1

The Business/Society The Business/Society RelationshipRelationship

2

Chapter One Objectives

• Characterize business, society, and their relationship to each other

• Describe pluralism and identify its strengths and weaknesses• Clarify how our pluralistic society became a special-interest

society• Identify and discuss factors leading up to the criticism of

business • Identify the major criticisms of business and characterize

business' response• Identify the major themes of this book: managerial approach,

ethics, and stakeholder management

Chapter One Outline

• Business and Society

• Society as the Macroenvironment

• Our Pluralistic Society

• Our Special-Interest Society

• Business Criticism and Corporate Response

• Focus of the Book• Structure of the

Book• Summary

Introduction to Chapter One

The Business and Society Relationship

• Specific incidents versus broad societal concerns– Firestone tires versus discrimination

• Questions arise as to the behavior of the firm– Is the firm’s behavior ethical?– Is the firm’s behavior socially responsible?– What is the firm’s correct response?– What is the role of the firm in society?

Business and Society RelationshipBusiness is the collection of private, profit-

oriented organizations.

Society is a broad group of people and other organizations, interest groups, a community, a nation. Business and society interrelate in a macroenvironment as stakeholders.

Business

Community

Consumers

Owners

Government

Employees

Society as the Macroenvironment

The macroenvironment is the total societal context in which the firm resides and is composed of four segments:

•Social

•Economic

•Political

•Technological

Society as the Macroenvironment

Four segments of the Macroenvironment• Social environment focuses on

demographics, lifestyles and social values• Economic environment focuses on the

economy• Political environment focuses on the

legislative process, election process and the interaction between firms, politics and government

• Technological environment focuses on the changes in technological advancement

Pluralistic Society

Strengths • Prevents

concentration of power

• Maximizes freedom of expression

• Disperses individual allegiances

• Creates diversified set of loyalties

• Provides checks and balances

Weaknesses• Pursuit of self-

interest• Proliferates

organizations and groups with overlapping goals

• Forces conflicts to center stage

• Promotes inefficiency

Diffusion of Power

Business and Selected Stakeholder Relationships

Business

Community

Consumers

Owners

Government

Employees

General Public

Environmental GroupsLocal

State

Federal

Corporate Raiders

Private Citizens

Institutional Investors

Consumer Activists Product Liability Threats

Unions

Older Employees

Women

Minorities

Civil Liberties Activists

Special-Interest Society

• Special interests make life more complex for business

• Special interest groups number in the tens of thousands

• Special interest groups each pursue their own limited agenda

• Special interest groups are more active, intense, diverse and focused

• Special interest groups attract a significant following increasing revenue and power

Social Environment, Criticism, and Corporate

Response

A Changed Social A Changed Social ContractContractA Changed Social A Changed Social ContractContract

Increased Concern for Increased Concern for Societal EnvironmentSocietal EnvironmentIncreased Concern for Increased Concern for Societal EnvironmentSocietal Environment

Business CriticismBusiness CriticismBusiness CriticismBusiness Criticism

Affluence Education Awareness

Factors in the Social EnvironmentFactors in the Social Environment

Rising Expectations

Entitlement Mentality Victimization Philosophy

Rights Movement

Business Criticism

• Affluence and education• Awareness through television• Revolution of rising expectations• Entitlement mentality• Rights movement• Victimization philosophy

Factors in the Social Environment

Society’s Expectations versus

Actual Social PerformanceSociety’s Expectations of Business Performance

So

cial

Per

form

ance

: E

xpec

ted

an

d A

ctu

al

1960s 1990sTime

Social Social ProblemProblem

Business’s Actual Social Performance

Social Social ProblemProblem

Business CriticismPower

• Use and abuse of power– Business power refers to the ability or

capacity to produce an effect or to bring an influence to bear on a situation or people

• Iron Law of Social Responsibility– In the long run, those who do not use

power in a manner society considers responsible will tend to lose it

Business CriticismLevels and Spheres of

Corporate PowerMacro Level

Intermediate Level

Micro Level

Individual Level

Economic

Social/Cultural

Individual

Technological

Environmental

Political

LevelsSpheres

Business CriticismResponse

Elements In the Social Contract

BusinessSociety or

Societal Stakeholder

Groups

Laws or Regulations:“Rules of the Game”

Two-Way Shared Understandings of Each Other

Business and Society: Ethics and Stakeholder Management, 5E • Carroll & Buchholtz

Copyright ©2003 by South-Western, a division of Thomson Learning.  All rights reserved1-16

Focus of Book

• Managerial approach• Ethics theme• Stakeholder management theme

Structure and Flow of Book

1. The Business and Society Relationship2. Corporate Citizenship: Social Responsibility,

Responsiveness and Performance3. The Stakeholder Approach to Business

Part One

BUSINESS, SOCIETY, AND STAKEHOLDERS

STRATEGIC MANAGEMENT FOR CORPORATE STAKEHOLDER PERFORMANCE

4. Strategic Management and Corporate Affairs5. Issues Management and Crisis Management

Part Two

Business and Society: Ethics and Stakeholder Management, 5E • Carroll & Buchholtz

Copyright ©2003 by South-Western, a division of Thomson Learning.  All rights reserved1-18

Chapter 1 • The Business/Society Relationship

Structure and Flow of BookBUSINESS ETHICS AND MANAGEMENT6. Business Ethics Fundamentals

7. Personal and Organizational Ethics8. Business Ethics and Technology9. Ethical Issues in the Global Arena

10. Business, Government and Regulation 11. Business’s Influence on Government and

Public Policy12. Consumer Stakeholders: Information Issues

and Responses13. Consumer Stakeholders: Product and Service

Issues14. The Natural Environment as Stakeholder15. Business and Community Stakeholders

EXTERNAL STAKEHOLDER ISSUES

Part Three

Part Four

Business and Society: Ethics and Stakeholder Management, 5E • Carroll & Buchholtz

Copyright ©2003 by South-Western, a division of Thomson Learning.  All rights reserved1-19

Chapter 1 • The Business/Society Relationship

Structure and Flow of Book

INTERNAL STAKEHOLDER ISSUES

16. Employee Stakeholders and Workplace Issues17. Employee Stakeholder: Privacy, Safety, and

Health18. Employment Discrimination and Affirmative

Action19. Owner Stakeholders and Corporate

Governance

Part Five

Cases

Business and Society: Ethics and Stakeholder Management, 5E • Carroll & Buchholtz

Copyright ©2003 by South-Western, a division of Thomson Learning.  All rights reserved1-20

Chapter 1 • The Business/Society Relationship

Selected Key Terms

• Affluence• Business• Business ethics• Business power• Economic environment• Education• Entitlement mentality• Ethics• Iron Law of

Responsibility• Macroenvironment• Pluralism

• Political environment• Revolution of rising

expectations• Rights movement• Social contract• Social environment• Social problem• Society• Special-interest society• Stakeholders• Technological

environment