MGMT 3880

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Business
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organizations engaged in making a product or providing a service for profit
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Society
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human being and the social structures they collectively creat
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Social struction
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we create the classes, middle class, upper class, national boundaries, government levels
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business
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has a border it has boundaries a lot of interaction with society
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organisms do not exist in isoltion
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but can only be understood in relation ship to their surroundings. ex: plant is soil, water, sun, relation to interaction
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Businesses are embedded in a
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boarder social environment with which they constantly interact
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what is the purpose of corporation?
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create value that no one individual can create alone
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to whom or what should firms be responsible?
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ownership and stakeholder
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Ownership theory
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1. sees the firm as property of owners (stakeholders) 2. owner’s interest take precedence over interest of others 3. the purpose of the firm is to maximize its long term market value and money for its shareholders
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Adam Smith
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theory of moral sentiments, virtual person who balance with the wealth of others not just self interest
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Stakeholder theory of the firm
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1. corporation serve a board public purpose: to create value of society 2. profit is necessary for survival but other values 3. Corporations have multiple obligations and need to consider all stakeholders
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Ownership purpose
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1. owners needs and wants 2. share value
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stakeholder purpose
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stake holders needs and values, are persons or groups that affect or are affected by a firm’s decision, policies and operations.
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Descriptive
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companies are made of people by nature balance with the interest of others
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Normative
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management is the right thing to balance the interest of the company
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instrumental
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it is good for me, balance with out the stakeholders
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A stake
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is an interest in or ion a business
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stake holder is not
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the same as stockholder or sharholders
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stockholders represent
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one of several kinds of stakeholders.
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market stakeholders
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shareholders, supplies, employees, etc. they engage in economic transactions with the company as it carries out its primary purpose of providing society with goods and services
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None Market stakeholders
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community, government business support groups, etc. People or groups who all though they do not engage in direct economic exchange with the firm are affected by or can affect its actions (do not have direct but still affect)
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internal stakeholders
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are employed by the firm. they work inside the firm and contribute their efforts and skills to everyday operations (market stakeholder because they get paid)
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external stakeholders
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may have important transactions with the firm but are no on its payroll (market stakeholders because they get paid)
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Coelitions
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gain power and can work for or against (power)
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Who are the relevant stakeholders?
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1. some businesses sell directly to the public and will not have retailers 2. a certain stakeholder may not be relevant to a particular decision/action
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What is the power of each stakeholder?
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1. voting power – owners and stockholders only 2. economic power – customers, suppliers, banks, creditors investors, and employees 3. legal power – customers, employees, shareholders 4. information power access to valuable data 5. political power – lobbyist, government, non government
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stakeholders power
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is the ability of a group to use resources to make an event happen or to secure a desired outcome
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what are interest of each stakeholder?
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1. stakeholders have an ownership interest they expect to receive dividends and Capital appreciation 2. customers are interested in gaining fair value and quality in goods and services they purchase 3. public interest groups advance broad social interest example: human right national environment
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How are stake holder coalitions likely to form?
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1. common interest and will form temporary alliances to pursue 2. Coalitions are very dynamic, can change any time, increasing international, and increase power 3. internet has enabled coalitions to form quickly across political boundaries
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Salient
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stands out from a background, is seen as important or draws attention
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stakeholders stand out
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to managers when they have power, legitimacy, and urgency
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Managers can use the salience concept to
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develop a stakeholder map a graphical representation of the relationship of stakeholder salience to a particular issue
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stakeholder map
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is a useful tool because it enables managers to see quickly how stakeholders feel about an issue
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Boundary spanning department or offices within
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an organization that reach across the dividing line that separates the company from groups and people in society
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The purpose of the firm is not simply to make a profit
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but to create value for all its stake holders a successful business must meet both economic and social objectives
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six dynamic forces powerfully shape the business and society relationships
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1. changing societal expectations 2. growing emphasis on ethical reasoning and actions 3. Globalization 4. Evolving government regulations and business responses 5. Dynamic natural environment 6. explosion of new technology and innovation
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public issues
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any issues is of mutual concern to an organization and one or more of its stakeholders
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stakeholders expectations
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a mixture of people’s opinions, attitudes and beliefs about what constitutes reasonable business behavior
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Public issues ( performance expectations gap )
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respond appropriately will permit the performance expectations gap to grow and the larger the gap the greater the risk of stakeholder backlash or of missing business opportunity ( positive, opportunity, address before creditors, change, negative, failure ) ex: human antibiotics in chicken
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The performance expectation act
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ex food safety but technology is not applied to food just like other sections
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Environmental Analysis
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a method managers use to gather information about external issues and trends. to develop an organizational strategy that minimizes threats and takes advantage of new opportunities.
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Environmental intelligence
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the acquisitions of information gained from analyzing the multiple environments affecting organizations
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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 competitor’s that can affect the organization’s plans decisions and operations, with the need to comply with all applicable laws and to follow the professional standards of fairness and honesty
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stakeholders materialty
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adaptation of an accounting term to prioritize the relevance of the stakeholders and their issues to the company Ex: issues that are priority and could come to be ripe or issues facing a firm how to be proactive
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The issue management process
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1. identify anticipating emerging concerns or horizon issues 2. analyze organizations must understand how the issue is likely to evolve and how it is likely to affect them 3. Generate requires complex judgement that incorporate ethical considerations like the company’s reputation 4. take action once an option is chosen the organization must design and implement a plan of action 5. evaluate results must assess results of the program and make adjustments if necessary
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organizing for effective issue management
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creating relationships to understand, communicate, engaging to gain information, and manage issues
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part of the organization is mobilized
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to address a particular emerging issue it often depends on the nature of the issue itself (involve the board of directors and top management levels)
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Effective global leadership on public issues requires three basic capabilities
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1. understanding of the changing business context 2. ability to lead in the face of complexity 3. connectedness the ability to engage with external stakeholders in dialogue and partnership
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states in the business stake holder relationship evolve through
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1. inactive companies ignore stakeholder concerns (no relationships) 2. reactive companies act only when forced to do so and then in a defensive manner 3. proactive companies try to anticipate stakeholder concerns 4. interactive companies actively engage stakeholders in an ongoing relationship of mutual respect, openness, ad trust
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stakeholders engagement is
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at its core, a relationship
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the participation of a
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business organization and at least one stakeholder organization is necessary
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Engagement both the company and its stakeholders both have
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an urgent and important role, the motivation to participate, the organizational capacity to engage with one another
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Company Goal
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to improve corporate reputations to earn a license to operate to win approval of society
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stakeholders goal
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to change corporate behavior on an issue of cencern
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Company motivation
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needs stakeholder involvement because of their expertise or control of critical resources
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stakeholder motivation
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governmental campaigns protest perceived as inadequate to change corporate behavior
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Company organizational capacity
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top leaders committed to engagement well funded department of external affairs
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stakeholder organizational capacity
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experienced staff, core group of activities committed to dialogue with business
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stakeholder networks addressing public issues by
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working collaboratively with other businesses, concerned persons and organizations in stakeholder networks ex: nike
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The benefits of engaging stakeholders organizations bring a number off distinct strengths
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alert companies to emerging issues, give a firm access to information via networking, technical or scientific expertise in specific areas, better results in the eyes of the public, meet the society’s expectations and generate good solutions, improve a company’s reputation
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fiduciary
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a person who exercises power on behalf of another that is who acts as the others agent
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Corporate Power
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Capability of corporations to influence government, the economy, and society, based on their organizational resources
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Iron law of responsibility
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says in the long run, those who do not use power in ways that society considers responsible will tend to lose it.
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The Meaning of Corporate Social Responsibility
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1. Act in a way that enhances society and its inhabitants and be held accountable. 2. Acknowledge any harm to people and society and correct it if possible. 3. May forgo some profits if its social impacts hurt its stakeholders or if its funds is usable for a positive social impact.
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Corporate Citizenship
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the actions they take to put their commitments to corporate social responsibility into practice.
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global corporate citizenship
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similarly, refers to putting these commitments into practice worldwide.
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Companies demonstrate their corporate citizenship by
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1. proactively building stakeholder partnerships 2. discovering business opportunities in serving society 3. transforming a concern for financial performance into a vision of integrated financial and social performance
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The Origins of Corporate Social Responsibility
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1. In the United States, the idea of corporate social responsibility appeared around the start of the 20th century. 2. Corporations under attack for being too big, too powerful, and guilty of antisocial and anti-competitive practices. 3. To use their power and influence voluntarily for broad social purposes rather than for profits alone. Example: Steelmaker Andrew Carnegie, Henry Ford
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Phases of Corporate Social Responsibility
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Frederick provides expanded framework for understanding the evolution of CSR concept. Divided into 4 phases
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Multiple responsibilities of business include
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1. Economic responsibilities 2. Social responsibilities 3. Legal responsibilities
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Successful firm
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is one which finds ways to meet each of its critical responsibilities and develops strategies to enable the obligations to help each other.
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Enlightened Self-Interest
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1. Economic and social goals come together in companies that practice enlightened self-interest 2. The company’s self-interest in the long term to provide: a. true value to its customers b. to help its employees grow and behave responsibility Example: Nestle
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Reputation
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refers to desirable or undesirable qualities associated with an organization or its actors that may influence the organization’s relationships with its stakeholders.
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Reputation Index
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measures a company’s social reputation. It evaluates critical intangible assets that constitute corporate reputation. Rating Research, a British firm, distributes the index and ratings to interested parties.
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The B Corporation
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Must meet rigorous, independent social and environmental performance standards. Focus on social responsibility and citizenship by blending their social objectives with financial goals. B Corporation must prove its socially responsible by meeting the B Lab standards. B Lab is a non-profit organization that assesses a corporation’s social and environmental performance standards.
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Management Systems for Corporate Social Responsibility and Citizenship
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1. Businesses for Social Responsibility (BSR) survey: The goal of a global citizenship management system is to integrate corporate responsibility and citizenship concerns into a company’s values, culture, operations and decisions at all organizational levels. 2. One emerging trend is the consolidation of corporate citizenship efforts. Example: GAP 3. Citizenship as an opportunity to: a. Create value for their organization b. Gain a competitive advantage c. Help address some of the world’s biggest challenges
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Social audit
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a systematic evaluation of an organization’s social, ethical, and environmental performance.
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Assessing and Reporting Social Performance
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6 Benefit of Social audits by Simon Zadek: 1. Help businesses know what is happening within their firm 2. Understand what stakeholders think about and want from the business 3. Tell stakeholders what the business has achieved 4. Strengthen the loyalty and commitment of stakeholders 5. Enhance the organization’s decision making 6. Improve the business’s overall performance
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Social Audit Standards
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1. Companies can develop standards designed to set expectations of performance for themselves or their suppliers or partners. Example: Apple 2. Companies within an industry can agree on a common industry-wide standard. Example: EICC 3. Can be developed by global nongovernmental organizations or standard-setting organizations. Example: International Organisation for Standards, Account Ability (AA), United Nations Global Compact, The Global Reporting Initiative and others.
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Social Reporting
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When a company decides to publicize information collected in a social audit
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Transparency:
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When companies clearly and openly report their performance—financial, social, and environmental. Example: 1. Australia 2. New Zealand
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integrated report
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An emerging trend in corporate reporting is the integration of legally required financial information with social and environmental information into a single
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Globalization
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the increasing movement of goods, services, and capital across national borders
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The Process of Globalization
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A process – an ongoing series of interrelated events International trade and financial flows integrate the world economy, leading to the spread of technology, culture, and politics. Globalization is not simply a trend or a fad but, rather, an international system.
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Develop global market channels
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First build a successful business in their home country, then export products or services to buyers in other countries. Example: Nestlé
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Establish global operations
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Locate manufacturing plants or service operations in other countries as a way to cut costs. Example: Ford, BMW
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Develop global supply chains
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Purchase raw materials, components, or other supplies from sellers in other countries; work may also be subcontracted. Example: Nike, Gap (Summarized in 3 words: sell, make, and source.)
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Major Transnational Corporations (TNCs)
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1. Defined by the United Nations as firms that control assets abroad. 104,000 TNCs operate in the modern global economy. 2. Most global commerce is carried out by a small number of powerful firms.
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Foreign Direct Investment (FDI)
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1. Another important aspect of globalization is the worldwide flow of capital. 2. FDI occurs when a company, individual, or fund invests money in another country, buying shares of stock in or loaning money to a foreign firm. 3. In 2013, FDI was $1.45 trillion
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Inversion
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1. Companies avoid taxes in their home countries. a. By merging with companies located in other countries and shifting their headquarters there. 2. A strategy of acquiring or merging with a foreign firm in order to reduce corporate tax obligations at home. b. Example: Burger King
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International Financial and Trade Institutions
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1. Three institutions that set the rules by which international commerce is transacted: a. World Bank (WB) b. International Monetary Fund (IMF) c. World Trade Organization (WTO) 2. No business can operate across national boundaries without complying with rules set by the WTO. 3. Many businesses in developing countries are dependent on WB and IMF loans to survive.
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The World Bank
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1. Established in 1944. 2. Provides economic development loans to its member nations. 3. Funds used mainly for roads, dams, power plants, and other infrastructure projects, as well as for education, health and social services. 4. Funding provided by member countries and international capital markets.
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International Monetary Fund
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1. \”Sister\” organization to World Bank, created at same time. 2. Purpose: to stabilize the system of currency exchange rates and international payments to enable member countries to participate in global trade. 3. Lends foreign exchange to member countries. 4. Imposes conditions on governments that receive its loans. a. These conditions often lead to hardship: 1. Demands that governments cut spending 2. Devalue their currencies 3. Increase exports 4. Liberalize financial markets and reduce wages
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World Trade Organization
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1. Founded in 1995, successor to General Agreement on Tariffs and Trade (GATT). 2. International body that establishes the ground rules for trade among nations. 3. Its major objective is to promote free trade; attempts to eliminate barriers to trade (e.g. quotas, duties and tariffs). 4. Conducts \”rounds\” of negotiations on various topics. 5. \”Most favored nation\” rule means members countries cannot discriminate against foreign products for any reason.
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The Benefits and Costs of Globalization
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1. Globalization is highly controversial. 2. Clearly, some benefit from globalization, while others do not
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Comparative Political and Economic Systems
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1. Nations differ greatly in their political, social and economic systems. 2. First important dimension to consider is how power is exercised and degree of democratic rights. 3. Past century has been marked by spread of democratic rights to many nations for the first time.
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Democracy
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The presence of political freedom Four defining features of democracy (according to the U.N.)
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Military dictatorships
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Repressive regimes ruled by dictators who exercise total power through control of the armed forces. Examples: Zimbabwe and Uzbekistan
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Comparative Political Systems
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1. Rights of citizens to organize for cultural or religious freedoms is restricted in others. Examples: Syria, Saudi Arabia 2. According to United Nations estimates, 106 countries still limit important civil and political freedoms.
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Comparative Political Systems
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1. Degree to which human rights are protected differs greatly among nations. 2. Several international codes of human rights exist. a. United Nations Universal Declaration of Human Rights of 1948 b. Over half world’s nations have adopted these human rights covenants 3. Still, many violations of human rights still occur:
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Comparative Economic Systems
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Free enterprise systems Central state control
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Free enterprise systems
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Based on the principle of voluntary association and exchange. Members of society satisfy most of their economic needs through voluntary market transactions.
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Central state control
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Economic power is concentrated in the hands of government officials and political authorities. The central government owns the property that is used to produce goods and services
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The Heritage Foundation
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Has scored the nations of the world according to an Index of Economic Freedom: the fundamental rights of every human being to control his or her own labor and property. 1. Among the freest nations in 2015: Hong Kong, Singapore, and New Zealand. 2. Among the most repressed were Cuba, Venezuela, and—the least free in the world—North Korea. The United States ranked twelfth out of 178 countries.
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Global Inequality and the Bottom of the Pyramid
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1. Inequality may be measured in two ways: by wealth and income. 2. Wealth refers to assets that a person accumulates and he or she owns at a point in time. 3. Income—how much a person earns in a day or a year. Focusing on the bottom of the pyramid can foster a. Social development b. Provide employment in undeserved communities c. Reap profits
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Micro-finance:
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This occurs when financial organizations provide loans to low-income clients or solidarity lending groups (a community of borrowers) who traditionally lack access to banking or related services. Example: Grameen Bank in Bangladesh Indonesia, a midsized bank called BTPN
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Collaborative Partnerships for Global Problem Solving
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1. Emerging trend for development of collaborative, multi-sector partnerships focused on particular social issues or problems in the global economy. 2. These partnerships have been termed global action networks, or GANs. 3. Involves 3 sectors: business, government, civil society
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Which of the following examples illustrates the boundary exchanges a company would encounter according to the general systems theory? A. An industrial company installs new equipment in its plant to comply with environmental regulations. B. A software company develops an application for a client. C. A purchasing department employee negotiates a price on parts from a supplier.
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ALL OF THE ABOVE
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The CEO of Clean Chemical Co. company states \”while we appreciate our obligation to create long-term value for our shareholders, we also take seriously the obligation we have to protect the natural environment and all those who currently inhabit it and those who will inhabit it in the future.\” This CEO subscribes to:
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The Stakeholder Theory of the Firm
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A company’s suppliers are an
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External market stakeholder

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