MNGT 3711 Thompson Stakeholder Responsibilities Consumer Protection Paper


I post one screen shot, and the screen shot is about the requirement. This essay need to follow the requirement of the screen shot step by step.

I posted the case, and this essay should base the case.

In additional, maybe you need some information from the Ethic book, which is Chapter 16.

Business and
Stakeholders, Ethics, Public Policy
Fifteenth Edition
Anne T. Lawrence
San José State University
James Weber
Duquesne University
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2017 by McGraw-Hill
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Library of Congress Cataloging-in-Publication Data
Names: Lawrence, Anne T., author. | Weber, James (Business ethics professor),
Title: Business and society : stakeholders, ethics, public policy / Anne T.
Lawrence, San Jose State University, James Weber, Duquesne University.
Description: Fifteenth edition. | New York, NY : McGraw-Hill Education, [2017]
Identifiers: LCCN 2015044071 | ISBN 9781259315411 (alk. paper)
Subjects: LCSH: Social responsibility of business.
Classification: LCC HD60 .F72 2017 | DDC 658.4/08–dc23 LC record available at
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System (HCPCS) Level II 2015. All names, situations, and anecdotes are fictitious. They do not represent any person, event, or medical record.
About the Authors
Anne T. Lawrence San José State University
Anne T. Lawrence is a professor of management at San José State University. She holds
a Ph.D. from the University of California, Berkeley, and completed two years of postdoctoral study at Stanford University. Her articles, cases, and reviews have appeared in many
journals, including the Academy of Management Review, Administrative Science Quarterly, Case Research Journal, Journal of Management Education, California Management
Review, Business and Society Review, Research in Corporate Social Performance and Policy, and Journal of Corporate Citizenship. Her cases in business and society have been
reprinted in many textbooks and anthologies. She has served as guest editor of the Case
Research Journal for two special issues on business ethics and human rights, and social
and environmental entrepreneurship. She served as president of both the North American
Case Research Association (NACRA) and the Western Casewriters Association and is a
Fellow of NACRA, from which she received a Distinguished Contributor Award in 2014.
She received the Emerson Center Award for Outstanding Case in Business Ethics (2004)
and the Curtis E. Tate Award for Outstanding Case of the Year (1998, 2009, and 2015).
At San José State University, she was named Outstanding Professor of the Year in 2005.
In 2015, she received a Master Teacher in Ethics Award from The Wheatley Institution at
Brigham Young University.
James Weber Duquesne University
James Weber is a professor of management and business ethics at Duquesne University.
He also serves as the executive director of the Institute for Ethics in Business and coordinates the Masters of Science in Leadership and Business Ethics program at Duquesne.
He holds a Ph.D. from the University of Pittsburgh and has taught at the University of San
Francisco, University of Pittsburgh, and Marquette University. His areas of interest and
research include managerial and organizational values, cognitive moral reasoning, business ethics, ethics training and education, eastern religions’ ethics, and corporate social
audit and performance. His work has appeared in Organization Science, Human Relations,
Business & Society, Journal of Business Ethics, Academy of Management Perspectives,
and Business Ethics Quarterly. He received the SIM Sumner Marcus Award for lifetime
contribution to the Social Issues in Management division of the Academy of Management
in 2013 and the Best Reviewer Award from Business & Society in 2015. He was recognized
by the Social Issues in Management division with the Best Paper Award in 1989 and 1994
and received the Best Article Award from the International Association for Business and
Society (IABS) in 1998. He has served as division and program chair of the Social Issues
in Management division of the Academy of Management. He has also served as president
and program chair of the IABS.
In a world economy that is becoming increasingly integrated and interdependent, the relationship between business and society is becoming ever more complex. The globalization
of business, the emergence of civil society organizations in many nations, and new government regulations and international agreements have significantly altered the job of managers and the nature of strategic decision making within the firm.
At no time has business faced greater public scrutiny or more urgent demands to act in
an ethical and socially responsible manner than at the present. Consider the following:
∙ The global financial crisis—highlighted by the failure of major business firms and
unprecedented intervention in the economy by many governments—and its continuing
aftermath as societies have struggled to recover have focused a fresh spotlight on issues
of corporate responsibility and ethics. Around the world, people and governments are
demanding that executives do a better job of serving shareholders and the public. Once
again, policymakers are actively debating the proper scope of government oversight in
such wide-ranging arenas as health care, financial services, and manufacturing. Management educators are placing renewed emphasis on issues of business leadership and
∙ A host of new technologies have become part of the everyday lives of billions of the
world’s people. Advances in the basic sciences are stimulating extraordinary changes
in agriculture, telecommunications, and pharmaceuticals, which have the potential to
enhance peoples’ health and quality of life. Technology has changed how we interact
with others, bringing people closer together through social networking, instant messaging, and photo and video sharing. These innovations hold great promise. But they also
raise serious ethical issues, such as those associated with genetically modified foods,
stem cell research, or use of the Internet to exploit or defraud others, censor free expression, or invade individuals’ privacy. Businesses must learn to harness new technologies, while avoiding public controversy and remaining sensitive to the concerns of their
many stakeholders.
∙ Businesses in the United States and other nations are transforming the employment relationship, abandoning practices that once provided job security and guaranteed pensions
in favor of highly flexible but less secure forms of employment. The Great Recession
caused job losses across broad sectors of the economy in the United States and many
other nations. Many jobs, including those in the service sector, are being outsourced to
the emerging economies of China, India, and other nations. As jobs shift abroad, transnational corporations are challenged to address their obligations to workers in far-flung
locations with very different cultures and to respond to initiatives, like the Bangladesh
Accord on Fire and Building Safety, which call for voluntary commitment to enlightened labor standards and human rights.
∙ Ecological and environmental problems have forced businesses and governments to take
action. An emerging consensus about the risks of climate change, for example, is leading many companies to adopt new practices, and the nations of the world have recently
adopted a groundbreaking agreement designed to limit the emissions of greenhouse
gases. Many businesses have cut air pollution, curbed solid waste, and designed products and buildings to be more energy-efficient. A better understanding of how human
Preface v
activities affect natural resources is producing a growing understanding that economic
growth must be achieved in balance with environmental protection if development is to
be sustainable.
∙ Many regions of the world and their nations are developing at an extraordinary rate.
Yet, the prosperity that accompanies economic growth is not shared equally. Access to
health care and education remain unevenly distributed among and within the world’s
nations, and inequalities of wealth and income have become greater than they have been
in many years. These trends have challenged businesses to consider the impact of their
compensation, recruitment, and professional development practices on the persistent—
and in some cases, growing—gap between the haves and the have-nots.
∙ The tragic epidemic of Ebola in West Africa, as well as the continuing pandemic of
AIDS in sub-Saharan Africa and the threat of a swine or avian flu outbreak have compelled drug makers to rethink their pricing policies and raised troubling questions about
the commitment of world trade organizations to patent protection. Many businesses
must consider the delicate balance between their intellectual property rights and the
urgent demands of public health, particularly in the developing world.
∙ In many nations, legislators have questioned business’s influence on politics. Business
has a legitimate role to play in the public policy process, but it has on occasion shaded
over into undue influence and even corruption. In the United States, recent court decisions have changed the rules of the game governing how corporations and individuals
can contribute to and influence political parties and public officials. Technology offers
candidates and political parties new ways to reach out and inform potential voters. Businesses the world over are challenged to determine their legitimate scope of influence
and how to voice their interests most effectively in the public policy process.
The new Fifteenth Edition of Business and Society addresses this complex agenda of
issues and their impact on business and its stakeholders. It is designed to be the required
textbook in an undergraduate or graduate course in Business and Society; Business, Government, and Society; Social Issues in Management; or the Environment of Business. It
may also be used, in whole or in part, in courses in Business Ethics and Public Affairs
Management. This new edition of the text is also appropriate for an undergraduate sociology course that focuses on the role of business in society or on contemporary issues in
The core argument of Business and Society is that corporations serve a broad public
purpose: to create value for society. All companies must make a profit for their owners.
Indeed, if they did not, they would not long survive. However, corporations create many
other kinds of value as well. They are responsible for professional development for their
employees, innovative new products for their customers, and generosity to their communities. They must partner with a wide range of individuals and groups in society to advance
collaborative goals. In our view, corporations have multiple obligations, and all stakeholders’ interests must be taken into account.
A Tradition of Excellence
Since the 1960s, when Professors Keith Davis and Robert Blomstrom wrote the first edition of this book, Business and Society has maintained a position of leadership by discussing central issues of corporate social performance in a form that students and faculty have
found engaging and stimulating. The leadership of the two founding authors, and later of
vi Preface
Professors William C. Frederick and James E. Post, helped Business and Society to achieve
a consistently high standard of quality and market acceptance. Thanks to these authors’
remarkable eye for the emerging issues that shape the organizational, social, and public
policy environments in which students will soon live and work, the book has added value
to the business education of many thousands of students.
Business and Society has continued through several successive author teams to be the
market leader in its field. The current authors bring a broad background of business and
society research, teaching, consulting, and case development to the ongoing evolution of
the text. The new Fifteenth Edition of Business and Society builds on its legacy of market
leadership by reexamining such central issues as the role of business in society, the nature
of corporate responsibility and global citizenship, business ethics practices, and the complex roles of government and business in a global community.
For Instructors
For instructors, this textbook offers a complete set of supplements.
Continually evolving, McGraw-Hill Connect® has been redesigned to provide the only
true adaptive learning experience delivered within a simple and easy-to-navigate environment, placing students at the very center.
∙ Performance Analytics—Now available for both instructors and students, easy-todecipher data illuminates course performance. Students always know how they are
doing in class, while instructors can view student and section performance at-a-glance.
∙ Personalized Learning—Squeezing the most out of study time, the adaptive engine
within Connect creates a highly personalized learning path for each student by identifying areas of weakness and providing learning resources to assist in the moment of need.
This seamless integration of reading, practice, and assessment ensures that the focus is
on the most important content for that individual.
Instructor Library
The Connect Management Instructor Library is a repository for additional resources to
improve student engagement in and out of class. The instructor can select and use any
asset that enhances his or her lecture. The Connect Instructor Library includes an extensive instructor’s resource manual—fully revised for this edition—with lecture outlines,
discussion case questions and answers, tips from experienced instructors, and extensive
case teaching notes. A computerized test bank and power point slides for every chapter are
also provided.
Manager’s Hot Seat
Now instructors can put students in the hot seat with access to an interactive program.
Students watch real managers apply their years of experience when confronting unscripted
issues. As the scenario unfolds, questions about how the manager is handling the situation
pop up, forcing the student to make decisions along with the manager. At the end of the
scenario, students watch a postinterview with the manager and view how their responses
matched up to the manager’s decisions. The Manager’s Hot Seat videos are now available
as assignments in Connect.
Preface vii
With McGraw-Hill Create,, the instructor can easily rearrange chapters, combine material from other content sources, and quickly upload selfdeveloped content such as a course syllabus or teaching notes. Content may be drawn
from any of the thousands of leading McGraw-Hill textbooks and arranged to fit a particular class or teaching approach. Create even allows an instructor to personalize the book’s
appearance by selecting the cover and adding the instructor’s name, school, and course
information and to select a print or eBook format.
For Students
Business and Society has long been popular with students because of its lively writing,
up-to-date examples, and clear explanations of theory. This textbook has benefited greatly
from feedback over the years from thousands of students who have used the material in the
authors’ own classrooms. Its strengths are in many ways a testimony to the students who
have used earlier generations of Business and Society.
The new Fifteenth Edition of the text is designed to be as student-friendly as always.
Each chapter opens with a list of key learning objectives to help focus student reading and
study. Numerous figures, exhibits, and real-world business examples (set as blocks of colored type) illustrate and elaborate the main points. A glossary at the end of the book provides definitions for bold-faced and other important terms. Internet references and a full
section-by-section bibliography guide students who wish to do further research on topics
of their choice, and subject and name indexes help students locate items in the book.
The Fifteenth Edition of Business and Society is available with LearnSmart, the most
widely used adaptive learning resource, which is proven to improve grades. (To find out
more about LearnSmart, go to McGraw-Hill Connect® By
helping students focus on the most important information they need to learn, LearnSmart
personalizes the learning experience so they can study as efficiently as possible.
An extension of LearnSmart, SmartBook is an adaptive eBook that helps students focus
their study time more effectively. As students read, SmartBook assesses comprehension
and dynamically highlights where they need to study more.
New for the Fifteenth Edition
Over the years, the issues addressed by Business and Society have changed as the environment of business itself has been transformed. This Fifteenth Edition is no exception,
as readers will discover. Some issues have become less compelling and others have taken
their place on the business agenda, while others endure through the years.
The Fifteenth Edition has been thoroughly revised and updated to reflect the latest theoretical work in the field and the latest statistical data, as well as recent events. Among the
new additions are:
∙ An all-new chapter for this edition on business and its suppliers, incorporating the latest
thinking about social, ethical, and environmental responsibility in global supply chains.
viii Preface
∙ New discussion of theoretical advances in stakeholder theory, corporate citizenship,
public affairs management, public and private regulation, corporate governance, social
and environmental auditing, social investing, reputation management, business partnerships, and corporate philanthropy.
∙ Treatment of practical issues, such as social networking, digital medical records, bottom of the pyramid, gender diversity, political advertising and campaign contributions,
as well as the latest developments in the regulatory environment in which businesses
operate, including the Dodd-Frank Act and the Affordable Care Act.
∙ New discussion cases and full-length cases on such timely topics as worker safety in the
garment industry in Bangladesh; the ignition switch recalls by General Motors; Google
and the “right to be forgotten”; Uber’s responsibilities toward its drivers, customers,
and communities; the decision to raise wages at Gravity Payments; the regulation of
e-cigarettes; security breaches that compromised customers’ information at Target and
other companies; the hacking of Sony Pictures’ servers; the environmental impact of
hydraulic fracturing; shareholder proxy access at Whole Foods; the sale of chemically
tainted flooring by Lumber Liquidators; substandard wages and working conditions at
nail salons; and JPMorgan Chase’s reputational challenges.
Finally, this is a book with a vision. It is not simply a compendium of information
and ideas. The new edition of Business and Society articulates the view that in a global
community, where traditional buffers no longer protect business from external change,
managers can create strategies that integrate stakeholder interests, respect personal values,
support community development, and are implemented fairly. Most important, businesses
can achieve these goals while also being economically successful. Indeed, this may be the
only way to achieve economic success over the long term.
Anne T. Lawrence
James Weber
We are grateful for the assistance of many colleagues at universities in the United States
and abroad who over the years have helped shape this book with their excellent suggestions
and ideas. We also note the feedback from students in our classes and at other colleges and
universities that has helped make this book as user-friendly as possible.
We especially wish to thank three esteemed colleagues who made special contributions
to this edition. Cynthia E. Clark, founder and director of the Harold S. Geneen Institute
of Corporate Governance and director of the Alliance for Ethics and Social Responsibility
at Bentley University, generously shared with us her expertise on corporate reputation,
governance, and media relations. She provided new material for and helped reorganize
Chapter 19, which has greatly benefited from her insights. She also advised us on the revisions of Chapter 3 and contributed the case, “Google and the Right to Be Forgotten.” Anke
Arnaud of Embry-Riddle Aeronautical University provided research support for the two
environmental chapters (Chapters 9 and 10), drawing on her extensive knowledge of the
sustainability literature. An expert in pedagogy, she also prepared the PowerPoint slides
that accompany the text. Harry J. Van Buren III of the University of New Mexico shared
his expertise on technology and society and provided in-depth suggestions on how best to
reorganize the two technology chapters (Chapters 11 and 12), which have been extensively
revised for this edition. For all of these contributions, we are most grateful.
We also wish to express our appreciation for the colleagues who provided detailed reviews
for this edition. These reviewers were Heather Elms of the Kogod School of Business at
American University; Joseph A. Petrick of Wright State University; Kathleen Rehbein of
Marquette University; Judith Schrempf-Stirling of the Robins School of Business at the
University of Richmond; and Caterina Tantalo of San Francisco State University.
In addition, we are grateful to the many colleagues who over the years have generously
shared with us their insights into the theory and pedagogy of business and society. In particular, we would like to thank Shawn Berman of University of New Mexico; Jennifer J.
Griffin of George Washington University; Ronald M. Roman, Asbjorn Osland, and MarcCharles Ingerson of San José State University; Bernie Hayen of Kansas State University;
Cynthia M. Orms of Georgia College & State University; Alexia Priest of Post University;
Sandra Waddock of Boston College; Mary C. Gentile of Giving Voice to Values; Margaret
J. Naumes of the University of New Hampshire (retired); Michael E. Johnson-Cramer and
Jamie Hendry of Bucknell University; John Mahon and Stephanie Welcomer of the University of Maine; Bradley Agle of Brigham Young University; Ann Svendsen of Simon Fraser
University (retired); Robert Boutilier of Robert Boutilier & Associates; Kathryn S. Rogers
of Pitzer College (retired); Anne Forrestel of the University of Oregon; Kelly Strong of Colorado State University; Daniel Gilbert of Gettysburg College; William Sodeman of Hawaii
Pacific University; Gina Vega of Merrimack College; Craig Dunn and Brian Burton of Western Washington University; Lori V. Ryan of San Diego State University; Bryan W. Husted
of York University; Sharon Livesey of Fordham University; Barry Mitnick of the University of Pittsburgh; Virginia Gerde, Matthew Drake, and David Wasieleski of Duquesne
University; Robbin Derry of the University of Lethbridge; Linda Ginzel of the University of
Chicago; Jerry Calton of the University of Hawaii–Hilo; Anthony J. Daboub of the University of Texas at Brownsville; Linda Klebe Treviño of Pennsylvania State University; Mary
x Acknowledgments
Meisenhelter of York College of Pennsylvania; Stephen Payne of Georgia College and State
University; Amy Hillman and Gerald Keim of Arizona State University; Jeanne Logsdon of
the University of New Mexico (retired); Barbara Altman of Texas A&M University Central
Texas; Craig Fleisher of the College of Coastal Georgia; Karen Moustafa Leonard of Indiana University–Purdue University Fort Wayne; Deborah Vidaver-Cohen of Florida International University; Lynda Brown of the University of Montana; Kathleen A. Getz of Loyola
University–Maryland; Gordon P. Rands of Western Illinois University; Paul S. Adler of the
University of Southern California; Diana Sharpe of Monmouth University; Pierre Batellier
and Emmanuel Raufflet of HEC Montreal; Bruce Paton, Tom E. Thomas, Denise Kleinrichert, Geoffrey Desa, and Peter Melhus of San Francisco State University; Jacob Park of
Green Mountain College; Armand Gilinsky of Sonoma State University; Tara Ceranic of
the University of San Diego; and Diane Swanson of Kansas State University.
These scholars’ dedication to the creative teaching of business and society has been a
continuing inspiration to us.
Thanks are also due to Murray Silverman of San Francisco State University; Robyn
Linde of Rhode Island College and H. Richard Eisenbeis of the University of Southern
Colorado Pueblo (retired); Steven M. Cox, Bradley W. Brooks, S. Cathy Anderson, and
J. Norris Frederick of Queens University of Charlotte; and Debra M. Staab, a freelance
writer and researcher, who contributed cases to this edition.
A number of individuals have made research contributions to this project for which we
are appreciative. Among the special contributors to this edition were Patricia Morrison
of Grossmont College and Caitlin Merritt and Clare Lamperski of Duquesne University,
who provided research assistance, and Debra M. Staab, who both provided research and
assisted in preparing the instructor’s resource manual and ancillary materials. Thanks are
also due to Carolyn Roose, Nate Marsh, and Benjamin Eagle for research support. Emily
Marsh, of The Sketchy Pixel, provided graphic design services.
We wish to express our continuing appreciation to William C. Frederick, who invited
us into this project many years ago and who has continued to provide warm support and
sage advice as the book has evolved through numerous editions. James E. Post, another
former author of this book, has also continued to offer valuable intellectual guidance to
this project.
We continue to be grateful to the excellent editorial and production team at McGraw-Hill.
We offer special thanks to Laura Hurst Spell, our sponsoring editor, for her skillful leadership of this project. We also wish to recognize the able assistance of Diana Murphy, development editor, and MaryJane Lampe and Ligo Alex, project managers, whose ability to keep
us on track and on time has been critical. Casey Keske headed the excellent marketing team.
Keri Johnson, media project manager; Susan K. Culbertson, buyer; Richard Wright, copy
editor; and Studio Montage, who designed the book cover, also played key roles. Each of
these people has provided professional contributions that we deeply value and appreciate.
As always, we are profoundly grateful for the ongoing support of our spouses, Paul
Roose and Sharon Green.
Anne T. Lawrence
James Weber
Brief Contents
Business in Society
14. Consumer Protection
1. The Corporation and Its Stakeholders
2. Managing Public Issues and Stakeholder
Relationships 24
3. Corporate Social Responsibility and
Citizenship 45
4. Business in a Globalized World 70
15. Employees and the Corporation
16. Managing a Diverse Workforce
17. Business and Its Suppliers
18. The Community and the
Corporation 394
19. The Public and Corporate
Reputation 417
Business and Ethics 91
5. Ethics and Ethical Reasoning
6. Organizational Ethics 113
Business and Public Policy 133
7. Business–Government Relations
8. Influencing the Political
Environment 157
Business and the Natural
Environment 181
9. Sustainable Development and Global
Business 182
10. Managing for Sustainability
Business and Technology 231
11. The Role of Technology
12. Regulating and Managing Information
Technology 256
Business and Its Stakeholders 277
13. Shareholder Rights and Corporate
Governance 278
After Rana Plaza 440
Google and the Right to Be
Forgotten 451
General Motors and the Ignition Switch
Recalls 461
Sustainability at Holland America
Line 471
The Carlson Company and
Protecting Children in the Global
Tourism Industry 480
Ventria Bioscience and the Controversy
over Plant-Made Medicines 489
Moody’s Credit Ratings and the
Subprime Mortgage Meltdown 500
The Upper Big Branch Mine
Disaster 513
Carolina Pad and the Bloggers 523
Name 554
Subject 558
Stakeholder Dialogue
The Corporation and Its Stakeholders
Summary 42
Key Terms 42
Internet Resources 42
Discussion Case: Coca-Cola’s Water Neutrality
Initiative 43
Business and Society
The Stakeholder Theory of the Firm
The Stakeholder Concept 7
Different Kinds of Stakeholders
Stakeholder Analysis
A Systems Perspective
The Corporation’s Boundary-Spanning
Departments 18
The Dynamic Environment of Business
Creating Value in a Dynamic Environment
Corporate Power and Responsibility 47
Corporate Social Responsibility and Citizenship
The Origins of Corporate Social Responsibility
Balancing Social, Economic, and Legal
Responsibilities 52
The Corporate Social Responsibility Debate
Arguments for Corporate Social Responsibility
Arguments against Corporate Social
Responsibility 56
Summary 21
Key Terms 22
Internet Resources 22
Discussion Case: Insuring Uber’s App-On Gap
Managing Public Issues and Stakeholder
Relationships 24
Competitive Intelligence 29
Stakeholder Materiality 30
The Issue Management Process
Identify Issue 32
Analyze Issue 33
Generate Options 33
Take Action 34
Evaluate Results 34
Organizing for Effective Issue Management
Stakeholder Engagement 36
Management Systems for Corporate Social
Responsibility and Citizenship 58
Stages of Corporate Citizenship 60
Assessing and Reporting Social Performance
Social Audit Standards
Social Reporting 64
Summary 66
Key Terms 66
Internet Resources 67
Discussion Case: Corporate Social Responsibility
at Gravity Payments 67
Business in a Globalized World 70
The Process of Globalization
Major Transnational Corporations 72
International Financial and Trade Institutions
Stages in the Business–Stakeholder Relationship
Drivers of Stakeholder Engagement 38
The Role of Social Media in Stakeholder
Engagement 39
Corporate Social Responsibility
and Citizenship 45
Stakeholder Interests 12
Stakeholder Power 12
Stakeholder Coalitions 14
Stakeholder Salience and Mapping 15
Public Issues 25
Environmental Analysis
Stakeholder Networks 40
The Benefits of Engagement
The Benefits and Costs of Globalization
Benefits of Globalization 76
Costs of Globalization 77
Doing Business in a Diverse World
Comparative Political and Economic Systems
Contents xiii
Global Inequality and the Bottom of the Pyramid 83
Collaborative Partnerships for Global Problem
Solving 85
Building Ethical Safeguards into the Company 121
Corporate Ethics Awards and Certifications 126
A Three-Sector World 85
Summary 87
Key Terms 87
Internet Resources 87
Discussion Case: Intel and Conflict Minerals
Other Functional Areas
Making Ethics Work in Corporations
Ethics in a Global Economy
Efforts to Curtail Unethical Practices 128
Summary 130
Key Terms 130
Internet Resources 130
Discussion Case: Alcoa’s Core Values in
Practice 131
Ethics and Ethical Reasoning 92
The Meaning of Ethics 93
Business–Government Relations 134
What Is Business Ethics? 94
Why Should Business Be Ethical? 95
Why Ethical Problems Occur in Business
Personal Gain and Selfish Interest 99
Competitive Pressures on Profits 100
Conflicts of Interest 100
Cross-Cultural Contradictions 101
Seeking a Collaborative Partnership 136
Working in Opposition to Government 136
Legitimacy Issues 137
The Core Elements of Ethical Character 102
Managers’ Values 102
Spirituality in the Workplace 103
Managers’ Moral Development 104
Analyzing Ethical Problems in Business
How Business and Government Relate
Government’s Public Policy Role
Elements of Public Policy 138
Types of Public Policy 140
Government Regulation of Business
Virtue Ethics: Pursuing a “Good” Life 106
Utility: Comparing Benefits and Costs 107
Rights: Determining and Protecting Entitlements 108
Justice: Is It Fair? 109
Applying Ethical Reasoning to Business Activities 109
Market Failure 142
Negative Externalities 142
Natural Monopolies 143
Ethical Arguments 143
Types of Regulation 143
The Effects of Regulation 147
Summary 110
Key Terms 111
Internet Resources 111
Discussion Case: Chiquita Brands: Ethical
Responsibility or Illegal Action? 111
Regulation in a Global Context 152
Summary 153
Key Terms 154
Internet Resources 154
Discussion Case: Should E-Cigarettes Be
Regulated? 154
Organizational Ethics
Influencing the Political Environment 157
Corporate Ethical Climates 114
Business Ethics across Organizational
Functions 116
Accounting Ethics 116
Financial Ethics 116
Marketing Ethics 118
Information Technology Ethics 120
Participants in the Political Environment
Business as a Political Participant 159
Influencing the Business–Government
Relationship 160
Corporate Political Strategy 160
Political Action Tactics
Promoting an Information Strategy
xiv Contents
Promoting a Financial-Incentive Strategy 165
Promoting a Constituency-Building Strategy 170
Levels of Political Involvement 173
Managing the Political Environment 174
Business Political Action: A Global Challenge 175
Summary 177
Key Terms 177
Internet Resources 178
Discussion Case: Stop Online Piracy Act—A
Political Battle between Old and New Media 178
Sustainable Development and Global
Business 182
Business and Society in the Natural
Environment 184
Sustainable Development 185
Threats to the Earth’s Ecosystem 185
Forces of Change 186
The Earth’s Carrying Capacity 189
Global Environmental Issues
Climate Change 191
Ozone Depletion 194
Resource Scarcity: Water and Land 194
Decline of Biodiversity 196
Threats to Marine Ecosystems 197
Response of the International Business
Community 198
Codes of Environmental Conduct 200
Summary 202
Key Terms 202
Internet Resources 202
Discussion Case: Clean Cooking
Managing for Sustainability
Role of Government 207
Major Areas of Environmental Regulation 207
Alternative Policy Approaches 212
Costs and Benefits of Environmental
Regulation 216
Managing for Sustainability 218
Stages of Corporate Environmental Responsibility 218
The Ecologically Sustainable Organization
Sustainability Management in Practice 219
Environmental Auditing and Reporting 221
Environmental Partnerships 222
Sustainability Management as a Competitive
Advantage 222
Cost Savings 223
Brand Differentiation 224
Technological Innovation 224
Reduction of Regulatory and Liability Risk 225
Strategic Planning 225
Summary 227
Key Terms 227
Internet Resources 227
Discussion Case: Hydraulic Fracturing—Can the
Environmental Impacts Be Reduced? 228
The Role of Technology 232
Technology Defined
Phases of Technology in Society 234
Fueling Technological Growth 235
The Role of Technology in Society
The Internet
The Digital Divide in the United States
and Worldwide 239
Mobile Telephones 240
Social Networking 241
The Impact of Scientific Breakthroughs
Genetically Engineered Foods 242
Sequencing of the Human Genome 244
Biotechnology and Stem Cell Research 245
The Role of Technology in Business
E-Business 247
Transforming Prevailing Business Models
The Use of Robotics at Work 248
Ethical Challenges Involving Technology
The Loss of Privacy 250
Free Speech Issues 251
Summary 252
Key Terms 252
Internet Resources 252
Discussion Case: How Safe Is Your Personal
Information? 252
Contents xv
Regulating and Managing Information
Technology 256
Information Technology Challenges for Governments
and Businesses 258
Government Interventions of Information
and Ideas 259
Government Internet Censorship and Control 259
Government Acquisition of Information to Protect the
Public Good 261
Government Protecting Individuals’ Rights and
Property 262
Business Access to and Use of Confidential
Information 263
Access to Stakeholders’ Personal Information 263
Special Issue: Cybercrime—A Threat
to Organizations and the Public 265
Costs of Cybercrime 266
Exploring Why Hackers Hack 267
Business Responses to Invasions of Information
Security 269
The Chief Information, Security,
Technology Officer 271
Government Efforts to Combat Cybercrime 272
Summary 273
Key Terms 274
Internet Resources 274
Discussion Case: Sony Pictures and North Korean
Hackers 274
Social Investment 293
Shareholder Lawsuits 294
Government Protection of Shareholder
Interests 295
Securities and Exchange Commission 295
Information Transparency and Disclosure 295
Insider Trading 296
Shareholders and the Corporation 298
Summary 298
Key Terms 299
Internet Resources 299
Discussion Case: Whole Foods Adopts Egalitarian
Compensation Policies—But Fights Back on Board
Elections 299
Consumer Protection
The Rights of Consumers 304
Self-Advocacy for Consumer Interests
Reasons for the Consumer Movement
How Government Protects Consumers
Goals of Consumer Laws 307
Major Consumer Protection Agencies
Special Issue: Consumer Privacy in the
Digital Age 312
Using the Courts and Product Liability Laws
Positive Business Responses to Consumerism
Shareholder Rights and Corporate
Governance 278
Shareholders around the World 279
Who Are Shareholders? 280
Objectives of Stock Ownership 282
Shareholders’ Legal Rights and Safeguards 282
The Board of Directors 283
Principles of Good Governance 285
Special Issue: Executive Compensation
Shareholder Activism 291
The Rise of Institutional Investors 292
Managing for Quality 318
Voluntary Industry Codes of Conduct 320
Consumer Affairs Departments 320
Product Recalls 320
Corporate Governance
Strict Liability 315
Product Liability Reform and Alternative Dispute
Resolution 317
Consumerism’s Achievements 321
Summary 322
Key Terms 322
Internet Resources 322
Discussion Case: Lumber Liquidators’ Laminate
Flooring 322
Employees and the Corporation 325
The Employment Relationship
Workplace Rights 327
The Right to Organize and Bargain Collectively 328
The Right to a Safe and Healthy Workplace 329
The Right to a Secure Job 332
xvi Contents
Special Issue: Wages and Income Inequality
Privacy in the Workplace 336
Electronic Monitoring 337
Romance in the Workplace 338
Employee Drug Use and Testing 339
Alcohol Abuse at Work 340
Employee Theft and Honesty Testing 341
Whistle-Blowing and Free Speech in the
Workplace 341
Employees as Corporate Stakeholders 343
Summary 344
Key Terms 344
Internet Resources 344
Discussion Case: The Ugly Side of Beautiful
Nails 344
Managing a Diverse Workforce
The Changing Face of the Workforce 348
Gender and Race in the Workplace 350
Women and Minorities at Work 350
The Gender and Racial Pay Gap 351
Where Women and Persons of Color Manage 353
Breaking the Glass Ceiling 354
Women and Minority Business Ownership 357
Government’s Role in Securing Equal Employment
Opportunity 357
Equal Employment Opportunity 357
Affirmative Action 359
Sexual and Racial Harassment 359
What Business Can Do: Diversity and Inclusion
Policies and Practices 361
Balancing Work and Life 364
Child Care and Elder Care 364
Work Flexibility 365
Environmental Issues 379
Supply Chain Risk 380
Private Regulation of the Business–Supplier
Relationship 381
Supply Chain Auditing 384
Supplier Development and Capability Building 387
Summary 391
Key Terms 391
Internet Resources 391
Discussion Case: Apple’s Supplier Code of Conduct
and Foxconn’s Chinese Factories 392
The Community and the Corporation 394
The Business–Community Relationship
The Business Case for Community Involvement
Community Relations
Economic Development 400
Housing 400
Aid to Minority, Women, and Disabled Veteran-Owned
Enterprises 400
Disaster, Terrorism, and War Relief 401
Corporate Giving
Forms of Corporate Giving 405
Priorities in Corporate Giving 407
Corporate Giving in a Strategic Context 408
Measuring the Return on Social Investment 410
Building Collaborative Partnerships 411
Summary 413
Key Terms 414
Internet Resources 414
Discussion Case: Fidelity Investments’ Partnership
with Citizen Schools 414
Summary 367
Key Terms 368
Internet Resources 368
Discussion Case: Unauthorized Immigrant Workers
at Chipotle Mexican Grill Restaurants 368
The Public and Corporate Reputation
Business and Its Suppliers 371
The Public Relations Department
Suppliers 373
Social, Ethical, and Environmental Issues in Global
Supply Chains 376
Brand Management 424
Crisis Management 425
Engaging Key Stakeholders with Specific
Tactics 428
Social Issues 376
Ethical Issues 377
The General Public 419
What Is Reputation? 419
Why Does Reputation Matter?
Using Technology-Enhanced Channels for Public
Relations 423
Executive Visibility
Contents xvii
5. The Carlson Company and
Protecting Children in the Global
Tourism Industry 480
User-Generated Content 430
Paid Content 431
Event Sponsorship 432
Public Service Announcements 433
Image Advertisements 433
Summary 435
Key Terms 435
Internet Resources 435
Discussion Case: JPMorgan Chase’s #AskJPM
6. Ventria Bioscience and the Controversy
over Plant-Made Medicines 489
7. Moody’s Credit Ratings and the
Subprime Mortgage Meltdown 500
8. The Upper Big Branch Mine
Disaster 513
1. After Rana Plaza 440
9. Carolina Pad and the Bloggers
2. Google and the Right to Be
Forgotten 451
3. General Motors and the Ignition Switch
Recalls 461
4. Sustainability at Holland America
Line 471
Bibliography 549
Name 554
Subject 558
Business in Society
The Corporation
and Its Stakeholders
Business corporations have complex relationships with many individuals and organizations in society.
The term stakeholder refers to all those that affect, or are affected by, the actions of the firm. An
important part of management’s role is to identify a firm’s relevant stakeholders and understand the
nature of their interests, power, and alliances with one another. Building positive and mutually beneficial relationships across organizational boundaries can help enhance a company’s reputation and
address critical social and ethical challenges. In a world of fast-paced globalization, shifting public
expectations and government policies, growing ecological concerns, and new technologies, managers face the difficult challenge of achieving economic results while simultaneously creating value for
all of their diverse stakeholders.
This Chapter Focuses on These Key Learning Objectives:
LO 1-1
Understanding the relationship between business and society and the ways in which business and
society are part of an interactive system.
LO 1-2
Considering the purpose of the modern corporation.
LO 1-3
Knowing what a stakeholder is and who a corporation’s market and nonmarket and internal and
external stakeholders are.
LO 1-4
Conducting a stakeholder analysis and understanding the basis of stakeholder interests and power.
LO 1-5
Recognizing the diverse ways in which modern corporations organize internally to interact with
various stakeholders.
LO 1-6
Analyzing the forces of change that continually reshape the business and society relationship.
Chapter 1 The Corporation and Its Stakeholders
Walmart has been called “a template for 21st century capitalism.” In each period of history,
because of its size and potential impact on many groups in society, a single company often
seems to best exemplify the management systems, technology, and social relationships of
its era. In 1990, this company was U.S. Steel. In 1950, it was General Motors. Now, in the
2010s, it is Walmart.1
In 2015, Walmart was the largest private employer in the world, with 2.2 million employees worldwide. The company operated more than 11,000 facilities in 27 countries and had
annual sales of $473 billion. The retailer was enormously popular with customers, drawing
them in with its great variety of products under one roof and “save money, live better” slogan; 250 million customers worldwide shopped there every week. Economists estimated
that Walmart had directly through its own actions and indirectly through its impact on its
supply chain saved American shoppers $287 billion annually, about $957 for every person
in the United States.2 Shareholders who invested early were richly rewarded; the share price
rose from 5 cents (split adjusted) when the company went public in 1970 to around $90
a share in early 2015, its all-time high. Walmart was a major customer for tens of thousands
of suppliers worldwide, ranging from huge multinationals to tiny one-person operations.
Yet, Walmart had become a lightning rod for criticism from many quarters, charged
with corruption; driving down wages, benefits, and working conditions; and hurting local
communities. Consider that:
∙ On the Friday after Thanksgiving 2014—so-called Black Friday—thousands of protesters rallied at 1,600 Walmart stores across the United States, calling on the retailer
to raise its workers’ pay to at least $15 an hour and offer more of them full-time work
and predictable schedules. Said one part-time cashier, “It is very hard on what I earn.
Right now I’m on food stamps and applying for medical assistance.” A month earlier,
the company had announced it would no longer provide health insurance to associates
working less than 30 hours a week.3
∙ In 2012, the company confronted shocking charges that it had conducted a “campaign
of bribery” to facilitate its rapid growth in Mexico. According to an investigation by
The New York Times, Walmart had made $24 million in payments to government officials
to clear the way for hundreds of new stores in what became the company’s most important
foreign subsidiary, in probable violation of both U.S. and Mexican law. Two years later, the
company had spent more than $400 million to investigate the bribery allegations, and faced
numerous lawsuits from irate shareholders and an ongoing U.S. government investigation.4
∙ In 2013, local activists protested the opening of a Walmart neighborhood market in Los
Angeles’s Chinatown, carrying large puppets dressed as the ghosts of small businesses.
It was the latest of many incidents in which communities resisted the arrival of the retail
giant, saying it would hurt local shopkeepers.5 Economists studying Walmart’s impact
in Chicago, for example, found that about one-quarter of neighborhood retailers near a
new Walmart had gone out of business, causing a loss of 300 jobs.6
In a continuing effort to improve its social performance, Walmart offered grants to
small businesses, donated to wildlife habitat restoration, and announced a plan to lower
Nelson Lichtenstein, “Wal-Mart: A Template for Twenty-First Century Capitalism,” in Wal-Mart: The Face of Twenty-First
Century Capitalism, ed. Nelson Lichtenstein (New York: The New Press, 2006), pp. 3–30.
Global Insight, “The Price Impact of Wal-Mart: An Update through 2006,” September 4, 2007.
“Wal-Mart Cutting Health Benefits to Some Part-Time Employees,” Bloomberg, October 7, 2014, and “On Black Friday,
Walmart Is Pressed for Wage Increases,” The New York Times, November 28, 2014.
“Wal-Mart Hushed Up a Vast Mexican Bribery Case,” The New York Times, April 21, 2012; “After Bribery Scandal, High-Level
Departures at Walmart,” The New York Times, June 4, 2014.
“Walmart in LA’s Chinatown Has Opened, Despite Major Protest,” September 13, 2013,
Julie Davis et al., “The Impact of an Urban Wal-Mart Store on Area Businesses: An Evaluation of One Chicago Neighborhood’s Experience,” Center for Urban Research and Learning, Loyola University Chicago, December 2009.
4 Part One Business in Society
the salt, fat, and sugar in many of its packaged foods. The company strengthened its ethics
and compliance program. It also pursued ambitious environmental goals to reduce waste,
use more renewable energy, and sell more sustainable products, and began reporting to the
public on its progress.7 “Reputation is very important to Wal-Mart,” said a historian who
had studied the company. “They put a lot of money into building it.”8
Walmart’s experience illustrates, on a particularly large scale, the challenges of managing successfully in a complex global network of stakeholders. The company’s actions
affected not only itself, but also many other people, groups, and organizations in society.
Customers, suppliers, employees, stockholders, creditors, business partners, governments,
and local communities all had a stake in Walmart’s decisions. Walmart had to learn just
how difficult it could be to simultaneously satisfy multiple stakeholders with diverse and,
in some respects, contradictory interests.
Every modern company, whether small or large, is part of a vast global business system.
Whether a firm has 50 employees or 50,000—or, like Walmart, more than 2 million—its
links to customers, suppliers, employees, and communities are certain to be numerous,
diverse, and vital to its success. This is why the relationship between business and society
is important for you to understand as both a citizen and a manager.
Business and Society
Business today is arguably the most dominant institution in the world. The term business
refers here to any organization that is engaged in making a product or providing a service for
a profit. Consider that in the United States today there are 6 million businesses, according
to government estimates, and in the world as a whole, there are uncounted millions more.
Of course, these businesses vary greatly in size and impact. They range from a woman who
helps support her family by selling handmade tortillas by the side of the road in Mexico City
for a few pesos, to ExxonMobil, a huge corporation that employs 75,000 workers and earns
annual revenues approaching $412 billion in almost every nation in the world.
Society, in its broadest sense, refers to human beings and to the social structures they collectively create. In a more specific sense, the term is used to refer to segments of humankind,
such as members of a particular community, nation, or interest group. As a set of organizations created by humans, business is clearly a part of society. At the same time, it is also a
distinct entity, separated from the rest of society by clear boundaries. Business is engaged in
ongoing exchanges with its external environment across these dividing lines. For example,
businesses recruit workers, buy supplies, and borrow money; they also sell products, donate
time, and pay taxes. This book is broadly concerned with the relationship between business
and society. A simple diagram of the relationship between the two appears in Figure 1.1.
As the Walmart example that opened this chapter illustrates, business and society are highly
interdependent. Business activities impact other activities in society, and actions by various
social actors and governments continuously affect business. To manage these interdependencies, managers need an understanding of their company’s key relationships and how the social
and economic system of which they are a part affects, and is affected by, their decisions.
A Systems Perspective
General systems theory, first introduced in the 1940s, argues that all organisms are open to,
and interact with, their external environments. Although most organisms have clear boundaries, they cannot be understood in isolation, but only in relationship to their surroundings.
“2014 Global Responsibility Report,”
“Wal-Mart’s Good-Citizen Efforts Face a Test,” The New York Times, April 30, 2012.
Chapter 1 The Corporation and Its Stakeholders
Business and Society:
An Interactive
This simple but powerful idea can be applied to many disciplines. For example, in botany,
the growth of a plant cannot be explained without reference to soil, light, oxygen, moisture,
and other characteristics of its environment. As applied to management theory, the systems
concept implies that business firms (social organisms) are embedded in a broader social
structure (external environment) with which they constantly interact. Corporations have
ongoing boundary exchanges with customers, governments, competitors, suppliers, communities, and many other individuals and groups. Just as good soil, water, and light help a
plant grow, positive interactions with society benefit a business firm.
Like biological organisms, moreover, businesses must adapt to changes in the environment. Plants growing in low-moisture environments must develop survival strategies, like the
cactus that evolves to store water in its leaves. Similarly, a long-distance telephone company
in a newly deregulated market must learn to compete by changing the products and services it
offers. The key to business survival is often this ability to adapt effectively to changing conditions. In business, systems theory provides a powerful tool to help managers conceptualize
the relationship between their companies and their external environments.
Systems theory helps us understand how business and society, taken together, form an
interactive social system. Each needs the other, and each influences the other. They are
entwined so completely that any action taken by one will surely affect the other. They are
both separate and connected. Business is part of society, and society penetrates far and
often into business decisions. In a world where global communication is rapidly expanding, the connections are closer than ever before. Throughout this book we discuss examples of organizations and people that are grappling with the challenges of, and helping to
shape, business–society relationships.
The Stakeholder Theory of the Firm
What is the purpose of the modern corporation? To whom, or what, should the firm be
responsible?9 No question is more central to the relationship between business and society.
For summaries of contrasting theories of the purpose of the firm, see Margaret M. Blair, “Whose Interests Should Corporations Serve,” in Margaret M. Blair and Bruce K. MacLaury, Ownership and Control: Rethinking Corporate Governance for the
Twenty-First Century (Washington, DC: Brookings Institution, 1995), ch. 6, pp. 202–34; and James E. Post, Lee E. Preston,
and Sybille Sachs, Redefining the Corporation: Stakeholder Management and Organizational Wealth (Palo Alto, CA: Stanford
University Press, 2002).
Part One Business in Society
In the ownership theory of the firm (sometimes also called property or finance theory),
the firm is seen as the property of its owners. The purpose of the firm is to maximize its
long-term market value, that is, to make the most money it can for shareholders who own
stock in the company. Managers and boards of directors are agents of shareholders and
have no obligations to others, other than those directly specified by law. In this view, owners’ interests are paramount and take precedence over the interests of others.
A contrasting view, called the stakeholder theory of the firm, argues that corporations
serve a broad public purpose: to create value for society. All companies must make a profit
for their owners; indeed, if they did not, they would not long survive. However, corporations create many other kinds of value as well, such as professional development for their
employees and innovative new products for their customers. In this view, corporations
have multiple obligations, and all stakeholders’ interests must be taken into account. This
approach has been expressed well by the pharmaceutical company Novartis, which states
in its code of conduct that it “places a premium on dealing fairly with employees, customers, vendors, government regulators, and the public. Novartis’ success depends upon
maintaining the trust of these essential stakeholders.”10
Supporters of the stakeholder theory of the firm make three core arguments for their
position: descriptive, instrumental, and normative.11
The descriptive argument says that the stakeholder view is simply a more realistic
description of how companies really work. Managers have to pay keen attention, of course,
to their quarterly and annual financial performance. Keeping Wall Street satisfied by managing for growth—thereby attracting more investors and increasing the stock price—is a
core part of any top manager’s job. But the job of management is much more complex than
this. In order to produce consistent results, managers have to be concerned with producing
high-quality and innovative products and services for their customers, attracting and retaining talented employees, and complying with a plethora of complex government regulations.
As a practical matter, managers direct their energies toward all stakeholders, not just owners.
In what became known as the “dollar store wars,” in 2014 two companies made
competing bids to buy Family Dollar, a U.S. discount retail chain based in Charlotte, North Carolina—each with very different consequences for stakeholders. One
suitor, Dollar Tree, offered $76.50 per share for the company, while the other, Dollar General, offered $80—seemingly a better deal for shareholders. But the Dollar
General deal faced likely government antitrust scrutiny and would probably have
required the closure of thousands of stores, throwing employees out of work and
depriving low-income communities of access to a discount store. In the end, after
considering the impact on all stakeholders, Family Dollar’s management recommended the lower-priced offer, and three-quarters of its shareholders agreed.12
The instrumental argument says that stakeholder management is more effective as a
corporate strategy. A wide range of studies have shown that companies that behave responsibly toward multiple stakeholder groups perform better financially, over the long run, than
those that do not. (This empirical evidence is further explored in Chapter 3.) These findings make sense, because good relationships with stakeholders are themselves a source of
value for the firm. Attention to stakeholders’ rights and concerns can help produce
“Code of Conduct: Values to Live By,” online at
The descriptive, instrumental, and normative arguments are summarized in Thomas Donaldson and Lee E. Preston, “The
Stakeholder Theory of the Corporation: Concepts, Evidence and Implications,” Academy of Management Review 20, no. 1
(1995), pp. 65–71. See also, Post, Preston, and Sachs, Redefining the Corporation, ch. 1.
“Family Dollar Shareholders Approve Sale to Dollar Tree,” Charlotte Observer, January 22, 2015.
Chapter 1 The Corporation and Its Stakeholders
motivated employees, satisfied customers, committed suppliers, and supportive communities, all good for the company’s bottom line.
The normative argument says that stakeholder management is simply the right thing to
do. Corporations have great power and control vast resources; these privileges carry with
them a duty toward all those affected by a corporation’s actions. Moreover, all stakeholders, not just owners, contribute something of value to the corporation. A skilled engineer
at Microsoft who applies his or her creativity to solving a difficult programming problem
has made a kind of investment in the company, even if it is not a monetary investment. Any
individual or group who makes a contribution, or takes a risk, has a moral right to some
claim on the corporation’s rewards.13
A basis for both the ownership and stakeholder theories of the firm exists in law. The
legal term fiduciary means a person who exercises power on behalf of another, that is, who
acts as the other’s agent. In U.S. law, managers are considered fiduciaries of the owners of
the firm (its stockholders) and have an obligation to run the business in their interest. These
legal concepts are clearly consistent with the ownership theory of the firm. However, other
laws and court cases have given managers broad latitude in the exercise of their fiduciary
duties. In the United States (where corporations are chartered not by the federal government
but by the states), most states have passed laws that permit managers to take into consideration a wide range of other stakeholders’ interests, including those of employees, customers,
creditors, suppliers, and communities. (Benefit corporations, firms with a special legal status
that obligates them to do so, are further discussed in Chapter 3.) In addition, many federal
laws extend specific protections to various groups of stakeholders, such as those that prohibit
discrimination against employees or grant consumers the right to sue if harmed by a product.
In other nations, the legal rights of nonowner stakeholders are often more fully developed than in the United States. For example, a number of European countries—including
Germany, Norway, Austria, Denmark, Finland, and Sweden—require public companies
to include employee members on their boards of directors, so that their interests will be
explicitly represented. Under the European Union’s so-called harmonization statutes, managers are specifically permitted to take into account the interests of customers, employees,
creditors, and others.
In short, while the law requires managers to act on behalf of stockholders, it also gives
them wide discretion—and in some instances requires them—to manage on behalf of the
full range of stakeholder groups. The next section provides a more formal definition and an
expanded discussion of the stakeholder concept.
The Stakeholder Concept
The term stakeholder refers to persons and groups that affect, or are affected by, an organization’s decisions, policies, and operations.14 The word stake, in this context, means
Another formulation of this point has been offered by Robert Phillips, who argues for a principle of stakeholder fairness.
This states that “when people are engaged in a cooperative effort and the benefits of this cooperative effort are accepted,
obligations are created on the part of the group accepting the benefit” [i.e., the business firm]. Robert Phillips, Stakeholder
Theory and Organizational Ethics (San Francisco: Berrett-Koehler, 2003), p. 9 and ch. 5.
The term stakeholder was first introduced in 1963 but was not widely used in the management literature until the publication of R. Edward Freeman’s Strategic Management: A Stakeholder Approach (Marshfield, MA: Pitman, 1984). For summaries
of the stakeholder theory literature, see Thomas Donaldson and Lee E. Preston, “The Stakeholder Theory of the Corporation:
Concepts, Evidence, Implications,” Academy of Management Review, January 1995, pp. 71–83; Max B. E. Clarkson, ed., The
Corporation and Its Stakeholders: Classic and Contemporary Readings (Toronto: University of Toronto Press, 1998); Abe J.
Zakhem, Daniel E. Palmer, and Mary Lyn Stoll, Stakeholder Theory: Essential Readings in Ethical Leadership and Management (Amherst, NY: Prometheus Books, 2008); and R. Edward Freeman, Stakeholder Theory: The State of the Art
(Cambridge, UK: Cambridge University Press, 2010).
Part One Business in Society
an interest in—or claim on—a business enterprise. Those with a stake in the firm’s
actions include such diverse groups as customers, employees, shareholders (also called
stockholders), governments, suppliers, professional and trade associations, social and
environmental activists, and nongovernmental organizations. The term stakeholder is
not the same as stockholder, although the words sound similar. Stockholders—individuals or organizations that own shares of a company’s stock—are one of several kinds of
Business organizations are embedded in networks involving many participants. Each
of these participants has a relationship with the firm, based on ongoing interactions.
Each of them shares, to some degree, in both the risks and rewards of the firm’s activities. And each has some kind of claim on the firm’s resources and attention, based on
law, moral right, or both. The number of these stakeholders and the variety of their interests can be large, making a company’s decisions very complex, as the Walmart example
Managers make good decisions when they pay attention to the effects of their decisions on stakeholders, as well as stakeholders’ effects on the company. On the positive
side, strong relationships between a corporation and its stakeholders are an asset that
adds value. On the negative side, some companies disregard stakeholders’ interests,
either out of the belief that the stakeholder is wrong or out of the misguided notion
that an unhappy customer, employee, or regulator does not matter. Such attitudes often
prove costly to the company involved. Today, for example, companies know that they
cannot locate a factory or store in a community that strongly objects. They also know
that making a product that is perceived as unsafe invites lawsuits and jeopardizes market share.
Different Kinds of Stakeholders
Business interacts with society in many diverse ways, and a company’s relationships with
various stakeholders differ.
Market stakeholders are those that engage in economic transactions with the company
as it carries out its purpose of providing society with goods and services. Each relationship
between a business and one of its market stakeholders is based on a unique transaction, or
two-way exchange. Stockholders invest in the firm and in return receive the potential for
dividends and capital gains. Creditors loan money and collect payments of interest and
principal. Employees contribute their skills and knowledge in exchange for wages, benefits, and the opportunity for personal satisfaction and professional development. In return
for payment, suppliers provide raw materials, energy, services, finished products, and other
inputs; and wholesalers, distributors, and retailers engage in market transactions with the
firm as they help move the product from plant to sales outlets to customers. All businesses
need customers who are willing to buy their products or services.
The puzzling question of whether or not managers should be classified as stakeholders
along with other employees is discussed in Exhibit 1.A.
Nonmarket stakeholders, by contrast, are people and groups who—although they do
not engage in direct economic exchange with the firm—are nonetheless affected by or
can affect its actions. Nonmarket stakeholders include the community, various levels of
government, nongovernmental organizations, business support groups, competitors, and
the general public. Nonmarket stakeholders are not necessarily less important than others,
simply because they do not engage in direct economic exchange with a business. On the
contrary, interactions with such groups can be critical to a firm’s success or failure, as
shown in the following example.
Exhibit 1.A
Are Managers Stakeholders?
Are managers, especially top executives, stakeholders? This has been a contentious issue in stakeholder
On one hand, the answer clearly is “yes.” Like other stakeholders, managers are impacted by the firm’s
decisions. As employees of the firm, managers receive compensation—often very generous compensation,
as shown in Chapter 13. Their managerial roles confer opportunities for professional advancement, social
status, and power over others. Managers benefit from the company’s success and are hurt by its failure. For
these reasons, they might properly be classified as employees.
On the other hand, top executives are agents of the firm and are responsible for acting on its behalf. In
the stakeholder theory of the firm, their role is to integrate stakeholder interests, rather than to promote their
own more narrow, selfish goals. For these reasons, they might properly be classified as representatives of the
firm itself, rather than as one of its stakeholders.
Management theory has long recognized that these two roles of managers potentially conflict. The main
job of executives is to act for the company, but all too often they act primarily for themselves. Consider, for
example, the many top executives of Lehman Brothers, MF Global, and Merrill Lynch, who enriched themselves personally at the expense of shareholders, employees, customers, and other stakeholders. The challenge of persuading top managers to act in the firm’s best interest is further discussed in Chapter 13.
In 2001, a company called Energy Management Inc. (EMI) announced a plan to
build a wind farm about six miles off the shore of Cape Cod, Massachusetts, to supply clean, renewable power to New England customers. The project, called Cape
Wind, immediately generated intense opposition from residents of Cape Cod and
nearby islands, who were concerned that its 130 wind turbines would spoil the view
and get in the way of boats. A nonprofit group called Save Our Sound filed dozens
of lawsuits, charging possible harm to wildlife, increased electricity rates, and danger to aircraft. In early 2015, EMI appeared blocked on all sides, as local utilities
withdrew their commitments to buy power from the wind farm, which one local
newspaper called the final “death blow.”15
In this instance, activists were able to block the company’s plans for more than a
decade—and possibly permanently—even though they did not have a market relationship
with it.
Theorists also distinguish between internal stakeholders and external stakeholders.
Internal stakeholders are those, such as employees and managers, who are employed by the
firm. They are “inside” the firm, in the sense that they contribute their effort and skill, usually at a company worksite. External stakeholders, by contrast, are those who—although
they may have important transactions with the firm—are not directly employed by it.
The classification of government as a nonmarket stakeholder has been controversial
in stakeholder theory. Most theorists say that government is a nonmarket stakeholder (as
does this book) because it does not normally conduct any direct market exchanges (buying
and selling) with business. However, money often flows from business to government in
the form of taxes and fees, and sometimes from government to business in the form of
subsidies or incentives. Moreover, some businesses—defense contractors for example—do
“Renewable Energy: Wind Power Tests the Waters,” Nature, September 24, 2014; “Cape Wind’s Future Called into Question,” The Boston Globe, January 8, 2015; and “Cape Wind Becalmed,” Providence Journal, January 21, 2015. The website
of the project is at The story of the opposition to Cape Wind is told in Robert Whitcomb and Wendy
Williams, Cape Wind: Money, Celebrity, Energy, Class, Politics, and the Battle for Our Energy Future (New York: PublicAffairs,
10 Part One Business in Society
sell directly to the government and receive payment for goods and services rendered. For
this reason, a few theorists have called government a market stakeholder of business. And,
in a few cases, the government may take a direct ownership stake in a company—as the
U.S. government did after the financial crisis of 2008–09 when it invested in several banks
and auto companies, becoming a shareholder of these firms. Government also has special
influence over business because of its ability to charter and tax corporations, as well as
make laws that regulate their activities. The unique relationship between government and
business is discussed throughout this book.
Other stakeholders also have some market and some nonmarket characteristics. For
example, business support groups, such as the Chamber of Commerce, are normally considered a nonmarket stakeholder. However, companies may support the Chamber of Commerce with their membership dues—a market exchange. Communities are a nonmarket
stakeholder, but receive taxes, philanthropic contributions, and other monetary benefits
from businesses. These subtleties are further explored in later chapters.
Modern stakeholder theory recognizes that most business firms are embedded in a complex web of stakeholders, many of which have independent relationships with each other.16
In this view, a business firm and its stakeholders are best visualized as an interconnected
network. Imagine, for example, an electronics company, based in the United States, that
produces smartphones, tablets, and music players. The firm employs people to design,
engineer, and market its devices to customers in many countries. Shares in the company
are owned by investors around the world, including many of its own employees and managers. Production is carried out by suppliers in Asia. Banks provide credit to the company,
as well as to other companies. Competing firms sell their products to some of the same
customers, and also contract production to some of the same Asian suppliers. Nongovernmental organizations may seek to lobby the government concerning the firm’s practices,
and may count some employees among their members. A visual representation of this
company and its stakeholders is shown in Figure 1.2.
As Figure 1.2 suggests, some individuals or groups may play multiple stakeholder roles.
Some theorists use the term role sets to refer to this phenomenon. For example, a person
may work at a company, but also live in the surrounding community, own shares of company stock in his or her 401(k) retirement account, and even purchase the company’s products from time to time. This person has several stakes in a company’s actions.
Later sections of this book (especially Chapters 13 through 19) will discuss in more
detail the relationship between business and its various stakeholders.
Stakeholder Analysis
An important part of the modern manager’s job is to identify relevant stakeholders and to
understand both their interests and the power they may have to assert these interests. This
process is called stakeholder analysis. The organization from whose perspective the analysis is conducted is called the focal organization.
The first step of a stakeholder analysis is for managers of the focal organization to
identify the issue at hand. For example, in the Cape Wind situation discussed earlier in this
chapter, Energy Management Inc. had to analyze how best to win regulatory approval for
the construction of its wind farm. Once the issue is determined, managers must ask four
key questions, as discussed below and summarized in Figure 1.3.
Timothy J. Rowley, “Moving Beyond Dyadic Ties: A Network Theory of Stakeholder Influence,” Academy of Management
Review 22, no. 4 (October 1997).
Chapter 1 The Corporation and Its Stakeholders
A Firm and Its
Who are the relevant stakeholders?
The first question requires management to identify and map the relevant stakeholders.
Exhibit 1.B, which appears later in this chapter, provides a guide. However, not all stakeholders listed will be relevant in every management situation. For example, a privately held
The Four Key
Questions of
Stakeholder Analysis
Who are the relevant stakeholders?
What are the interests of each stakeholder?
What is the power of each stakeholder?
How are coalitions likely to form?
12 Part One Business in Society
firm will not have shareholders. Some businesses sell directly to customers online, and
therefore will not have retailers. In other situations, a firm may have a stakeholder—say,
a creditor that has loaned money—but this group is not relevant to a particular issue that
management faces.
But stakeholder analysis involves more than simply identifying stakeholders; it also
involves understanding the nature of their interests, power, legitimacy, and links with one
Stakeholder Interests
What are the interests of each stakeholder?
Each stakeholder has a unique relationship to the organization, and managers must respond
accordingly. Stakeholder interests are, essentially, the nature of each group’s stake. What
are their concerns, and what do they want from their relationship with the firm?17
Shareholders, for their part, have an ownership interest in the firm. In exchange for their
investment, shareholders expect to receive dividends and, over time, capital appreciation.
The economic health of the corporation affects these people financially; their personal
wealth—and often, their retirement security—is at stake. They may also seek to achieve
social objectives through their choice of investments. Customers, for their part, are most
interested in gaining fair value and quality in exchange for the purchase price of goods and
services. Suppliers wish to obtain profitable orders, use their capacity efficiently, and build
stable relationships with their business customers. Employees, in exchange for their time
and effort, want to receive fair compensation and an opportunity to develop their job skills.
Governments, public interest groups, and local communities have another sort of relationship with the company. In general, their stake is broader than the financial stake of owners,
customers, and suppliers. They may wish to protect the environment, assure human rights,
or advance other broad social interests. Managers need to understand these complex and
often intersecting stakeholder interests.
Stakeholder Power
What is the power of each stakeholder?
Stakeholder power means the ability to use resources to make an event happen or to secure
a desired outcome. Stakeholders have five different kinds of power: voting power, economic power, political power, legal power, and informational power.
Voting power means that the stakeholder has a legitimate right to cast a vote. Shareholders typically have voting power proportionate to the percentage of the company’s stock
they own. They typically have an opportunity to vote on such major decisions as mergers
and acquisitions, the composition of the board of directors, and other issues that may come
before the annual meeting. (Shareholder voting power should be distinguished from the
voting power exercised by citizens, which is discussed below.)
For example, Starboard Value LP, a New York–based hedge fund, used its voting
power as a shareholder to force change in a company it had invested in. Starboard
bought more than 8 percent of the shares of Darden Restaurants, the owner of Red
Lobster, Olive Garden, and other eatery chains. It called for radical change, slamming
management for tolerating “lavish excess, bureaucracy, and low standards.” When
Darden resisted, Starboard and its allies fielded their own slate of nominees in the
A full discussion of the interests of stakeholders may be found in R. Edward Freeman, Ethical Theory and Business (Englewood Cliffs, NJ: Prentice Hall, 1994).
Chapter 1 The Corporation and Its Stakeholders
election for the board of directors, organized support from other voting shareholders—
and won. Activist investors like Starboard engaged in almost 300 such campaigns in
2014, the highest in five years, and won almost three-quarters of the time.18
Suppliers, customers, employees, and other stakeholders have economic power with the
company. Suppliers, for example, can withhold supplies or refuse to fill orders if a company fails to meet its contractual responsibilities. Customers may refuse to buy a company’s products or services if the company acts improperly. They can boycott products if they
believe the goods are too expensive, poorly made, or unsafe. Employees, for their part, can
refuse to work under certain conditions, a form of economic power known as a strike or
slowdown. Economic power often depends on how well organized a stakeholder group is.
For example, workers who are organized into unions usually have more economic power
than do workers who try to negotiate individually with their employers.
Governments exercise political power through legislation, regulations, or lawsuits.
While government agencies act directly, other stakeholders use their political power indirectly by urging government to use its powers by passing new laws or enacting regulations.
Citizens may also vote for candidates that support their views with respect to government
laws and regulations affecting business, a different kind of voting power than the one discussed above. Stakeholders may also exercise political power directly, as when social,
environmental, or community activists organize to protest a particular corporate action.
Stakeholders have legal power when they bring suit against a company for damages,
based on harm caused by the firm; for instance, lawsuits brought by customers for damages
caused by defective products, brought by employees for damages caused by workplace
injury, or brought by environmentalists for damages caused by pollution or harm to species
or habitat. After the mortgage lender Countrywide collapsed, many institutional shareholders, such as state pension funds, sued Bank of America (which had acquired Countrywide) to recoup some of their losses.
Finally, stakeholders have informational power when they have access to valuable data,
facts, or details and are able to bring their own information and perspectives to the attention of the public or key decision makers. With the explosive growth of technologies that
facilitate the sharing of information, this kind of stakeholder power has become increasingly important.
Consumers’ ability to use social networks to express their views about businesses
they like—and do not like—has given them power they did not previously have. For
example, Yelp Inc. operates a website where people can search for local businesses,
post reviews, and read others’ comments. In 2014, a decade after its launch, Yelp
attracted almost 140 million unique visitors every month. Its reviewers collectively
have gained considerable influence. Restaurants, cultural venues, hair salons, and
other establishments can attract customers with five-star ratings and “People Love
Us on Yelp” stickers in their windows—but, by the same token, can be badly hurt
when reviews turn nasty. A study in the Harvard Business Review reported that a
one-star increase in an independent restaurant’s Yelp rating led to a 5 to 9 percent
increase in revenue. Some businesses have complained that Yelp reviewers have too
much power. “My business just died,” said the sole proprietor of a housecleaning
business. “Once they locked me into the 3.5 stars, I wasn’t getting any calls.”19
“The Hedge Fund Presentation on Olive Garden is a Masterpiece,” Business Insider, September 13, 2014; “Activist Hedge
Fund Starboard Succeeds in Replacing Darden Board,” The New York Times, October 10, 2014; and “Taking Recipes from the
Activist Cookbook,” The New York Times, December 9, 2014.
“Is Yelp Fair to Businesses?” PC World, November 15, 2011.
14 Part One Business in Society
Activists often try to use all of these kinds of power when they want to change a company’s policy. For example, human rights activists wanted to bring pressure on Unocal
Corporation to change its practices in Burma (Myanmar), where it had entered into a joint
venture with the government to build a gas pipeline. Critics charged that many human
rights violations occurred during this project, including forced labor and relocations. In
an effort to pressure Unocal to change its behavior, activists organized protests at stockholder meetings (voting power), called for boycotts of Unocal products (economic power),
promoted local ordinances prohibiting cities from buying from Unocal (political power),
brought a lawsuit for damages on behalf of Burmese villagers (legal power), and gathered
information about government abuses by interviewing Burmese refugees and publicizing
the results online (informational power). These activists increased their chances of success
by mobilizing many kinds of power. This combination of tactics eventually forced Unocal
to pay compensation to people whose rights had been violated and to fund education and
health care projects in the pipeline region.20
Exhibit 1.B provides a schematic summary of some of the main interests and powers of
both market and nonmarket stakeholders.
Stakeholder Coalitions
An understanding of stakeholder interests and power enables managers to answer the final
question of stakeholder analysis regarding coalitions.
How are coalitions likely to form?
Not surprisingly, stakeholder interests often coincide. For example, consumers of fresh
fruit and farmworkers who harvest that fruit in the field may have a shared interest in
reducing the use of pesticides, because of possible adverse health effects from exposure to
chemicals. When their interests are similar, stakeholders may form coalitions, temporary
alliances to pursue a common interest. Companies may be both opposed and supported by
stakeholder coalitions, as shown in the example of the controversial Keystone XL pipeline.
TransCanada, a major North American energy company, sought approval to build a
pipeline from Alberta, Canada, to Steele City, Nebraska, where it would connect to
existing pipelines running to refineries and ports along the Gulf Coast. In opposing
the Keystone XL pipeline, environmentalists argued it would enable the export of
oil extracted from Canadian tar sands, an energy-intensive and dirty process. When
burned, the tar sands oil would release carbon dioxide, contributing to further
climate change, and spills from the pipeline could foul water supplies. They were
joined in coalition by other groups, such as ranchers, farmers, and Native Americans whose land would be crossed by the pipeline. On the other side, construction
unions, many local governments, and business groups supported the pipeline, saying that it would create jobs, reduce U.S. dependence on foreign oil, and provide a
safer method of transport than trains or tanker trucks.21
Stakeholder coalitions are not static. Groups that are highly involved with a company
today may be less involved tomorrow. Issues that are controversial at one time may be
uncontroversial later; stakeholders that are dependent on an organization at one time may
be less so at another. To make matters more complicated, the process of shifting coalitions does not occur uniformly in all parts of a large corporation. Stakeholders involved
with one part of a large company often have little or nothing to do with other parts of the
Further information about the campaign against Unocal is available at
“Keystone Pipeline Pros, Cons and Steps to a Final Decision,” The New York Times, November 18, 2014.
Chapter 1 The Corporation and Its Stakeholders
organization. Today, stakeholder coalitions are numerous in every industry and important
to every company.
The discussion case at the end of this chapter describes the coalitions that developed in
favor of and opposition to new regulations that would require the ride-hailing start-up Uber
to insure drivers logged onto its system to look for customers.
Stakeholder Salience and Mapping
Some scholars have suggested that managers pay the most attention to stakeholders possessing greater salience. (Something is salient when it stands out from a background, is
seen as important, or draws attention.) Stakeholders stand out to managers when they have
power, legitimacy, and urgency. The previous section discussed various forms of stakeholder power. Legitimacy refers to the extent to which a stakeholder’s actions are seen as
proper or appropriate by the broader society, because they are clearly affected by the company’s actions. Urgency refers to the time-sensitivity of a stakeholder’s claim, that is, the
extent to which it demands immediate action. The more of these three attributes a stakeholder possesses, the greater the stakeholder’s salience and the more likely that managers
will notice and respond.22
Managers can use the salience concept to develop a stakeholder map, a graphical representation of the relationship of stakeholder salience to a particular issue. Figure 1.4 presents a simple example of a stakeholder map. The figure shows the position of various
stakeholders on a hypothetical issue—whether or not a company should shut down an
underperforming factory in a community. The horizontal axis represents each stakeholder’s position on this issue—from “against” (the company should not shut the plant) to
“for” (the company should shut the plant). The vertical axis represents the salience of the
stakeholder, an overall measure of that stakeholder’s power, legitimacy, and urgency. In
this example, the company’s creditors (banks) are pressuring the firm to close the plant.
Stakeholder Map
of a Proposed Plant
Stakeholder Salience
Position on the Issue
Ronald K. Mitchell, Bradley R. Agle, and Donna J. Wood, “Toward a Theory of Stakeholder Identification and Salience:
Defining the Principle of Who and What Really Counts,” Academy of Management Review 22, no. 4 (1997), pp. 853–86.
Exhibit 1.B
Stakeholders: Nature of Interest
and Power
Nature of Interest—
Stakeholder Wishes To:
Nature of Power—Stakeholder
Influences Company By:
■  Maintain stable employment in firm
■  Receive fair pay for work and mandated
■  Work in safe, comfortable environment
■  Union bargaining power
■  Work actions or strikes
■  Publicity
■  Receive a satisfactory return on
investments (dividends)
■  Realize appreciation in stock value over
■  Exercising voting rights based on share
■  Exercising rights to inspect company
books and records
■  Receive fair exchange: value and quality
for money spent
■  Receive safe, reliable products
■  Receive accurate information
■  Be able to voice concerns
■  Purchasing goods from competitors
■  Boycotting companies whose products
are unsatisfactory or whose policies are
■  Receive regular orders for goods
■  Be paid promptly for supplies delivered
■  Use capacity efficiently
■  Build stable relationships with
business customers
■  Be treated ethically
■  Refusing to meet orders if conditions of
contract are breached
■  Supplying to competitors
Retailers, Wholesalers
■  Receive quality goods in a timely fashion
at reasonable cost
■  Offer reliable products that consumers
trust and value
■  Buying from other suppliers if terms of
contract are unsatisfactory
■  Boycotting companies whose goods or
policies are unsatisfactory
■  Receive repayment of loans
■  Collect debts and interest
■  Calling in loans if payments are not made
■  Utilizing legal authorities to repossess or
take over property if loan payments are
severely delinquent
Market Stakeholders
They have high salience, because they control the company’s credit line and are urgently
demanding action. Shareholders, who are powerful and legitimate (but not as urgent in
their demands), also favor the closure. On the other side, employees urgently oppose shutting the plant, because their jobs are at stake, but they do not have as much power as the
creditors and are therefore less salient. Local government officials and local businesses
also wish the plant to remain open, but have lower salience than the other stakeholders
A stakeholder map is a useful tool, because it enables managers to see quickly how
stakeholders feel about an issue and whether salient stakeholders tend to be in favor or
opposed. It also helps managers see how stakeholder coalitions are likely to form, and
what outcomes are likely. In this example, company executives might conclude from the
Nature of Interest—
Stakeholder Wishes To:
Nature of Power—Stakeholder
Influences Company By:
Nonmarket Stakeholders
■  Employ local residents in the company
■  Ensure that the local environment is
■  Ensure that the local area is developed
■  Refusing to extend additional credit
■  Issuing or restricting operating licenses
and permits
■  Lobbying government for regulation of
the company’s policies or methods of
land use and waste disposal
■  Monitor company actions and policies
to ensure that they conform to legal and
ethical standards
■  Promote social and economic
■  Gaining broad public support through
publicizing the issue
■  Lobbying government for regulation of
the company
Business support
groups (e.g., trade
■  Provide research and information
which will help the company or industry
perform in a changing environment
■  Using its staff and resources to assist
company in business endeavors and
development efforts
■  Providing legal or “group” political
support beyond that which an individual
company can provide for itself
■  Promote economic development
■  Encourage social improvements
■  Raise revenues through taxes
■  Adopting regulations and laws
■  Issuing licenses and permits
■  Allowing or disallowing commercial
The general public
■  Protect social values
■  Minimize risks
■  Achieve prosperity for society
■  Receive fair and honest communication
■  Networking with other stakeholders
■  Pressing government to act
■  Condemning or praising individual
■  Compete fairly
■  Cooperate on industry-wide or
community issues
■  Seek new customers
■  Pressing government for fair competition
■  Suing companies that compete
stakeholder map that those supporting the closure—creditors and shareholders—have the
greatest salience. Although they are less salient, employees, local government officials,
and the community all oppose the closure and may try to increase their salience by working together. Managers might conclude that the closure is likely, unless opponents organize
an effective coaliton. This example is fairly simple; more complex stakeholder maps can
represent network ties among stakeholders, the size of stakeholder groups, and the degree
of consensus within stakeholder groups.23
For two different approaches to stakeholder mapping, see David Saiia and Vananh Le, “A Map Leading to Less Waste,” Proceedings of the International Association for Business and Society 20: 302–13 (2009); and Robert Boutilier, Stakeholder Politics: Social Capital, Sustainable Development, and the Corporation (Sheffield, UK: Greenleaf Publishing, 2009), chs. 6 and 7.
18 Part One Business in Society
The Corporation’s Boundary-Spanning Departments
How do corporations organize internally to respond to and interact with stakeholders?
Boundary-spanning departments are departments, or offices, within an organization that
reach across the dividing line that separates the company from groups and people in society. Building positive and mutually beneficial relationships across organizational boundaries is a growing part of management’s role.
Figure 1.5 presents a list of the corporation’s market and nonmarket stakeholders, alongside the corporate departments that typically have responsibility for engaging with them.
As the figure suggests, the organization of the corporation’s boundary-spanning functions
is complex. For example, in many companies, departments of public affairs or government
relations interact with elected officials and regulators. Departments of investor relations
FIGURE 1.5 The Corporation’s Boundary-Spanning Departments
Health & Safety,
• EPA and state
• Internal environmental
• Recycling, take-back
Public Relations,
Media Relations,
Corporate Communications
• Public relations
• Brand management
• Image advertising
• Crisis management
al p
, su
Shareholder Relations,
Customer Relations
Investor Relations
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