CH-1 The Business and Society Relationship – Business and Society: Ethics, Sustainability, and Stakeholder Management : Chapter Notes

Chapter 1 The Business and Society Relationship LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Characterize business and society and their interrelationships. 2. Describe pluralism and identify its attributes, strengths and weaknesses. 3. Clarify how our pluralistic society has become a special-interest society. 4. Identify, discuss and illustrate the factors leading up to business criticism. 5. Single out the major criticisms of business and characterize business’s general response. 6. Explain the major themes of the book: managerial approach, ethics, sustainability and stakeholder management. TEACHING SUGGESTIONS INTRODUCTION – This chapter introduces some important basic concepts in the business and society discussion, including pluralism, special-interest society, business criticism, corporate power, corporate social responsibility to stakeholders and sustainability. KEY TALKING POINTS – The instructor is likely to find that students have given little or no thought to the role that business plays in our society. Most undergraduates (most people for that matter) have never really considered the influence of business in their lives, and so fall victim to the “is/ought” fallacy. They assume that just because something “is” a certain way, then it “ought” to be that way. Thus, they assume that because business is the dominant social institution in our society, it should be. One of the main challenges that the instructor faces in this chapter is simply getting students to reflect on the power that business holds in our society. Most don’t realize the influence that corporations hold over them because they have never given the idea any thought. The second, and even greater challenge, will be getting students to realize and accept that corporations are dependent on them (the students) for their very existence. Corporations are legal fictions that exist only because we have passed laws that allow them to exist. Thus, the continued existence of the corporation as a legal entity depends on social legitimacy granted to corporations by citizens. Most students will rebel at the notion that they have any power over whether General Motors or General Electric or General Dynamics continues to exist or not (here is a good spot to point out how quickly and easily the students can see where the power lies). Practically speaking, they will be correct—individuals have precious little power to influence our corporate system. But as Margaret Mead, the famed anthropologist, noted, “Never doubt that a small group of thoughtful citizens can change the world. Indeed, it is the only thing that ever has.” PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: Wal-Mart: The Main Street Merchant of Doom The Body Shop: Pursuing Social and Environmental Change The Body Shop’s Reputation is Tarnished The Body Shop International PLC (1998-2010) The Benefit Corporation: Making a Difference while Making Money Using Ex-Cons to Teach Business Ethics Goldman Sachs and Greece The Hudson River Cleanup and GE Goodbye, Indiana-Hello, Mexico: The Whirlpool Plant Closing Ethics in Practice Cases: Drink Specials? Donations for Profit Spotlight on Sustainability: What Is Sustainability? Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. BUSINESS AND SOCIETY A. Business: Defined B. Society: Defined II. SOCIETY AS THE MACROENVIRONMENT III. A PLURALISTIC SOCIETY A. Pluralism Has Strengths and Weaknesses B. Multiple Publics, Systems, and Stakeholders IV. A SPECIAL-INTEREST SOCIETY V. BUSINESS CRITICISM AND CORPORATE RESPONSE A. Factors in the Social Environment 1. Affluence and Education 2. Awareness Through Television, Movies and the Internet a. 24/7 News and Investigative News Programs b. Prime-Time Television Programs c. Commercials d. Movies 3. Revolution of Rising Expectations 4. Entitlement Mentality 5. Rights Movement 6. Victimization Philosophy B. Criticisms of Business: Use and Abuse of Power 1. Levels of Power 2. Spheres of Power 3. Balance of Power and Responsibility C. Business Response: Concern and Changing Social Contract VI. FOCUS OF THE BOOK A. Managerial Approach 1. Urgent vs. Enduring Issues B. Business Ethics Theme C. Sustainability Theme D. Stakeholder Management Theme VII. STRUCTURE OF THE BOOK VIII. SUMMARY Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Explain how corporate social responsibility (CSR) evolved and encompasses economic, legal, ethical, and philanthropic components. 2. Provide business examples of CSR and corporate citizenship. 3. Differentiate between corporate citizenship, social responsibility, responsiveness, and performance. 4. Elaborate on the concept of corporate social performance (CSP). 5. Explain how corporate citizenship develops in stages in companies. 6. Describe the socially responsible investing movement. TEACHING SUGGESTIONS INTRODUCTION – This chapter explores several different aspects of the CSR topic and provides some insights into what CSR means and how businesses are carrying it out. An entire chapter is devoted to CSR concepts because it is a core idea that underlies most of the material in the textbook. This chapter also focuses on the concept of corporate citizenship. KEY TALKING POINTS – In some ways this may be a difficult chapter to teach, since the instructor will be laying the foundation for future discussions that will more directly involve analyzing and evaluating corporate social performance. The current chapter focuses on the analytical tools we will be using rather than actually using those tools. In some ways this distinction can be likened to a teenager learning how the steering wheel, brake, and accelerator work in a car, rather than actually getting behind the wheel and driving. Of course, everyone would want a new driver to understand what the steering wheel does and which pedal to use when she needs to slow down. But that fact alone does not mean that the new driver doesn’t want to skip the lesson on how to use the tools and just go drive. This is compounded by the fact that many students may have heard of or discussed the terms introduced in this chapter in other business courses, specifically corporate social responsibility, but they may not grasp that CSR requires the simultaneous execution of economic, legal, ethical and philanthropic responsibilities. Many students may struggle with the concept that these responsibilities need to be addressed concurrently by firms, since previous exposure to the concept may have focused on the idea that CSR is the culmination of the ethical and/or philanthropic activities of firms rather than the culmination of all four responsibilities. Consequently, students in your class may not be as anxious to delve into the intricacies of corporate citizenship, including corporate social responsibility, corporate social responsiveness and corporate social performance when they could be discussing a juicy corporate scandal. But it is important that students have better tools to help them dissect corporate citizenship than just their gut feelings as they will encounter business colleagues who will argue against and resist implementation of activities that emphasize corporate citizenship. This chapter also is a good starting point for students to begin to focus on what they, as citizens, want from the business sector. Do they want corporations to simply recognize their various responsibilities to society, do they want them to make improvements, do they demand evidence that corporations are making improvements, or do they have more general concerns about the role business plays in society (corporate citizenship)? As they begin to contemplate the implications of their expectations of business, they also should begin to see why this topic has evolved and how the different models can inform their understanding of business’s impact on society. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: Wal-Mart: The Main Street Merchant of Doom The Body Shop: Pursuing Social and Environmental Change The Body Shop’s Reputation is Tarnished The Body Shop International PLC (1998-2010) The Benefit Corporation: Making a Difference while Making Money Using Ex-Cons to Teach Business Ethics Goldman Sachs and Greece The Hudson River Cleanup and GE The BP Oil Spill and Mental Health New Belgium Brewery: Building a Business on Sustainability Felony Franks: Home of the Misdemeanor Weiner Goodbye, Indiana- Hello, Mexico: The Whirlpool Plant Closing Ethics in Practice Cases: Feeling “Used” The Socially Responsible Shoe Company Is There a Market for a Sustainable Hamburger? Spotlight on Sustainability: “Myths” about Sustainability Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. THE CORPORATE SOCIAL RESPONSIBILITY CONCEPT A. Historical Perspective on CSR B. Modification of the Economic Model 1. CSR’s Acceptance and Broadening of Meaning C. Evolving Meanings of CSR D. A Four-Part Definition of CSR 1. Economic Responsibilities 2. Legal Responsibilities 3. Ethical Responsibilities 4. Philanthropic Responsibilities 5. The Pyramid of Corporate Social Responsibility a. Pyramid as a Unified Whole b. CSR Definition and Pyramid are Sustainable Stakeholder Models c. CSR in Practice II. ARGUMENTS AGAINST AND FOR CORPORATE SOCIAL RESPONSIBILITY A. Arguments Against CSR B. Arguments for CSR C. The Business Case for CSR III. CORPORATE SOCIAL RESPONSIVENESS IV. CORPORATE SOCIAL PERFORMANCE A. Carroll’s CSP Model V. CORPORATE CITIZENSHIP A. Broad Views B. Narrow Views C. Drivers of Corporate Citizenship D. Benefits of Corporate Citizenship E. Stages of Corporate Citizenship F. Global Corporate Citizenship VI. BUSINESS’S INTEREST IN CORPORATE CITIZENSHIP A. Fortune’s Rankings of “Most Admired” and “Least Admired” Companies B. The Conference Board’s Ron Brown Award for Corporate Leadership C. CR Magazine Awards D. U.S. Chamber of Commerce Corporate Citizenship Awards VII. SOCIAL PERFORMANCE AND FINANCIAL PERFORMANCE RELATIONSHIP A. Three Perspectives on the Relationship B. A Stakeholder Bottom-Line Perspective VIII. SOCIALLY RESPONSIBLE OR ETHICAL INVESTING IX. SUMMARY Chapter 3 The Stakeholder Approach to Business, Society, and Ethics LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Define stake and stakeholder, and describe the origins of these concepts. 2. Differentiate among the production, managerial, and stakeholder views of the firm. 3. Differentiate among the three values of the stakeholder model. 4. Explain the concept of stakeholder management. 5. Identify and describe the five major questions that capture the essence of stakeholder management. 6. Identify the three levels of stakeholder management capability (SMC). 7. Describe the key principles of stakeholder management. TEACHING SUGGESTIONS INTRODUCTION – In the face of increasingly complex business environments and operations, the models by which businesses are managed are also becoming more complex. Perhaps the principle reason for this increasing complexity is the fact that business organizations are no longer viewed as the sole property or interest of the owners. Recognition of various stakeholders’ interests in the firm requires management models that are capable of identifying and addressing those interests. The stakeholder concept is one such model. KEY TALKING POINTS – The primacy of ownership interest in business organizations is still very much the norm in the United States. When students are asked why shareholders should normatively receive the profits of a business, their standard answer is that the shareholders own the company. The idea that an ownership position entitles privileged treatment is almost universal among U. S. residents. Realization that other groups also have legitimate claims on the corporation is a nearly foreign concept for some students. Introduction of the stakeholder model of the firm is an excellent opportunity to make a significant difference in how students think about the firm and its responsibilities. Students should begin to think of the corporation in a different light, with claims on it from many different constituencies. In addition to introducing stakeholder theory, the instructor should be able to make many connections with the previous chapter on corporate social responsibility, responsiveness, and performance. The concepts are virtually opposite sides of the same coin—stakeholder theory shows that there are many groups with legitimate claims on the firm, and corporate social responsibility makes the case why the firm has obligations to those groups. A key element in stakeholder theory that should probably be emphasized more in the chapter is the question of what stakeholder management truly means. If it is interpreted to mean managing the various stakeholder groups to the advantage of the firm (the strategic approach), the real point of stakeholder theory is lost. All that would mean is that managers have a broader group to manage, but their end is still the same—benefit the firm. Conversely, if managers see stakeholders as groups that have a claim on the firm, and recognize that the firm should provide benefits to them as well as the owners (the multifiduciary approach), the true power of the stakeholder model will be released. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: Wal-Mart: The Main Street Merchant of Doom The Body Shop International PLC (1998-2010) The Benefit Corporation: Making a Difference while Making Money Using Ex-Cons to Teach Business Ethics Goldman Sachs and Greece Firestone and Ford: The Tire Tread Separation Tragedy McDonald's: The Coffee Spill Heard ‘Round the World The Betaseron® Decision (A) The BP Oil Spill and Mental Health Felony Franks: Home of the Misdemeanor Weiner Goodbye, Indiana- Hello, Mexico: The Whirlpool Plant Closing A Moral Dilemma: Head Versus Heart Ethics in Practice Cases: Are Plants Stakeholders? Do Flora Have Rights? “Taxing” Questions for this Preparer Spotlight on Sustainability: Walmart’s “Sustainability 360” Initiative Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. ORIGINS OF THE STAKEHOLDER CONCEPT A. What is the Stake in Stakeholder? B. What is a Stakeholder? II. WHO ARE BUSINESS’S STAKEHOLDERS? A. Three Views of the Firm: Production, Managerial, and Stakeholder B. Primary and Secondary Stakeholders C. A Typology of Stakeholder Attributes: Legitimacy, Power, Urgency III. S TAKEHOLDER APPROACHES: STRATEGIC, MULTIFIDUCIARY, AND SYNTHESIS APPROACHES A. Strategic Approach B. Multifiduciary Approach C. Stakeholder Synthesis Approach IV. THREE VALUES OF THE STAKEHOLDER MODEL A. Descriptive Value B. Instrumental Value C. Normative Value V. KEY QUESTIONS IN STAKEHOLDER MANAGEMENT A. Who Are Our Stakeholders? 1. McDonald’s Experience 2. Wool Industry Under Fire B. What Are Our Stakeholders’ Stakes? 1. Identifying the Nature or Legitimacy of a Group’s Stakes 2. Identifying the Power of a Group’s Stakes 3. Identifying Specific Groups within a Generic Group C. What Opportunities and Challenges Do Our Stakeholders Present? D. What Responsibilities Does a Firm Have toward Its Stakeholders? E. What Strategies or Actions Should Management Take? 1. Type 1: The Supportive Stakeholder 2. Type 2: The Marginal Stakeholder 3. Type 3: The Nonsupportive Stakeholder 4. Type 4: The Mixed-Blessing Stakeholder 5. Tapping Expertise of Stakeholders VI. EFFECTIVE STAKEHOLDER MANAGEMENT A. Stakeholder Thinking VII. DEVELOPING A STAKEHOLDER CULTURE VIII. STAKEHOLDER MANAGEMENT CAPABILITY A. Level 1: Rational Level B. Level 2: Process Level C. Level 3: Transactional Level D. Stakeholder Engagement IX. THE STAKEHOLDER CORPORATION X. PRINCIPLES OF STAKEHOLDER MANAGEMENT XI. STRATEGIC STEPS TOWARD SUCCESSFUL STAKEHOLDER MANGAEMENT XII. SUMMARY Chapter 4 Corporate Governance: Foundational Issues LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Link the issue of legitimacy to corporate governance. 2. Identify the best practices that boards of directors can follow. 3. Discuss the problems that have led to the recent spate of corporate scandals and the efforts that are currently underway to keep them from happening again. 4. Discuss the principal ways in which shareholder activism exerted pressure on corporate management groups to improve governance. 5. Discuss the ways in which managers relate to shareholders and the issues arising from that relationship. 6. Discuss the issue of shareholder democracy, its current state, and the trend for the future. TEACHING SUGGESTIONS INTRODUCTION – In this chapter, the authors explore corporate governance and the ways in which it has evolved. They first examine the concept of legitimacy and the part that corporate governance plays in establishing the legitimacy of business. They then explore how good corporate governance can mitigate the problems created by the separation of ownership and control and examine some of the specific challenges facing board members today. KEY TALKING POINTS – In some sense, discussing corporate governance may seem a bit premature for business students, especially at the undergraduate level. Most of the students will not have direct contact with board members of publicly-traded companies and their issues for quite some time. However, the issues are highly relevant to them in many ways. Some undergraduates plan to start their own business upon graduation and need to understand the mechanics and obligations of corporate formation. Further, when starting their own business, many will operate as owner-managers. They need to understand their various roles in the corporate form, as well as their legal obligations to other investors should they serve as directors. Further, as citizens, they should be concerned with the legitimacy of corporations and understand the power that they hold. The 2008 financial crisis illustrates how breakdowns in corporate governance can create legitimacy problems for business. As investors, they should realize the impact that boards and CEOs have on the firm and be aware of the relationship between the board and senior management. They will, in all likelihood, understand the theoretical relationship—the board oversees management activity and has authority over managers. The reality, that the power structure is inverse to the theory, may come as quite a surprise. Most students will not be familiar with the proxy process and the agency problems that exist with the corporate form. As workers, they should be aware of the issues surrounding executive compensation. Executives are often in the enviable position of setting their own compensation plans, with the board providing only rubber stamp approval in some cases (although compensation committees of publicly-traded companies now are required to explain and justify executive compensation). An attitude of self-enrichment at the top of the organization can have grave consequences for the rest of the employees (e.g., Enron, Tyco, WorldCom, etc.). Furthermore, they need to understand how different compensation elements (including stock options) impact their personal financial situation. As the authors point out, boards are making an effort to wrest control back from management. In addition to the steps pointed out in the textbook, there are many efforts to “create” better board members, through education and research. The National Associate of Corporate Directors works to improve corporate governance in companies ranging from Fortune 100 companies to small, over-the-counter, closely held, and private firms (http://www.nacdonline.org/). Jeffrey Sonnenfeld, a professor at Yale University, is well known for his “CEO College.” He has written several articles about the CEO position and board of directors. Two of his articles are: Sonnenfeld, J. A. Good governance and the misleading myths of bad metrics. Academy of Management Executive, Feb 2004, Vol. 18 Issue 1, p108. Sonnenfeld, J. A. What Makes Great Boards Great. Harvard Business Review, Sep 2002, Vol. 80 Issue 9, p106. Students also may be interested in finding out more about the issue of executive compensation. Two excellent websites provide a wealth (no pun intended) of information about the topic. The AFL-CIO (an umbrella labor organization) provides Executive Pay Watch information at http://www.aflcio.org/corporateamerica/paywatch/. The Institute for Policy Studies and United for a Fair Economy jointly produce an annual report on CEO pay entitled Executive Excess. The most recent report, for 2008, is available at http://www.faireconomy.org/files/executive_excess_2008.pdf. Students also may want to explore the stock option backdating scandals from a few years ago. Various federal agencies, including the Department of Justice, the IRS and the SEC, became involved in the investigation of over 200 companies implicated in the controversy. This is an example of how breakdowns in corporate governance can lead to serious problems for a company. Essentially, backdating occurred in many cases due to governance oversights or intentional fraudulent acts. Many companies lacked the internal governance structures necessary to prevent both inadvertent and intentional backdating problems. Students can review a list of implicated companies at WSJ Options Scorecard http://online.wsj.com/public/resources/documents/info-optionsscore06-full.html. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: The Benefit Corporation: Making a Difference while Making Money The Waiter Rule: What Makes for a Good CEO? Family Business Ethics in Practice Cases: Monitoring the Monitors Spotlight on Sustainability: Linda Fisher, Chief Sustainability Officer for DuPont Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. LEGITIMACY AND CORPORATE GOVERNANCE A. The Purpose of Corporate Governance B. Components of Corporate Governance 1. Roles of Four Major Groups 2. Separation of Ownership from Control II. PROBLEMS IN CORPORATE GOVERNANCE A. The Need for Board Independence B. Issues Surrounding Compensation 1. The CEO Pay/Firm Performance Relationship 2. Excessive CEO Pay 3. Executive Retirement Plans and Exit Packages 4. Outside Director Compensation 5. Transparency C. The Governance Impact of the Market for Corporate Control 1. Poison Pills 2. Golden Parachutes D. Insider Trading Scandals III. IMPROVING CORPORATE GOVERNANCE A. Sarbanes-Oxley Act B. Changes in Boards of Directors C. Board Diversity D. Outside Directors E. Use of Board Committees F. The Board’s Relationship with the CEO G. Board Member Liability IV. THE ROLE OF SHAREHOLDERS A. Shareholder Democracy V. THE ROLE OF THE SEC VI. SHAREHOLDER ACTIVISM A. The History of Shareholder Activism B. Shareholder Resolutions C. Shareholder Lawsuits VII. INVESTOR RELATIONS VIII. SUMMARY Chapter 5 Strategic Management and Corporate Public Affairs LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Describe the concept of corporate public policy and relate it to strategic management. 2. Articulate the four major strategy levels and explain enterprise-level strategy. 3. Explain corporate social performance reporting. 4. Identify the major activities of public affairs departments. 5. Highlight key trends with respect to the public affairs function. 6. Link public affairs with the strategic management function. 7. Indicate how public affairs may be incorporated into every manager’s job. TEACHING SUGGESTIONS INTRODUCTION – This chapter provides a broad overview of how social, ethical, and public issues fit into the general strategic management processes of the organization. Corporate public policy, that part of management decision making that encompasses these issues, is discussed. Corporate social performance reporting also is examined. Finally, the chapter covers public affairs management as the formal organizational approach companies use to deal with these issues. The overarching goal of the chapter is to focus on planning for the turbulent social and ethical stakeholder environment currently existing. KEY TALKING POINTS – After laying the groundwork and introducing concepts necessary for the study of (1) business and society in Part 1 of the textbook and (2) corporate governance in Part 2 of the textbook, this chapter provides the initial steps in applying those concepts to specific issues. The authors provide an insight into how corporations currently deal with the issues that lie at the intersection of business operations and social issues. Students should find this chapter quite interesting as more and more companies are employing corporate public policy as part of its strategic management process. Furthermore, it provides information about a potentially fascinating and important career path. As the authors show by relating corporate public policy to the firm’s strategic planning process, public policy professionals can play a key role in setting the strategic direction for the firm and working in concert with a firm’s board of directors and other members of top management. Playing a role in this process gives the public policy staff a significant say in both the firm’s values and operations, and the role it plays in its society. Another important facet of the chapter is its emphasis on the proactive position firms now take toward social issues. Following the evolution of corporate social responsibility to responsiveness to performance, corporate public affairs departments are at the cutting edge of determining how firms will respond to current social issues and how firms report their efforts in those areas. The better public affairs departments actively scan the environment specifically to identify looming issues before they become critical. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: The Body Shop International PLC (1998-2010) Coke and Pepsi in India: Issues, Ethics, and Crisis Management Chiquita: An Excruciating Dilemma Between Life and Law Astroturf Lobbying Goldman Sachs and Greece The Betaseron Decision (A) New Belgium Brewery: Building a Business on Sustainability Goodbye, Indiana- Hello, Mexico: The Whirlpool Plant Closing Ethics in Practice Cases: Not Much Range for this Manager Spotlight on Sustainability: Enterprise-Level Strategy in Action Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. THE CONCEPT OF CORPORATE PUBLIC POLICY A. Corporate Public Policy Defined B. Corporate Public Policy and Strategic Management C. Relationship of Ethics to Strategic Management II. FOUR KEY STRATEGY LEVELS A. Four Strategy Levels Described B. Emphasis on Enterprise-Level Strategy 1. Importance of Core Values 2. Other Manifestations of Enterprise-Level Strategic Thinking III. THE STRATEGIC MANAGEMENT PROCESS A. Strategic Corporate Social Responsibility B. Social Auditing and Social Performance Reporting 1. Development of the Social Audit C. Corporate Social Performance Reporting 1. Ceres IV. PUBLIC AFFAIRS V. PUBLIC AFFAIRS AS A PART OF STRATEGIC MANAGEMENT VI. THE CORPORATE PUBLIC AFFAIRS FUNCTION TODAY A. Public Affairs Activities and Functions 1. Activities and Functions VII. USEFUL PUBLIC AFFAIRS CONCEPTS A. Looking Out and Looking In B. Buffering and Bridging C. Tools and Techniques D. Ethical Guidelines E. Global Public Affairs 1. Competencies Needed VIII. PUBLIC AFFAIRS STRATEGY A. Design of External Affairs and Corporate Social Performance B. Business Exposure and External Affairs Design IX. INCORPORATING PUBLIC AFFAIRS THINKIING INTO ALL MANAGERS’ JOBS A. Make Public Affairs Relevant to All Managers B. Help Managers Develop a Sense of Ownership C. Make It Easy for Operating Managers D. Show How Public Affairs Makes a Difference X. FUTURE OF CORPORATE PUBLIC AFFAIRS IN THE TWENTY-FIRST CENTURY XI. SUMMARY Chapter 6 Issues Management and Crisis Management LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Distinguish between the conventional and strategic approaches to issues management. 2. Identify and briefly explain the stages in the issues management process. 3. Describe the major components in the issues development process and some of the factors that have characterized issues management in actual practice. 4. Define a crisis and identify the four crisis stages. 5. List and discuss the major stages or steps involved in managing business crises. TEACHING SUGGESTIONS INTRODUCTION – The decision-making processes known as issues management and crisis management are two important ways that organizations deal with internal issues (e.g., corporate scandals, litigation, employee rights, sexual harassment, product safety, workplace safety, sweatshops, bribery and corruption, smoking in the workplace, and deceptive advertising) and external issues (e.g., natural disasters and terrorist attacks). This chapter introduces the concepts of issues management and crisis management, distinguishes between them, and describes their similarities. The authors utilize the conventional approach toward issues management, not because it is favored, but because it concentrates on public, social, and ethical stakeholder issues. KEY TALKING POINTS – This chapter allows students to get into the “juicy” cases of issues that companies deal with on a daily basis—worker relations, pollution and sustainability, Affirmative Action, product liability, and many others. Although the chapter focuses on the process of issues and crisis management, students should be given ample opportunity to discuss actual and hypothetical crises. Case analyses will provide a glimpse into the complexities involved in both of these increasingly important areas of management. Students should be allowed to both critique the issues/crisis management processes utilized by companies that have experienced them (e.g., Johnson & Johnson’s Tylenol case or BP’s oil spill in the Gulf) and try their hands at “managing” a crisis or two through cases. The group cases at the end of this section and the cases in the textbook (see below) provide good opportunities for students to practice managing a crisis. Further, two Harvard Business Review articles contain engaging material for class discussion (see Bronwyn Fryer, “When No News is Good News,” April 2001;Watins and Bazeman, “Predictable Surprises: The Disasters You Should Have Seen Coming,” March 2003). After spending the previous chapters providing necessary background information and concepts, this chapter provides an excellent opportunity to fully engage students in animated classroom discussion about topics they will find fascinating. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: The Body Shop’s Reputation is Tarnished The Body Shop International PLC (1998-2010) Nike, Inc. and Sweatshops Coke and Pepsi in India: Issues, Ethics, and Crisis Management Chiquita: An Excruciating Dilemma Between Life and Law Astroturf Lobbying DTC: The Pill Pushing Debate Big Pharma’s Marketing Tactics Firestone and Ford: The Tire Tread Separation Tragedy McDonald's: The Coffee Spill Heard ‘Round the World The Hudson River Cleanup and GE The BP Oil Spill and Mental Health Safety? What Safety? The Betaseron Decision (A) Goodbye, Indiana- Hello, Mexico: The Whirlpool Plant Closing Ethics in Practice Cases: Johnson & Johnson’s Tylenol Response Is the Gold Standard in Crisis Management Crisis Management: When to Repent? When to Defend? Spotlight on Sustainability: Sustainable Corporations Shine in Economic Crisis Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. THE RELATIONSHIP BETWEEN ISSUES MANAGEMENT AND CRISIS MANAGEMENT II. ISSUES MANAGEMENT A. Two Approaches to Issues Management 1. Conventional Approach (Narrowly Focused) 2. Strategic Management Approach (Broadly Inclusive) B. The Changing Issue Mix 1. A Portfolio Approach C. Issue Definition and the Issues Management Process 1. Model of the Issues Management Process 2. Identification of Issues 3. Issues Selling and Buying 4. Analysis of Issues 5. Ranking or Prioritization of Issues 6. Formulation and Implementation of Responses 7. Evaluation, Monitoring, and Control D. Issues Development Process 1. Illustrations of Issue Development E. Issues Management in Practice F. From Issues Management to Crisis Management III. CRISIS MANAGEMENT A. The Nature of Crises 1. Types of Crises 2. Four Crisis Stages a. Prodromal Crisis Stage b. Acute Crisis Stage c. Chronic Crisis Stage d. Crisis Resolution Stage B. Managing Business Crises 1. Five Practical Steps in Managing Crises a. First: Identifying Areas of Vulnerability b. Second: Developing a Plan for Dealing with Threats c. Third: Forming Crisis Teams d. Fourth: Simulating Crisis Drills e. Fifth: Learning from Experience C. Crisis Communications D. Successful Crisis Management 1. Being Prepared for Crisis 2. Learning from Crisis 3. A Successful Crisis Management Example IV. SUMMARY Instructor Manual for Business and Society: Ethics, Sustainability, and Stakeholder Management Archie B. Carroll, Ann K. Buchholtz 9780538453165