Business & society stakeholders etc edition 15th

Business and society Working together 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. The Fourteenth Edition of Business and Society: Stakeholders, Ethics, Public Policy draws on the latest research to address the challenges facing business organizations and their stakeholders. The text 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.

What ’s neW in the Fourteenth edition? •  Theoretical advances in stakeholder theory, social and environmental entrepreneurship, corporate citizenship, public affairs management, corporate governance, corporate social auditing, social investing, reputation management, business partnerships, and corporate philanthropy.

•  Practical issues such as social networking, digital medical records, bottom of the pyramid, social entrepreneurship, 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 conditions in Apple’s Chinese supplier factories, the Upper Big Branch mine disaster, conflict minerals in cell phones, child sexual abuse in the global hotel industry, online piracy, Chiquita Brands in Latin America, working with bloggers in marketing, the campaign for clean cookstoves, the shareholder “say on pay” vote at Citigroup, the controversy over “pink slime,” and undocumented immigrants in the workforce.

To learn more about the Fourteenth Edition of Business and Society: Stakeholders, Ethics, Public Policy, please visit www.mhhe.com/lawrence14e.

Business and society

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Stakeholders, Ethics, Public Policy Fourteenth Edition

Anne T. Lawrence San José State University

James Weber Duquesne University

Business and Society

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BUSINESS AND SOCIETY: STAKEHOLDERS, ETHICS, PUBLIC POLICY, FOURTEENTH EDITION

Published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. Printed in the United States of America. Previous editions © 2011, 2008, and 2005. No part of this publica- tion may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

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To Our Fathers Paul R. Lawrence

1922–2011

James F. Weber 1924–2009

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About the Authors Anne T. Lawrence San José State University Anne T. Lawrence is a professor of organization and management at San José State Uni- versity. 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 Perfor- mance 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 of the Western Casewriters Associa- tion and is a Fellow of NACRA. 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 and 2009). At San José State University, she was named Outstanding Professor of the Year in 2005.

James Weber Duquesne University James Weber is a professor of management and business ethics at Duquesne University. He also serves as senior fellow and founding director of the Beard Center for Leadership in Ethics 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 Uni- versity of San Francisco, University of Pittsburgh, and Marquette University. His areas of interest and research include managerial and organizational values, cognitive moral rea- soning, business ethics, ethics training and education, eastern religions’ ethics, and corpo- rate social audit and performance. His work has appeared in Organization Science, Human Relations, Business & Society, Journal of Business Ethics, Academy of Management Per- spectives , and Business Ethics Quarterly . He was recognized by the Social Issues in Man- agement division of the Academy of Management with the Best Paper Award in 1989 and 1994 and received the Best Article Award from the International Association for Business and Society 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 International Association of Business and Society (IABS).

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Preface In a world economy that is becoming increasingly integrated and interdependent, the rela- tionship between business and society is becoming ever more complex. The globalization of business, the emergence of civil society organizations in many nations, and new govern- ment regulations and international agreements have significantly altered the job of manag- ers 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 and its continuing aftermath—highlighted by the failure of major business firms, unprecedented intervention in the economy by many govern- ments, and the fall from grace of numerous prominent executives—have focused a fresh spotlight on issues of corporate responsibility and ethics. Around the world, people and governments are demanding that managers do a better job of serving shareholders and the public. Once again, policymakers are actively debating the proper scope of govern- ment oversight in such wide-ranging arenas as health care, financial services, and man- ufacturing. Management educators are placing renewed emphasis on issues of business leadership and accountability.

• A host of new technologies has 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. Businesses can now grow medi- cine in plants, embed nanochips in tennis rackets, and communicate with customers overseas over the Internet and wireless networks. Technology has changed how we in- teract 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 or to censor free expression. 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 re- lationship, abandoning practices that once provided job security and guaranteed pen- sions in favor of highly flexible but less secure forms of employment. The recession that began in the latter part of the first decade of the 21st century 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 dif- ferent cultures and to respond to initiatives, like the United Nations’ Global Compact, that 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 once again the nations of the world have experimented with public policies designed to limit the emissions of greenhouse gases. Many businesses have cut air pollution, curbed solid waste, and designed prod- ucts and buildings to be more energy-efficient. A better understanding of how human

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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 are developing at an extraordinary rate. Yet, the prosperity that accompanies economic growth is not shared equally. Personal income, health care, and educational opportunity are unevenly distributed among and within the world’s na- tions. The tragic pandemic of AIDS in sub-Saharan Africa and the threat of a swine or avian flu epidemic 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 intellec- tual property rights and the urgent demands of public health, particularly in the develop- ing 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 deci- sions 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. Busi- nesses 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 Fourteenth 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, Gov- ernment, 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 sociol- ogy course that focuses on the role of business in society or on contemporary issues in business. 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 communi- ties. 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 stakehold- ers’ interests must be taken into account.

A Tradition of Excellence Since the 1960s, when Professors Keith Davis and Robert Blomstrom wrote the first edi- tion of this book, Business and Society has maintained a position of leadership by discuss- ing 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 Professor 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.

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Preface vii

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 Fourteenth 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 com- plex roles of government and business in a global community.

For Instructors For instructors, this textbook offers a complete set of supplements. An extensive instruc- tor’s resource manual—fully revised for this edition—includes lecture outlines, discussion case questions and answers, tips from experienced instructors, and extensive case teaching notes. A computerized test bank and PowerPoint slides for every chapter are also provided to adopters. A video supplement, compiled especially for the Fourteenth Edition, features recent segments from PBS NewsHour, produced by the Public Broadcasting Service. These videos may be used to supplement class lectures and discussions. Business and Society is designed to be easily modularized. An instructor who wishes to focus on a particular portion of the material may select individual chapters or cases to be packaged in a Create custom product. Sections of this book can also be packaged with other materials from the extensive Create database, including articles and cases from the Harvard Business School, to provide exactly the course pack the instructor needs. For instructors who teach over the Internet and for those who prefer an electronic for- mat, this text may be delivered online, using McGraw-Hill’s eBook technology. eBooks can also be customized with the addition of any of the materials in Create’s extensive col- lection. Students may choose between an online product and a downloadable CourseSmart eBook.

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 Fourteenth 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. Additional student resources are also available via the book’s password-protected On- line Learning Center at www.mhhe.com/lawrence14e, including self-grading quizzes and chapter review material.

New for the Fourteenth Edition Over the years, the issues addressed by Business and Society have changed as the environ- ment of business itself has been transformed. This Fourteenth Edition is no exception,

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viii Preface

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 Fourteenth 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:

• New discussion of theoretical advances in stakeholder theory, social and environmental entrepreneurship, corporate citizenship, public affairs management, corporate govern- ance, corporate social auditing, social investing, reputation management, business part- nerships, and corporate philanthropy.

• Treatment of practical issues, such as social networking, digital medical records, bottom of the pyramid, social entrepreneurship, political advertising and campaign contribu- tions, as well as the latest developments in the regulatory environment in which busi- nesses operate, including the Dodd-Frank Act and the Affordable Care Act.

• New discussion cases and full-length cases on such timely topics as conditions in Apple’s Chinese supplier factories, the Upper Big Branch mine disaster, conflict miner- als in cell phones, child sexual abuse in the global hotel industry, online piracy, Chiquita Brands in Latin America, working with bloggers in marketing, the campaign for clean cookstoves, the shareholder “say on pay” vote at Citigroup, the controversy over “pink slime,” and undocumented immigrants in the workforce.

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 com- munity, where traditional buffers no longer protect business from external change, manag- ers 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

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Acknowledgments 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 sugges- tions and ideas. We also note the feedback from students in our classes and at other col- leges and universities that has helped make this book as user-friendly as possible. We especially wish to acknowledge the assistance of several esteemed colleagues who provided detailed reviews for this edition. These reviewers were Shawn Berman of the Univer- sity of New Mexico, Geoffrey Desa of San Francisco State University, Jennifer J. Griffin of George Washington University, Bernie Hayen of Kansas State University, Denise Kleinrichert of San Francisco State University, Cynthia M. Orms of Georgia College & State Univer- sity, Alexia Priest of Post University, Joseph Petrick of Wright State University, and Ronald M. Roman of San José 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 par- ticular, we would like to thank Sandra Waddock of Boston College, Mary C. Gentile of Babson College, 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, Ann Svendsen of Simon Fraser Univer- sity, Robert Boutilier of Robert Boutilier & Associates, Kathryn S. Rogers of Pitzer Col- lege, Anne Forrestel of the University of Oregon, Kelly Strong of Colorado State University, Daniel Gilbert of Gettysburg College, William Sodeman of Hawaii Pacific Uni- versity, 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 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, H. Richard Eisenbeis of the University of Southern Colorado (retired), Anthony J. Daboub of the University of Texas at Brownsville, Asbjorn Osland of San José State University, Linda Klebe Treviño of Pennsylvania State Univer- sity, Mary Meisenhelter of York College of Pennsylvania, Stephen Payne of Georgia Col- lege 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 Chicago, Gordon P. Rands of Western Illinois University, Paul S. Adler of the University of Southern California, Diana Sharpe of Monmouth University, Kathleen Rehbein of Marquette University, Harry Van Buren of the University of New Mexico, Bruce Paton and Peter Melhus of San Francisco State University, Heather Elms of American 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.

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x Acknowledgments

Thanks are also due to Murray Silverman and Tom E. Thomas of San Francisco State University; Pierre Batellier and Emmanuel Raufflet of HEC Montreal; Robyn Linde of Rhode Island College and H. Richard Eisenbeis of the University of Southern Colorado Pueblo (retired); and Steven M. Cox, Bradley W. Brooks, S. Cathy Anderson, and J. Norris Frederick of Queens University of Charlotte, who contributed cases to this edition. A number of research assistants and former students have made contributions through- out this project for which we are appreciative. Among the special contributors to this proj- ect were Patricia Morrison of Grossmont College and Xi Yin of Duquesne University, who provided research assistance, and Emily DeMasi of Duquesne University, who provided research and assisted in preparing the instructor’s resource manual and ancillary materials. Thanks are also due to Carolyn Roose and Nate Marsh for research assistance. 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 Paul Ducham, our managing director, for his skillful lead- ership of this project. We also wish to recognize the able assistance of Trina Hauger, development editor, and Mary Jane Lampe and Manish Sharma, project managers, whose ability to keep us on track and on time has been critical. Elizabeth Trepkowski headed the excellent marketing team. Prashanthi Nadipalli, media project manager; Susan K. Culbertson, buyer; Richard Wright, copy editor; Susan Higgins, proofreader; and Jenny Lindeman, 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

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Online Learning Center (OLC) www.mhhe.com/lawrence14e Find a variety of online teaching and learning tools that are designed to reinforce and build on the text content. Students will have direct access to the learning tools while instructor materials are password protected.

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Features CourseSmart eBooks allow students to highlight, take notes, organize notes, and share the notes with other CourseSmart users. Students can also search for terms across all eBooks in their purchased CourseSmart library. CourseSmart eBooks can be printed (five pages at a time).

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Brief Contents PART ONE Business in Society 1

1. The Corporation and Its Stakeholders 2

2. Managing Public Issues and Stakeholder Relationships 24

3. The Corporation’s Social Responsibilities 45

PART TWO Business and Ethics 67

4. Ethics and Ethical Reasoning 68

5. Organizational Ethics and the Law 90

PART THREE Business in a Globalized World 115

6. The Challenges of Globalization 116

7. Global Corporate Citizenship 137

PART FOUR Business and Public Policy 159

8. Business–Government Relations 160

9. Influencing the Political Environment 183

PART FIVE Business and the Natural Environment 209

10. Sustainable Development and Global Business 210

11. Managing Environmental Issues 234

PART SIX Business and Technology 259

12. Technology, Organizations, and Society 260

13. Managing Technology and Innovation 285

PART SEVEN Business and Its Stakeholders 307

14. Stockholder Rights and Corporate Governance 308

15. Consumer Protection 332

16. Employees and the Corporation 355

17. Managing a Diverse Workforce 378

18. The Community and the Corporation 402

19. Managing Public Relations 426

CASES IN BUSINESS AND SOCIETY 447 1. The Upper Big Branch Mine Disaster 448

2. The Carlson Company and Protecting Children in the Global Tourism Industry 458

3. Carolina Pad and the Bloggers 467

4. Moody’s Credit Ratings and the Subprime Mortgage Meltdown 480

5. Merck, the FDA, and the Vioxx Recall 493

6. Kimpton Hotels’ EarthCare Program 503

7. Ventria Bioscience and the Controversy over Plant-Made Medicines 511

8. The Solidarity Fund and Gildan Activewear, Inc. 522

9. Mattel and Toy Safety 531

GLOSSARY 541

BIBLIOGRAPHY 553

INDEXES Name 559 Subject 563

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Contents PART ONE BUSINESS IN SOCIETY 1

Chapter 1 The Corporation and Its Stakeholders 2

Business and Society 4 A Systems Perspective 5

The Stakeholder Theory of the Firm 6 The Stakeholder Concept 7 Different Kinds of Stakeholders 8

Stakeholder Analysis 10 Stakeholder Interests 11 Stakeholder Power 12 Stakeholder Coalitions 13 Stakeholder Salience and Mapping 16

The Corporation’s Boundary-Spanning Departments 18 The Dynamic Environment of Business 19

Creating Value in a Dynamic Environment 21 Summary 21 Key Terms 22 Internet Resources 22 Discussion Case: A Brawl in Mickey’s Backyard 22

Chapter 2 Managing Public Issues and Stakeholder Relationships 24

Public Issues 25 Environmental Analysis 28

Competitive Intelligence 31 The Issue Management Process 32

Identify Issue 33 Analyze Issue 33 Generate Options 34 Take Action 35 Evaluate Results 35

Organizing for Effective Issue Management 35 Stakeholder Engagement 37

Stages in the Business–Stakeholder Relationship 37 Drivers of Stakeholder Engagement 38 Making Engagement Work Effectively 39 Stakeholder Networks 41 The Benefits of Engagement 41

Summary 42 Key Terms 42 Internet Resources 43 Discussion Case: Coca-Cola’s Water Neutrality Initiative 43

Chapter 3 The Corporation’s Social Responsibilities 45

Corporate Power and Responsibility 47 The Meaning of Corporate Social Responsibility 49

The Origins of Corporate Social Responsibility 50 Balancing Social, Economic, and Legal Responsibilities 51 The Corporate Social Responsibility Debate 53

Arguments for Corporate Social Responsibility 53 Arguments against Corporate Social Responsibility 56 The Social Enterprise 59 Social Entrepreneurship 60 The B Corporation 60 Serving the Bottom of the Pyramid 61

Award-Winning Corporate Social Responsibility Practices 63 Summary 64 Key Terms 64 Internet Resources 65 Discussion Case: Timberland’s Corporate Social Responsibility—Under New Ownership 65

PART TWO BUSINESS AND ETHICS 67

Chapter 4 Ethics and Ethical Reasoning 68

The Meaning of Ethics 69 What Is Business Ethics? 70 Why Should Business Be Ethical? 71

Why Ethical Problems Occur in Business 75 Personal Gain and Selfish Interest 76 Competitive Pressures on Profits 77 Conflicts of Interest 77 Cross-Cultural Contradictions 78

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xiv Contents

The Core Elements of Ethical Character 78 Managers’ Values 78 Spirituality in the Workplace 80 Managers’ Moral Development 81

Analyzing Ethical Problems in Business 83 Virtue Ethics: Pursuing a “Good” Life 83 Utility: Comparing Benefits and Costs 84 Rights: Determining and Protecting Entitlements 85 Justice: Is It Fair? 86 Applying Ethical Reasoning to Business Activities 86

Summary 87 Key Terms 87 Internet Resources 87 Discussion Case: Chiquita Brands: Ethical Responsibility or Illegal Action? 88

Chapter 5 Organizational Ethics and the Law 90

Corporate Ethical Climates 91 Business Ethics across Organizational Functions 93

Accounting Ethics 93 Financial Ethics 95 Marketing Ethics 96 Information Technology Ethics 97 Other Functional Areas 98

Making Ethics Work in Corporations 99 Building Ethical Safeguards into the Company 99 Comprehensive Ethics Programs 104 Corporate Ethics Awards and Certifications 104

Ethics in a Global Economy 105 Efforts to Curtail Unethical Practices 106

Ethics, Law, and Illegal Corporate Behavior 109 Corporate Lawbreaking and Its Costs 109

Summary 110 Key Terms 111 Internet Resources 111 Discussion Case: Alcoa’s Core Values in Practice 111

PART THREE BUSINESS IN A GLOBALIZED WORLD 115

Chapter 6 The Challenges of Globalization 116

The Process of Globalization 117 Major Transnational Corporations 118 The Acceleration of Globalization 119 International Financial and Trade Institutions 120

The Benefits and Costs of Globalization 122 Benefits of Globalization 122 Costs of Globalization 124

Doing Business in a Diverse World 126 Comparative Political and Economic Systems 127 Meeting the Challenges of Global Diversity 130

Collaborative Partnerships for Global Problem Solving 131

A Three-Sector World 131 Summary 133 Key Terms 133 Internet Resources 133 Discussion Case: Conflict Coltan in the Global Electronics Industry Supply Chain 134

Chapter 7 Global Corporate Citizenship 137

Global Corporate Citizenship 138 Citizenship Profile 140 Management Systems for Global Corporate Citizenship 142

Stages of Corporate Citizenship 143 Assessing Global Corporate Citizenship 147

Global Social and Environmental Audit Standards 147 The Auditing Process 150 Social and Environmental Reporting 151 Triple Bottom Line 153

Summary 154 Key Terms 155 Internet Resources 155 Discussion Case: Apple’s Supplier Code of Conduct and Foxconn’s Chinese Factories 155

PART FOUR BUSINESS AND PUBLIC POLICY 159

Chapter 8 Business–Government Relations 160

How Business and Government Relate 162 Seeking a Collaborative Partnership 162 Working at Arm’s Length 163 Legitimacy Issues 164

Government’s Public Policy Role 164 Elements of Public Policy 165 Types of Public Policy 167

Government Regulation of Business 168 Market Failure 169 Negative Externalities 169

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Contents xv

Natural Monopolies 169 Ethical Arguments 170 Types of Regulation 170 The Effects of Regulation 175

Regulation in a Global Context 178 Summary 179 Key Terms 180 Internet Resources 180 Discussion Case: Derivative Losses at JPMorgan Chase 180

Chapter 9 Influencing the Political Environment 183

Participants in the Political Environment 185 Business as a Political Participant 185 Stakeholder Groups in Politics 186 Coalition Political Activity 186

Influencing the Business–Government Relationship 187

Corporate Political Strategy 187 Political Action Tactics 188

Promoting an Information Strategy 189 Promoting a Financial-Incentive Strategy 192 Promoting a Constituency-Building Strategy 199

Levels of Political Involvement 202 Managing the Political Environment 203 Business Political Action: A Global Challenge 204 Summary 205 Key Terms 206 Internet Resources 206 Discussion Case: Stop Online Piracy Act— A Political Battle between Old and New Media 207

PART FIVE BUSINESS AND THE NATURAL ENVIRONMENT 209

Chapter 10 Sustainable Development and Global Business 210

Business and Society in the Natural Environment 212

Sustainable Development 213 Threats to the Earth’s Ecosystem 214 Forces of Change 216 The Earth’s Carrying Capacity 219

Global Environmental Issues 221 Ozone Depletion 221 Climate Change 222

Decline of Biodiversity 224 Threats to Marine Ecosystems 226

Response of the International Business Community 227

Codes of Environmental Conduct 229 Summary 231 Key Terms 231 Internet Resources 231 Discussion Case: Clean Cooking 232

Chapter 11 Managing Environmental Issues 234

Role of Government 236 Major Areas of Environmental Regulation 236 Alternative Policy Approaches 242

Costs and Benefits of Environmental Regulation 246 The Greening of Management 248

Stages of Corporate Environmental Responsibility 248 The Ecologically Sustainable Organization 249

Environmental Partnerships 250 Environmental Management in Practice 250 Environmental Audits 251

Environmental Management as a Competitive Advantage 252

Cost Savings 252 Product Differentiation 253 Technological Innovation 254 Reduction of Regulatory Risk 255 Strategic Planning 255

Summary 256 Key Terms 256 Internet Resources 256 Discussion Case: Digging Gold 257

PART SIX BUSINESS AND TECHNOLOGY 259

Chapter 12 Technology, Organizations, and Society 260