Discussion 2

1. read article “Ikea puts it all on the Table with SR” pg 3 and give your thoughts (one paragraph for 150-200 words) [Ch1]
2. read article “Best Buy in Stakeholder Communication” pg 61 and give your thoughts (one paragraph for 150-200 words) [Ch 2]
managementbusiness
ATTACHED FILE(S)
1. read article on “Ikea puts it all on the Table with SR” pg 3 and give your thoughts
2. read article on “Best Buy in Stakeholder Communication” pg 61 and give your thoughts
3
IKEA is a favorite among customers searching for
well-designed products at low prices. IKEA stores
sell ready-to-assemble furniture, appliances, and
household goods. Today the firm is the largest fur-
niture retailer in the world, with 139,000 employees
operating in 43 countries. Germany is the firm’s
largest market, followed by the United States and
France. Its diverse variety of products includes furni-
ture, food, large items such as cabinetry, and smaller
items such as kitchenware, decor, and small plants.
IKEA also operates restaurants within its stores.
IKEA is highly focused on design, viewing it as
a competitive advantage. For instance, IKEA stores
have been designed intentionally to what some
describe as a maze that encourages shoppers to
go through the entire store. Some customers find
themselves lost or retracing their steps. This strategy
allows shoppers to see a wide variety of IKEA items,
possibly leading to impulse or add-on purchases.
IKEA was founded in Sweden in 1943 by Ingvar
Kamprad. The culture of the company heavily
reflects Swedish culture, which values hard-working,
friendly, and helpful people. These values helped
create IKEA’s vision, which is “to create a better
everyday life for the many people,” according to the
company’s website. IKEA aims to accomplish this
not only through selling affordable home furnishing
products, but also by helping people around the
world. One way that IKEA hopes to help people is
by helping the planet, by reducing carbon emis-
sions and creating sustainable energy through solar
panels that they sell.
Corporate social responsibility (CSR) is a large
factor in IKEA’s company culture. IKEA uses CSR to
expose its employees to new challenges. Employees
at IKEA are encouraged to mentor young students,
assist senior citizens, and other altruistic actions. By
volunteering for these tasks, employees can learn
valuable skills that they can transfer to their jobs.
IKEA has also found that CSR is a powerful recruiting
tool. Many potential employees look for employers
who share their values. Through CSR, IKEA can help
its community while attracting better talent.
In 1982, IKEA launched the IKEA Foundation.
Initially, the foundation focused on architecture and
interior design, but then it expanded to fight for
children’s rights and education. Recently, the IKEA
Foundation awarded a grant of $2.3 million to the
World Resources Institute to help bring clean elec-
tricity to 1 million people in India and East Africa. In
these areas, many schools, clinics, and agricultural
facilities are without power. The grant will be used to
create a map that shows the demand for electricity
in these areas. Once this map is created, the World
Resources Institute will be able to better identify
areas in need of electricity and other resources.
Another focus for IKEA is reducing carbon emis-
sions. In fact, IKEA’s long-term goal is to become
carbon positive, which means they will remove more
carbon dioxide than they create. IKEA is already
moving toward this goal by switching to electric
delivery trucks. The company plans to switch to
only electric trucks in major cities like New York and
Paris and is committed to completely switching over
to electric trucks in every location by 2025. IKEA
has already invested around $2 billion in renewable
energy. By 2030, IKEA plans to cut emissions from
stores by 80 percent and reduce emissions from
deliveries and customer travel by 50 percent. These
are lofty goals, but the company has invested con-
siderable resources into becoming carbon positive.
For IKEA, CSR is at the very core of its heritage
and current culture. IKEA aims to create value for
customers by selling stylish, low-cost home furnish-
ing products. However, the company doesn’t stop
there. It also feels that to sustain the planet, it must
reduce its environmental impact and encourage its
customers to do the same.1
IKEA Puts It All on the Table with Social Responsibility
Chapter Objectives
�O Define the concept of social responsibility
�O Trace the development of social responsibility
�O Examine the global nature of social responsibility
�O Discuss the benefits of social responsibility
�O Introduce a framework for understanding social responsibility
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Responsible Business Debate
Best Buy Excels in Stakeholder Communication
Issue: Is communication the key to stakeholder
satisfaction?
Best Buy was founded in 1966 by Richard Schulze. Ranking
72 on the Fortune 500 list, it is known for its discounted,
high-quality products, customer-centered approach,
sustainable outreach, and extensive recycling program.
The success of Best Buy over the years can be attributed to
a variety of factors, including savvy business decisions and
services to increase employee and customer satisfaction.
As primary stakeholders, customers and employees
have a major impact on the continued existence and
profit of Best Buy; therefore, their satisfaction is a high
priority. To meet stakeholders’ interests, Best Buy has
implemented methods to foster communication with both
customers and employees. The company uses its website
to learn more about its customers’ needs andpreferences,
andcustomers can use that website to rate every
product purchased. It was this type ofcommunication
that led Best! Buy to develop its first Corporate Social
Responsibility Report in 2007. The report was a response
to itscustomers’ repeated concerns over sustainability,
particularly in the area of electronics. It showedcustomers
that the company had received and understood their
concerns. Electronic waste was filling landfills, and
customers wanted to see this problem addressed. In
response, Best Buy implemented awide-scale electronics
recycling program. The company has set a goal to cut
carbon emissions by 60!percent in the next year and to
be carbon neutral by 2050.
After a period of stagnant growth, Best Buy hired a
new CEO, Hubert Joly, in 2012. Under Joly, Best Buy once
again became a growth company. Research has shown
that Best Buy’s advertisements tend to have more of an
impact when they highlight products, which is prompting
the company to engage in more product-oriented adver-
tising campaigns. For example, the company introduced a
service called “Assured Living” in 2017, which uses smart
home technology to allow millennials/caregivers to look
in on their aging parents while permitting the seniors
to live independently. To communicate this new service
to consumers, Best Buy has developed a website and
has advisors that can offer more detailed information to
customers about the technology. Best Buy’s current CEO,
Corie Barry, will work to continue this growth.
Best Buy invests in different platforms to foster its
communication with employees. For example, Geek
Squad forums provide a way for all Best Buy employees
to exchange information and share ideas. In addition,
Best Buy has conducted a multitude of interviews with
employees to determine issues with usability of the store’s
products. In response to these interviews, according to
vice president of retail operations, Shari Rossow, Best Buy
has invested in everyday products familiar to employees
to cut back on necessary training, make employee duties
easier, and help employees focus more on customer
service than learning arduous programs. This not only
benefits the employees, but also benefits customers and
Best Buy as a company.
Stakeholder satisfaction is crucial to the success of any
business, and communication with stakeholders is the key
to that satisfaction. Best Buy has proved that it can listen to
its stakeholders and will implement initiatives based upon
their feedback. This communication has been integral in
allowing Best Buy to develop strong stakeholder relation-
ships, allowing the company to compete against online
rivals and adapt to an increasingly digital world.
There Are Two Sides to Every Issue
1. Communication is the most important factor in stake-
holder satisfaction.
2. Though communication is critical, it is one of many
factors in stakeholder satisfaction.
Sources: Courtney Reagan, “Best Buy CEO Sees ‘Growth Opportunities’ Ahead, Wall Street Isn’t Buying It,” CNBC, September 19, 2017, https://www.
cnbc.com/2017/09/19/best-buy-ceo-weve-fixed-what-was-broken-now-focus-is-on-growth.html (accessed January 6, 2019); Adrianne Pasquarelli, “Why
Best Buy Is Reorganizing Its Marketing Team,” AdAge, April 21, 2017, http://adage.com/article/cmo-strategy/buy-reorganizes-marketing-team/308756/
(accessed January 6, 2019); Jeff Bullas, “How Best Buy Energized 170,000 Employees with Social Media,” jeffbullas.com, http://www.jeffbullas.com/how-
best-buy-energized-170000-employees-with-social-media/ (accessed January 6, 2019); Best Buy, “Corporate Responsibility and Sustainability,” 2018,
https://corporate.bestbuy.com/sustainability/ (accessed January 6, 2019); Corinne Ruff, “Why Best Buy Is Investing in Employees,” Retail Dive, February 7,
2018, https://www.retaildive.com/news/why-best-buy-is-investing-in-employees/516497/ (accessed January 6, 2019); “Fortune 500,” Fortune, 2018, http://
fortune.com/fortune500/list/ (accessed January 6, 2019).
Chapter 2Strategic Management of Stakeholder Relationships 61
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Chapter 2
Strategic Management of Stakeholder Relationships
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2-1 Define stakeholders and understand their importance
2-2 Distinguish between primary and secondary stakeholders
2-3 Discuss the global nature of stakeholder relationships
2-4 Consider the impact of reputation and crisis situations on social responsibility performance
2-5 Examine the development of stakeholder relationships
2-6 Explore how stakeholder relationships are integral to social responsibility
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Why do you think stakeholders are important to industries and organizations?
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Customers Employees Investors
Stockholders Suppliers Government
Communities
They not only are influenced by businesses
They have the ability to affect businesses
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Stakeholders
Constituents who have an interest or stake in a company’s products, industry, markets, and outcomes
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Adam Smith (A founder of capitalism)
Created the concept if of the invisible hand and spoke about self-interest
However, went on to explain that this common good is associated with psychological motives and that each individual has to produce for the common good
A notion of capitalism that reemphasizes stakeholder concerns and issues
In the 21st century, Friedman’s form of capitalism is being replaced by Smith’s original concept (now called enlightened capitalism)
Acceptance of enlightened capitalism may occur faster in developed countries
Theodore Levitt wrote that although profit is required for business, profit is not the purpose of business
Norman Bowie noted that focusing on profit alone can create an unfavorable paradox that causes a firm to fail to achieve its objectives
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enlightened capitalism
a theory of capitalism originally proposed by Adam Smith as “promoting the happiness of mankind” that emphasizes stakeholder concerns and issues
What power (if any) do you think stakeholders have over organizations?
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stakeholder engagement
the process of involving stakeholders who may be affected by an organization’s decisions or that may influence the content or implementation of the organization’s decisions
Stakeholder Issues and Interactions
New reforms to improve corporate accountability and transparency also suggest that stakeholders such as suppliers:
Can play a major role in fostering responsible decision making
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Banks
Law
Firms
Public Accounting Firms
Identifying Stakeholders
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Primary Stakeholder
They are fundamental to a company’s operations and survival; these include shareholders & investors, employees, customers, suppliers, and public stakeholders, such as government and the community
Secondary Stakeholder
They do not typically engage in direct transactions with a company and thus are not essential for its survival; these include the media, trade associations, special-interest groups, and competitors
Cannot be ignored
For example, sometimes the media can have more of an impact than a primary stakeholder
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stakeholder orientation
the degree to which a firm understands and addresses stakeholder demands
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Comprises three sets of activities
The organization-wide generation of data about stakeholder groups and assessment of the firm’s effects on these groups
The distributionof this information throughout the firm
The organization’s responsiveness as a whole to this intelligence
stakeholder orientation
the degree to which a firm understands and addresses stakeholder demands
First, relevant stakeholder communities should be analyzed on the basis of:
The power each enjoys
The ties between them
Next, firm should characterize the concerns about the business’s conduct that each relevant stakeholder group shares
Finally, the company should evaluate its impact on the issues that are important to the various stakeholders it has identified
This intelligence should be circulated throughout the firm
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A stakeholder orientation is not complete unless it includes activities that actually address stakeholder issues
Stakeholder orientation can be viewed as a continuum, in that firms are likely to adopt the concept to varying degrees
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A stakeholder has power to the extent that it can gain access to coercive, utilitarian, or symbolic means to impose or communicate its views to an organization.
Coercive power—the use of fear, suppression, punishment or some type of restraint (issue is emotionally charged & somewhat controversial)
Utilitarian power—financial or material control or based on a decision’s utility or usefulness (boycotts & lawsuits)
Symbolic power—the use of symbols that connote social acceptance, prestige, or some other attribute (letter-writing, advertising messages, & websites)
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Legitimacy is the perception or belief that a stakeholder’s actions are proper, desirable, or appropriate within a given context
Gained through the stakeholder’s ability and willingness to explore the issue from a variety of perspectives and then to communicate in an effective and respectful manner on the desire for change
Extremist views are less likely to be considered legitimate because these groups often use covert and inflammatory measures that overshadow the issues and create animosity
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Urgency is the time sensitivity and the importance of the claim to the stakeholder
Stakeholders exercise greater pressures on managers and organizations when they stress the urgency of their claims
Time sensitivity usually heightens the stakeholder’s effort and may compress an organization’s ability to research and react to a claim
How do you think a firm’s reputation relates to its stakeholder relationships?
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Corporate reputation, image, and brands are among the most critical aspects of sustaining relationships with constituents
Investors
Media
Government watchdogs
Customers
Financial analysts
Company’s reputation is affected by every contact with a stakeholder
Companies can take decades to build their reputation and one mistake can cause significant reputational damage
Reputation Management
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Reputation Management
The process of building and sustaining a company’s good name and generating positive feedback from stakeholders
Reputation Management Process
Process of reputation management involves four components that work together:
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Identify how the organization wants to be viewed by stakeholders
Determine how stakeholders evaluate the company and their impressions of its image
Evaluate other’s impressions of organizational performance
Understand the company’s reputation
Most firms will, at one time or another, experience crisis situations
How a company reacts to the situation is indicative of its commitment to and implementation of social responsibility
The acceptance and implementation of reputation management strategies may bring challenges to the marketplace of ideas
An ideas marketplace
assumes that ideas
compete against one
another for truth and
acceptability
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What could a company facing a crisis do to satisfy its stakeholders & protect its reputation?
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Ethical Misconduct Disaster (EMD)
Unexpected organizational crisis that results from:
Employee misconduct
Illegal activities (fraud)
Unethical decisions that significantly disrupts operations and threatens or is perceived to threaten the firm’s continuity of operations
Organizational crises are far-reaching events that can have dramatic effects on both the organization and its stakeholders
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Stressful Uncertain
Emotional Demanding context
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Crisis Management
The process of handling a high-impact event characterized by ambiguity and the need for swift action
Crisis usually leads to both success and failure outcomes for a business and its stakeholders
Provides information for making improvements to future crisis management and social responsibility efforts
Requires a firm’s leadership to communicate in an often:
Crisis Management Process
Fundamental difficulty that a company faces is how to communicate effectively to stakeholders during and after a disaster
Crisis events are often so chaotic that a company’s leadership may not be certain of the cause of the situation before the media and other relevant groups demand a statement
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Crisis Management Process
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First
Leadership should express concern and/or remorse for the event
Second
Organization should delineate guidelines regarding how it intends to address the crisis so that stakeholders can be confident that the situation will not escalate or reoccur
Third
Company should provide explicit criteria to stakeholders regarding how each group will be compensated for any negative effect it experiences as a result of the crisis
Firm’s leadership should try to communicate as much accurate information to stakeholder groups as possible to minimize their uncertainty
When firm fails to do so, its credibility, legitimacy, and reputation in the eyes of stakeholders often suffer
The needs of various stakeholder groups may conflict
Firms have the responsibility to manage the competing interests of stakeholders to ensure that all stakeholder groups are treated fairly in the aftermath of a crisis
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Why do you think that developing strong relationships with stakeholders is so important?
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Instead of just pursuing one-time transactions
Companies are now searching for ways to develop long-term and collaborative relationships with their customers and business partners
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Some investments are tangible, such as buildings, equipment, & other elements dedicated to a particular relationship
Other investments are less tangible, such as the time, effort, trust, and commitment required to develop relationships
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Social Capital
An asset that resides in relationships and is characterized by mutual goals and trust
Like financial and intellectual capital, social capital facilitates internal and external transactions and processes
Unlike financial and intellectual capital, social capital is not tangible or the obvious property of one organization
Why might developing a process for implementing a stakeholder perspective be beneficial for an organization?
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Implementing a Stakeholder Perspective in Social Responsibility
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Step 1:Assessing the Corporate Culture
Social responsibility program must align with the corporate culture of the organization
Step 2:Identifying Stakeholder Groups
Important to recognize stakeholder needs, wants, and desires
Identify the organizational mission, values, and norms that are likely to have implications for social responsibility
Stakeholders have some level of power over a business because they are in the position to withhold, or threaten to withhold, organizational resources
Implementing a Stakeholder Perspective in Social Responsibility (cont.)
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Step 3:Identifying Stakeholder Issues
Steps 1 & 2 – identify the stakeholders who are both powerful and legitimate, determines the degree of urgency in addressing their issues
Step 4:Assessing the Organization’s Commitment to Social Responsibility
Arrive at an understanding of social responsibility that specifically matches the organization of interest
Step 3 – understanding the nature of the main issues of concern to these stakeholders
Used to evaluate current practices and to select concrete social responsibility initiatives
Implementing a Stakeholder Perspective in Social Responsibility (cont.)
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Step 5:Identifying Resources and Determining Urgency
Levels of financial and organizational investments required by different actions should be determined
Step 6:Gaining Stakeholder Feedback
General assessment obtained through satisfaction or reputation surveys
When prioritizing social responsibility challenges factor in levels of urgency
Stakeholder-generated media can be assessed
Formal research conducted by using focus groups, observations, and surveys
What motivates companies to pursue stakeholder relationships?
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Without a solid understanding of stakeholders and their interests, a firm may miss important trends and changes in its environment and not achieve strategic social responsibility
The Reactive-Defensive-Accommodative-Proactive Scale provides a method for assessing a company’s strategy and performance with each stakeholder
Scale is based on a continuum of strategy options and performance outcomes with respect to stakeholders
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The Reactive-Defensive-Accommodative-Proactive Scale is useful because it:
Evaluates real practice
Allows an organization to see its strengths and weaknesses within each stakeholder relationship
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Social Audit
The process of assessing and reporting a firm’s performance in adopting a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected of it by its stakeholders
Chapter 1
Social Responsibility Framework
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1-1 Define the concept of social responsibility
1-2 Trace the development of social responsibility
1-3 Examine the global nature of social responsibility
1-4 Discuss the benefits of social responsibility
1-5 Introduce the framework for understanding social responsibility
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What do you believe organizations should be responsible for accomplishing?
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Businesses should:
Look beyond their self-interests
Recognize that they belong to a larger group that expects responsible participation
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social responsibility
a strategic focus for fulfilling economic, legal, ethical, and philanthropic responsibilities, can also be referred to as corporate social responsibility (CSR)
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Social Responsibility
Goes beyond being philanthropic or environmentally sustainable
75% of Americans think social responsibility is important in developing attitudes toward brands
Never-ending process of continuous improvement
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philanthropy
the desire to improve the welfare of others through donations of money, resources, or effort
consumer protection laws
regulations enacted to protect vulnerable members of society with formal safeguards for consumers
sustainability
a company’s economic, environmental, and social performance
Employees thrive when managers:
Treat them with dignity
Provide the right atmosphere
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legal responsibility
the most basic expectation that a company must comply with the law
employee well-being
The health and wellness of employees, including how workers feel about their work and their working environment
Applies to all types of businesses
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Small Businesses
Large Businesses
Sole Proprietorships
Partnerships
Multinational Corporations
Nonprofit Organizations
Nonprofit organizations are expected to be socially responsible
Government agencies are expected to:
Uphold the common good
Act in an ethical and responsible manner
Social responsibility efforts of large corporations usually receive the most attention, but the activities of small businesses may have a greater impact on local communities
Applies to All Types of Businesses
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Needs a strategic focus
Requires a formal commitment from top management
Requires action and results
Depends on collaboration and coordination across business and among constituencies
Large companies often create specific positions and departments to support social responsibility programs
Communicated through mission and vision statements, annual reports, websites, public relations
Social responsibility initiatives should be:
aligned with the company’s corporate culture
integrated with companywide goals and plans
fully communicated within and outside the company
measured to determine their effectiveness and strategic impact
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corporate culture
shared values, attitudes, and beliefs that characterize members of an organization
Many people believe that businesses should accept and abide by four types (stages) of responsibility:
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Stage 1
Businesses have responsibility to be financially viable so that they can:
Provide a return on investment for their owners
Create jobs for the community
Contribute goods and services to the economy
Economy influenced by the ways organizations relate to their shareholders, customers, employees, suppliers, competitors, community, and natural environment
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Stage 2
Companies required to maintain compliance with legal and regulatory requirements specifying the nature of responsible business conduct
Businesses perceived as irresponsible:
Elected representatives may draft legislation to regulate the firm’s behavior
Firm may be sued in a court of law in an effort to force it to “play by the rules”
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Stage 3
Companies must decide what they consider to be just, fair, and right
Business ethics refers to the principles and standards that guide behavior in the world of business
Principles are specific and universal boundaries for behavior that should never be violated
Values are enduring beliefs and ideals that are socially enforced
A code of conduct is a written collection of the rules, principles, values, and expectations of employee behavior
Strategic responsibility is realized when a company has integrated a range of expectations, desires, and constituencies into its strategic direction and planning processes
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Stage 4
Philanthropic activities promote human welfare and goodwill
By making donations of money, time, and other resources, companies can:
Contribute to their communities and society
Improve the quality of life
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stakeholder orientation
the aim to benefit all parties affected by the success or failure of an organization
resource advantage theory
a theory stating that the value of a resource is viewed relative to its potential to create competitive differentiation or customer value
Who are the key stakeholders of the organization?
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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
Research suggests interorganizational networks can be an important element of a successful corporate strategy that creates shared value.
Customers Employees Investors
Stockholders Suppliers Government
Communities
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Stakeholders
Constituents who have an interest or stake in a company’s products, industry, markets, and outcomes
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1940s
Economic dominance of corporations
Total autonomy of top management
1950s-60s
Few formal governance procedures restraining management actions
Organizational charitable giving expanded (arts, culture, and community)
Laws passed that require protection of the natural environment, safer products, promotion of equity, and supporting workplace diversity
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1970s
World competition, bankruptcies, mergers, and acquisitions
1980s
Flatter organizations (downsizing)
More business scandals
Empowerment of lower-level employees
Focus on profitability and economies of scale
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1990s
Less employee loyalty and increased “job hopping”
Growth of temporary employment
2000s
Special interest groups, companies, human rights activists, and government strive to balance economic and social goals
Major scandals damage the global economy
Greater interest in ethics and social responsibility
Passed the Sarbanes-Oxley Act to overhaul securities laws and governance structures
Public Company Accounting Oversight Board was implemented to regulate the accounting and auditing profession
In 2007 and 2008, a house boom in the U.S. collapsed, setting off a financial crisis
In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act
Intended to protect economy from similar financial crisis by creating more transparency in the financial industry
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New technology creates opportunities for new business models and job opportunities.
While AI has been deployed to solve many business problems, it raises ethical issues of its own.
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artificial intelligence
machine (computer) learning that can perform activities and tasks that usually require human intelligence, such as decisions, visual perceptions, and speech recognition
blockchain
a linked group of ordered transactions that are a subset of a database
Who determines social responsibility on a global scale?
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Increasing globalization of business has made social responsibility an international concern
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Critics believe detrimental because
Destroys unique cultural elements of individual countries
Concentrates power within developed nations and their corporations
Abuses natural resources
Takes advantage of people in developing countries
Holds much greater potential than its critics think, and much more disruptive than its advocates admit
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Advocates of the global economy counter by pointing to
Increases in overall economic growth
New jobs
New and more effective products
Global social responsibility also involves the confluence of government, business, trade associations, and other groups.
Another trend involves business leaders becoming so-called cosmopolitan citizens by simultaneously harnessing their:
leadership skills
worldwide business connections
access to funds
beliefs about human and social rights
Progressive global businesses and executives recognize the shared bottom line that results from the partnership among businesses, communities, government, customers the natural environment
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Benefits of Social Responsibility
↑ efficiency in daily operations ↑ employee commitment
↑ product quality ↑ decision making
↑ customer loyalty ↑ financial performance
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If social responsibility is strategic and aligned with a firm’s mission and values
Then improved performance can be achieved
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Stakeholder Trust
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Trust
The glue that holds organizations together
Allows focus on efficiency, productivity, and profits
Low trust results in organizational decay and relationship deterioration
Trusting relationships between managers and their subordinates and between peers contribute to greater decision-making efficiencies
Customer Loyalty
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A company should strive to market products that satisfy customers’ needs through a coordinated effort that also allows the company to achieve it own objectives
By focusing on customer satisfaction, a business can strengthen its customers’ trust, and as their confidence grows, this in turn increases the firm’s understanding of their requirements
Irresponsible behavior could trigger disloyalty and refusals to buy, whereas good social responsibility initiatives could draw customers to a company’s products
What happens when employee loyalty is breached?
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Employee Commitment
Employee commitment stems from employees who are empowered with training and autonomy
If firms fail to provide value for their employees, loyalty and commitment suffer
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Service quality is positively related to employee loyalty
Leads to higher customer satisfaction and customer loyalty
Shareholder Support
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Investors look at a corporation’s bottom line for profits or the potential for increased stock prices
Relationships with stockholders and other investors must rest on dependability, trust, and commitment
Many shareholders are also concerned about the reputation of companies in which they invest
Shareholder Support
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Those shareholders willing to hold onto their investments for lengthy periods are more willing to sacrifice short-term gains for long-term income.
Focus on short-term gains subjects corporate managers to tremendous pressure to boost short-term earnings (often at the expense of long-term strategic plans)
Attracting long-term investors shields companies from the vagaries of the stock market and gives them flexibility and stability in long-term strategic planning
The Bottom Line:Profits
Studies have identified a positive relationship between social responsibility and financial performance
Company with strong efforts and results in social responsibility is generally not penalized by market forces
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Social responsibility is positively associated with:
Return on investment
Return on assets
Sales growth
How does business conduct relate to a nation’s overall economic conduct?
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National Economy
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Economic well-being is promoted by:
Social institutions are important for the economic well-being of a society
Countries with institutions based on strong trust foster a productivity-enhancing environment
A key factor distinguishing societies with high standards of living from those with lower standards of living is whether the institutions within the society are generally trustworthy
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