Ethical Lens Flashcards

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Rights and Responsibility Lens
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Rationality (head) and Autonomy (Individual)
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Results Lens
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Sensibility (heart) and Autonomy (individual)
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Relationship Lens
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Rationality (head) and Equality (community)
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Reputation Lens
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Sensibility (heart) and Equality (community)
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General Systems Theory
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~Business firms are embedded in a broader structure with which they consistently interact, adapt effectively, interactive social system. Relationship – ongoing interaction and exchange- both influence each other
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Stakeholder
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~All those that affect or are effected by the actions of a firm. >ie. Customers[product livelihood] , Employees [livelihood, security, job], Management {employee, safeguard business], Supplier [vital to success, final product, rise and fall together] media, government [mitigates need for industrial policy], Community [grants right for firm to do business, benefit economic and social contributions], Owner/Stockholders [financial, return], Competitors [monopoly, aid, obligation to the competitive environment, aware and nurturing to dynamic]
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Market Stakeholder
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~Those that engage in economic transactions with the company. >internal: employee and managers {+ compensation, impacted, benefit from success, hurt by failure. – viewed as representative of the firm} >external: Stockholders, customers, consumers, creditors, suppliers
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Nonmarket Stakeholder
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~those that do not engage in direct economic exchange with the firm but still affected by or can affect actions >External: government{does not normally conduct any direct market exchange}, community, NOG’s, Business support groups {may pay dues to support groups}, Media {advertisement}, Competitors, general public)
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Internal Stakeholder
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Those employed by the firm
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External Stakeholder
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Not directly employed by the firm
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Stakeholder Theory of the Firm
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~Purpose: to whom or what should the firm be responsible? >Takes all stakeholders into account (including customers and employees) >The purpose of the firm is to create value for society: Descriptive: realistic, Instrumental: effective, Normative: right thing to do.
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Ownership Theory (property/finance)
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~Maximize long term return for shareholders, Profit Maximization. ~Firm is seen as property of (agents of) its owner, their interest take precedence over all others. ~Law requires managers to act on behalf of.
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Fiduciary
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~The legal obligation of acting in the best interest of someone else, by putting their interests ahead through duty of care, obedience, and loyalty. >Legal duty to act solely in another parties interest (business = owners)
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Stakeholder Analysis: 4 key questions
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1. Who are the RELEVANT stakeholders? 2. What are the INTERESTS of each stakeholder? 3. What is the POWER of each stakeholder? 4. How are COALITIONS likely to form?
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Stockholder Coalition
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~When interests are similar, stakeholders may form temporary alliances to pursue common interests.
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Stakeholder Powers (5)
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The ability to use resources to make an event happen or to secure a desired outcome. 1. VOTING Power: has the right to vote {stockholder, proportionate to the percentage of owned stock} 2. ECONOMIC Power: {Customers, suppliers, retailers, employees- refuse to fill orders, refuse to buy products, refuse to work- depends on how organized} 3. POLITICAL Power: Government uses legislation, regulation, or lawsuits {directly}, other stakeholders can urge government to use its power, vote on candidates, protests {indirectly} 4. LEGAL Power: Stakeholders can bring up lawsuits against a company. 5. INFORMATIONAL Power: access to valuable data, facts, or details. Disclosure or nondisclosure of informations can be used to persuade, mobilize, or threaten others.
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Salience – state of being (stands out)
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~Legitimacy: extent to which a stakeholder’s actions are seen as proper or appropriate by the broader society. ~Urgency: the time-sensitivity of a stakeholder’s claim (extent to which it demands immediate action) ~Stakeholder Map: Positon on issue vs. Stakeholder salience … power
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Dynamic Environment of Business
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~The external environment of business is dynamic and ever changing. >Forces 6: Changing societal expectation, growing emphasis on ethical issues, globalization, evolving government regulation of business, dynamic natural environment, explosion of new technology.
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Disney Case
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~Workers weren’t getting paid enough, Disney had profits of 35 billion dollars, Workers couldn’t afford to live in the area because it was too expensive, complete disregard for workers, Relevant stakeholders: employees and managers {market}, media and community {nonmarket}
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Public Issue (also called social or sociopolitical issues)
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~Any issue that is of mutual concern to an organization and one or more of its stakeholders.-risk and opportunity for a firm (issues that firm does not anticipate, must plan for effectively, can hurt a company or confer a competitive advantage.) >typically broad issues that impact many companies and groups, and of concern to significant number of people. >Different groups may have different opinions on what should be done.
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Performance- Expectation Gap
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~The difference of what public and society expects to be accomplished and what business actually accomplishes. (expected corporate performance–gap–actual corporate performance. X-axis: time, Y-axis: performance (social and economic)) >Increase in gap: Failure to understand stakeholder concern and to respond appropriately. ie. firm is doing less and less of what society expects it to do. greater risk of stakeholder backlash or of missing major business opportunities
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Prioritizing Issues
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~Relevance to Business vs. Societies Expectation -ripeness, increases
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Environmental Analysis
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~Systematic way of identifying, monitoring, and selecting public issues. >gather information about the external issues and trends in order to develop a strategy to react to these issues, multiple environments affecting organization.
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Environmental Intelligence
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~The acquisition of information gained from environmental analysis >scanning to acuire intelligence: environments of 1.customer, 2.competitor, 3.economic, 4.technological, 5. social, 6. political, 7. legal, 8.geophysical environment.
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Competitive Intelligence
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~The systematic and continuous process of gathering, analyzing, and managing external information about the organization’s competitors that can affect the organization’s plans, decisions, and operations. (+)helping to better understand what other companies in the industry are doing, informed decisions, long term strategies (-) Must acquire ethically; temptation to use unethical and illegal means to obtain such information or provide to others. >Must balance the importance of acquiring competitive intelligence with the need to comply with all applicable laws and profesional standards of fairness and honesty.
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Issue Management and 5 step Process
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~Actively manage issues as they arise ~Steps company must take once they realize that the company’s actions do not match society’s expectations. >Boundary spanning departments, top management support is essential for effective issue management.1.IDENTIFY Issue: anticipate emerging concerns, attention to all 8 environments 2. ANALYZE Issue: understand how the issue is likely to evolve and how it will affect them, work with others 3. GENERATE Options: complex judgment that incorporate ethical considerations, reputation, and other. 4. TAKE Action: implement plan 5. EVALUATE Results: assess the results and make adjustments if necessary.
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Stakeholder Engagement and Stages
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~Relationship between a business and its stakeholders where both have an urgent and important goal, the motivation to participate, and the organizational capacity to engage one another. >Involves dialogue, network building, or partnership (+)benefits business by bringing in expertise, enhancing legitimacy, and generating creative solution to common problems. ~Stages: >Inactive: Company ignore stakeholders >Reactive: When they are forced to do so and then in a defensive manner. >Proactive: try to anticipate, use environmental scanning practices, specialized departments. Much less blindsided by crisis. Stakeholders are still considered a problem to be managed, rather than a source of competitive advantage. >Interactive: company actively engages with stakeholders in an ongoing relationship of mutual respect, openness, and trust. positive, source of value and competitive advantage
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Coca Cola Case: Water Neutrality Initiative
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~water quality, availability, access around the world, Coke used too much and deprived local communities, studies and worked with stakeholders (employees, owners, communities, customers), promised to return to nature and communities an amount of water equal to what they used in beverages. NOG and other activists involved. >Reduce, reuse, replenish.
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Cooperate Power and Responsibility
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~POWER: the capability of corporation to influence government, the economy, and society based on their organizational resources. ~RESPONSIBILITY: corporation should act in a way that enhances society and its inhabitants and be held accountable for any of its actions that affects people, their communities, and their environment. ~Iron Law of Responsibility: in the long run those who dont use power in ways that society considers responsible will tend to lose. Economic, legal, and social- integrate responsibilities into a coherent and comprehensive mission. (+)enhanced reputation, customer loyalty, employee satisfaction, and global community support
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Pros of Social Responsibility
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[+] Balanced corporate power and responsibility, iron law of responsibility, discourages misuse of power. [+] Discourages government regulation – some regulations reduce freedom of both business and society add economic costs and restrict flexibility-, keep power decentralized [+] Promotes long-term profits, indirectly helps bottom line [+]Improves Stakeholder relationships: viewed positively by stakeholders, employee trust and desire to work, positive, loyal consumer, investor decision. [+] Enhances business reputation: loyal customers, attract and retain better employees, productivity.
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Cons of Social Responsibility
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[-]Lower economic efficiency and profit, only most efficient companies will survive [-]Imposes unequal costs among competitors, competitive disadvantage, different countries unequal [-] Imposes hidden costs passed onto stakeholders, do not realize they are paying for social responsibility efforts (decreased wages or return on investment, or increased costs) [-] Requires skills business may lack, not trained to solve social problems, unlike the government they have not been elected by public to solve -unnecessary expenses and poorly conceived approaches [-]Places responsibility on business rather than individual [-]Efforts are superficial
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Social Enterprise
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~Organization that uses business strategies for the purpose of improving human and environmental well-being. (not to maximize returns) >Benefit Organizations – seeks to blend social objectives with financial goals, must meet rigorous, independent social and environment performance standards. >Serving the Bottom of the Pyramid: bringing products and services to the poorest people in the world.
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Timberland Case: Corporate Social Responsibility
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~Known for deep commitment to social responsibility, employee involvement, charity, acquired by another company, still responsible. Stakeholders: employees, community, environment. (+) benefits the community and environment, improved reputation (-) potentially worked against bottom line, made vulnerable.
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Freidman: Stockholder Theory
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~Responsibility to increase profits $ ~Direct responsibility to owners (agents), legally must conduct business in accordance with their desires, make money while conforming to rules of society ( both laws and ethics) ~Only individuals have social responsibilities: recognize and assume responsibilities voluntarily, spending own money (Owners can spend own money -virtue of private competitive enterprise- forces people to be responsible for their own actions and makes it difficult for them to exploit others for either selfish or unselfish purposes, can’t spend owner money: political mechanisms not market mechanisms are the appropriate way to determine the allocation of resources to alternate uses- imposing taxes} ~How to spend it, how much is justified?
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Freeman: Stakeholder Theory
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~Managers bear a fiduciary duty to STAKEholders (employees, suppliers, customers, stockholders, community, management – all participate in determining decisions of the firm.) >Legal: should primarily be run in the interest of STOCKholders (in accordance of the law, pay return), also required to take others into consideration >Economic: costs must be born by all (often firms sought to internalize benefits and externalize costs). Moral hazards, avoidance of competitive behavior occur when managers try to act in interests of stockholders. >Have the right to make claims, stakes are reciprocal ~keep relationship of stakeholders in BALANCE ~We pay returns to owners not because they \”own\” the firm, but that their support is necessary for the survival of the firm, and that they have a legitimate claim on the firm, similar reasonings to each stakeholder.
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Inland Bank
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~National bank, made economic sense to reorganize branches but it would affect the community, cause the lose of jobs and no bank to go to, bank had a reputation of community involvement and solid financial performance,uproar in media and through protests. Stakeholders: banks and the community, owners
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Business Ethics
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~Guides to moral behavior, the application of general ethical ideas to business behavior. >relativism: ethical principles defined by various times, places, circumstances, and personal opinion. >Managers create ethical tone, serve as models, ethical character and moral development >Spirituality: greatly influence how a manager understands ethical chalenges, must acknowledge spirituality
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Why Should Business Be Ethical?
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~To meet demands of business stakeholders – social responsibility ~To enhance business performance – integrity capital (reap rewards) ~To comply with legal requirements – U.S. Corporate Sentencing Guidelines- strong incentive for businesses to promote ethics; reduced sentencing for criminal act for companies who have taken ethical steps ~To prevent or minimize hard ~To promote personal morality
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Sarbanes Oxley Act
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~Seeks to ensure that firms maintain high ethical standards in how they conduct and monitor business operations. -strict rules for auditing, pay back fraudulent financial reports, restricts auditing firms from providing both auditing and consulting services to same client >born from ethical scandals >turned businesses attention toward entrusting ethical compliance and the development and implementation of ethics programs to an ethics or compliance officer
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Why do Ethical Problems Occur?
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~Personal gain and selfish interests – selfishness of few, disregard for harm of others ~Competitive pressures on profit – bottom line ~Conflicts of interest – clash of personal values and business goals, favoritism ~Cross-cultural contradictions – different ethical standards, may be legal but is it ethical
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Conflict of Interest
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~When an individual’s self-interest conflicts with acting in the best interest of another, when the individual has an obligation to do so.
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Stages of Moral Development (managers)
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1. Childhood: ego centered (own pleasure), punishment avoidance: obedience to power, avoid hard 2. Adolescence, youth: ego centered (own pleasure), reward seeking: self interest, own needs, reciprocity 3.Early childhood, adolescence: Group centered (interaction, please other), Social groups: friends, school coworkers 4.Adulthood: society and law-centered, Society at large:customs traditions, laws 5.Mature adulthood: principal centered (above and beyond) moral beliefs above and beyond social customers: human rights, social contracts, broad constitutional principals 6.Mature adulthood: principal centered(above and beyond), Universal principles: justice, fairness, universal human rights.
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Analyzing and Reasoning Ethical Problems
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~Values: do no harm, be fair and just, be honest, respect ones rights, do your duty and act responsibly 1) identify and analyze the nature of an ethical problem 2)decide which course of action is likely to produce ethical results Ethical reasoning: use all 4 to understand ethical issues >Virtue ethics: character traits of a good person, way of being, valuable characteristics rather than rules of correct behavior, subjective and incomplete set of virtues >Utilitarian: the overal amount of good that can be produced by an actions or decision, cost and benefits, difficult to measure >Rights: respect basic rights of human beings, difficult to balance conflicting rights >Justice: Distributing fair shares, benefits and costs are fairly distributed, difficult to measure and agree
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Chiquita Case
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~Emphasis on a strong sense of ethical performance and social responsibility, confronted to pay for employee safety, cost of doing business, armed a terrorist organization, should have stopped the payments as it was illegal, rejected the idea of moving company, became responsible for putting money in hands of terrorists, victims of extortion
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Corporate culture
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~Personal values and moral character play key role in improving company’s ethical performance. >blend of ideas, customs,traditional practices, company values, and shared meaning help define normal behavior for everyone who works in a company
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Ethical climate: 3 criteria
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Unspoken understanding among employees of what is and is not acceptable behavior. Moral atmosphere 1. Egoism: self centered 2. Benevolence: concern for others 3. Principle: respect for ones own integrity, for group norms, and society laws -Criteria: used to describe how individuals, companies, or society at large approach moral dilemmas
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Business Ethics: Different Organizational Functions
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~Accounting:{publically held companies financial record hace to be audited} integrity, honesty, accuracy, often face conflict of interest ~Financial:{responsible for managing firms assets and raising capital}little loyalty with the company and abuse of company money (best path for ethical compliance is self regulation) ~Marketing: {advertising, distributing, and selling of products and services, most directly with customer} honesty and fairness in advertising , health and safety. ~Information Technology: invasion of privacy (collection, storage, and access to personal business info) confidentiality, copyright, question of trust ~Production and operations: loyalty to organization, justice to those with whom you deal, and faith in your profession. integrity
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White Collar Crimes
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~illegal acts committed by individuals, employees, or business professionals. {fraud, insider trading, embezzlement, computer crime ect.}
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Building ethical safeguards
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Reinforce each other and become more effective not just in times of crisis but as an integral part of day to day business ~Top management commitment and involvement tone at the tope ~Ethical policies or Codes :provides guidelines when encountered with an ethical dilema, rules and procedures for employees to follow ~Ethics compliance officers ~Ethics reporting mechanisms: provide interpretation of proper behavior, create avenue to make known to the proper authorities allegation of unethical conduct, employees and corporate stakeholders a way to discover general info ~Ethics training programs :expensive and time consuming, making sure employees know what the law requires and company expects, measure effectiveness ~Ethics audits: assess the effectiveness of their ethical safeguards by documenting evidence of increased ethical employee behavior. Outside or inside consultant – note any deviation form the companies ethics standards and to bring them to the attention of the supervisors.
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Bribery
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Unethical activity, a questionable or unjust payment often to a government official to ensure or facilitate a business transaction. -Legislation approach, by itself, is unlikely to be effective in curbing briber, as culture of society plays an important role in the occurrence
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Foreign Corrupt Practices Act
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U.S. based companies have been prohibited from paying bribes to foreign government officials, political parties, or political candidates. >Department of Justice and Security and Exchange Commission >effort to curtail unethical practices >Companies with foreign operations have to have full disclosure accounting practices, requires evidence of the intent to corrupt -Effective in combating bribery is an integrated approach of economic advancement policies, social investment education, and friendly business policies to foster economic growth (anti-corruption laws and punishments to comabt bribery while seeking to enhance economic development and gradual cultural adjustments)
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Ethics and the Law
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~Best way to ensure ethical business conduct is to insist that business firms obey society’s laws. >both define proper and improper behavior –Laws: society’s attempt to reduce to written rules (formalize) the general publics ideas about what constitutes right and wrong. (cannot always define proper action) –Ethics:more complex, human dilemmas, preempt legislation, and voluntarily adopt ethically based practices. >Need to do more than comply with laws, the consequences of acting unethically and illegally are serious.
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Alcoa Case: core values in practice
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~Employees must comply with company values, documented values, importance of health and safety, employee got hurt in one of the branches and it wasn’t reported = unacceptable, CEO fixed it, integrity caring for employees -*-Role of CEO impacted the culture- top down, management ethical beliefs go to employees
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Enron Case
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~Case of greed, malpractice, criminal behavior, down right laziness. Used as a warning/ example –Creative accounting: the process of manipulating accounting figures by taking advantage of the loopholes in accounting rules –Accounting: constructed reality of business transactions, without accounting rules there would be no profits, assets, or liability, shapes perceptions, behaviors, and expectations; all accounting is creative. Enron: universally hailed as a good company, used creative and manipulative accounting practices to distort reported profitability and indebtedness -Market to market {income statement of present value, simultaneously inflates current earnings, and creates need to prop up future profits} also used special purpose entities {white collar: borrow money and absorb debt}, loopholes, choices of measurement, and disclosure of practices. >Opaque accounting or feeble corporate governance and ends in bankruptcy >International Accounting Standards -internationally accepted. >Auditor independence: conflict of interest, should have reported accounting manipulation and refused to accept accounts >Do accounting through traditional accounting methods provides accuracy, integrity, vigilance, transparency. >SEC- regulatory agency
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Capitalism
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:economic freedom, individuals rights to pursue his or her financial goals without government involvement. Laissez faire: unregulated economy, interconnected, self-regulating network of producers, consumers, and markets. Adam Smith- pure capitalism, no government, personal gain eventually benefits society, regulate itself (invisible hand, Darwinian capitalism: survival of the fittest, companies unfit to operate won’t survive), competition, private ownership, supply and demand (companies compete to offer lowest price), different classes >obeying laws and maximizing investor wealth, fiduciary duty to owners (ethically) >market corrects itself (recession strips away bad assets, those who reamin re build, recession ends) (-)different classes lead to conflict, selfish, amoral, exclusion of government didn’t work, monopolies eliminated competition. U.S. showed a lack of faith in free markets We do not have a free market today – SEC, not free market, regulations ect.
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Stakeholder theory (MARKET)
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~Blend of competitive environment between firms for market shares and collaborative environment between and among the internal stakeholders along with society and market itself. ~Market efficiency is still desired outcome but to take into account all, corporate responsibility, act ethically ~democracy and capitalism – usually at odds, interact the two core values, democratic principles to business decision making, government intervention can help stabilize capitalistic economy (+) protect from boom and bust, promote social good, constant, tend to emerge in crisis
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Government and Market
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>Can stand alone and or Can interact. ~Coping strategy: considers all stakeholders avoids government intervention ~Self interest: Goal is to make money, legally, ethically – collaborative with stakeholders, win win ~Social contract: Social responsibility balances multiple interests- society+ government + business, responsible for all claims against business ~Fundamental fairness: underlying rules of fairness, act fairly in market activities, holds market together >return on investment, obey law, combine financial and legal perspective (ethics- consideration of stakeholders, express values)
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Business Ownership
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Corporation Partnership- business that has more than one owner that has not filed with the state to be a corporation, personally liable for all business debts and obligations. Limited (one partner liable) or general. Sole proprietorship: simplest operating business, not a legal entity, owns business and is personally responsible for its debts, loses and liabilities, simple, easy set up, nominal cost, freely mix business or personal assets
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Online Privacy Case: how to protect
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~Technology can violate sense of privacy {hackers, personal and identifying information}, epidemic of privacy violations, government has pledged to correct, data is a new form of currency, companies have to better correct customers, and individuals responsibility {dont have enough power}, do not track act. ~Use data to attract you, advertise to relevant stakeholders, FTC
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City Group – Cardholder information hacked
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~breached credit card info names and account numbers emails, took 12 days to complete investigation, took appropriate measures, reimbursed loses and not liable, hackers used an easily detected hack, implemented enhanced procedures
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Stockholder
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~Legal owners of a business, by purchasing stock, big stake. provide capital, monitor corporate performance, assuring the effective operation of stock markets, bringing new issues to the attention of management- make business work. increasingly powerful and vocal stakeholder group >Individual stockholder: people who directly own shares of stock issued by companies. >Institutions: pensions mutual funds, insurance companies, and university endowments own stock.(account for 63% if the value of all equities) ~Objective: make money (capital appreciation and dividends: movement of stock market {bear market – and bull market + alternate by economy, interest rates, world events}, company performance), use ownership to achieve social and ethical objectives, take control Legal rights and Safeguards: ~right to share in the profit, receive annual reports, inspect corporate books, vote on members of board, major decisions (proxy- absentee ballot), hold directors responsible for acts through suits, sell stock to others
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Board of Directors
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~Elected group of individuals who have a legal duty to carry out these objectives, develop broad policies, and select top-level personel to carry out these objectives and policies, reviews manager performance. meet 6 times a year, vary in size and composition but average of 12 (10-11 should be outside company), different committees: nominating, executive, special, audit
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Good Governance
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~The process by which a company is controlled or governed. Good: -select outside directors -hold election for members of the board -appoint an independent lead director -align director compensation with corporate performance -evaluate the boards own performance on a regular basis
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Executive Compensation
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~One of the most important functions of BOD >if managers were merely hired agents, what will guarantee that they act in the interests of shareholders rather than simply themselves? ~Mechanism for aligning the interests of the corporation and its stockholders with those of its top managers is compensations (through money and stock), compare the pay of top managers with the average employee, system can fail, can be excessive (+)incentive for innovation and risk taking, shortage of able workers (-) cant compete with foreign businesses (diverts financial resources), resentment from other employees, pay over failure and success, managers have a lot of influence on pay setting process, want to pay above industry average. ~Today: compensation boards made of outsiders, hire consultants, compensation ties more closely to performance,earn more than a certain multiple- remain a core challenge of corporate governance.
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Dodd Frank Act
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~Provisions 2010 required major U.S. firms to disclose the ratio of their CEO’s compensation to the median compensation of their employees, disclose top five executives are paid and lay out the rational, also report the value off various perks compensation ~Say on Pay, public companies must hold shareholder votes on executive compensation at lease every 3 years (not binding but they voice displeasure) ~SEC: more funding and greater regulatory authority granted.
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Shareholder activism
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:take action directly to protect own interests, can and do protect their economic and social rights >increase in Large Institutions (more active, harder for them to sell shares so they organize to share- often improves performance) Social Investors (stocks of social criteria, corporate governance), Owners seeking redress through courts (advance interests by suing, if think they or their company has been damaged can bring lawsuit on behalf of themselves or company- all about money doesn’t have to be illegal)
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Social investment: 2 ways
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~The use of stock ownership as a strategy for promoting social objectives, what they are doing for society not just bottom line 1. Stock screening: Choose stock based on social, environmental, or governance criteria. Used to select companies to invest in, weeding out bad ones (pollute, over pay, discriminate, unethical) 2. Social responsibility shareholder resolutions: resolution on an issue of corporate social responsibility placed before stockholders for a vote at the company’s annual meeting. [SEC allows stockholders to place resolutions concerning appropriate social issues (environmental responsibility, tobacco advertising) in proxy statements sent out by companies, minimize harassment by requiring a resolution to receive minimum support to be resubmitted- but cant real with a companies ordinary business (constitute unjustified interference with managements decisions)]
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Security and Exchange Commission (SEC)
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~Mission to protect stockholders rights by making sure that stock markets are run fairly and that investment information is fully disclosed. >Generates revenue to pay for its operations (come from fees from major stock exchanges) >protect fraudulent financial accounting and unfair insider training, improving accuracy and transparency of financial info
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Government Protection: SEC
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~Information Transparency and Disclosure: by law, stockholders have a right to know about the affairs of the corporation in which they hold ownership shares – best way to safeguard stockholder interest ~Insider Trading: person gains access to confidential information about a compay’s financial condition and then uses that information, before it become public knowledge, to buy for sell the company’s stock. – outlaws any manipulative or deceptive device(steal nonpublic info, trade stock based on tip,pass info to others)
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Citigroup: No on pay
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Shareholders did not approve payment package, vote once every 3 years, useful feedback, manager did a lot for firms profitability, misalignment of pay with shareholder return
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Safeguarding Consumers
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~Provide the goods they want, at the right price, safe and high quality product, protect privacy, prevent fraud and manipulation, meet ever changing expectation Neuro-market: read mind
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Consumer Movement
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~Consumers want to be treated fairly and honestly- promote the interests of consumers by balancing the amount of market power held by sellers and buyers. >harmed by -Complex products, specialized services, inflated or appeal to emotion ads, technology allows business to learn, ignore product safety. ~better informed about purchases, are more aware of rights when something goes wrong, an are better protected against inflated advertising claims, hazardous or ineffective products, and unfair pricing >socially responsible companies: serious consideration to problems, communicate, procedures to resolve problems, and recall, voluntary codes of conduct and quality management
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Rights of Consumers
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~To be informed ~Safety ~to Choose ~To be heard ~to privacy (self help, indutry self reg, protective legislation) Goal: attempt to assure that consumers are treated fairly, fair prices, receive adequate information, are protected against potential hazards, have free choices, have legal recourse
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Major Consumer Protection Agencies
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~Federal Trade Commission: competitive pricing, deceptive trade, packing and labeling, consumer credit disclosure, online privacy ~Food and Drug Administration: safety, effectiveness, and labeling, standards for radiation exposure, toxic chemical research ~Consumer Product Safety Commission: safety of products, hazardous objects prevention packaging ~National Highway Traffic Safety Administration: motor vehicle safety standards, fuel economy standards, speed limits ~Department of Justice: fair competition, consumer civil rights ~National Transportation Safety Board: airline safety ~Consumer Financial Protection Bureau : fairness and transparency in consumer financial products and services
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Big Fat Liability Case
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Obesity, massive medical and economic issue, should the food industry be held responsible, adequately communicate health risks, in appropriate advertising, should government control- no they choose to buy the fast food, where to draw the line. Stakeholders: consumers, owners
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Workplace Rights
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Legal guarantees: ~right to organize and bargin: labor unions (represent workers on job, negotiate wages, conditions, and other terms)- dont have to agree to demands but required to bargin in good faith. ~to have a safe and healthy workplace: training, regulations, precautions, adapt job to worker, significant decrease ~to have some degree of job security: employment at will: legal doctrine that means that employees are hired and retain their jobs at the will (sole discretion) of employeer –cannot discriminate, violate public policy, worker adjustment retainment notification act (if lay off more than 1/3 of workers 60 day notice if not pay), union involvement, implied contract, (Bargin) many union contract say employee can only be fired with just cause and have a right to appeal >Adapt to fair labor standards to ensure that product are not manufactured under substandard conditions.
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Privacy in workplace
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Protecting individuals personal life from unwarranted intrusion by the employer -email, romance, drug test, alcohol abuse, theft and honesty testing (can intrude- act ethically toward employees which continuing to work for a high level of economic performance)
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Whistle Blowing
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~when an employee believes their employer has done something that is wrong or harmful to the public and he or she reports alleged misconduct to the media, government, or high-level company official. >Sarbanes Oxley Act: makes it illegal for employers to retaliate in any way against whistle- blowers who report information that could hace an impact on the value of a company’s shares >Dodd Frank Act: requires the government to pay a reward to whistle-blowers who voluntarily provide information that leads to successful prosecution for violations of federal securities laws, prohibits retaliation agais employees Conditions for justly informing: organization is doing or will do something that harms others, employee tried and failed to resolve problem, reporting publicly would stop or prevent harm, harm is serious enough to justify the probable cause of disclosure –> go public
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No Smoking Allowed Case
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~no longer hire people who smoke, culture of wellness, good example, changing health insurance for smokers, second hand smoke, employees are more expensive and less productive, pressure to quit, violation of personal freedom, form of discrimination
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Workplace Diversity Reasons
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Diversity-variation in important human characteristics that distinguish people from one another- among employees ~More women working now than ever before ~immigration has profoundly reshaped the workplace ~Ethnic and racial diversity is increasing ~the workforce will continue to get older ~Millennials are entering the workforce
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Gender and Race in the Workplace
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~Women and Minorities have made great strides in entering all occupations but are continuing to be underrepresented in many business management roles, especially at top levels >Pay gap, occupational segregation, Glass ceiling: just as competent, rarely attain the highest positions in corporations, Glass walls: fewer opportunities to move sideways into jobs that lead to top positions (word of mouth, old boys network)
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What Business Can Do: Diversity
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~Companies can obey laws, zero tollerance policy, communicate with employees, complaint procedure, act quickly to resolve >Articulate goals, set quantitate objectives, hold managers accountable, wide net in requirment, most diverse pool of qualified candidates, mentors, diversity councils to monitor goals and progress (+)Avoid costly lawsuits and damages to their reputation – bottom line, foster innovation, serve a diverse customer base
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Governments Role in Securing Equal Employment Opportunity
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~Promote equal treatment without regard to race, color, religion, sex, national origin, disability, or age. Sexual or racial harassment are illegal(intimidating, hostile, offensive working environment). >Flexibly and temporary Affirmative Action Plans: a way to promote equal opportunity and remdy past discrimination through specific goals, actions, and timelines for promoting job equality.
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Chipotle Case
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Hiring illegal citizens, taking jobs from americans, work for lower price, unethical, illegal, less government regulation if they were proactive
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Community
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~Organization’s area of local influence, as well as more broadly to other groups that are impacted by its actions. Mutually dependent- business relies on community for services and infrastructure and the community relies on business for support on various civic activities. Ideally expectations are balanced >Site community- geographic, Fence-line community: immediate neighbors, Virtual communities- groups that share a common interest with the company, Employee community: people who work near the community
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Civic engagement
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~Active involvement of business and individuals in changing and improving communities. Socially responsible ways reap benefits – bottom line, support, lisense to operate. >social capital: commitment to community develops closer relationships and commitment to company, loyalty >Businesses use economic development,housing, aid to minorities, women, and disabled, disaster, terrorism, and war relief to promote responsibility.
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Corporate giving
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~Comprises gifts of cash, property, and employee time. Philanthropic contribution both improve a companies reputation and sustain vital community institutions. >charitable donations, in-kind contributions, volunteer employee services >Tax rules encourages- deduct from their taxable income all such gifts that do not exceed 10% of the company’s before tax income –Strategic philanthropy: corporate giving linked directly or indirectly to business goals and objectives. both company and society benefit factor conditions, demand conditions, context for strategy and rivalry, related and supporting industries. unique assets of business, alight priorities with employee interest, align priority with core values of the firm
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Measuring Return on Social Investment
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Assessment of the impact to measure the outcome of investments Inputs- resources company provided, Outputs-measures of the activities that took place, Impacts: difference the program made, Value Creation:benefits to the business of the program
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Collaborative partnership
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Voluntary collaboration among business, government, and civil society organizations to achieve specific actions >draw on unique skills to address complex social problems
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Fidelity Investments Partnership Case
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~How to invest like a millionaire, partnership, philanthropic, educating middle school kids about money, after school program, academic and life decisions, decreased drop out rate, contributed money, gave time and space, increased team building skills, more connected to colleagues, improved communication presentation skils, public speaking, teach about their job, leadership`
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Adelphia Case
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~Cable Company, family owed, small enterprise that grew to a large public company ~Charged with fraud and conspiracy, using company money as their personal piggy bank to fuel extravagant lifestyle ~Unusual system of governance: BOD consisted of 9 people, 5 from family, class A stocks public investors, class B stock family who owned 11% of shares but 56% of power ~SEC was concerned with accounting irregularities, insider dealing, unreported loans ~Immediate fallout, resigned, reconstructed board, bankruptcy, new management, sued former accounting firm
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Importance of Management Information Systems
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~Info is power, every aspect of management relies on it- develop resources, better planning, decision making, results. ~Organization wide capability of creating, maintaining, retrieving, and making immediately available the right info, in the right hands, at the lowest cost, to the best media for use in decision making. (+) economically efficient, improve performance, relevant and timely decision making, organized, control, communication, awareness, understanding, commitment
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Ford and Firestone Case
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~Violations of business ethics ~Stakeholders: customer, owners, employees ~Had a harmonious relationship for years ~Ford: (-) can be held morally and legally responsible, stability of vehicle- asked for changed to be made to tire, thousands of parts contribute to vehicle, duty to ensure safety, controlled manufacturing, choose not to delay production, blamed each other, Utilitarian:placing blame where it will do greater good, duty of producer to ensure product safety (+)proactive and extensive, exceed firestone efforts, more personal and direct, committed to customers in public eye, proved to be more issues with firestone tires than other brands ~Firestone:(-) thread separation, played the blame game, CEO from japan silent, defensive, resistant, announced recall once crisis hit, (+) duty of producer, they didn’t want to lower tire pressure, recalled 6.5 mil tires.
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Malden Mills Case
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~Fire destroyed textile mill and injured workers, crisis can have devastating effects on organization and its stakeholders, threatened to put 3000 workers out of work, community, highly skilled workers, market monopoly >reemphasized loyalty, quick response, gave hope (pay for months, helped employee get back to work), worked to regain stability, community donations, honored it pre-crisis commitments >primary: community (highly dependent economically, trust, dedication), workers (treated fairly, reciprocally, prosperity, trust) Secondary: customers (corporate consumers, personal relationships), media (assembling info, open communication, accessible, insider, consistant, positive) ~Lead in communication (integral role) prior to crisis, public awareness of organizational core values, consistant, freeman (stakeholder) on pre crisis communication. Longitudinal relationship: focus on pre/post crisis, more than just damage control, planning and preparing, mutually beneficial relationship, complex ~Stakeholders: identify prior to crisis and cultivate positive relationship (reservoir of good will), can be invested in success, advocate, loyal, but if they are effected negatively they could withdraw intensifying crisis ~Communication after Crisis: single spokes person (play an important role in identifying and developing values, role model), go to scene, communicate to those most in need, prepare for media, content: meet the criteria of info stakeholders need, plan of action, cause, alleviate extended harm. prompt, responsibility, vow, legal concerns, cant narrowly focus on economic stability, resource was predicted, cause of crisis has influence ~Corporate responsibility- need to meet key public expectations, CEO: built loyalty, trust, reciprocally, reap reward of positive media coverage, stakeholder advocacy, and instrumental communication channels.
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Globalization
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~The increasing movement of good, services, ad capital across national borders. Step across geographic, social, political, cultural, economic boarder. >3 sector world – business (private), government (public), society (no commercial or governmental purpose): each have distinct resources, competencies, and weaknesses ~Global market channels (export, sell), operations (relocate, make), supply chain (subcontract, source) ~Diverse world: how power is exercised, human rights, economic freedom >constructive engagement: transnational companies operate according to strong moral principles to force positive change, collective and collaborative process (+)Increases economic productivity, reduces prices for consumers, gives developing countries access to foreign funds to support economic development, transfers technology, spreads democracy and freedom, and reduces military conflict. (-)Causes job insecurity, weakens environmental and labor standards, prevents individual nations from adopting policies promoting environmental or social objective, if these discriminate against products from another country, is compatible with despotism (absolute power) >May benefit world economy as a whole but simultaneously hurt individuals – challenge to extend benefits to all mitigate adverse affects.
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Acceleration of Globalization
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~ Technological innovation (easier and faster to communicate), transportation systems (fast cheap movement), rise of major transitional corporations (capitalized, equip to conduct business across boarders), cultural convergence (increase demand for universal products), social and political reforms (rise of dynamic economy, open world trade)
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International Trade and Financial Institutions
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~World Bank: economic development loans, strict conditions, get money from members and international market ~International Monetary Fund: make currency exchange easier for member countries to participate in global trade (+) many businesses in developing world are dependent on WB and IMF (-)unintended consequence of persistant poverty ~World Trade Organization: international body that establishes ground rules for trade – promote free trade, does not lend money (+) no business can operate with out compliance
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Non Governmental Organizations
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Civil society organizations concerned with environmental risks, labor practices, worker rights, community development, human rights. -nonprofit, educational, religious, community, family, interest groups organizations- no commercial or governmental purpose
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Democracy
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All who affected by decision should have right to help make decision >fair elections, independent media, separation of powers (executive, legislative, judicial), open society rights to form organizations for specific goals >citizens elect political leaders who can appoint others to fulfill defined public functions ranging from municipal services to national services.
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Coltan Conflict case
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~Material called coltan is mined primarily in DRC, war torn area with coltan as the main resource fought over, companies try to responsibly avoid conflit coltan but its near impossible to trace back the roots of it. ~Multiple acts passed (US and united nations), NGO, and company collaboration to certify and regulate trade: international guidelines, national laws, voluntary initiatives to keep from inadvertently supporting killing, sexual assault, and labor abuse. ~Stakeholders: customers, companies, stockholders, government of DRC, US government, citizens of DRC
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Global Corporate Citizenship
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Putting an organization’s commitment to social and environmental responsibility into practice worldwide, not only locally or regionally. >proactively building stakeholder partnerships, discovering business opportunities in serving societies, and transforming a concern for financial performance into a vision of integrated financial and social performance. \”capitalism with a conscious.\” Legal and ethical, long term can increase profit, strategic investment ~Themes: managers and companies have responsibility to all stakeholders, more than just meeting legal requirements, focus on and respond to stakeholder expectations and do acts that are consistant with its values, involves what the business does and the structure and processes through which it engages its stakeholders and makes decisions (+) enhance reputation and legitimacy, competitive advantage, strategic investment >Centralized or decentralized management, citizenship profile-configuration of citizenship activities that fit the setting in which the company is working
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Stages of Corporate Citizenship (stakeholder relationship)
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>Citizenship content, strategic intent, leadership, structure, issue management, stakeholder relationship, transparency 1. Elementary: out of touch, citizenship undeveloped, uninterested in social issues, obey laws but not above compliance, one way communications with stakeholders, defensive and react only when threatened 2.Engaged: in the loop, aware of changing public expectations, need for license to operate, adopt formal policies, interactive with stakeholders, top manager involvement, reactive 3.Innovative: on top of it, aware of companies capacity to carry out wave of innovation, mutual influence with stakeholders, social audits, fully engaging in citizenship, responsive 4.Integrated:in front of it, need to build initiatives, tripple bottom line, external audits, ongoing partnership with stakeholders, proactive 5.Transforming: visionary leaders ahead of pack, motivated by higher sense of corporate purpose, partner across industry, address social problems, defining pg 145 >be in more than one stage at once (ie. if development progresses faster in some areas than others: might audit its activities and disclose findings (stage 5) but still be interacting with stakeholders in a pattern of mutual influence (stage 3) (-) superficial attempt to enhance reputation without real substance, limited by profit maximization.
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Social Audits
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A systematic evaluation of an organization’s social, ethical, and environmental performance. >evaluated bases on a set of external standards, tells a lot about company: what is happening, achievements, stakeholders opinions, strengths, loyalty and commitment, enhances decision making, improve overall performance. >uses to measure social equity produced from their actions {use of company resources must be justified, the greater the social equity document the stronger the argument a business can make that it is meeting its social obligations.} ~global, social and environmental standards: companies, industry, or global NGO or standard setting organizations can set standards that recognize and concentrate on a combination of internally focuses economic benefits for the firm, as well as externally focused socially benefits for the environment and key stakeholders. ~Hire and train own staff of auditors ([+]company controls, manages profit, determine what to audit, get immediately [-] bias, less credible, cast in favorable light), other organization to carry out audits {particular set or work with company standards} ([+]more objective and reliable, [-]information is delayed, lack of control), or get information directly from workers confidentially ([+]no conflict of interest, [-] must be trustworthy and wide participation to be useful and reliable) >Continue to develop and become more focused on the impact of firm’s performance affecting various stakeholders, the projected performance targets can be better accessed. >accept importance of stakeholders for financial viability: welcome the approach of disclosure
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Corporate Social Reporting
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When a company decides to publicize information collected in a social audit (-) risk reputation damage from exposing any problem (+) value in transparency: quality of complete clarity and openness, ethical considerations >steep increase in corporate social reporting in recent years, virtually mandatory for most multinational companies ~Why repots?: motivated by ethical concerns (complete reverse from economic considerations)
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Tripple Bottom Line
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Report to stakeholders of financial results and environment and social impacts. >Corporate social reporting, emerging trend, proactive way to increase transparency and broader framework for decision making. >has limitations but is a great way to disclose meaningful non financial information that impacts their financial results
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Apple Code of Conduct Case
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NOG- released the results of an independent investigation on labor conditions of apple suppliers, found many violations of apples and suppliers code of conduct and own, overtime, underpaid, mistreated workers, unsafe, unethically preformed audits that avoided detection of violations, Apple later joined NOG- fair labor association, undertook another audit, educate workers, improve conditions, make suppl chain a model for the industry, made changes, precedent set
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Best Practices in Sustainable Finance
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~ Corporate social responsibility, emerging trend. ~Setting up governance and management systems to embed CSR, create long term value >Sustainable finance is the practice of creating economic and social value through financial models, products and markets that are sustainable over time (+/ aspects) reporting with independent validation, integrate social and environmental consideration, risk management system, investment vs. criteria, CSR policies and programs to reduce or offset negative, stakeholder consideration, long term shareholder value, mission, business modle, values, fundamentally committed to using resources to contribute to social and environmental progress, CSR board, training and development, performance contract,incentives, target setting and performance report, (+)Minimize risk, improve bottom line, long term value when you’re socially and environmentally responsible, improves morals and confident long term relationship, transparency- improves external dialoge and internal communication- overcome cultural differences, growing demand =creates opportunities, >Managing: set CSR goals, monitor, measure, report. >invest in CSR product development to align their CSR values with their products and services, build new markets, provide opportunities for customers to contribute to sustainability.
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How Does Government Regulate Business
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~Collaborative partnership: seek mutually beneficial goals, see each other as key partners in the relationship and work openly to achieve common objectives, benefit both society and business, teamwork, mutual aid. Crisis can join business and government. (+) minimize standards that all firms must meet, public confidence in the safety of products, fair competition, creating barriers to entry to maintain a business’s competitive advantage ~Work at arms length: objectives are at odds, and conflicts result in an adversarial relationship. Small businesses tend to dislike government regulation (-) costly or restricted >Cooperation –> conflict, constantly changing, requires managers to keep a careful eye trained towards significant forces that might alter relationship or to promote forces that encourage a positive one ~Legitimacy issues: in the global economy business may encounter government or social groups whose authority or right to power is questioned. Business can influence through being politically active, refusing to do business (economic sanction: not conducting business in war zones, human rights violations ect.)
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Public Policy
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Plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens. (what government chooses to do or not to do. Acting in public interest.) >Basic set of goals, plans, actions that each national government follows in achieving its purpose. >Government – proper size? Legitimate need in modern economies. Provides important basic needs: safety and protection, provide economic security and essential social services, and to deal with the most pressing social problems that require collective action. >Other sources of authority: common law or past decisions of courts.
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Elements and Types of Public Policy
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Elements: ~Inputs: external pressures that shape a governments policy decision and strategy to address the problem. ~Goals: broad and high mind or narrow and self serving, what public goals are being served by action? ~Policy tools: to achieve goals, combination incentives and penalties to prompt citizens to act in ways to achieve policy goals ~Effects: outcomes arising from government regulations, some are intended other unintended, goals may be obstructed as an unintended effect of compliance with such regulations Types: ~Economic Policy: >fiscal policy: refers to patterns of government collecting and spending funds that are intended to stimulate or support the economy (loans, bailouts) — basic too to achieve prosperity. >monetary policy: policies that affect the supply, demand, and value of a nation’s currency. (worth or worthlessness of currency has serious effects on business and society – buying power of money, stability and value of savings, and the confidence of citizens and investors about the nations future. affects ability to borrow money from other nations and attract private capital), >taxation policy, industrial policy, trade policy. ~Social Assistance Policies: advances in the well-being of people across the globe, advanced industrial nations have developed elaborate systems of social services for their citizens. >Developing economies have improved key areas of social assistance that continues with growing economy, international standards and best practices supported these trends.
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Government Regulation of Business
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~Society relies on government to establish rules of conduct for citizens and organizations. Regulations are the primary way of accomplishing public policy. >Government operates at so many levels modern business faces a complex web of regulations. ~Why not just let market be free? >Market failures (:when marketplace fails to adjust prices for the true costs of a firms behavior. Regulations forces everyone to comply- fair, bear same costs) Negative externalities (spillover effects:when the manufacture or distribution of a product gives rise to unplanned or unintended costs [economic,physical, or psychological] borne by other stakeholders, regulations prevent effects), Natural monopolies (businesses can raise prices due to lack of competition, regulations on prices), Ethical arguments (regulate safe work conditions, fair, justified, protect employees consumers and stakeholders, some business self regulate).
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Types of Regulations
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Types: directly imposed, indirectly imposted, specific business or all industry. >Economic: aim to modify the normal operations of free market and free supply and demand. May come from the distortion of free market, or consequences of undesirable actions in the marketplace. FTC regulates some economic aspects. (ex. trade and labor practices, allocation of scarce resources, price control) >Antitrust:special kind of economic reg. Government acts to preserve competition in the marketplace, thereby protecting consumers. Social >Social Regulation:aimed at important social goals- not limited to one type of business of industry (like economic regulations) laws concerning pollution, safety and health, health care, and job discrimination (consumer protection) apply to all businesses. ~Who regulates? >Normally for both economic and social regulations, specific rules are set by agencies of government and by the executive branch, further interpreted by courts. – government regulators have a challenging job of applying the broad mandates of public policy.
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Sherman Antitrust Law
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Antitrust law: prohibit unfair, anticompetitive practices by business. (group agreed price, predatory pricing: practice of sellin below cost to drive rivals out, use market dominance to restrain comerse, compete unfairly, or hurt consumer) ~Two main enforcement agencies are the Antitrust Devision of the U.S. Department of Justice and the Federal Trade Commission. Both may bring suits against companies they believe to be guilty of violating laws. May investigate possible violations, issue guidelines, and advisory options for mergers, identify specific practices considered to be illegal, negotiate informal settlements outside of court. Regulators active in prosecuting price fixing, blocking anticompetitive mergers, and dealing with foreign companies that have violated U.S. laws on fair composition. Violation Consequences: penalties: fines, pay damages, Non-$ remedies: structural (breakup of monopolistic firm), conduct (change in conduct, government supervision), intellectual (disclosure of information)
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Costs and Benefits of Regulation
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>Legitimate need for government regulations, businesses feel these problems firsthand (regulation directly affect the cost of products and the freedom of managers to design their business operations) Cost, effectiveness, unintended consequences emerge from regulatory actions ~Cost benefit analysis:helps public understand what is at stake when new regulation is sought. >many believe high cost of regulation on business is justified by high stakes >benefits exceed costs >Ongoing debate over the need for and effectiveness of regulation leads to alternating periods of deregulation (removal or scaling down, politically popular) and re-regulation (increase or expansion). >Global context: need to establish rules to protect own citizens, international regulatory agreements and cooperation. >Local, state, federal, or international all exert their control seeking to protect society through regulations. Balance costs and benefits or prevention of harm. > Business has long understood that managing and cooperating with the government regulations generally leads to a more productive economic environment and financial health.
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Dodd Frank Act
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In response to the global recession the U.S. Congress passed act. ~Heralded as the most financial regulatory reform since before great depression. ~Revolutionized business activities. affected the oversight and supervision of financial institution, new resolution procedures for large financial companies, created a new agency responsible for implementing and enforcing compliance with consumer financial laws, introduced more stringent regulatory capital requirements, effected significan change in the regulation of over-the-counter derivatives, reformed the regulation of credit rating agencies, implemented changes to corporate governance and executive compensation practices, required registration of advisers to certain private funds, and effected significant changes in securities market.
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JP Morgan Case
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~One of the largest banks in the US, only bank to remain profitable in recession, good reputation, used derivatives (popular due to large return, riskiest for bank to invest), $2 billion lose, government decided to extend government regulation over the derivatives market (Dodd Frank- prevent banks from taking excessive risk that leaves tax payers on the hook to bail them out if something went seriously wrong.), if JP Morgan cant handle it who can, arms length as government looked to regulate against will of business, hurt stockholders, other taxpayers, employees
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Should Business be Involved in Politics
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~Many businesses have become active participants in order to promote a variety of goals and objectives, access to political tools, and disparate levels of power or influence. Better understand dynamic nature. ~Levels of Political Involvement >limited: indirect and impersonal, contribution to PAC, support trade associations and industry activities >moderate:indirect yet personal, organizational lobbyist, employee involvement, stockholder and customer encouraged involvement. >aggressive: direct and personal, executive participation, involvement with industry, public policy development. ~Global challenge: critical that managers be aware of the opportunities for and restrictions on business involvement in the political processes in other countries. Ethical norms and standards should guide > Ultimately business has an important long-term stake in a healthy, honest political system
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For and Against Political Involvement by Business
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Debate: whether, and to what extent? (+) pluralistic system invites many participants, high economic stakes (justice and fairness), business counterbalance other social interest, business is a vital stakeholder of government (have a voice) (-) Managers are not qualified to engage in political debate, business is too big and powerful, business is too selfish to care about the common good, business risks its credibility by engaging in strong supporting politics. too much power, >Natural in a democratic, pluralistic society.
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Corporate Political Strategy
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Activities taken by organizations to acquire, develop, and use power to gain advantage. > government will and does act upon many issues that affect basic operations of business and its pursuit of economic stability and growth. 1. Information strategy: where business seek to provide government policymakers with information to influence their actions (ie.lobbying) 2. Financial- incentives strategy: where businesses prove incentives to influence government policy makers to act in a certain way (ie. PAC contributions) 3.Constituency-building strategy: where businesses see to gain support from other affected organizations to better influence government policymakers to act in ways that help them.Tactics: Lobbying (important tool, hire people to represent the business before people and agencies involved in determine legislation and regulatory outcomes that may affect the company, involves direct contact {communicate, try to persuade as they consider a new law, policy, or regulation} rules- register, disclose, no gifts ect. Revolving door: circulation of individuals between business and government), Direct communication (democracy- citizen access and communication with political leaders, business roundtable: CEO of leading corp, study public policy issues and advocates for laws that foster economic growth),Expert witness testimony, Economic leverage (uses economic power to threaten to leave community unless a desired political action is taken, persuades government to act a certain way that favors business) Promoting a constituency (seek support from origination of people who are also affected by the public policy and who sympathize with business- stakeholder coalition, advocacy advertising (same view), trade associations(same industry), legal challenges)
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SOPA
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~Stop Online Piracy Act that would allow owners of films, music, and other intellectual property that ability tot take legal action against internet service providers, search engines, payment processors, and advertisement networks to stop doing business with websites linked to online piracy. ~For: owners of film, music, and other intelectual property who want to protect themselves against online piracy (old media, want to protect americas innovative and creative products as well as jobs in creation industry). Against: google, yahoo, ebay, and many more believe the acts as drafted would lead to privacy violations and new internt monitoring websites that would negatively affect american companies. ~Political action tactics used: lobbying, direct communication, stakeholder coalitions, advocacy advertising, trade association
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Sustainable Development
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The need for balance between economic progress and environmental protection. Meet the needs of the present without compromising the ability of future generations to meet their own needs (leave better than found it), decent standard of living. Rapid changes pose sever threats to many businesses: limited supplies, unpredictable whether changes, and increased political risk. -challenge with great opportunity. >Business operates within the natural environment, abundant resources with constraints. >ecosystem: unified natural system, preserving it is an urgent imperative for government, business, and society to engage in a range of innovations >Earth carrying capacity: population growth, peoples rising expectation, industrialization of deveopling countries, using up resources faster than they can be replenished.
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Threats and Forces of Change to Ecosystem
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~Human kind is altering the face of the planet. >Three major forms of natural resources: water, air, land. >Renewable: naturally replenished (fresh water or wind – sometime use before it can be replenished, developing countries) vs. nonrenewable: gone forever (fossil fuels, depleted, more efficient) ~Threats: water resource, fossil fuels, arable (fertile, over farming, climate change, properly care) land ~Forces of change: population explosion (increase strain on resources, poverty, developing countries), world income inequality (countries on extreme end tend to behave poorly), economic development, rapid industrialization {economic growth}(+reducing poverty and slowing population grown, – industry = energy). ~Global issues: (commons: shared resource that a group of people use collectively) global and require international cooperation: ozone depletion, climate change, decline of biodiversity, treat to marine ecosystem. ~Back to balance {+} technological innovation (more efficiency), changing patterns in consumption (desire to consume less and use less harmful products, care about impact), getting the prices right (taxes on environmentally harmful products and activities). Global business have begun to put the principles of sustainable development into action through innovative action such as life-cycle analysis, industrial ecology, extended product responsibility, carbon neutrality, technology cooperation, and compliance with carious voluntary codes.
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Clean Cooking Case
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~600 million households in developing countries affected by indoor air pollution, 5th worst risk factor for health and leads to death, affects environment by deforestation and black carbon. ~Stakeholders: consumers, shareholders, government, and community. ~United Nations and several other government collaborated to launch global alliance for clean cooking. Adopt clean and efficient cookstoves, technological innovation, financing, culture, support from businesses. Cost saving, health benefits, small businesses.
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Managing Environmental Issues: government
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~actively involved in regulating business actives in order to protect environment. (businesses have few incentives to minimize pollution if their competitors do not as it would incur extra costs.) Common standards, economic incentives, offer legal and administrative systems to resolve disputes. – government cannot accomplish these goals by itself: rather its role is to make a critical contribution to a collective effort, with business and civil society, to move towards sustainability. > Environmental Protection Agency (EPA): government effort to protect environment. Major Regulations: Air pollution (6 criteria pollutants, AQI, more emitted than can safely absorbed or diluted), water pollution(waste cant be naturally diluted), land pollution (waste, source reduction, superfund:supported by tax on toxi companies that pays to clean up).
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Leading U.S. Environmental Protection Laws
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~Clean Air Act:establishes national air quality standards and timetables ~Clean Water Act: Authorized funds for sewage treatment plants and waterway cleanup ~CERCLA (Comprehensive Environmental Response Compensation and Liability Act): establishes superfund and procedures to clean up hazardous waste sites ~RCRA (Resource Conservation and Recovery Act): regulates hazardous materials from production to disposal. >Brought many benefits, pollution levels lower than in 1970, continuing challenge is to find a way to promote a clean environment and sustainable business practices without impairing the competitiveness of the U.S. economy.
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Alternate Policy Approaches
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~Environmental standards: allowable levels of various pollutants are established by legislation or regulatory action and applied by administrative agencies and courts. – command and control: commands businesses to comply and often directly controls choice of technology. ~Market Based Mechanisms: based on the idea that the market is a better control than extensive standards that specify precisely what companies must do. >cap and trade: buy and sell the right to pollute. Law establishes emission levels (caps) and permitted companies with emission below the cap to sell (trade) their rights to the remaining permissible amount to firms that faced penalties because their emissions were over cap. (+ flexibility to choose the most cost effective methodes to comply with law, – gives richer companies the right to pollute) >Emission charges: each business is charged for the undesirable waste that it emits, with the fee varying according to the amount. (polluting is not illegal but expensive- taxes or fees) positive incentives (selective) -more flexible, market-oriented approaches to achieve environmental objectives where possible. ~Information disclosure: regulation by publicity or embarrassment. (- does not motivate, hard to set) ~Civil and Criminal Enforcement: deters wrong doers.
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Cost and Benefits of Environmental regulation
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(+) emission of pollutants have dropped, air and water quality improved, health improved, job creation in clean economy (-) excessive amounts of money, expensive to comply with environmental regulations, loss of jobs, lower productivity, reduced competition.
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The Greening of Management
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~Moving toward more proactive environmental management – beyond compliance >avoid legislation, fees, criminal penalties ~Stages: pollution prevention (minimizing or eliminating waste before creating it), product stewardship (all environmental impacts associated with the full life cycle of a product), clean technology (develop innovative, new technology that supports sustainability, provide environmental benefits) ~Competitive Advantage: cost saving (efficiency), product differentiation (reputation, sustainable products, green marketing), technological innovation (leader), reduction of regulatory risk (proactive, better positioned to respond to government regulations), strategic planning (cultivate a vision of sustainability, adopt, plan techniques, top managers assess effects.)
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Ecologically sustainable organization
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~ideal type, continue activities indefinitely. ~Environmental partnerships (voluntary, collaborative, organizations and regulators to achieve specific goals), management in practice (new structures, processes, and incentives are needed, top management commitment- top down, chief sustainability officer,cross functional teams, rewards and incentives), audits (closely track progress to see if organization is achieving environmental goals)
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Digging Gold Case
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~Gold mining, cyanide heap-leaching, 30 tons of rock produce a single ounce of metal, cyanide is poisonous, highly damaging to environment- directly into river damaging water and land, metal extraction pollutes air, acid mine drainage into waterways, stored in reservoirs to break down- prone to accident – contaminated drinking water, transportation dangerous, legislation (epa), businesses, communities, NGO \”no dirty gold\”, retailers
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Supply Chain Management
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~Advances in technology, globalization of markets, and stabilization of political economies.- have to improve their internal processes rapidly in order to stay competitive. Strong engineering (be able to translate customer needs into product and service specifications), design (produced at high quality, low cost), and manufacturing functions (demand- increase flexibility and responsive to modifications and processes or to develop new ones to meet ever changing customer need) are necessary. As manufacturing capabilities improved led to increased focus on supply base and organizations sourcing strategy. Producing a quality product was not enough, getting the product when, where, how and in quantity that they want, in a cost effective manner. ~No longer enough to manage their organizations – must be involved in the network of all upstream firms that provide inputs (directly or indirectly), as well as the network of downstream firms responsible for delivery and after-market service of product to the end customer. === supply chain. *Supply Chain: Encompasses all activities associated with the flow and transportation of goods from raw materials stage (extraction), through the end user, as well as associated information flow. Materials and information flow both up and down supply chain. >essentially a series of linked suppliers and customers; every customers is in turn a suppliers ato the next down stream organization until a finished product reaches the ultimate end user. *Supply Chain Management: the integration of these activities through improved supply chain relationships, to achieve a sustainable competitive advantage. internal divisions of company as well as external suppliers, a material may pass thrugh multiple processes within multiple suppliers and divisions -A supplier for for one company has its own set of suppliers that provide inputs (second tier) that are also apart of chain -beginning starts with mother nature 3 components: 1.internal functions: different processes used in transforming the inputs provided by the supplier network.(includes all of its parts manufacturing, which are eventually brought together in their final assembly) Coordination and scheduling of these internal flows are very challenging – orderprocessing managers- translating customer requirements into actual orders, order processing – customer interaction, product scheduling- order into actual production tasks 2. upstream external:Upstream activities can be described as supply chain activities that take place prior to when the company in focus takes over further product refinement. Managing flow of materials between upstream organizations in a supply chain difficult – employ an array of managers who ensure the right materials are at the right location at the right time, purchasing, material. Strategic initiatives like quality product, timely delivery and innovation are often directly linked to performance of upstream. Social standards of upstream 3. downstream external: encompasses all of the downstream distribution channels, processes and functions that the product passes through on its way to the end customer. distribution management ~All organizations are a part of one or more supply chains (whether a company sells directly to the end customer, provides a service, manufactures a product, or extracts materials from earth) Major developments in global market and technology – 1)information revolution, 2)customer demands brought increased global competition, 3)emergence of new forms of inter organizational relationships- have bought supply chain management to the forefront of managers attention. Each has fostered the emergence of an integrated supply chain approach. Most important job of managers in supply chain? creating efficiency in the flow of goods as well as maintaining healthy relationships with the suppliers so that costs are cut, consumers satisfaction improves, and time is saved. When done correctly this leads to bigger return for company’s stakeholders.- significant because without proper SCM the company will not have the efficiency it needs to be able to compete in the market.
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Mission Statements
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~Clear definition of the mission and purpose of organization, it may be referred to as the organizational creed statement, statement of purpose, of general principles, corporate intent, vision statement. -opportunity to define the company’s goals, ethics, culture, and norms of decision-making: 3 what the company does for its customers, what it does for its employees, and what it does for its owners (community and world) -vast majority are meaningless hype, describe a business in any category -well developed great took for understanding, developing, and communicating fundamental business objectives. ~goals, differentiating factors, identify aspirations, define role of stakeholders, what they will do, what business they’re in, communicate values and beliefs that put customers first in decision making process, values of culture, internal and external stakeholders. >rallying points for all stakeholders, provide employees with understanding >Framework of decision making: sense of direction and purpose, control mechanism to keep on track, help in making decisions, inspire and motivate employees. >(-) detrimental to employee motivation and morale, heightens expectation, may not be satisfied, may be counter productive, window dressing, if nonspecific not much impact ~Mission statement vs. corporate policy: mission statement is at best sort of guideline for expectation and communication, create and update a statement of values, expectations and goals to abide by. —- does not necessarily mean that the company will make a commitment to socially responsible activities, but should state policies on issues. >enhance? mission statement a template? still a fiduciary duty, alleviated if stakeholders are apart of creation of mission statement. Social audit- how well organized, if lives up to values to which committed, dialoge progress- extensive picture of relationships, long term development and survival. good faith attempt to provide managerial guideline and direction. ~Accountable reliance? – employment at will doctrine, implied or expressed warrantee to customers, create expectations to competitors- or are they merely guidelines. >companies aspirational goals and ideas in employee handbook is not a specific promis of job security or continued employment. – not sufficient enough to create an implied contract.
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Case 4, 5, 7, 8, 9 Nike
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4. Moody- credit rating, played role in financial crisis, debt, misjudged the risk inherited, investors relied solely on agencies ratings, weakened standards of loans, liar loans, mislead, people lied and moody didn’t do their job to think of the worse case senario, conflict of interest, code of conduct, SEC 5. Merk, Vioxx- drug, increased risk of heart attack and stroke, recall, SEC mislead investors, justice department unwarranted health issues, FDA clinical trials and monitored,leading fir, admired,renown, ethical, responsible, blockbuster drug, advertising to customers, safety, knew it caused heart issues, unethical,voluntary with drawl7. Plant made meds: genetically modified rice to protein, vigorous opposition from environmentalist, food safety analyst, consumer advocates, rice farmers, secretary of agriculture. benefits in cost, time, efficiency, risks that it contaminates food.FDA, EPA, USDA, highly sophisticated technology, farming and milling 8. Solitary fund and Active ware: large pension fund, goals: democratize access to professionally managed retirement funds, support job growth, look for responsible companies, social audit was not made public but concerns, work in honduras mistreatment of workers, unsafe working environment, public controversy lead to bankruptcy,illegal firing of unions, investor was ethical socially responsible, environment – controversy of what to do, digest completely, preform social audits, keep shares and step up efforts to influence behavior. 9. Toy recall, alarmed parents, consumer activist, industy, retailers,mantle had a code of conduct- working conditions, product safety and quality, sought to reassure customers, went to media, CPSC (consumer product safety commission), external vendors and subcontractors cutting corners to save time and money,lead paint, toy design, toy industry, stores, company. Nike: developed human resources management training, strengthened manufacturing implementations, specific actions plans: goals of reducing number of workers reporting dissatisfaction with behavior and attitude of director. target training, increase technical skills, clear goals, responsibility, timeline, methose of tracking, after better understanding, developed programs, leaders, further training monitor, prepared follow up continue to learn.

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