LAW, BUSINESS, &

SOCIETY
11th
Edition

McGraw-Hill

2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.

Learning Objectives

Recognize the interdependent

relationship between business and the
larger society
Discuss whether business should play a
more or less active role in politics,
education, and other public-sector
activities
Discuss concerns about globalization
3-2

Learning Objectives

List some of the critics primary

complaints about the alleged abuse of
corporate power in contemporary
America
Make a tentative assessment regarding
the proper role of business in society
Explain the concept of corporate social
responsibility
3-3

Learning Objectives

Discuss whether socially responsible

business is good business
Explain the triple bottomline/sustainability approach to
corporate citizenship
Contrast the stakeholder and
shareholder approaches to corporate
social responsibility
3-4

Corporate Power and Critics

Critics argue that:

Americas big corporations do not serve

public interest well

Size and economies of scale of
corporations lead to continuing abuse of
the American public

3-5

Corporate State - Economics

Corporate power threatens Americas

economy
States compete by improving business
climates with incentives
Taxes
Americas biggest publicly traded

companies exploit tax code loopholes

The countrys corporate tax rates are the
highest in the world
3-6

Corporate State - Economics

Misconduct/incompetence
Recent scandals and financial failures have

supported doubts about corporate honor

and competence

Monopoly
Corporate power problem is attributed to

the structure of economy

3-7

Corporate State - Economics

Shared monopolies dominate the economy
Producers and retailers charge inflated
prices
Number of public corporations are reducing

Globalization
Global free trade enables corporations to

exploit cheap, powerless labor abroad

The triumph of capitalism has lead to the
Americanization of the global populace
3-8

Corporate State - Politics

Corporate community is taking a direct

role in the political process
Political action committees (PACs)
Established by corporations to solicit and

disburse voluntary campaign contributions

Citizens United case - Supreme court held
that federal laws limiting campaign
contributions violate free speech rights

3-9

Corporate State - Politics

Corporate influence
Money is a powerful force in electoral

performance, shapes legislative process

Americans stand in need of amendments
to the Constitution to clarify that:
Money does not constitute speech
Corporations are not entitled to the rights of
persons

3-10

Lobbying

Helps educate politicians on the issues

to be addressed
Drawback - Lobbyists take government

roles and undermine the democratic

process
Maintains the status quo
Corporate money influences outcomes
when heavily weighted to one side
Firms investing heavily in lobbying enjoy
lower federal tax rates
3-11

Corporate State - Social

Issues and Institutions

Advertising and promotion in schools

Corporations prepare model curricula and

donate money to improve school

performance
Administrators sell ad space in school
settings
Criticism - Encourages materialism,
celebrates dubious values and discourages
critical thinking

3-12

Corporate State - Social

Issues and Institutions

Manage public schools

School districts contract private companies

to operate struggling public schools

Expect competition and for-profit efficiencies
to improve educational quality

Higher education
Businesses are turning campuses into

marketing and development opportunities

3-13

Corporate State - Social

Issues and Institutions

Religion
Churches employ standard business

practices and compete for market share

Religion has become a product

Culture
Corporate America supports traditional

intellectual culture generously

Criticism - Popular culture has been debased
by corporate greed, indifference to quality,
and relentless consolidation
3-14

Corporate State - Social

Issues and Institutions

Sports
Funding is provided for many unprofitable

sports
Revenues support academic programs
Significance of conversion from sport to
business is unclear
Commercialism of athletics is bemoaned

High school sports facilities mimic college

and professional experiences

3-15

Corporate Social
Responsibility

Social enterprise/social entrepreneurship

People launch non-profits and businesses or

take up jobs to address social problems

Example - Love.futbol - Builds safe soccer fields
for children in impoverished nations

Expectations for business in society have

been altered
Profit-seeking remains central and essential

but social responsibility must be considered

3-16

Social Responsibility

Decision makers must take actions to

protect and improve welfare of the
society
Social role of business is thought of as
an ideological continuum
Goal - To ensure long-term viability of the

organization and the society

3-17

Figure 3.1 - Social

Responsibility Continuum

3-18

Social Responsibility

Profit maximization point of view

Dominant concern is to maximize

shareholders interests
Responsible and moral course of behavior
is to reap high returns within the law

Long-term company interest

Some managers believe that a strong

bottom line requires considerations beyond

profit-maximizing interests
3-19

Triple bottom line/sustainability

Approach that produces a sustainable,

enduring global community

Employs free-market principles
Recognizes the necessity for financial success
Gives importance to social and environmental
responsibilities

Corporations that attends to social and

economic duties have a competitive

advantage
3-20

Social Responsibility (CSR)

Pyramid
Desired

Expected

Required

Required

Source: Archie B. Carroll, The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational
Stakeholders. Reprinted from Business Horizons 34, no. 4 (JulyAugust 1991), pp. 39, 42. Copyright 1991 by the Foundation for the School of
Business at Indiana University. Used with permission.
3-21

CSR: Two Big Questions

Is CSR good business?

Market rewards socially responsible

performance by business
Studies indicate a positive relationship
between social performance and financial
performance

Do we have a better alternative?

Creating shared value (CSV) - Enhances

economic competitiveness and increases

social returns
3-22

Stakeholder Approach

Corporation identifies the groups that

may affect the firms performance or
be affected by it
New Stakeholder Approach
Companies should focus on customer

needs, investment in workers and

sustainability
Boosts public confidence in business

3-23

Stakeholder Approach

Progressive approach - Collaborative

strategy
Stakeholder relationships are regarded to

be mutually defined, cooperative, and

reciprocal
Managers identify and address social
issues and stakeholder concerns

3-24

Stakeholder Approach

Social Accountability Accreditation

Services
Accredits companies that meet SA8000

standards
Social Accountability 8000 (SA8000) - Global
standard measuring companies social and
environmental records

3-25

Shareholder Approach

Companies focusing on the bottom line

contributes to the society better
Criticism - Companies may face
market-based pressure to respond to
social issues

3-26

Case: Pay More Than the Law

Requires?

Hobby Lobby raised its minimum wage

to $11 per hour in 2010
$4 more than the wage rate specified by the

federal law
David Green, the CEO, explained that the
company always tried to serve its employees
How can it make good business sense to pay
employees more than the law and the market
require?
Would you do as Hobby Lobby did?
3-27