3_INTRO TO BGS

3_INTRO TO BGS

1. Modern corporation

   • collaboration of multiple and diverse constituencies and interests, referred to as stakeholders
   • Triple bottom line: Economic, Environment, Social

2. 9 key attributes of reputation

   • 1. innovation 2. people management 3.  use of corporate assets 4. social responsibility 5. quality of management 6.  financial soundness 7. long term investment 8. quality of products/services 9. global competitiveness

3. 3 components

   • Business
     • range of actions and institutions related to profit-making activity that provides products and services to satisfy human needs
   • Government
     • Government refers to structures and processes in society that authoritatively made and apply policies and rules
     • Criteria of public policies: Efficiency, Equity and Paternalism
   • Society
     • A network of human relations that includes organizations and interest groups. It is a community/nation. Society as the macroenvironment: THE PEST SEGMENTS: Political, Economic, Social, Technological
     • R/s between business and society: Stakeholders
       • •Business criticism and scandals •Issues, such as executive compensation, abuse of corporate power, and sexual harassment •Broad societal concerns, such as the “rights” movement, discrimination, loss of jobs to foreign countries (offshoring, outsourcing), and workplace violence
     • Pluralistic Society
       • A state of society in which members of diverse ethnic, racial, religious, or social groups maintain an autonomous participation in and development of their traditional culture or special interest within the confines of a common civilization
       • Strengths
         • •Prevents concentration of power •Maximizes freedom of expression and action •Disperses individual allegiances (not forced to follow one/two grps) •Creates diversified set of loyalties •Provides checks and balances
       • Weaknesses
         • •Pursuit of self-interest •Proliferates organizations and groups with overlapping goals •Forces conflicts to center stage (promoting harmony is not equal to promoting pluralistic but it makes pluralism more comfy) •Promotes inefficiency
       • Characteristics of a special interest society
         • •Make life more complex for business •number in the tens of thousands •pursue their own limited agenda •are more active, intense, diverse and focused •attract a significant following
     • Social contract
       • •exists between business institutions and society. •It defines the broad duties the business must perform to retain society’s support. •It is partially expressed in law and partially in social values.
       • Business Criticisms
         • 1. Use and abuse of powerIn the long run, those who do not use power in a manner society considers responsible will tend to lose it (The Iron Law of Responsibilities). 2. Business often engages in questionable or unethical behavior with respect to its stakeholders
         • Reasons for rise in business criticisms
           • 1. Affluence and education 2.Awareness through television/Internet 3.Revolution of rising expectations (education + wealth + internet -> knows how other countries run things -> knows our entitlement) 4.Entitlement mentality 5.Rights movement 6.Victimization philosophy
         • Power
           • Ranging from coercion at one extreme to weak influence at the other
           • Levels
             • 1. Macro ( refers to the corporate system—Corporate America—the totality of business organizations. Power here emanates from the sheer size, resources, and dominance of the corporate system) 2. Intermediate (refers to groups of corporations acting in concert in an effort to produce a desired effect—to raise prices, control markets, dominate purchasers, promote an issue, or pass or defeat legislation) 3. Micro (refers to the level of the individual firm/ exertion of power or influence by any major corporation) 4. Individual (refers to the individual corporate leader exerting power)
           • Spheres
             • 1. Economic 2. Political 3. Social/Cultural 4. Individual 5. Technological 6. Environmental
       • Gap between society's expectations and business's actual social performance

4. People associated with this chapter

   • Milton Friedman: business of business is business John Mackey: CEO of wholefoods market (For CSR) Roberto Gorzueta: Coca Cola (Why shareowner value) Francis Fukuyama: Trust (Social Capital Literature) David Millband: CSR complements rather than substitutes government (education policy) Michael Heseltine: CSR complements rather than substitutes government (urban decay)