementation of CSR Strategy 163
Reporting and Verification 165
Corporate Philanthropy 168
Patterns of Corporate Giving 169
Strategic Philanthropy 171
Cause-Rela ted Marketing 173
New Forms of Philanthropy 174
Concluding Observations 176
Case Study: Marc Kasky versus Nike Inc. 176
Chapter 7
Business Ethics 186
"Today's verdict is a triumph of our legal
system..." 186
What Are Business Ethics? 189
Two Theories of Business Ethics 190
Major Sources of Ethical Values in
Business 192
Religion 193
Philosophy 194
Cultural Experience 196
Law 198
Factors That Influence Managerial Ethics 203
Leadership 203
Strategies and Policies 204
Corporate Culture 205
Individual Characteristics 208
How Corporations Manage Ethics 209
Ethics Programs: A Strong Future 216
Concluding Observations 216
Case Study: The Trial of Martha Stewart 217
Chapter 8
Making Ethical Decisions in
Business 226
Realtors in the Wilderness 226
Principles of Ethical Conduct 228
The Categorical Imperative 228
l
'
The Conventionalist Ethic 229
The Disclosure Rule 230
The Doctrine of the Mean 230
The Ends-Means Ethic 231
The Golden Rule 232
The Intuition Ethic 232
The Might-Equals-Right Ethic 233
The Organization Ethic 233
The Principle of Equal Freedom 234
The Proportionality Ethic 235
Table of Contents vii
The Rights Ethic 235
The Theory of Justice 236
The Utilitarian Ethic 237
Reasoning with Principles 239
Character Development 240
Practical Suggestions for Making Ethical
Decisions 241
Concluding Observations 243
Case Studies: Short Incidents for Ethical
Reasoning 243
Columbia/HCA 247
Chapter 9
Business in Politics 256
The Abramoff Scandals 256
The Open Structure of American
Government 260
A History of Political Dominance by
Business 262
Laying the Groundwork 262
Ascendance, Corruption, and Reform 263
Business Falls Back under the New Deal 265
Postwar Politics and Winds of Change 266
The Rise of Antagonistic Groups 267
Diffusion of Power in Government 268
The Universe of Organized Business
Interests 269
Lobbying 271
Lobbying Methods 273
Regulation of Lobbyists 275
The Corporate Role in Elections 276
Efforts to Limit Corporate Influence 276
The Federal Election Campaign Act 277
Political Action Committees 279
How PACs Work 280
Soft Money and Issue Advertising 280
Reform Legislation in 2002 281
Tension over Corporate Political
Expression 285
Concluding Observations 287
Case Study: Westar Goes to
Washington 288
Chapter 10
Regulating Business 297
Annals of Regulation: The FCC Fines CBS 297
Reasons for Government Regulation of
Business 300
Flaws in the Market 300
Social and Political Reasons for Regulation 301
Waves of Growth 301
Wave 1: The Young Nation 302
Wave 2: Confronting Railroads and Trusts 303
Wave 3: The New Deal 304
Wave 4: Administering the Social Revolution 305
War Blips 306
How Regulations Are Made 306
Regulatory Statutes 306
Rulemaking 308
Presidential Oversight 311
Congressional Oversight 312
Challenges in the Courts 313
The Costs and Benefits of Regulation 314
The Regulatory Burden 315
Benefits of Regulations 317
Regulation in Other Nations 318
Regulating the Global Economy 320
Concluding Observations 320
Case Study: The FDA and Tobacco
Regulation 321 ~"^
Chapter 11
Multinational Corporations 330
The Coca-Cola Company 330
The Multinational Corporation 332
A Look at Multinational Corporations 334
How Transnational Is a Corporation? 336
Breaking the Bonds of Country: Weatherford
International 337
Foreign Direct Investment 339
FDI in Less Developed Countries 340
The Alien Tort Claims Act 342
Drummond Company on Trial 344
International Codes of Conduct 345
Corporate Codes 347
Wal-Mart and Mattel 348
Industry Codes 350
Other Codes 351
The United Nations Global Compact 353
Concluding Observations 357
Case Study: Union Carbide Corporation and
Bhopal 358
viii Table of Contents
Chapter 12
Globalization 369
McDonald's Corporation 369
What Is Globalization? 371
Major Forces in Expanding Globalization 372
Benefits of Globalization 372
Flaws and Problems in Globalization 374
Critics of Globalization 375
Expanding Trade Agreements 376
The European Union (EU) 377
The North American Free Trade Agreement
(NAFTA) 379
Other Trade Agreements 382
Globalization and the Erosion of State
Sovereignty 382
Nation-State Sovereignty Has Been Eroded 382
Nation-State Sovereignty Has Not Been
Seriously Eroded 383
In Sum 383
Erosion of Cultures 384
Free Trade versus Protectionism 385
Why Free Trade? 386
Pressures for Protectionism 386
The Politics of Protectionism 387
Free Trade Responses to Protectionism 387
U.S. Deviation from Free Trade Policy 388
Tariff Barriers in Other Countries 388
Classical Free Trade Theory versus Reality 389
Corruption 390
What Is Corruption? 390
Costs and Consequences of Corruption 391
Business Anticorruption Practices and
Procedures 392
The Foreign Corrupt Practices Act 393
Corporate Policies on Corruption
Prevention 394
Concluding Observations 395
Case Study: David and Goliath at
the WTO 395
Chapter 13
Industrial Pollution and
Environmental Policy 405
The Indian Health Service Solves a Mystery 405
Pollution 406
Human Health 407
The Biosphere 408
Industrial Activity and Sustainability 409
Ideas Shape Attitudes toward the
Environment 412
New Ideas Challenge the Old 413
Environmental Regulation in the United
States 414
The Environmental Protection Agency 415
Principal Areas of Environmental Policy 415
Air 415
Water 425
Land 426
Concluding Observations 430
Case Study: Owls, Loggers, and Old-Growth
Forests 430
Chapter 14
Managing Environmental Quality 440
The Commerce Railyards 440
Regulating Environmental Risk 443
Analyzing Human Health Risks 444
Risk Assessment 444
Risk Management 450
Cost-Benefit Analysis 451
Advantages 451
Criticisms 452
Control Options 455
Command-and-Control Regulation 455
Market Incentive Regulation 455
Voluntary Regulation 460
Managing Environmental Quality 461
Environmental Management Systems 461
A Range of Actions 462
Concluding Observations 463
Case Study: Harvesting Risk 465
Chapter 15
Consumerism
473
Harvey W. Wiley 473
Consumerism 477
Consumerism as an Ideology 477
Consumerism Rises in America 478
Consumerism in Perspective 479
Table of Contents ix
The Global Rise of Consumerism 483
Consumerism as a Protective Movement 484
The Consumer's Protective Shield 485
The Consumer Product Safety Commission
(CPSC) 486
The National Highway Traffic Safety Administration
(NHTSA) 487
The Food and Drug Administration (FDA) 487
Consumer Protection by Other Agencies 490
Product Liability Law 490
Negligence 491
Warranty 492
Strict Liability 493
Perspectives on Product Liability 494
The Costs and Benefits of Lawsuits 494
A Look at Two Lawsuits 496
Concluding Observations 497
Case Study: Alcohol Advertising 497
Chapter 16
The Changing Workplace 507
Ford Motor Company 507
External Forces Shaping the Workplace 510
Demographic Change 510
Technological Change 512
Structural Change 513
Competitive Pressures 516
Reorganization of Work 517
Government Intervention 519
Development of Labor Regulation in the United
States 519
Work and Worker Protection in Japan and Europe 525
Labor Regulation in Perspective 528
Concluding Observations 531
Case Study: Workplace Drug Testing 531
Chapter 17
Civil Rights in the Workplace 540
The Employment Non-Discrimination Act of
2007 540
A Short History of .Workplace Civil Rights 542
The Colonial Era 543
Civil War and Reconstruction 543
Other Groups Face Employment Discrimination 545
The Civil Rights Cases 546
Plessy v. Ferguson 547
Long Years of Discrimination 548
The Civil Rights Act of 1964 549
Disparate Treatment and Disparate Impact 550
The Griggs Case 551
Affirmative Action 552
Executive Order 11246 552
The Supreme Court Changes Title VII 553
The Affirmative Action Debate 556
Women at Work 559
Gender Attitudes at Work 560
Subtle Discrimination 561
Harassment 563
Occupational Segregation 566
Compensation 567
Corporate Efforts to Promote Diversity 569
Concluding Observations 573
Case Study: Adarand v. Pena 573
Chapter 18
Corporate Governance 584
Backdating with Dr. McGuire 584
What is Corporate Governance? 588
The Corporate Charter 589
Federal Regulation of Governance 591
The Failure of Corporate Governance at
Enron 591
Other Corporate Governance Scandals 595
The Sarbanes-Oxley Act 595
Boards of Directors 597
Duties of Directors 598
Compensation of Outside Board Members 599
Suggestions for Improving Board Performance 599
Institutional Investors and Governance 600
Shareholder Resolutions 602
Executive Compensation 603
Components of Executive Compensation 603
Criticisms of CEO Compensation 606
In Defense of CEO Pay 609
Suggested Compensation Reforms 610
Concluding Observations 611
Case Study: High Noon at Hewlett-
Packard 611