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Company cultures that spawn an ethically corrupt or amoral work climate encourage

03/11/2020 Client: arwaabdullah Deadline: 24 Hours

Business & Society Ethics, Sustainability, and Stakeholder Management

TENTH EDITION

ARCH I E B . CARROL L University of Georgia

J I L L A . BROWN Bentley University

ANN K . BUCHHOLTZ Rutgers University

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

Business & Society: Ethics, Sustainability, and Stakeholder Management, Tenth Edition

Archie B. Carroll, Jill A. Brown, and Ann K. Buchholtz

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Brief Contents

Preface xvii About the Authors xxv

PART 1 Business, Society, and Stakeholders 1

CHAPTER 1 The Business and Society Relationship 2

CHAPTER 2 Corporate Social Responsibility, Citizenship, and Sustainability 30

CHAPTER 3 The Stakeholder Approach to Business, Society, and Ethics 71

PART 2 Corporate Governance and Strategic Management Issues 101

CHAPTER 4 Corporate Governance: Foundational Issues 102

CHAPTER 5 Strategic Management and Corporate Public Policy 135

CHAPTER 6 Risk, Issue, and Crisis Management 155

PART 3 Business Ethics and Leadership 183

CHAPTER 7 Business Ethics Essentials 184

CHAPTER 8 Managerial and Organizational Ethics 224

CHAPTER 9 Business Ethics and Technology 272

CHAPTER 10 Ethical Issues in the Global Arena 305

PART 4 External Stakeholder Issues 341

CHAPTER 11 Business, Government, and Regulation 342

CHAPTER 12 Business Influence on Government and Public Policy 370

CHAPTER 13 Consumer Stakeholders: Information Issues 395

CHAPTER 14 Consumer Stakeholders: Product and Service Issues 432

CHAPTER 15 Sustainability and the Natural Environment 457

CHAPTER 16 Business and Community Stakeholders 491

PART 5 Internal Stakeholder Issues 521

CHAPTER 17 Employee Stakeholders and Workplace Issues 522

CHAPTER 18 Employee Stakeholders: Privacy, Safety, and Health 551

CHAPTER 19 Employment Diversity and Discrimination 580

Cases 611 Subject Index 748 Name Index 763

Contents

Preface xvii About the Authors xxv

PART 1 Business, Society, and Stakeholders 1

CHA P T E R 1

The Business and Society Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.1 Business and Society 5 1.1a Business Defined 5 1.1b Society Defined 6

1.2 Society as the Macroenvironment 6

1.3 A Pluralistic Society 7 1.3a Pluralism Has Strengths and Weaknesses 8 1.3b Multiple Publics, Systems, and Stakeholders 8

1.4 A Special-Interest Society 9

1.5 Business Criticism and Corporate Response 10 1.5a Factors in the Social Environment 10 1.5b A General Criticism of Business: Use and Abuse of Power 17 1.5c Balancing Power with Responsibility 20 1.5d Business’s Response: Concern and a Changing Social Contract 20

1.6 Focus of the Book 22 1.6a Managerial Approach 22 1.6b Business Ethics Theme 23 1.6c Sustainability Theme 23 1.6d Stakeholder Management Theme 24

1.7 Structure of the Book 24

Summary 26 Key Terms 26 Discussion Questions 27 Endnotes 27

CHA P T E R 2

Corporate Social Responsibility, Citizenship, and Sustainability . . . . . . . . . . . . . . . . . 30

2.1 Corporate Social Responsibility as a Concept 31 2.1a Historical Perspectives on CSR 32 2.1b Adaptations of the Economic Model 33 2.1c Evolving Meanings of CSR 35 2.1d A Four-Part Definition of CSR 35 2.1e The Pyramid of Corporate Social Responsibility 39 2.1f CSR in Practice 42

2.2 Traditional Arguments against and for CSR 44 2.2a Arguments against CSR 44 2.2b Arguments in Support of CSR 45 2.2c The Business Case for CSR 46

2.3 Ages and Stages of CSR 48

2.4 CSR Greenwashing 49

2.5 Political CSR 50

2.6 Corporate Social Responsiveness 50

2.7 Corporate Social Performance 51 2.7a Carroll’s CSP Model 51

2.8 Corporate Citizenship 53 2.8a Broad and Narrow Views 54 2.8b Stages of Corporate Citizenship 54 2.8c Global Corporate Citizenship 56 2.8d CSR and Corporate Citizenship Awards by Business Media 57

2.9 The Social Performance and Financial Performance Relationship 57 2.9a Three Perspectives on the Social–Financial–Reputation Relationship 58

2.10 Sustainability—Profits, People, Planet 61 2.10a Creating Shared Value and Conscious Capitalism 62

2.11 Socially Responsible, Sustainable, Ethical Investing 63

Summary 64 Key Terms 65 Discussion Questions 66 Endnotes 66

CHA P T E R 3

The Stakeholder Approach to Business, Society, and Ethics . . . . . . . . . . . . . . . . . . . . . 71

3.1 Origins of the Stakeholder Concept 72 3.1a What Is the Stake in Stakeholder? 72 3.1b What Is a Stakeholder? 72

3.2 Who Are Business’s Stakeholders? 73 3.2a Three Views of the Firm: Production, Managerial, and Stakeholder 74 3.2b Primary and Secondary Stakeholders 75 3.2c Important Stakeholder Attributes: Legitimacy, Power, Urgency 76

3.3 Stakeholder Approaches: Strategic, Multifiduciary, and Synthesis 78

3.4 Three Values of the Stakeholder Model 80 3.4a Descriptive Value 80 3.4b Instrumental Value 80 3.4c Normative Value 80

3.5 Stakeholder Management: Five Key Questions 80 3.5a Who Are the Organization’s Stakeholders? 81 3.5b What Are Our Stakeholders’ Stakes? 85 3.5c What Opportunities and Challenges Do Our Stakeholders Present? 86 3.5d What Responsibilities Does a Firm Have toward Its Stakeholders? 87 3.5e What Strategies or Actions Should Management Take? 88

3.6 Effective Stakeholder Management 91 3.6a Stakeholder Thinking 91 3.6b Developing a Stakeholder Culture 91 3.6c Stakeholder Management Capability 92 3.6d Stakeholder Engagement 93 3.6e The Stakeholder Corporation 95 3.6f Principles of Stakeholder Management 96

3.7 Strategic Steps toward Global Stakeholder Management 96 3.7a Implementation 96

Contents v

Summary 97 Key Terms 97 Discussion Questions 98 Endnotes 98

PART 2 Corporate Governance and Strategic Management Issues 101

CHA P T E R 4

Corporate Governance: Foundational Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

4.1 Legitimacy and Corporate Governance 102 4.1a The Purpose of Corporate Governance 104 4.1b Components of Corporate Governance 104

4.2 Problems in Corporate Governance 106 4.2a The Need for Board Independence 107 4.2b Issues Surrounding Compensation 107 4.2c The Governance Impact of the Market for Corporate Control 111 4.2d Insider Trading 112

4.3 Improving Corporate Governance 114 4.3a Legislative Efforts 114 4.3b Changes in Boards of Directors 115 4.3c Board Diversity 115 4.3d Outside Directors 116 4.3e Use of Board Committees 116 4.3f The Board’s Relationship with the CEO 117 4.3g Board Member Liability 118

4.4 The Role of Shareholders 120 4.4a Shareholder Democracy 120

4.5 The Role of the SEC 121

4.6 Shareholder Activism 122 4.6a The History of Shareholder Activism 122 4.6b Shareholder Resolutions 123 4.6c Shareholder Lawsuits 124

4.7 Investor Relations and Shareholder Engagement 124

4.8 An Alternative Model of Corporate Governance 125

Summary 127 Key Terms 128 Discussion Questions 129 Endnotes 129

CHA P T E R 5

Strategic Management and Corporate Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

5.1 Strategic Management and Corporate Public Policy 135 5.1a Relationship of Ethics to Strategic Management 136

5.2 Four Key Strategy Levels 137 5.2a Four Strategy Levels Described 137 5.2b Emphasis on Enterprise-Level Strategy 138

5.3 The Strategic Management Process 143 5.3a Strategic Corporate Social Responsibility 144 5.3b Measuring Sustainable Corporate Performance 145

vi Contents

5.4 Public Affairs as a Part of Strategic Management 149

5.5 The Corporate Public Affairs Function Today 149 5.5a PA’s Place at the Table 150 5.5b Future of Corporate PA in the 21st Century 150

Summary 151 Key Terms 151 Discussion Questions 152 Endnotes 152

CHA P T E R 6

Risk, Issue, and Crisis Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

6.1 The Relationships between Risk, Issue, and Crisis Management 156

6.2 Risk Management 156 6.2a Risk Management and Sustainability 157

6.3 Issue Management 158 6.3a A Portfolio Approach 159 6.3b Issue Definition and the Issue Management Process 159 6.3c Issue Development Process 166 6.3d Issue Management in Practice 167

6.4 Crisis Management 168 6.4a The Nature of Crises 169 6.4b Managing Business Crises 172 6.4c Crisis Communications 174 6.4d Successful Crisis Management 176

Summary 177 Key Terms 178 Discussion Questions 178 Endnotes 178

PART 3 Business Ethics and Leadership 183

CHA P T E R 7

Business Ethics Essentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

7.1 The Public’s Opinion of Business Ethics 187 7.1a Are the Media Reporting Business Ethics More Vigorously? 188 7.1b Is It Society That Is Changing? 189

7.2 Business Ethics: Some Basic Concepts 189 7.2a Descriptive versus Normative Ethics 190 7.2b The Conventional Approach to Business Ethics 191 7.2c Ethics and the Law 194 7.2d Making Ethical Judgments 195

7.3 Ethics, Economics, and Law—A Venn Model 197

7.4 Three Models of Management Ethics 199 7.4a Immoral Management 199 7.4b Moral Management 201 7.4c Amoral Management 204 7.4d Two Hypotheses Regarding the Models of Management Morality 207

7.5 Making Moral Management Actionable 209

7.6 Developing Moral Judgment 209 7.6a Levels of Moral Development 210 7.6b Different Sources of a Person’s Values 213

Contents vii

7.7 Elements of Moral Judgment 217 7.7a Moral Imagination 217 7.7b Moral Identification and Ordering 217 7.7c Moral Evaluation 217 7.7d Tolerance of Moral Disagreement and Ambiguity 218 7.7e Integration of Managerial and Moral Competence 218 7.7f A Sense of Moral Obligation 218

Summary 219 Key Terms 220 Discussion Questions 220 Endnotes 221

CHA P T E R 8

Managerial and Organizational Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

8.1 Ethics Issues Arise at Different Levels 225 8.1a Personal Level 225 8.1b Managerial and Organizational Levels 226 8.1c Industry or Profession Level 227 8.1d Societal and Global Levels 227

8.2 Managerial Ethics and Ethical Principles 228 8.2a Principles Approach to Ethics 228 8.2b Ethical Tests Approach to Decision Making 237

8.3 Managing Organizational Ethics 240 8.3a Factors Affecting the Organization’s Moral Climate 241 8.3b Improving the Organization’s Ethical Culture 243

8.4 Best Practices for Improving an Organization’s Ethics 245 8.4a Top Management Leadership (Moral Management) 246 8.4b Effective Communication of Ethical Messages 249 8.4c Ethics and Compliance Programs and Officers 249 8.4d Setting Realistic Objectives 252 8.4e Ethical Decision-Making Processes 252 8.4f Codes of Ethics or Conduct 254 8.4g Disciplining Violators of Ethics Standards 255 8.4h Ethics “Hotlines” and Whistle-Blowing Mechanisms 257 8.4i Business Ethics Training 257 8.4j Ethics Audits and Risk Assessments 260 8.4k Corporate Transparency Policies 260 8.4l Board of Directors Leadership and Oversight 261

8.5 Behavioral Ethics—Toward a Deeper Understanding 262

8.6 Moral Decisions, Managers, and Organizations 264

Summary 265 Key Terms 265 Discussion Questions 266 Endnotes 266

CHA P T E R 9

Business Ethics and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272

9.1 The New World of Big Data 273 9.1a Social Media 273 9.1b Surveillance 274

9.2 Technology and the Technological Environment 274

9.3 Characteristics of Technology 275

viii Contents

9.3a Benefits, Costs, and Challenges 276

9.4 Technology and Ethics 277

9.5 Information Technology 278 9.5a E-Commerce as a Pervasive Technology 278 9.5b Ongoing Issues in E-Commerce Ethics 279 9.5c Invasion of Consumer Privacy via E-Commerce 279 9.5d The Workplace and Computer Technology 286

9.6 Biotechnology 291 9.6a Bioethics 291 9.6b Genetic Engineering 292 9.6c Genetically Modified Organisms (GMOs) 296

Summary 299 Key Terms 299 Discussion Questions 300 Endnotes 300

CHA P T E R 1 0

Ethical Issues in the Global Arena . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305

10.1 Business Challenges in a Global Environment 306

10.2 Ethical Issues in the Global Business Environment 308 10.2a Questionable Marketing and Plant Safety Practices 309 10.2b Human Rights, Sweatshops, and Labor Abuses 312 10.2c Corruption, Bribery, and Questionable Payments 318

10.3 Improving Global Business Ethics 325 10.3a Balancing and Reconciling the Ethics Traditions of Home and Host Countries 326 10.3b Strategies for Improving Global Business Ethics 328 10.3c Corporate Action against Corruption 334

Summary 334 Key Terms 335 Discussion Questions 335 Endnotes 336

PART 4 External Stakeholder Issues 341

CHA P T E R 1 1

Business, Government, and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342

11.1 The Pendulum of Government’s Role in Business 343

11.2 The Roles of Government and Business 345 11.2a A Clash of Ethical Belief Systems 346

11.3 Interaction of Business, Government, and the Public 347 11.3a Government–Business Relationship 347 11.3b Public–Government Relationship 348 11.3c Business–Public Relationship 348

11.4 Government’s Nonregulatory Influence on Business 348 11.4a Industrial Policy 349 11.4b Privatization 351 11.4c Other Nonregulatory Governmental Influences on Business 352

11.5 Government’s Regulatory Influences on Business 354 11.5a Regulation: What Does It Mean? 355 11.5b Reasons for Regulation 355

Contents ix

11.5c Types of Regulation 357 11.5d Issues Related to Regulation 360

11.6 Deregulation 363 11.6a Purpose of Deregulation 363 11.6b The Changing World of Deregulation 363

Summary 365 Key Terms 366 Discussion Questions 366 Endnotes 366

CHA P T E R 1 2

Business Influence on Government and Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . 370

12.1 Corporate Political Participation 371

12.2 Business Lobbying 371 12.2a Organizational Levels of Lobbying 373

12.3 Corporate Political Spending 381 12.3a Arguments for Corporate Political Spending 383 12.3b Arguments against Corporate Political Spending 383

12.4 Political Action Committees 383 12.4a The Impact of Super PACs 384 12.4b Agency Issues 384

12.5 Political Accountability and Transparency 385

12.6 Strategies for Corporate Political Activity 387 12.6a Financial Performance Outcomes 388

Summary 388 Key Terms 389 Discussion Questions 389 Endnotes 390

CHA P T E R 1 3

Consumer Stakeholders: Information Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395

13.1 The Consumer Movement 396 13.1a Ralph Nader’s Consumerism 397 13.1b Consumerism Today 397 13.1c Product/Service Information Issues 399 13.1d Advertising Issues 400 13.1e Specific Controversial Advertising Issues 403 13.1f Warranties and Guarantees 417 13.1g Packaging and Labeling 418 13.1h Other Product Information Issues 421

13.2 The Federal Trade Commission (FTC) 421 13.2a The FTC in the 21st Century 422 13.2b Consumer Financial Protection Bureau 423

13.3 Self-Regulation in Advertising 424 13.3a The National Advertising Division’s Program 425

13.4 Moral Models and Consumer Stakeholders 425

Summary 426 Key Terms 426 Discussion Questions 427 Endnotes 427

x Contents

CHA P T E R 1 4

Consumer Stakeholders: Product and Service Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 432

14.1 Two Central Issues: Quality and Safety 433 14.1a The Issue of Quality 433 14.1b The Issue of Safety 436 14.1c Product Liability 441

14.2 Consumer Product Safety Commission 445

14.3 Food and Drug Administration 447

14.4 Business’s Response to Consumer Stakeholders 448

14.5 Customer Service Programs 448

14.6 Total Quality Management Programs 450

14.7 Six Sigma Strategy and Other Processes 451

Summary 452 Key Terms 453 Discussion Questions 453 Endnotes 454

CHA P T E R 1 5

Sustainability and the Natural Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457

15.1 The Sustainability Imperative 458

15.2 The Natural Environment 460

15.3 A Brief Introduction to the Natural Environment 461

15.4 The Impact of Business on the Natural Environment 462 15.4a Climate Change 463 15.4b Energy 463 15.4c Water 464 15.4d Biodiversity and Land Use 465 15.4e Chemicals, Toxics, and Heavy Metals 466 15.4f Air Pollution 467 15.4g Waste Management 467 15.4h Ozone Depletion 469 15.4i Oceans and Fisheries 469 15.4j Deforestation 470

15.5 Responsibility for Environmental and Sustainability Issues 471 15.5a Environmental Ethics 471 15.5b The NIMBY Problem 472

15.6 The Role of Governments in Environmental and Sustainability Issues 473 15.6a Responses of Governments in the United States 473 15.6b International Government Environmental and Sustainability Responses 477

15.7 Other Environmental and Sustainability Stakeholders 478 15.7a Environmental Interest Groups 478 15.7b Other Sustainability Interest Groups 480

15.8 Business Environmentalism and Sustainability 482 15.8a Patagonia 482 15.8b Apple 483 15.8c CVS Health 483 15.8d Tesla 483 15.8e Business and Environmental Partnerships-Activists, NGOs, and Interest Groups 483

15.9 The Future of Business: Greening and/or Growing? 484

Summary 484

Contents xi

Key Terms 485 Discussion Questions 485 Endnotes 485

CHA P T E R 1 6

Business and Community Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491

16.1 Community Involvement 492 16.1a Volunteer Programs 494 16.1b Managing Community Involvement 495

16.2 Corporate Philanthropy or Business Giving 496 16.2a A Brief History of Corporate Philanthropy 497 16.2b A Call for Transparency in Corporate Philanthropy 498 16.2c Giving to the “Third Sector”: The Nonprofits 499 16.2d Managing Corporate Philanthropy 503

16.3 Detrimental Impacts on Communities 508 16.3a Offshoring and Reshoring 508 16.3b Business and Plant Closings 510

Summary 514 Key Terms 515 Discussion Questions 515 Endnotes 516

PART 5 Internal Stakeholder Issues 521

CHA P T E R 1 7

Employee Stakeholders and Workplace Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522

17.1 The New Social Contract 523

17.2 Employee Engagement 525

17.3 The Employee Rights Movement 525 17.3a The Meaning of Employee Rights 526

17.4 The Right Not to Be Fired without Cause 527 17.4a Employment-at-Will Doctrine 528 17.4b Dismissing an Employee with Care 531

17.5 The Right to Due Process and Fair Treatment 532 17.5a Due Process 532 17.5b Alternative Dispute Resolution 533

17.6 Freedom of Speech in the Workplace 536 17.6a Whistle-Blowing 537 17.6b Consequences of Whistle-Blowing 539 17.6c Government’s Protection of Whistle-Blowers 541 17.6d False Claims Act 542 17.6e Management Responsiveness to Potential Whistle-Blowing Situations 544

Summary 545 Key Terms 546 Discussion Questions 546 Endnotes 547

CHA P T E R 1 8

Employee Stakeholders: Privacy, Safety, and Health . . . . . . . . . . . . . . . . . . . . . . . . . . . 551

18.1 Privacy in the Workplace 552 18.1a Collection and Use of Employee Information by Employers 554

xii Contents

18.1b Integrity Testing 557 18.1c Drug Testing 560 18.1d Workplace Monitoring 562 18.1e Policy Guidelines on the Issue of Privacy 565

18.2 Workplace Safety 566 18.2a The Workplace Safety Problem 567 18.2b Workplace Safety Today 568 18.2c Right-to-Know Laws 568 18.2d Workplace Violence 569

18.3 Health in the Workplace 571 18.3a Smoking in the Workplace 572 18.3b The Family-Friendly Workplace 572

Summary 574 Key Terms 575 Discussion Questions 575 Endnotes 575

CHA P T E R 1 9

Employment Diversity and Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580

19.1 Diversity in the Workforce 581

19.2 The Civil Rights Movement 582

19.3 Federal Laws Prohibiting Discrimination 583 19.3a Title VII of the Civil Rights Act of 1964 583 19.3b Age Discrimination in Employment Act of 1967 585 19.3c Equal Pay Act of 1963 585 19.3d Rehabilitation Act of 1973, Section 503 586 19.3e Americans with Disabilities Act 586 19.3f Civil Rights Act of 1991 591 19.3g Equal Employment Opportunity Commission 591

19.4 Expanded Meanings of Employment Discrimination 592 19.4a Disparate Treatment 592 19.4b Disparate Impact 593

19.5 Issues in Employment Discrimination 594 19.5a Inequality Persists Despite Diversity Efforts 594 19.5b Race and Ethnicity 594 19.5c Color 595 19.5d Gender 596 19.5e Other Forms of Employment Discrimination 598

19.6 Affirmative Action in the Workplace 602 19.6a The Future of Diversity Management 604

Summary 604 Key Terms 605 Discussion Questions 605 Endnotes 606

Cases 611 Subject Index 748 Name Index 763

ETHICS IN PRACTICE CASES

WORKING FOR MY CUP OR THE HOUSE? 17 IS BUSINESS POWER TOO GREAT? 19

Contents xiii

THE SOCIALLY RESPONSIBLE SHOE COMPANY 48 BURGERS WITH A SOUL—FRESH, LOCAL, SUSTAINABLE 58 ARE PLANTS AND FLOWERS STAKEHOLDERS? DO THEY HAVE RIGHTS? 79 CHICKENS OR EMPLOYEES? WHICH IS THE MOST IMPORTANT STAKEHOLDER? 90 SOMETHING’S ROTTEN IN HONDO 94 EXCESSIVE DIRECTOR COMPENSATION AT FACEBOOK? 113 MONITORING THE MONITORS 119 DUPONT AND SUSTAINABILITY REPORTING 148 CRISIS MANAGEMENT: WHEN TO REPENT? WHEN TO DEFEND? 175 WHAT WOULD YOU DO? 193 TO HUNT OR NOT TO HUNT—THAT IS THE QUESTION 196 IS RÉSUMÉ INFLATION AND DECEPTION ACCEPTABLE? 198 ARE PEOPLE MORE ETHICAL WHEN BEING “WATCHED?” 214 MORE SALES, LOWER ETHICS? 244 FIRED FOR CHEATING ON EMPLOYER TESTS 247 THE NEW ETHICS CODE–SIGN OR RESIGN 256 SOMETIMES ETHICS HOTLINES DON’T WORK 258 TWITTER ETHICS IN BUSINESS 275 COPYRIGHT INFRINGEMENT? 285 USING PERSONAL TECHNOLOGY IN THE WORKPLACE 287 WHOLE FOODS: GMO TRANSPARENCY OR CLEVER MARKETING? 298 IS THE FAIR TRADE MOVEMENT SUSTAINABLE? 313 HELPING FACTORIES TO PASS SWEATSHOP AUDITS—USING CHEATING CONSULTANTS 317 VIOLATIONS OF THE FOREIGN CORRUPT PRACTICES ACT OR NOT? 324 THE MARIJUANA REGULATORY DILEMMA 358 BANNING THE BIG GULP 360 THE NRA AND THE CDC 372 DOUBLE IRISH WITH A DUTCH SANDWICH 381 WHAT DO WE TELL THE CUSTOMER? 401 SHOULD THE WORD FREE BE BANNED IN ADVERTISING? 404 DO THESE “ADVERTISING TRAPS” REPRESENT ETHICAL ADVERTISING? 406 SHOULD FOOD ADVERTISING TO CHILDREN BE BANNED? 409 RETURN FRAUD—A GROWING BUSINESS 419 THE PIRATED POPCORN 435 WAS “PINK SLIME” A VICTIM OF SOCIAL MEDIA FRENZY? 440 WATER SCORING: A WAY TO PUSH FOR BETTER WATER STEWARDSHIP? 466 A LITTLE GREEN LIE 473 WHO FAILED TO PROTECT THE COMMUNITY IN FLINT, MICHIGAN? 475

xiv Contents

SLOW FASHION 480 MATTERS OF GOOD INTENTIONS 497 COMPETITION IN THE NONPROFIT WORKPLACE 507 SHOULD I SAY SOMETHING? 527 THE POCKETED PURSE 529 A WHISTLE-BLOWER’S WINDFALL 536 THE SERIAL WHISTLE-BLOWER: HAVE THE INCENTIVES GONE TOO FAR? 538 EMPLOYEE HEALTH AND THE USE OF BIG DATA 553 CO-WORKERS VERSUS FRIENDSHIP 559 AMAZON: USING THE DIGITAL BULLETIN BOARD TO SHAME EMPLOYEES INTO GOOD BEHAVIOR 563 SICK DAY SNOOPS 565 WHEN EXTERNAL STAKEHOLDERS ATTACK 569 WHAT IS REASONABLE ACCOMMODATION FOR PREGNANCY? 589 GENTLEMAN’S CLUB? 599 BIGOTRY IN THE BAKERY? 600

CASES

WALMART: THE MAIN STREET MERCHANT OF DOOM 613 WALMART’S LABOR PRACTICES 623 THE BODY SHOP: POSTER CHILD OF EARLY CSR MOVEMENT 630 CHIPOTLE’S STRUGGLE WITH FOOD SAFETY 642 DIRECT-TO-CONSUMER ADVERTISING FOR PILLS: IS IT ETHICAL? 646 USING EX-CONS TO TEACH BUSINESS ETHICS 648 VOLKSWAGEN’S DIESEL DECEPTION 650 UNLOCKING THE SECRETS OF THE APPLE IPHONE IN THE NAME OF ANTITERRORISM 659 TO HIRE OR NOT TO HIRE 664 PAYDAY LOANS: A NEEDED PRODUCT OR A SCAM? 664 YOU PUNCH MINE AND I’LL PUNCH YOURS 667 PHANTOM EXPENSES 668 FAMILY BUSINESS 669 THE WAITER RULE: WHAT MAKES FOR A GOOD CEO? 669 NIKE, INC. AND SWEATSHOPS 671 COKE AND PEPSI IN INDIA: ISSUES, ETHICS, AND CRISIS MANAGEMENT 679 CHIQUITA: AN EXCRUCIATING DILEMMA BETWEEN LIFE AND LAW 685 THE BETASERON® DECISION (A) 689 SHOULD DIRECTORS SHINE LIGHT ON DARK MONEY? 691 BIG PHARMA’S MARKETING TACTICS 692 MCDONALD’S—THE COFFEE SPILL HEARD ’ROUND THE WORLD 701

Contents xv

GENERAL ELECTRIC AND THE HUDSON RIVER CLEANUP 705 WHAT HAVE YOU DONE FOR ME LATELY? THE CASE OF AMAZON IN SOUTH CAROLINA 711 EVERLANE: ETHICAL CHIC AND RADICAL TRANSPARENCY IN GLOBAL SUPPLY CHAINS 715 NEW BELGIUM BREWING: DEFINING A BUSINESS ON SUSTAINABILITY 718 ALTRUISM VERSUS PROFIT: THE CHALLENGES OF CLEAN WATER IN INDIA 721 SAFETY? WHAT SAFETY? 724 TARGETING CONSUMERS (AND USING THEIR SECRETS) 725 THE PERILS OF STUDENT LOAN DEBT 727 “DEAD PEASANT” LIFE INSURANCE POLICIES 730 THE CASE OF THE FIRED WAITRESS 732 AFTER-HOURS ACTIVITIES: THE CASE OF PETER OILER 734 LOCATION, LOCATION, LOCATION 736 LOOKS DISCRIMINATION AT A&F 737 TWO VETS, TWO DOGS, AND A DEADLOCK 739 ARE CRIMINAL BACKGROUND CHECKS DISCRIMINATORY? 741 TO TAKE OR NOT TO TAKE 742 TRAGEDY IN BANGLADESH—THE RANA PLAZA FACTORY COLLAPSE 742 WORKPLACE SPYING 746

xvi Contents

Preface

Business & Society: Ethics, Sustainability, and Stakeholder Management, Tenth Edition, pro- vides a conceptual framework, analysis, and discussion of the issues surrounding the business and society relationship. The book’s structure, chapters, and cases identify and engage the major topics involved in developing a robust understanding of business and society, or busi- ness in society. The latest research, examples, and cases provide you with a broad, yet detailed, analysis of the subject matter; they also offer a solid basis for thoughtful learning, reflection, and analysis of the domestic and global issues facing businesses today.

The book employs a managerial perspective that identifies and integrates current and rel- evant thought and practice. The managerial perspective is embedded within the book’s major themes of business ethics, sustainability, and stakeholder management. Each of these themes is essential today. Each theme builds upon its own perspective but is consistent with and overlaps with the others. Taken together, they capture the challenges of the past and provide frameworks for thinking about the current and future role of business in society.

The business ethics dimension is central because it has become clear that value con- siderations are and need to be woven into the fabric of the public issues that organiza- tions face today. An emphasis is placed on business ethics essentials and how ethics integrates into managerial and organizational decision making. Special spheres of busi- ness ethics discussed include the realms of technology and global capitalism, where ethi- cal questions increasingly have arisen for the past 20 years. The subject of each chapter, moreover, is infused with ethics considerations that are vital to their full treatment.

Sustainability is now one of business’s most pressing mandates. This dimension has been developed further since the ninth edition of this book because it has become more evident in the business world today that a concern for the natural, social, and financial environments are interconnected and that all three must be maintained in balance for both current and future generations. Hence, topics of the new circular economy, as well as measures of sustainability, are highlighted in this edition.

The stakeholder management perspective is crucial and enduring and it helps managers to (1) identify the various groups or individuals who have stakes in the firm or its actions, decisions, policies, and practices and (2) incorporate the stakeholders’ concerns into the firm’s daily operations and strategic plans. Stakeholder management is an approach that increases the likelihood decision makers will integrate ethical wisdom with management wisdom with respect to all salient parties to the business and society relationship.

As this edition goes to press, the country and world economies are still striving to recover from one of the most perilous financial periods since the Great Depression. The world stock market collapse beginning in the fall of 2008 had devastating repercussions for economies, governments, businesses, and individuals, and still we have not resolved completely the uncertainty associated with what began as financial turmoil and bank- ruptcies on Wall Street. This major event and its consequences will be with us for many years, and we urge readers to keep in mind the extent to which our world has now changed as they read the book and consider its content and application. Major events have the power to change the business and society relationship in significant ways—and instantaneously—so it is essential that the book’s topics be read with an ever present eye on the events breaking in the news each day.

Applicable Courses for Book This text is appropriate for college and university courses that carry such titles as Busi- ness and Society; Business in Society; Business and Its Environment; Business Ethics; Business and Public Policy; Social Issues in Management; Business, Government, and Society; Social Responsibility of Business; and Stakeholder Management. The book is appropriate for either a required or an elective course seeking to meet the most recent accrediting standards of the Association to Advance Collegiate Schools of Business (AACSB International). The book has been used successfully in both undergraduate and graduate courses.

Though the AACSB does not require any specific courses in this subject matter, its recently updated (January 31, 2016) standards specify that a business school’s curriculum should include the topics covered throughout this textbook in both undergraduate and graduate degree programs. For undergraduate and graduate degree programs, learning experiences should be addressed and are addressed in General Skill Areas such as ethical understanding and reasoning (able to identify ethical issues and address the issues in a socially responsible way) and diverse and multicultural work environments.

In terms of AACSB’s General Business and Management Knowledge Areas, the following topics should be addressed and are addressed in this textbook: economic, political, regulatory, legal, technological, and social contexts of organizations in a globalized society; and social responsibility, including sustainability, and ethical behavior and approaches to management.

This book is ideal for coverage of perspectives that form the context for business: eth- ical and global issues; the influence of political, social, legal, environmental, technologi- cal, and regulatory issues; and the impact of diversity on organizations. The book provides perspectives on business, society, and ethics in the United States, along with examples from Europe, Asia, and other parts of the world. As the world has grown closer due to technology, communications, and transportation, there has been more conver- gence than divergence in applicability of the ideas presented herein. The book has proved suitable in a number of different countries outside of the United States. In previ- ous editions, versions were published in Canada and China. Publication in Japan is under consideration. Though written from the perspective of American society, a special effort has been made to include some examples from different parts of the world to illus- trate major points. Most of the book applies in developed economies around the world.

Objectives in Relevant Courses Depending on the placement of a course in the curriculum or the individual instructor’s philosophy or strategy, this book could be used for a variety of objectives. The courses for which it is intended typically include several essential goals, including the following:

1. Students should be made aware of the expectations and demands that emanate from the stakeholder environment and are placed on business firms.

2. As prospective managers, students need to understand appropriate business responses and management approaches for dealing with social, political, environ- mental, technological, and global issues and stakeholders.

3. An appreciation of ethics and sustainability issues and the influence these have on society, management decision making, behavior, policies, and practices is important.

4. The broad question of business’s legitimacy as an institution in a global society is at stake and must be addressed from both business and societal perspectives. These topics are essential to business building trust with society and all stakeholders.

5. The increasing extent to which social, ethical, public, environmental, and global issues must be considered from a strategic perspective is critical in such courses.

xviii Preface

New to the Tenth Edition This tenth edition has been updated and revised to reflect recent research, laws, cases, and examples. Material in this new edition includes:

• New research, surveys, and examples throughout all the chapters • Coverage throughout the text on the most recent ethics scandals and their influence

on business, society, organizations, and people • New concepts and examples on the developing theme of “behavioral ethics” • Discussion of recent developments with the Dodd Frank Wall Street Reform and

Consumer Financial Protection Act, the Net Neutrality Act, the Consumer Drone Safety Act, the Affordable Care Act, and other laws with significant importance to managers today

• Expanded coverage of social media issues, including issues of usage, privacy, and liability • Coverage of competing corporate governance perspectives • Incorporation of the issue of risk management and its relation to business in society • Updated coverage of social entrepreneurship and social enterprises • Discussion of the emerging topic of Political Corporate Social Responsibility (PCSR) • Expanded coverage of sustainability reporting and integrated reports • Extended coverage of Citizens United, Super PACs, and Dark Money, and the

importance of Corporate Political Accountability and Transparency • Consideration of diversity, employee rights, and recent legislation regarding discrim-

ination, including LGBT rights and updated protections, updated affirmative action issues, and new EEOC reforms

• Updated “Spotlight on Sustainability” features in each chapter, which demonstrate how sustainability is relevant and applicable to each chapter’s topics

• Fifty-five “Ethics in Practice Cases” embedded in chapters throughout the book, many of which are brand new to this edition

• Thirty-nine end-of-text “Cases” that may be assigned with any of the book’s chapter topics, 11 of which are brand new to this edition

• A revised and updated Instructor’s Manual • A brand new MindTap product that includes a digital version of the book, plus

practice, graded, and media quizzes

“Ethics in Practice Cases” Integral to this tenth edition are in-chapter features titled “Ethics in Practice Cases.” Inter- spersed throughout the chapters, these short cases and incidents present (1) actual ethical situations faced by companies, managers, consumers, or employees; (2) topics currently being discussed in the news; or (3) dilemmas faced personally in the work experiences of our former students in university or executive education classes. These latter types of cases are real-life situations actually encountered in their full- and part-time work experiences. Students and managers wrote some of these cases, and we are pleased they gave us permis- sion to use them. They provide ready examples of the ethical issues people face today as citizens, consumers, and employees. We would like to acknowledge the authors of these for their contributions to the book. Instructors may wish to use these as mini-cases for class discussion when a lengthier case is not assigned. They can be read quickly, but they con- tain considerable substance for class discussion and analysis.

“Spotlight on Sustainability” Features The “Spotlight on Sustainability” features in each chapter highlight an important and rele- vant linkage of sustainability concepts that augment each chapter’s text material. The feature

Preface xix

sometimes highlights a pertinent organization covered in the chapter and further dis- cusses its activities or issues. Other features highlight a sustainability challenge that a range of organizations face or a sustainability success that organizations or individuals can emulate. These features permit readers to quickly and easily discover how the sus- tainability theme applies to each topic covered in the text. The concept of sustainability extends to virtually all business, society, and ethics topics and embraces people and profits, as well as the planet.

Structure of the Book Part 1. Business, Society, and Stakeholders Part 1 of the book provides foundational coverage of pertinent business, society, and stakeholder topics and issues. Because most courses that will use this book relate to the issue of corporate social responsibility (CSR), this concept is discussed at the out- set. Part 1 explores vital issues in the business and society relationship and discusses how corporate social responsibility and its complementary concepts—corporate citi- zenship and sustainability—provide basic frameworks to understanding. Also given early coverage is the stakeholder management concept, because it provides a way of thinking and analyzing all topics in the book, as well as a helpful perspective for think- ing about organizations.

Part 2. Corporate Governance and Strategic Management Issues The second part of the text addresses corporate governance and strategic manage- ment for stakeholder responsiveness. The purpose of this part is to discuss manage- ment considerations and implications for dealing with the issues discussed throughout the text. Corporate governance is covered early because in the past decade this topic has been identified as central to effective strategic management. The strategic management perspective is useful because these issues have impacts on the total organization and have become intense ones for many upper-level managers. Special treatment is given to corporate public policy; issue, risk, and crisis manage- ment; and public affairs management.

Some instructors may elect to cover Part 2 later in their courses. It could easily be covered after Part 4 or 5. This option would be most appropriate for those who use the book for a business ethics course or who desire to spend less time on the governance, strategy, and management perspectives.

Part 3. Business Ethics and Leadership Four chapters dedicated to business ethics and leadership topics are presented in Part 3. In actual practice, business ethics cannot be separated from the full range of external and internal stakeholder concerns, but the topic’s importance merits the more detailed treatment presented here. Part 3 focuses on business ethics essentials, managerial and organizational ethics, business ethics and technology, and ethical issues in the global arena. Taken together, these chapters examine business and society issues that require ethical thinking.

Part 4. External Stakeholder Issues Vital topics in Part 4 include business’s relations with government, consumers, the natural environment, and the community. In each of these topic areas, we encounter social and ethical issues and challenges that are integral to business today. The business–government relationship is divided into the regulatory initiatives to monitor business practices and business’s attempts to influence government. Consumers, environment, and community stakeholders are then treated in separate chapters.

xx Preface

Part 5. Internal Stakeholder Issues The primary internal stakeholders addressed in this part are employees. Here, we con- sider workplace issues and the key themes of employee rights, diversity, employment dis- crimination, and affirmative action. Two chapters address the changing social contract between business and employees and the urgent subjects of employee rights. A final chapter treats the vital topic of diversity and employment discrimination. Owner stake- holders may be seen as internal stakeholders too, but we cover them in Part 2, where the subject of corporate governance has been placed.

Case Studies Throughout each of the chapters, there are “Ethics in Practice Cases,” 55 in total, that pertain to the chapter in which they are located, but also can be used with other chapters as needed. The 39 end-of-text Cases address a broad range of topics and decision situa- tions. The cases are of varying length. They include classic cases (involving such corpo- rate giants as Walmart, The Body Shop, Nike, McDonald’s, Volkswagen, Chipotle, Coke, Pepsi, and Apple) with ongoing deliberations, as well as new cases touching upon issues that have arisen in the past several years.

All the cases are intended to provide instructors and students with real-life situations within which to further analyze course issues, concepts, and topics covered throughout the book. Both the Ethics in Practice Cases and the end-of-text Cases may be used with various chapters depending on the emphasis of the course. Many of the cases carry rami- fications that spill over into several subject areas or issues. Immediately preceding the end-of-text Cases is a set of guidelines for case analysis that the instructor may wish to use in place of or in addition to the questions that appear at the end of each case. A case matrix, located inside the front cover of the instructor edition of the textbook and in the instructor’s manual, provides guidance as to which of the cases in the book, both Ethics in Practice and end of text, work best with each chapter.

Support for the Student MindTap MindTap® Management for Carroll/Brown/Buchholtz, Business & Society: Ethics, Sustain- ability, and Stakeholder Management, 10th edition is the digital learning solution that powers students from memorization to mastery. It gives you complete control of your course—to provide engaging content, to challenge every individual, and to build their confidence. Empower students to accelerate their progress with MindTap. MindTap: Powered by You.

CourseMate Student Resources The CourseMate site, accessible at www.cengagebrain.com, includes student support resources to enhance and assess learning, including PowerPoint slides, key terms, and learning objectives.

Support for the Instructor Instructor’s Manual The Instructor’s Manual includes learning objectives, teaching suggestions, complete chap- ter outlines, highlighted key terms, answers to discussion questions, case notes, and group exercises. The Instructor’s Manual is available on the Instructor Companion Site.

Test Bank Cengage Learning Testing Powered by Cognero is a flexible, online system that allows you to author, edit, and manage test-bank content from multiple Cengage Learning solutions;

Preface xxi

create multiple test versions in an instant; and deliver tests from your LMS, your class- room, or wherever you want. The test bank for each chapter includes true/false, multiple- choice, short-answer, and essay questions, all correlated to AACSB guidelines and learning standards, and questions are identified by the level of difficulty.

PowerPoint Slides The PowerPoint presentations are colorful and varied, designed to hold students’ interest and reinforce each chapter’s main points. The PowerPoint presentations are available on the Instructor Companion Site.

Online Instructor Resources To access the online course materials, please visit www.cengage.com, and log in with your credentials.

Acknowledgments First, we would like to remember our dear friend, co-author, and colleague, Ann Buch- holtz, whose contributions to the study of business and society will remain with us forever, as will our memories of her generous spirit. When Ann won the Sumner Marcus Award for the Social Issues in Management Division at the 2015 Academy of Management Con- ference, the words used to describe her included “top tier scholar,” “mentor,” “servant leader,” and “teacher.” Beyond the stories of her incredible research impact in the areas of ethics, corporate governance, corporate social responsibility, and strategy, Ann was someone who stood out among her peers in every dimension of performance and service. She loved the phrase from Mahatma Gandhi, “Be truthful, gentle and fearless,” and it described her nature perfectly. Ann leaves behind many friends, colleagues, and students who will miss her dearly, as well as a beloved brother, Dick Buchholtz, who has been a friend to us over the years. Ann’s spirit will live on in this textbook, and we dedicate this edition to her.

Second, we would like to express gratitude to our professional colleagues in the Social Issues in Management (SIM) Division of the Academy of Management, the International Association for Business and Society (IABS), and the Society for Business Ethics (SBE). Over the years, members of these organizations have meant a great deal to us and have helped provide a stimulating environment in which we could intellectually pursue these topics in which we have a common interest. Many of these individuals are cited in this book and their work is sincerely appreciated.

Third, we would like to thank the many reviewers of the nine previous editions who took the time to provide us with helpful critiques. Many of their ideas and suggestions have been used for this edition and led to improvements in the text:

Steven C. Alber, Hawaii Pacific University

Paula Becker Alexander, Seton Hall University

Laquita C. Blockson, St. Leo University

Mark A. Buchanan, Boise State University

Peter Burkhardt, Western State College of Colorado

Preston D. Cameron, Mesa Community College

William B. Carper, University of West Florida

George S. Cole, Shippensburg University

Brenda Eichelberger, Portland State University

xxii Preface

Jeanne Enders, Portland State University

Joshua S. Friedlander, Baruch College

John William Geranios, George Washington University

Kathleen Getz, Loyola University Maryland

Peggy A. Golden, University of Northern Iowa

Russell Gough, Pepperdine University

Michele A. Govekar, Ohio Northern University

Wade Graves, Grayson College

Frank J. Hitt, Mountain State University

Robert H. Hogner, Florida International University

Sylvester R. Houston, University of Denver

Ralph W. Jackson, University of Tulsa

David C. Jacobs, American University

Leigh Redd Johnson, Murray State University

Ed Leonard, Indiana University–Purdue University Fort Wayne

Charles Lyons, University of Georgia

Timothy A. Matherly, Florida State University

Kenneth R. Mayer, Cleveland State University

Douglas M. McCabe, Georgetown University

Douglas McCloskey, Washington University School of Law

Bill McShain, Cumberland University

Geralyn Miller, Indiana University–Purdue University Fort Wayne

Nana Lee Moore, Warner University

Harvey Nussbaum, Wayne State University

Nathan Oliver, University of Alabama Birmingham

E. Leroy Plumlee, Western Washington University

Richard Raspen, Wilkes University

Dawna Rhoades, Embry-Riddle Aeronautical University

William T. Rupp, Austin Peay State University

Robert J. Rustic, The University of Findlay

John K. Sands, Western Washington University

William Sodeman, University of Alabama in Huntsville (UAH)

Valarie Spiser-Albert, University of Texas at San Antonio

David S. Steingard, St. Joseph’s University

John M. Stevens, The Pennsylvania State University

Diane L. Swanson, Kansas State University

Dave Thiessen, Lewis-Clark State College

Jeff R. Turner, Howard Payne University

Ivan R. Vernon, Cleveland State University

Marion Webb, Cleveland State University

Preface xxiii

George E. Weber, Whitworth College

Ira E. Wessler, Robert Morris University

We would also like to express gratitude to our students, who have not only provided comments on a regular basis but also made this tenth edition even more interesting with the ethical dilemmas they have personally contributed, as highlighted in the Ethics in Practice Cases features found in many of the chapters or at the end of the text. In addi- tion to those who are named in the Ethics in Practice Cases features and end-of-text Cases and have given permission for their materials to be used, we would like to thank the following individuals for their contributions: Michelle Alen, Kristine Calo, Chad Cleveland, Ken Crowe, Lee Askew Elkins, Charles Lyons, William Megathlin, Jr., Made- line Meibauer, Laura Rosario, Paul Rouland, Sr., William Sodeman and Clayton Wilcox. We express grateful appreciation to the authors of the other cases that appear at the end of the text, and their names are mentioned there. We also would like to thank Bruce F. Freed and Karl Sandstrom of the Center for Political Accountability for their support as we incorporated the issues stemming from Citizens United into our discussion of corpo- rate political activity.

Finally, we wish to express heartfelt appreciation to our family members and friends for their patience, understanding, and support when work on the book altered our priorities and plans.

Archie B. Carroll Jill A. Brown

xxiv Preface

About the Authors

Archie B. Carroll Archie B. Carroll is Robert W. Scherer Chair of Management & Corporate Public Affairs emeritus and professor of management emeritus in the Terry College of Business, Uni- versity of Georgia. He also served as director of the Nonprofit Management and Com- munity Service Program in the Terry College of Business. Dr. Carroll received his three academic degrees from The Florida State University in Tallahassee. He is the co-author of Corporate Responsibility: The American Experience (Cambridge University Press, 2012), which won the Academy of Management, Social Issues in Management, Book of the Year Award in 2014. He was recognized with the first Lifetime Achievement Award in Corporate Social Responsibility (2012) given by the Institute of Management, Hum- boldt University, Berlin, Germany.

Professor Carroll has published numerous books, chapters, articles, and encyclopedia entries. His research has appeared in the Academy of Management Journal, Academy of Management Review, Business and Society, Journal of Management, Business Ethics Quar- terly, Journal of Business Ethics, and many others.

He is former Division Chair of the Social Issues in Management (SIM) Division of the Academy of Management, a founding board member of the International Association for Business and Society (IABS), and past president of the Society for Business Ethics (SBE). He is an elected Fellow of the Southern Management Association (1995), Fellow of the Academy of Management (2005), and Fellow of the International Association for Busi- ness and Society (2012).

Other important professional recognitions include the Sumner Marcus Award (1992) for Distinguished Service by the SIM Division of the Academy of Management; Distin- guished Research Award (1993) by Terry College of Business, University of Georgia; Dis- tinguished Service Award (2003) by the Terry College of Business; and the Hunt SMA Sustained Outstanding Service Award (2016) by the Southern Management Association. He was named professor emeritus (2005) at the University of Georgia, and in 2008, he was recognized with the Outstanding Ph.D. Award from the College of Business, Florida State University.

Jill A. Brown Jill Brown is the Harold S. Geneen Research Professor of Corporate Governance at Bentley University. She received her Ph.D. at the University of Georgia; Ann Buchholtz served as her Dissertation Chair.

Dr. Brown’s research and teaching interests include ethics, corporate social responsibil- ity, corporate governance, and strategic leadership—with a focus on understanding how businesses can create both financial and social value. Brown’s work has been published in the Journal of Business Ethics, Organization Science, Business Ethics Quarterly, the Journal of Management Studies, the Oxford Handbook of Corporate Social Responsibility, Strategic Organization, and Corporate Governance: An International Review (CGIR), where she is an associate editor. She also serves as an associate editor for Business and Society.

She is an elected Representative-at-Large of the International Association of Business and Society (IABS), an international organization committed to understanding relationships

between business, government, and society. She has also served in many capacities for the SIM (Social Issues in Management) Division at the Academy of Management, including Co-Chair of the Doctoral Consortium, elected Representative-at-Large, and most recently as Program Chair-Elect. Dr. Brown has received numerous teaching and reviewing awards, including the Robert and Christine Staub Faculty Excellence Award at Lehigh University, and Best Reviewer awards from CGIR and Business & Society.

Ann K. Buchholtz The late Ann K. Buchholtz was professor of Leadership and Ethics at Rutgers University and served as research director of the Institute for Ethical Leadership at the Rutgers Business School. She received her Ph.D. from the Stern School of Business at New York University. She passed away in September 2015.

Professor Buchholtz’s research focused on the social and ethical implications of cor- porate governance, in particular, and the relationship of business and society in general. Journals in which her work has appeared include Business and Society, Business Ethics Quarterly, the Academy of Management Journal, the Academy of Management Review, the Journal of Management, Organization Science, the Journal of Management Studies, and Corporate Governance an International Review, among others. Her research on board processes received an ANBAR citation of excellence award.

Her teaching and consulting activities were in the areas of business ethics, social issues, strategic leadership, and corporate governance. Her service learning activities in the classroom received a Trailblazer Advocate of the Year award from the Domestic Vio- lence Council of Northeast Georgia. She was the recipient of numerous teaching awards, including Profound Effect on a Student Leader, and was named a Senior Teaching Fellow at the University of Georgia.

Professor Buchholtz served as past Division Chair of the Social Issues in Management Division of the Academy of Management. She served on the ethics task force that designed a Code of Ethics for the Academy of Management and then became the inau- gural chairperson of the Academy’s Ethics Adjudication Committee when the Academy’s ethics code was put into effect. She completed a three-year term on the Academy of Management’s Board of Governors. In 2015, she was honored with the Sumner Marcus Award for outstanding service given by the SIM Division of the Academy of Manage- ment. Prior to entering academe, Dr. Buchholtz’s work focused on the education, voca- tional, and residential needs of individuals with disabilities. She worked in a variety of organizations, in both managerial and consultative capacities, and consulted with numer- ous public and private firms.

xxvi About the Authors

PART 1

Business, Society, and Stakeholders

CHAPTER 1 The Business and Society Relationship

CHAPTER 2 Corporate Social Responsibility, Citizenship, and Sustainability

CHAPTER 3 The Stakeholder Approach to Business, Society, and Ethics

1 The Business and Society Relationship

The business and society relationship has generated many economic, social,ethical, and environmental challenges over the decades. Though the busi-ness system has served most market-based societies well, criticism of business and its practices has become commonplace. Aided by the media persis- tently looking for stories of conflict, this may be a reflection of the natural ten- dency to highlight the negative and to take for granted the beneficial aspects of the relationship. This tendency propels a focus on the stresses and strains of business operating in society. A Bloomberg BusinessWeek article in 2016 says that it is still “open season on big business.”1

Beginning with the Enron scandal in the early 2000s, a number of major companies have been in the news because of their ethical violations. In the fall of 2008, a collapsing U.S. stock market and worldwide recession had a deeper and more far-reaching impact on the world economy and began to raise questions about the future of the business system as we have known it. In what is now believed to be the most serious financial collapse since the 1920s, this financial crisis centered on Wall Street and many of the large firms that historically had been the backbone of the U.S. financial system.

The causes of the financial collapse and the ensuing economic chaos continue to be debated. The housing bubble burst and years of lax lending standards put big investment banks and Wall Street at the center of the collapse.2 Faced with an unprecedented financial crisis, the federal government got into the bailout business as Congress approved a $700 billion rescue plan3 for Wall Street financial firms, such as Merrill Lynch, Bear Stearns, Citigroup, Lehman Brothers, AIG, and notable industries, like the auto industry.

There was plenty of blame to go around for the financial crisis, and the finger- pointing continues to this day. Some of those identified as guilty parties included greedy home buyers who took on more debt than they could handle; mortgage lenders who ceased using conventional lending standards; credit rating agencies that did not do their job; commission-hungry brokers; builders who conspired with crooked appraisers; and the Federal Reserve, which was accused of flooding the market with easy money.4 Significant criticism was targeted toward Wall Street and the businesses themselves as being central to the financial collapse. Others claimed that capitalism itself was behind the mess because the Wall Street firms were just doing what the capitalist system encourages. The recent movie, The Big Short, provided a dramatic reminder of how this financial crisis unfolded.

By the fall of 2011, Big Business and the capitalistic system were targeted by a new protest movement, which called itself “Occupy Wall Street.” The movement reflected some of the built up discontent with the business system, which had resulted in high unemployment and financial stress for millions. In spite of

CHAPTER LEARNING OUTCOMES

After studying this chapter, you should be able to:

1 Define and explain business and society as foundational concepts. Describe how society is viewed as the macroenvironment.

2 Explain the characteristics of a pluralistic society. Describe pluralism and identify its attributes, strengths, and weaknesses.

3 Clarify what is a special-interest society and how it evolves.

4 Identify, discuss, and illustrate the factors leading up to business criticism and corporate response. What is the general criticism of business? How may the balance of power and responsibility be resolved? What is the changing social contract?

5 Make clear the major focuses or themes of the book: managerial approach, business ethics, sustainability, and stakeholder management.

protestations that continued beyond 2012, the Occupy Wall Street (OWS) movement never had a clear list of criticisms or demands but it was understood that the enemy was the big business system and modern capitalism. The movement’s broad list of accusations reflected a litany of complaints that included crony capitalism, inequality of wealth, poor housing, obscenely high executive compensation, business greed, the lack of good jobs, a culture that puts profits before people, and a general discontent with capitalism and the economic system.5 Though most of OWS’s complaints were targeted at business and the capitalistic system, some observers criticized the protestors because they failed to see the complicity of big government in developing and supporting housing policies that led to the financial crisis in the first place.6 In short, though many critics were preoccupied with Wall Street and the capitalistic system, Big Government also had a hand in the crisis as well.

Business is a more inviting target than government, however, because it is seen as being motivated only by profit while government is not seeking profits but is charged with acting in the public interest. Consequently, business and the capitalistic system have become the primary targets of the critics though flaws in the business-government relationship played a huge role in the controversy. The Wall Street protestors framed the battle as if they represented the 99 percent of citizens who were angry at the 1 percent of wealthy, primarily business people. This focus on the “One Percent” who own most of the wealth had become center stage by 2015 and continues today as the One Percent movement. Global income inequality has become the rallying point for many critics of the business system.7 Only time will tell whether the OWS and One Percent movements will continue, but in the meantime, it has raised public awareness of weaknesses in the capitalistic system. One major consequence of the OWS movement is that Wall Street, especially the big banks, have lost their “cool” factor and a lot of their prestige. Many of today’s top grads are more interested in going to Silicon Valley rather than Wall Street, believing they can make good money there and also have a chance to change the world.8 In addition, more and more commentaries questioning the capitalistic system have emerged, so it appears to be an issue the business community will need to address to repair its bruised image.9

The business system and society suffered another high profile blow when the Deepwater Horizon/BP oil spill occurred in the spring of 2010. Called the worst environmental disaster in history, the cleanup is still ongoing, with significant ecological and business consequences. The spill heightened the public’s awareness of the impact business can have on the natural environment and doubtless heightened support for the sustainability movement that was already well underway. In the fall of 2015, the Justice Department announced a record setting $20 billion settlement with BP, the British energy giant, after five years of negotiations over the effects of the Deepwater Horizon oil spill. The oil spill damaged more than 1,300 miles of the Gulf of Mexico’s coastline, and it has been called the largest environmental disaster in U.S. history.10

By 2016, a number of different business scandals had surfaced and damaged the business and society relationship further. These included the Volkswagen emissions scandal, admission by General Motors’ that it had schemed to conceal deadly safety defects in its ignition switches, revelations that Takata Corporation had been selling defective air bags, and disclosure that Toshiba had engaged in at least $1 billion in accounting irregularities. In addition to these scandals, a national

Chapter 1: The Business and Society Relationship 3

malaise seemed to have set in as many in the general public began experiencing a middle class financial squeeze due to a jobless economic recovery.11

According to a 2015 Gallup poll, many Americans began thinking that the country has been heading in the wrong direction. This has led to countless people questioning the major institutions of society, and according to one observer, a period of political distrust has taken over.12 A 2016 poll by the Edelman public relations firm confirmed that America has a trust issue with business and government, especially financial companies, and that this erosion of trust is not only in the United States but also around the world.13

In light of the business criticisms that have arisen, it is little wonder that the “conscious capitalism” movement is gaining increased attention. This movement has been inspired by the book Conscious Capitalism: Liberating the Heroic Spirit of Business, co-authored by John Mackey, CEO and cofounder of Whole Foods Market and Rajendra Sisodia, professor of marketing at Bentley University. Their book has helped to spawn a whole new way of thinking about capitalism that is based on four principles—seeking a higher purpose, using a stakeholder orientation, embracing conscious leadership, and promoting a conscious culture that seeks to improve the social fabric of business. According to one writer, Mackey’s latest mission is cleansing America’s free-enterprise soul.14

Other serious questions continue to be raised about a host of other ongoing day- to-day business issues: corporate governance, ethical conduct, executive compensation, the use of illegal immigrants as employees, fluctuating energy prices, government involvement in the economy, healthiness of fast food, international corruption, and so on. The listing of such issues could go on and on, but these examples illustrate the enduring tensions between business and society, which in part can be traced to recent high-profile incidents, trends, or events.

Undergirding the recent scandals and issues, familiar worries embodying social or ethical implications have continued to be debated within the business and society interface. Some of these have included businesses moving offshore, downsizing of pension programs, high unemployment, underemployment, level of the minimum wage, reduced health insurance benefits, abuses of corporate power, toxic waste disposal, insider trading, whistle-blowing, product liability, deceptive marketing, and questionable lobbying by business to influence the outcome of legislation. These examples of both general and specific issues are typical of the kinds of stories about business and society that one finds in newspapers and magazines today and on television, social media, and the Internet.

At the broadest level, the role of business in society is the subject of this book. Many key questions will be addressed—the role of business relative to the role of government in the socioeconomic system; what a firm must do to be considered socially responsible; what managers must do to be considered ethical; and what responsibilities companies have to consumers, employees, shareholders, and communities in an age of economic uncertainty and globalization. And, throughout all this, an escalating mandate for sustainability has captured the attention of business leaders, critics, and public policymakers.

As we approach the end of the second decade of the new millennium, many economic, legal, ethical, and technological issues concerning business and society continue on. This period is turbulent and has been characterized by significant and rapid changes in the world, the economy, society, technology, and global relationships. Against this setting of ongoing instability in the business and society relationship, some basic concepts and ideas are worth considering first.

4 Part 1: Business, Society, and Stakeholders

1.1 Business and Society There are some basic concepts that are central to understanding the continuing business and society relationship. Some have chosen to frame it as business in society. Either way it is framed, important concepts include pluralism, our special-interest society, business criticism, corporate power, and corporate social response to stakeholders. First, it is important to define and describe two key terms that are central to the discussion: busi- ness and society.

1.1a Business Defined Business may be defined as the collection of private, commercially oriented (profit- oriented) organizations, ranging in size from one-family proprietorships (e.g., DePalma’s Italian Café, Half-Moon Outfitters, and Taqueria del Sol) to corporate giants (e.g., Coca- Cola, UPS, Microsoft, Apple, Google, and Delta Airlines). Between these two extremes are many medium-sized proprietorships, partnerships, and corporations.

When businesses are thought of in this collective sense, all sizes and types of indus- tries are included. However, in embarking on a study of business and society, there is a tendency to focus more on big businesses in highly visible industries. Big businesses’ pro- ducts, services and advertising are widely known and they are more frequently in the critical public eye. Size is often associated with power, and the powerful are given closer scrutiny. Although it is well known that small businesses far outnumber large ones, the prevalence, power, visibility, and impact of large firms keep them in the spotlight most of the time.

In addition, some industries are simply more conducive than others in the creation of visible, social problems. For example, many manufacturing firms by their very nature cause observable air, water, and solid waste pollution and contribute to climate changes. Such firms, therefore, are more likely to be subject to criticism than a life insurance com- pany, which emits no obvious pollutant. The auto industry with the manufacture of trucks and sport utility vehicles (SUVs) is a specific case in point. Criticism of Volkswa- gen, General Motors (GM), and other automakers is raised because of their high profile as manufacturers, the omnipresence of the products they make (which are the largest single source of air pollution), and the popularity of their products (many families own multiple cars), and road congestion is experienced daily.

SPOTLIGHT on Sustainability

Sustainability—What Does It Mean?

• Sustainability is… providing for the needs of the pres- ent generation while not compromising the ability of future generations to meet theirs (original definition in the U.N. Brundtland Commission Report on “Our Common Future.”)

• Sustainability is … creating shareholder and social value while decreasing the environmental footprint along the value chains in which we operate (DuPont).

• Corporate sustainability is about being able to sustain your business responsibly, with one eye on new

external risks and the other on future consequences of your decisions (PwC).

• Corporate sustainability can be broadly defined as the pursuit of a business growth strategy by allocating financial or in-kind resources of the corporation to a social or environmental initiative (The Conference Board, Sustainability Matters).

• Sustainability involves the simultaneous pursuit of economic prosperity, environmental quality, and social equity (World Business Council on Sustainable Development).

Chapter 1: The Business and Society Relationship 5

Some industries are highly visible because of the advertising-intensive nature of their products (e.g., Procter & Gamble, FedEx, Anheuser-Busch, and Home Depot). Other industries (e.g., the cigarette, toy, and fast food industries) are scrutinized because of the possible effects of their products on health or because of their roles in providing health-related products (e.g., pharmaceutical firms, vitamin firms).

For these reasons, when discussing business in its relationship with society, the focus of attention tends to be on large businesses in well-known industries. However, we should not lose sight of the fact that small- and medium-sized companies increasingly represent settings in which our discussions also apply. In recent years, the social respon- sibilities of smaller enterprises and the developing movement toward social entre- preneurship has captivated increasing attention.

1.1b Society Defined Society may be thought of as a community, a nation, or a broad grouping of people with common traditions, values, institutions, and collective activities and interests. As such, when speaking of business and society relationships, this may be referring to business and the local community (business and Nashville), business and the United States as a whole, global business, or business and a specific group of stakeholders (consumers, employees, investors, environmentalists).

When discussing business and the total society, society is thought of as being com- posed of numerous interest groups, more or less formalized organizations, and a wide variety of institutions. Each of these groups, organizations, and institutions is a purpose- ful aggregation of people who are grouped together because they represent a common cause or share a set of common beliefs about a particular issue. Examples of special interest groups are numerous: The Sierra Club, Center for Science in the Public Interest, chambers of commerce, National Small Business Association, People for the Ethical Treatment of Animals (PETA), and the Forest Stewardship Council.

1.2 Society as the Macroenvironment The environment of society is a key element in analyzing business and society relationships. At its broadest level, the societal environment might be thought of as a macroenvironment that includes the total environment outside the firm. The macroenvironment is the compre- hensive societal context in which organizations reside. The idea of the macroenvironment is just another way of thinking about society as a whole. In fact, early courses on business and society were sometimes (and some still are) titled “Business and Its Environment.” The con- cept of the macroenvironment evokes different images or ways of thinking about business and society relationships and is therefore valuable in terms of analyzing and understanding the total business context.

A useful conceptualization of the macroenvironment is to think of it as being com- posed of four identifiable but interrelated segments: social, economic, political, and tech- nological.15

The social environment focuses on demographics, lifestyles, culture, and social values of the society. Of particular interest here is the manner in which shifts in these factors affect the organization and its functioning. For example, the influx of undocumented workers and immigrants over the past decade has brought changes to the demographic profile of countries. The economic environment addresses the nature and direction of the economy in which business operates. Variables of interest include such indices as gross national product, inflation, interest rates, unemployment rates, foreign exchange fluctuations, national debt, global trade, balance of payments, and various other indices

6 Part 1: Business, Society, and Stakeholders

of economic activity. Hypercompetition in the world economy has dominated the economic segment of this environment and global competitiveness is now a huge issue for businesses.16 Underwhelming business growth during the past several years has been a serious problem.

The economic picture has darkened since the start of the new millennium. Lackluster growth has been typical and the recovery from the recession of 2007–2008 has been even weaker and the middle class has felt it the most.17 Businesses moving jobs offshore to lower labor costs have been a controversial trend. Enduring levels of high unemployment, underemployment and use of part-time workers have been problematic economic issues. Many people have become frustrated about finding jobs and have left the workforce completely. An important overlay to these problems has been the growing belief by some that a significant income inequality has taken hold in American society and globally.

The political environment focuses on the processes by which laws get passed and officials get elected and all other aspects of the interaction between firms, political prac- tices, and government. Of particular interest to business in this segment are taxation, the regulatory process, and the changes that occur over time in business regulation of vari- ous industries, products, and different issues. Beginning in 2009, Congress ramped up its regulatory ambitions as it sought to improve the global economic system. Passage of the Affordable Care Act (ACA) in 2010 introduced considerable uncertainty in business decision making because of its dramatic impact on business costs and this concern con- tinues. At this writing, the 2016 presidential election process is well underway and an issue that keeps coming to the surface is the inability of Congress to get anything done because of paralysis in the political process. Part of the public’s reaction has been to favor “outsiders” to the Washington-centered political process when it comes to national elections.

Finally, the technological environment represents the total set of technology-based advancements taking place in society and the world. This rapidly changing segment includes new products, processes, materials, and means of communication (e.g., social networking), as well as the status of knowledge and scientific advancement. The process and speed of technological change is of significant importance here.18 The rate of inven- tion, innovation, and diffusion seems to become more dynamic with each passing year. In recent years, information technologies and biotechnology have been driving this seg- ment of environmental turbulence.

Understanding that business and society relationships are embedded in a macroenvir- onment provides us with a constructive way of understanding the kinds of issues that constitute the broad milieu in which business functions. Throughout this book, evidence of these ever-changing environmental segments will become apparent and it will become easier to appreciate what challenges managers face as they strive to operate effective organizations while interfacing with society. Each of the thousands of specific groups and organizations that make up our pluralistic society can typically be traced to one of these four environmental segments.

1.3 A Pluralistic Society Societies as macroenvironments are typically pluralistic. Pluralistic societies make for business and society relationships that are complex and dynamic. Pluralism refers to a diffusion of power among society’s many groups and organizations. A long-standing def- inition of a pluralistic society is helpful: “A pluralistic society is one in which there is wide decentralization and diversity of power concentration.”19

The key terms in this definition are decentralization and diversity. In other words, power is decentralized—dispersed among many groups and people. Power is not held

Chapter 1: The Business and Society Relationship 7

in the hands of any single institution (e.g., business, government, labor, military) or a small number of groups. Pluralistic societies are found all over the world now, and some of the virtues of a pluralistic society are summarized in Figure 1-1.

1.3a Pluralism Has Strengths and Weaknesses All social systems have strengths and weaknesses. A pluralistic society prevents power from being concentrated in the hands of a few. It also maximizes freedom of expression and action. Pluralism provides for a built-in set of checks and balances so that no single group dominates. However, a weakness of a pluralistic system is that it creates an envi- ronment in which diverse institutions pursue their own self-interests with the result that there is no unified direction to bring together individual pursuits. Another weakness is that groups and institutions proliferate to the extent that their goals start to overlap, thus causing confusion as to which organizations best serve which functions. Pluralism forces conflict, or differences in opinions, onto center stage because of its emphasis on autonomous groups, each pursuing its own objectives. In light of these concerns, a pluralistic system does not appear to be very efficient though it does provide a greater balance of power among groups in society.

1.3b Multiple Publics, Systems, and Stakeholders Knowing that society is composed of so many different semiautonomous and autono- mous groups might cause one to question whether we can realistically speak of society in a definitive sense that has any generally agreed-upon meaning. Nevertheless, we do speak in such terms, knowing that, unless we specify a particular societal subgroup or subsystem, we are referring to the total collectivity of all those persons, groups, and insti- tutions that constitute society. Thus, references to business and society relationships may refer either to particular segments or subgroups of society (consumers, women, minori- ties, environmentalists, millennials, senior citizens) or to business and some system in our society (politics, law, custom, religion, economics). These groups of people or sys- tems also may be referred to in an institutional form (business and the courts, business and labor unions, business and the church, business and the Federal Trade Commission, and so on).

Figure 1-2 depicts in graphic form the points of interface between business and some of the multiple publics, systems, or stakeholders with which business interacts. Stakeholders

FIGURE 1-1 The Virtues of a Pluralistic Society

A pluralistic society …

• Prevents power from being concentrated in the hands of a few • Maximizes freedom of expression and action and strikes a balance between monism (social

organization into one institution), on the one hand, and anarchy (social organization into an infi- nite number of persons), on the othera

• Is one in which the allegiance of individuals to groups is dispersed • Creates a widely diversified set of loyalties to many organizations and minimizes the danger that

a leader of any one organization will be left uncontrolledb

• Provides a built-in set of checks and balances, in that groups can exert power over one another with no single organization (business or government) dominating and becoming overly influential

Sources: aKeith Davis and Robert L. Blomstrom, Business and Society: Environment and Responsibility, 3d ed. (New York: McGraw-Hill, 1975), 63. bJoseph W. McGuire, Business and Society (New York: McGraw-Hill, 1963), 132. Also see “What Are Pluralistic Societies?” http://www.ask.com/world-view/pluralistic-societies -798b3a7163095a11. Accessed March 28, 2015.

8 Part 1: Business, Society, and Stakeholders

are those groups or individuals with whom an organization interacts or has interdependen- cies. The stakeholder concept will be developed further in Chapter 3. It also should be noted that each of the stakeholder groups may be further subdivided into more specific stakeholder subgroups, each of them posing special challenges for business.

If sheer numbers of relationships and interactions are an indicator of complexity, it is easily seen that business’s current relationships with different segments of society consti- tute a truly complex macroenvironment. Today, managers must deal with these inter- faces on a daily basis and the study of business and/in society is designed to improve that understanding.

1.4 A Special-Interest Society A pluralistic society often becomes a special-interest society. As pluralism expands, a society develops that is characterized by tens of thousands of special-interest groups, each pursuing its own specific agenda. General-purpose interest organizations, often called advocacy groups, such as Common Cause and the U.S. Chamber of Commerce, still exist. However, the past several decades have been characterized by increasing spe- cialization on the part of interest groups representing all sectors of society—consumers, employees, investors, communities, the natural environment, government, and business itself. In many parts of the world, these nonprofit organizations are frequently called nongovernmental organizations (NGOs). They are citizens’ groups that may be orga- nized on a local, national, or international level. Today, many NGOs are long-lived, robust, and ever active watchdogs and actors in the business and society relationship.20

One newspaper headline noted that “there is a group for every cause.” Special-interest groups not only have grown in number at an accelerated pace but they also have become increasingly activist, intense, and focused on single issues. Such groups are strongly com- mitted to their causes and strive to bring pressure to bear on businesses to meet their needs and on governments to accommodate their agendas.

The health-care debate in the United States that continues to rage on illustrates how a pluralistic, special-interest society works. Consider that the following special-interest groups have all been active and continue to be so in the fine-tuning of the health-care

FIGURE 1-2 Business and Selected Stakeholder Relationships

Business

Community

Owners

Consumers

Employees

Government

Environmental Groups Local State

Federal

Unions Older Employees Women

Minorities Civil Liberties Activists

Product Liability ThreatsConsumer Activists

Institutional Investors

Private Citizens

Corporate Raiders

General Public

Chapter 1: The Business and Society Relationship 9

system. The major interest groups include doctors, hospitals, drug companies, insurance companies, employers, insured people, seniors, and uninsured people.21 Each of these groups has much at stake in resolving this society-level issue that has significant implica- tions for many sectors, especially business, and tens of millions of dollars have been spent on lobbying by these groups. The implementation of the current health-care sys- tem has been gradual and contentious details are still in the process of being worked out. The full implications for business are not yet clear.

The minimum wage debate is another context in which different interest groups recently are making their views known. A number of interest groups think that a “living wage” should be the minimum wage and have sought a $15 per hour minimum wage. Some cities have taken this action. Other interest groups disagree and think the market should determine the minimum wage. Yet another nonprofit organization, “Business for a Fair Minimum Wage,” thinks that the current minimum wage is outdated and that the minimum wage should be gradually increased to $12 per hour by the year 2020. This group is made up of many business people who think a fair minimum wage makes good business sense.22 One conundrum is that if the minimum wage is raised too quickly it hurts smaller businesses and layoffs of these minimum wage employees typically follows.

The consequence of interest group specialization is that each of these groups has been able to attract a significant following that is dedicated to the group’s goals. Increased memberships have meant increased revenues and a sharper focus as each of these groups has aggressively sought its specific, narrow purposes. The likelihood of these groups working at cross-purposes and with no unified set of goals has made life immensely more complex for the major institutions, such as business and government. But this is how a pluralistic society works.

1.5 Business Criticism and Corporate Response It is inevitable in a pluralistic, special-interest society that the major institutions that make up that society, such as business and government, will become the subjects of con- siderable analysis and criticism. The purpose here is not so much to focus on the nega- tive as it is to illustrate how the process of business criticism has shaped the emergence of the business and society relationship today. Were it not for the fact that individuals and groups have been critical of business and have such high expectations and demands, there would be no articles, books or courses on this subject, and fewer improvements would occur in the business and society relationship over time.

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