Business,Governmentand SocietyA Managerial Perspective, Twelfth EditionText and Cases

John F. SteinerProfessor of ManagementCalifornia State University,Los Angeles

George A. SteinerHarry and Elsa KuninProfessor of Business andSociety and Professor ofManagement, Emeritus, UCLA

McGraw-HillIrwin

Boston Burr Ridge, IL Dubuque, IA New York San Francisco St. LouisBangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico CityMilan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto

Table of Contents

Preface x

Chapter 1The Study of Business, Government,and Society 1Exxon Mobil Corporation 1What Is the Business-Government-SocietyField? 4Why Is the BGS Field Important to Managers?Four Models of the BGS Relationship 8

The Market Capitalism Model 8The Dominance Model 11The Countervailing Forces Model 14The Stakeholder Model 15

Our Approach to the Subject Matter 18Comprehensive Scope 18Interdisciplinary Approach with a ManagementFocus 18Use of Theory, Description, and CaseStudies 18Global Perspective 19Historical Perspective 19

Chapter 2The Dynamic Environment 20Royal Dutch Shell PLC 20Underlying Historical Forces Changing theBusiness Environment 22

The Industrial Revolution 22Inequality 23Population Growth 25Technology 28Globalization 29Nation-States 30Dominant Ideologies 32Great Leadership 33Chance 33

Seven Key Environments of Business 34The Economic Environment 34The Technological Environment 36The Cultural Environment 37The Government Environment 39The Legal Environment 40The Natural Environment 41The Internal Environment 41

Concluding Observations 43Case Study: The American Fur Company 45

Chapter 3Business Power 53James B. Duke and the American TobaccoCompany 53The Nature of Business Power 56What Is, Power? 56Levels and Spheres of Corporate Power 57The Story of the Railroads 59Two Perspectives on Business Power 62

The Dominance Theory 63Pluralist Theory 68

Concluding Observations 72Case Study: John D. Rockefeller and theStandard Oil Trust 72

Chapter 4Critics of Business 80Mary "Mother" Jones 80Origins of Critical Attitudes towardBusiness 83

The Greeks and Romans 83The Medieval World 85The Modern World 85

The American Critique of Business 86The Colonial Era 86The Young Nation 871800-1865 88

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Populists and Progressives 90Socialists 92The Great Depression and World War II 96The Collapse of Confidence 97The New Progressives 99Global Critics 102Global Activism 104

Concluding Observations 107Case Study: A Campaign against KFCCorporation 108

Chapter 5Corporate Social Responsibility 117Merck & Co., Inc. 117The Evolving Idea of Corporate SocialResponsibility 119

Social Responsibility in Classical Economic Theory 121The Early Charitable Impulse 121Social Responsibility in the Late Nineteenth andEarly Twentieth Centuries 1231950-The Present 125

Basic Elements of Social Responsibility 127General Principles of Corporate SocialResponsibility 129Are Social and Financial PerformanceRelated? 130Corporate Social Responsibility in a GlobalContext 131Global Corporate Social Responsibility 133Assessing the Evolving Global CSRSystem 141Concluding Observations 142Case Study: The Jack Welch Era at GeneralElectric 143

Chapter 6Implementing Corporate SocialResponsibility 153The Bill & Melinda Gates Foundation 153Managing the Responsive Corporation 156Leadership and Business Models 157A Model of CSR Implementation 158

CSR Review 159CSR Strategy 162Implementation of CSR Strategy 163Reporting and Verification 165

Corporate Philanthropy 168Patterns of Corporate Giving 169Strategic Philanthropy 171Cause-Rela ted Marketing 173New Forms of Philanthropy 174

Concluding Observations 176Case Study: Marc Kasky versus Nike Inc. 176

Chapter 7Business Ethics 186"Today's verdict is a triumph of our legalsystem..." 186What Are Business Ethics? 189Two Theories of Business Ethics 190Major Sources of Ethical Values inBusiness 192

Religion 193Philosophy 194Cultural Experience 196Law 198

Factors That Influence Managerial Ethics 203Leadership 203Strategies and Policies 204Corporate Culture 205Individual Characteristics 208

How Corporations Manage Ethics 209Ethics Programs: A Strong Future 216Concluding Observations 216Case Study: The Trial of Martha Stewart 217

Chapter 8Making Ethical Decisions inBusiness 226Realtors in the Wilderness 226Principles of Ethical Conduct 228

The Categorical Imperative 228 l 'The Conventionalist Ethic 229The Disclosure Rule 230The Doctrine of the Mean 230The Ends-Means Ethic 231The Golden Rule 232The Intuition Ethic 232The Might-Equals-Right Ethic 233The Organization Ethic 233The Principle of Equal Freedom 234The Proportionality Ethic 235

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The Rights Ethic 235The Theory of Justice 236The Utilitarian Ethic 237

Reasoning with Principles 239Character Development 240Practical Suggestions for Making EthicalDecisions 241Concluding Observations 243Case Studies: Short Incidents for EthicalReasoning 243Columbia/HCA 247

Chapter 9Business in Politics 256The Abramoff Scandals 256The Open Structure of AmericanGovernment 260A History of Political Dominance byBusiness 262

Laying the Groundwork 262Ascendance, Corruption, and Reform 263Business Falls Back under the New Deal 265Postwar Politics and Winds of Change 266

The Rise of Antagonistic Groups 267Diffusion of Power in Government 268The Universe of Organized BusinessInterests 269Lobbying 271

Lobbying Methods 273Regulation of Lobbyists 275

The Corporate Role in Elections 276Efforts to Limit Corporate Influence 276The Federal Election Campaign Act 277Political Action Committees 279How PACs Work 280Soft Money and Issue Advertising 280Reform Legislation in 2002 281

Tension over Corporate PoliticalExpression 285Concluding Observations 287Case Study: Westar Goes toWashington 288

Chapter 10Regulating Business 297Annals of Regulation: The FCC Fines CBS 297

Reasons for Government Regulation ofBusiness 300

Flaws in the Market 300Social and Political Reasons for Regulation 301

Waves of Growth 301Wave 1: The Young Nation 302Wave 2: Confronting Railroads and Trusts 303Wave 3: The New Deal 304Wave 4: Administering the Social Revolution 305War Blips 306

How Regulations Are Made 306Regulatory Statutes 306Rulemaking 308Presidential Oversight 311Congressional Oversight 312Challenges in the Courts 313

The Costs and Benefits of Regulation 314The Regulatory Burden 315Benefits of Regulations 317

Regulation in Other Nations 318Regulating the Global Economy 320Concluding Observations 320Case Study: The FDA and TobaccoRegulation 321 ~"^

Chapter 11Multinational Corporations 330The Coca-Cola Company 330The Multinational Corporation 332

A Look at Multinational Corporations 334How Transnational Is a Corporation? 336Breaking the Bonds of Country: WeatherfordInternational 337

Foreign Direct Investment 339FDI in Less Developed Countries 340The Alien Tort Claims Act 342Drummond Company on Trial 344

International Codes of Conduct 345Corporate Codes 347Wal-Mart and Mattel 348Industry Codes 350Other Codes 351

The United Nations Global Compact 353Concluding Observations 357Case Study: Union Carbide Corporation andBhopal 358

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Chapter 12Globalization 369McDonald's Corporation 369What Is Globalization? 371

Major Forces in Expanding Globalization 372Benefits of Globalization 372Flaws and Problems in Globalization 374Critics of Globalization 375

Expanding Trade Agreements 376The European Union (EU) 377The North American Free Trade Agreement(NAFTA) 379Other Trade Agreements 382

Globalization and the Erosion of StateSovereignty 382

Nation-State Sovereignty Has Been Eroded 382Nation-State Sovereignty Has Not BeenSeriously Eroded 383In Sum 383

Erosion of Cultures 384Free Trade versus Protectionism 385

Why Free Trade? 386Pressures for Protectionism 386The Politics of Protectionism 387Free Trade Responses to Protectionism 387U.S. Deviation from Free Trade Policy 388Tariff Barriers in Other Countries 388Classical Free Trade Theory versus Reality 389

Corruption 390What Is Corruption? 390Costs and Consequences of Corruption 391Business Anticorruption Practices andProcedures 392The Foreign Corrupt Practices Act 393Corporate Policies on CorruptionPrevention 394

Concluding Observations 395Case Study: David and Goliath atthe WTO 395

Chapter 13Industrial Pollution andEnvironmental Policy 405The Indian Health Service Solves a Mystery 405

Pollution 406Human Health 407The Biosphere 408

Industrial Activity and Sustainability 409Ideas Shape Attitudes toward theEnvironment 412

New Ideas Challenge the Old 413Environmental Regulation in the UnitedStates 414

The Environmental Protection Agency 415Principal Areas of Environmental Policy 415

Air 415Water 425Land 426

Concluding Observations 430Case Study: Owls, Loggers, and Old-GrowthForests 430

Chapter 14Managing Environmental Quality 440The Commerce Railyards 440Regulating Environmental Risk 443Analyzing Human Health Risks 444

Risk Assessment 444Risk Management 450

Cost-Benefit Analysis 451Advantages 451Criticisms 452

Control Options 455Command-and-Control Regulation 455Market Incentive Regulation 455Voluntary Regulation 460

Managing Environmental Quality 461Environmental Management Systems 461A Range of Actions 462

Concluding Observations 463Case Study: Harvesting Risk 465

Chapter 15Consumerism 473Harvey W. Wiley 473Consumerism 477

Consumerism as an Ideology 477Consumerism Rises in America 478Consumerism in Perspective 479

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The Global Rise of Consumerism 483Consumerism as a Protective Movement 484

The Consumer's Protective Shield 485The Consumer Product Safety Commission(CPSC) 486The National Highway Traffic Safety Administration(NHTSA) 487The Food and Drug Administration (FDA) 487Consumer Protection by Other Agencies 490

Product Liability Law 490Negligence 491Warranty 492Strict Liability 493Perspectives on Product Liability 494The Costs and Benefits of Lawsuits 494A Look at Two Lawsuits 496

Concluding Observations 497Case Study: Alcohol Advertising 497

Chapter 16The Changing Workplace 507Ford Motor Company 507External Forces Shaping the Workplace 510

Demographic Change 510Technological Change 512Structural Change 513Competitive Pressures 516Reorganization of Work 517

Government Intervention 519Development of Labor Regulation in the UnitedStates 519Work and Worker Protection in Japan and Europe 525Labor Regulation in Perspective 528

Concluding Observations 531Case Study: Workplace Drug Testing 531

Chapter 17Civil Rights in the Workplace 540The Employment Non-Discrimination Act of2007 540A Short History of .Workplace Civil Rights 542

The Colonial Era 543Civil War and Reconstruction 543Other Groups Face Employment Discrimination 545

The Civil Rights Cases 546Plessy v. Ferguson 547Long Years of Discrimination 548

The Civil Rights Act of 1964 549Disparate Treatment and Disparate Impact 550The Griggs Case 551

Affirmative Action 552Executive Order 11246 552

The Supreme Court Changes Title VII 553The Affirmative Action Debate 556

Women at Work 559Gender Attitudes at Work 560Subtle Discrimination 561Harassment 563Occupational Segregation 566Compensation 567

Corporate Efforts to Promote Diversity 569Concluding Observations 573Case Study: Adarand v. Pena 573

Chapter 18Corporate Governance 584Backdating with Dr. McGuire 584What is Corporate Governance? 588The Corporate Charter 589Federal Regulation of Governance 591

The Failure of Corporate Governance atEnron 591Other Corporate Governance Scandals 595The Sarbanes-Oxley Act 595

Boards of Directors 597Duties of Directors 598Compensation of Outside Board Members 599Suggestions for Improving Board Performance 599

Institutional Investors and Governance 600Shareholder Resolutions 602Executive Compensation 603

Components of Executive Compensation 603Criticisms of CEO Compensation 606In Defense of CEO Pay 609Suggested Compensation Reforms 610

Concluding Observations 611Case Study: High Noon at Hewlett-Packard 611