SOCIAL RESPONSIBILITY AND

BUSINESS 4TH EDITION

FERRELL THORNE FERRELL

CHAPTER 1

Social Responsibility
Framework
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.
What do you believe organizations
should be responsible for
accomplishing?
Social Responsibility Defined (cont.)

Applies to all types of businesses

Small businesses
Large businesses
Sole proprietorships
Multinational corporations
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
Pyramid of Social Responsibility
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
SOCIAL RESPONSIBILITY AND
BUSINESS 4TH EDITION

FERRELL THORNE FERRELL

CHAPTER 2

Strategic Management of
Stakeholder Relationships
Stakeholders

Those constituents who have a stake in, or

claim on, some aspect of a companys
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.
Primary Stakeholders

Groups fundamental to a companys operation and survival

Customers
Employees
Shareholders
Investors
Suppliers
Government
Community
Balancing the needs and perspectives
of primary stakeholders is a strategic imperative.
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 organizations daily
survival.
They can place significant pressure on a business and
therefore, cannot be ignored.
Development of
Stakeholder 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.
Social Capital

An asset, which resides in relationships,

that is characterized by mutual goals and
trust
Facilitates smooth internal and external
transactions and processes
The Reactive-Defensive-
Accommodative-Proactive Scale
SOCIAL RESPONSIBILITY AND
BUSINESS 4TH EDITION

FERRELL THORNE FERRELL

CHAPTER 3

Corporate Governance
Corporate Governance

Corporate governance is the formal system

of 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
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 firms shareholders
Makes decisions based on what is ultimately best
for investors
Focuses on aligning investor and management
interests
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 relational
approach to business
Focuses on continuous improvement,
accountability, and engagement with internal and
external constituents
Issues in Corporate Governance
Systems
Boards of directors
Independence
Quality and experience
Performance
Shareholders and investors
Shareholder activism
Social investing
Investor confidence
Issues in Corporate Governance
Systems (cont.)
Internal control and risk management
Internal and external audits
Control systems
Risk management
Financial misconduct
Executive compensation
SOCIAL RESPONSIBILITY AND
BUSINESS 4TH EDITION

FERRELL THORNE FERRELL

CHAPTER 4

Legal, Regulatory, and

Political Issues
Governments Influence on Business

Laws are enforced through the judicial system.

Settles disputes and punishes criminals
Corporations have the same legal status as
a person.
Can sue
Can be sued
Can be held liable for debt
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
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
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
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 higher
prices and poorer service/quality.
Corporate Approaches
to 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
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 and
communication system.
Monitor and audit for misconduct.
Enforce and discipline.
Revise program as needed.
SOCIAL RESPONSIBILITY AND
BUSINESS 4TH EDITION

FERRELL THORNE FERRELL

CHAPTER 5

Business Ethics and

Ethical Decision Making
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
Personal Misconduct in the
Workplace
Moral Philosophies

Consequentialism
A decision is right or acceptable if it helps achieve
the desired results
Egoism
Maximizing ones 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
Kohlbergs Model

People progress through the previous six stages.

Cognitive moral development should be viewed
as a continuum.
Peoples moral beliefs and behavior change as
they gain education and experience.
There are universal values by which
people in the highest level of moral
development abide.
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
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.
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.