Business, Government, and Society
Thirteenth Edition
John F. Steiner George A. Steiner
A Managerial Perspective Text and Cases
B usiness, G
overnm ent, and S
ociety
13E
A M
anagerial P erspective T
ext and C ases
Steiner Steiner
The thirteenth edition continues a long effort to tell the story of how forces in business, government, and society shape our world. In addition, an emphasis on management issues and processes allows students to apply the principles they learn to real-world situations.
As always, a stream of events dictated the need for extensive revision. Accordingly, the authors have updated the chapters to include new ideas, events, personalities, and publications, while continuing the work of building insight into basic underlying principles, institutions, and forces.
Highlights of the Thirteenth Edition include: An expanded discussion of white collar crime and criminal prosecution of both managers and corporations in Chapter 7, “Business Ethics.”
A new section on the neural basis of ethical decisions in Chapter 8, “Making Ethical Decisions in Business.”
An expanded discussion of lobbying ethics as well as a revised discussion of corpo- rate money in elections and recent changes in election law in Chapter 9, “Business in Politics.”
A new fifth wave, “terrorism and financial crisis,” has been added to the four histori- cal waves of regulatory growth in Chapter 10, “Regulating Business.”
A new discussion of globalization, including the rise of the modern trading system and coverage of various trade organizations, such as the IMF and World Bank, in Chapter 12, “Globalization, Trade, and Corruption.”
New sections in Chapter 15, “Consumerism,” including Thoreau’s rejection of materialism, arguments defending consumerism, and a description of the consumer protection activities of the Federal Trade Commission.
Added emphasis on the nature and significance of diversity management programs in corporations in Chapter 17, “Civil Rights, Women, and Diversity.”
New coverage of the story of the Lehman Brothers bankruptcy and of the new governance reforms in the wake of the recent financial crisis in Chapter 18, “Corporate Governance.”
To learn more, visit this book’s Online Learning Center at
www.mhhe.com/steiner13e
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Business, Government, and Society A Managerial Perspective, Text and Cases
Thirteenth Edition
John F. Steiner Professor of Management, Emeritus California State University, Los Angeles
George A. Steiner Harry and Elsa Kunin Professor of Business and Society and Professor of Management, Emeritus, UCLA
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BUSINESS, GOVERNMENT, AND SOCIETY: A MANAGERIAL PERSPECTIVE, TEXT AND CASES Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2012, 2009, 2006, 2003, 2000, 1997, 1994, 1991, 1988, 1985, 1980 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication 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.
Some ancillaries, including electronic and print components, may not be available to customers outside the United States.
This book is printed on acid-free paper.
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ISBN 978-0-07-811267-6 MHID 0-07-811267-2
Vice president and editor-in-chief: Brent Gordon Editorial director: Paul Ducham Executive director of development: Ann Torbert Managing development editor: Laura Hurst Spell Editorial coordinator: Jonathan Thornton Vice president and director of marketing: Robin J. Zwettler Marketing director: Amee Mosley Market development specialist: Jaime Halteman Vice president of editing, design, and production: Sesha Bolisetty Lead project manager: Christine A. Vaughan Buyer II: Debra R. Sylvester Design coordinator: Joanne Mennemeier Senior photo research coordinator: Keri Johnson Media project manager: Suresh Babu, Hurix Systems Pvt. Ltd. Cover images: © Ingram Publishing; © Skip Nall/Getty Images; © Royalty-Free/CORBIS; © Hisham F. Ibrahim/Getty Images; © Getty Images/Digital Vision; © U.S. Navy photo by Mass Communication Specialist 1st Class Demetrius Kennon Typeface: 10/12 Palatino Compositor: Aptara®, Inc. Printer: R. R. Donnelley
Library of Congress Cataloging-in-Publication Data Steiner, John F. Business, government, and society : a managerial perspective: text and cases / John F. Steiner, George A. Steiner.—13th ed. p. cm. Includes index. ISBN-13: 978-0-07-811267-6 (alk. paper) ISBN-10: 0-07-811267-2 (alk. paper) 1. Industries—Social aspects—United States. 2. Industrial policy—United States. 3. Social responsibility of business—United States. I. Steiner, George Albert, 1912- II. Title. HD60.5.U5S8 2012 658.4—dc22 2011007905
www.mhhe.com
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We dedicate this book to the memory of Jean Wood Steiner.
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Brief Table of Contents Preface xi
PART ONE A Framework for Studying Business, Government, and Society
1 The Study of Business, Government, and Society 1
2 The Dynamic Environment 22
3 Business Power 55
4 Critics of Business 83
PART TWO The Nature and Management of Corporate Responsibility
5 Corporate Social Responsibility 121
6 Implementing Corporate Social Responsibility 157
PART THREE Managing Ethics
7 Business Ethics 194
8 Making Ethical Decisions in Business 238
PART FOUR Business and Government
9 Business in Politics 271
10 Regulating Business 316
PART FIVE Multinational Corporations and Globalization
11 Multinational Corporations 352
12 Globalization, Trade, and Corruption 395
PART SIX Corporations and the Natural Environment
13 Industrial Pollution and Environmental Regulation 436
14 Managing Environmental Quality 476
PART SEVEN Consumerism
15 Consumerism 512
PART EIGHT Human Resources
16 The Changing Workplace 549
17 Civil Rights, Women, and Diversity 585
PART NINE Corporate Governance
18 Corporate Governance 630
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Table of Contents
Preface xi
PART ONE A Framework for Studying Business, Government, and Society
Chapter 1 The Study of Business, Government, and Society 1
ExxonMobil Corporation 1 What Is the Business–Government–Society Field? 4 Why Is the BGS Field Important to Managers? 7 Four Models of the BGS Relationship 8
The Market Capitalism Model 9 The Dominance Model 12 The Countervailing Forces Model 15 The Stakeholder Model 16
Our Approach to the Subject Matter 20 Comprehensive Scope 20 Interdisciplinary Approach with a Management Focus 20 Use of Theory, Description, and Case Studies 20 Global Perspective 21 Historical Perspective 21
Chapter 2 The Dynamic Environment 22
Royal Dutch Shell PLC 22 Deep Historical Forces at Work 24
The Industrial Revolution 25 Inequality 25 Population Growth 28 Technology 30 Globalization 32 Nation-States 33
Dominant Ideologies 34 Great Leadership 35 Chance 35
Six External Environments of Business 36 The Economic Environment 36 The Technological Environment 38 The Cultural Environment 39 The Government Environment 41 The Legal Environment 42 The Natural Environment 43 The Internal Environment 44
Concluding Observations 45 Case Study: The American Fur Company 47
Chapter 3 Business Power 55
James B. Duke and The American Tobacco Company 55 The Nature of Business Power 58 What Is Power? 58 Levels and Spheres of Corporate Power 59 The Story of the Railroads 61 Two Perspectives on Business Power 64
The Dominance Theory 65 Pluralist Theory 71
Concluding Observations 75 Case Study: John D. Rockefeller and the Standard Oil Trust 75
Chapter 4 Critics of Business 83
Mary “Mother” Jones 83 Origins of Critical Attitudes Toward Business 86
The Greeks and Romans 86 The Medieval World 88 The Modern World 88
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The American Critique of Business 89 The Colonial Era 89 The Young Nation 90 1800–1865 91 Populists and Progressives 93 Socialists 95 The Great Depression and World War II 99 The Collapse of Confidence 100 The New Progressives 102
Global Critics 103 The Story of Liberalism 104 The Rise of Neoliberalism 105 Agenda of the Global Justice Movement 106 Global Activism 108
Concluding Observations 110 Case Study: A Campaign against KFC Corporation 112
PART TWO The Nature and Management of Corporate Responsibility
Chapter 5 Corporate Social Responsibility 121
Merck & Co., Inc. 121 The Evolving Idea of Corporate Social Responsibility 123
Social Responsibility in Classical Economic Theory 125 The Early Charitable Impulse 125 Social Responsibility in the Late Nineteenth and Early Twentieth Centuries 127 1950 to the Present 129
Basic Elements of Social Responsibility 131 General Principles 133 Are Social and Financial Performance Related? 134 Corporate Social Responsibility in a Global Context 135 The Problem of Cross-Border Corporate Power 136 The Rise of New Global Values 137
Global Corporate Responsibility 138 Development of Norms and Principles 138 Codes of Conduct 140 Reporting and Verification Standards 142 Certification and Labeling Schemes 142 Management Standards 143 Social Investment and Lending 144 Government Actions 144 Civil Society Vigilance 145
Assessing the Evolving Global CSR System 146 Concluding Observations 146 Case Study: Jack Welch at General Electric 147
Chapter 6 Implementing Corporate Social Responsibility 157
The Bill & Melinda Gates Foundation 157 Managing the Responsive Corporation 160 Leadership and Business Models 160 A Model of CSR Implementation 162
CSR Review 163 CSR Strategy 167 Implementation of CSR Strategy 168 Reporting and Verification 171
How Effectively Is CSR Implemented? 174 Corporate Philanthropy 175
Patterns of Corporate Giving 175 Strategic Philanthropy 177 Cause Marketing 179 New Forms of Philanthropy 181
Concluding Observations 183 Case Study: Marc Kasky versus Nike 183
PART THREE Managing Ethics
Chapter 7 Business Ethics 194
Bernard Ebbers 194 What Are Business Ethics? 197 Two Theories of Business Ethics 198
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Table of Contents vii
Major Sources of Ethical Values in Business 200
Religion 201 Philosophy 202 Cultural Experience 204 Law 206
Factors That Influence Managerial Ethics 212
Leadership 212 Strategies and Policies 214 Corporate Culture 215 Individual Characteristics 218
How Corporations Manage Ethics 220 Ethics and Compliance Programs: An Assessment 227 Concluding Observations 228 Case Study: The Trial of Martha Stewart 229
Chapter 8 Making Ethical Decisions in Business 238
David Geffen 238 Principles of Ethical Conduct 241
The Categorical Imperative 241 The Conventionalist Ethic 242 The Disclosure Rule 243 The Doctrine of the Mean 244 The Ends–Means Ethic 244 The Golden Rule 245 The Intuition Ethic 246 The Might-Equals-Right Ethic 246 The Organization Ethic 247 The Principle of Equal Freedom 248 The Proportionality Ethic 248 The Rights Ethic 249 The Theory of Justice 249 The Utilitarian Ethic 251
Reasoning with Principles 251 Character Development 253 The Neural Basis of Ethical Decisions 253
Probing Ethical Decisions 254 Emotions and Intuition 256
Practical Suggestions for Making Ethical Decisions 257 Concluding Observations 259 Case Studies: Short Incidents for Ethical Reasoning 260 Tangled Webs 264
PART FOUR Business and Government
Chapter 9 Business in Politics 271
Paul Magliocchetti and Associates 271 The Open Structure of American Government 275 A History of Political Dominance by Business 277
Laying the Groundwork 277 Ascendance, Corruption, and Reform 278 Business Falls Back under the New Deal 280 Postwar Politics and Winds of Change 281
The Rise of Antagonistic Groups 282 Diffusion of Power in Government 283 The Universe of Organized Business Interests 284 Lobbying 287
Lobbying Methods 288 Power and Limits 290 Regulation of Lobbyists 291
The Corporate Role in Elections 293 Efforts to Limit Corporate Influence 294 The Federal Election Campaign Act 295 Political Action Committees 296 Soft Money and Issue Advertising 298 Reform Legislation in 2002 299
How Business Dollars Enter Elections 301 Concluding Observations 303 Case Study: Citizens United v. Federal Election Commission 304
Chapter 10 Regulating Business 316
The Federal Aviation Administration 316
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The United Nations Global Compact 375 Criticism of the Global Compact 378
The Alien Tort Claims Act 379 The Drummond Company on Trial 381
Concluding Observations 383 Case Study: Union Carbide Corporation and Bhopal 384
Chapter 12 Globalization, Trade, and Corruption 395
McDonald's Corporation 395 Globalization 397
Ascent and Inertia 400 Trade 402
The Rise and Fall of Trade 402 A New Postwar Order 404 Success and Evolution 404 The World Trade Organization 406 Regional Trade Agreements 409
Free Trade versus Protectionism 411 Why Free Trade? 411 Why Protectionism? 412 The Politics of Protectionism 413 Free Trade Responses to Protectionism 415 U.S. Deviation from Free Trade Policy 416 Tariff Barriers in Other Countries 416
Corruption 417 A Spectrum of Corruption 418 The Fight Against Corruption 420 The Foreign Corrupt Practices Act 422 Corporate Actions to Fight Corruption 425
Concluding Observations 426 Case Study: David and Goliath at the WTO 427
PART SIX Corporations and the Natural Environment
Chapter 13 Industrial Pollution and Environmental Regulation 436
The Majestic Hudson River 436
Why Government Regulates Business 319 Flaws in the Market 319 Social and Political Reasons for Regulation 320
Waves of Growth 320 Wave 1: The Young Nation 321 Wave 2: Confronting Railroads and Trusts 322 Wave 3: The New Deal 323 Wave 4: Administering the Social Revolution 324 Wave 5: Terrorism and Financial Crisis 325 War Blips 327
How Regulations Are Made 327 Regulatory Statutes 327 Rulemaking 329 Presidential Oversight 332 Congressional Oversight 334 Challenges in the Courts 335
Costs and Benefits of Regulation 337 The Regulatory Burden 337 Benefits of Regulations 339
Regulation in Other Nations 340 Concluding Observations 342 Case Study: Good and Evil on the Rails 342
PART FIVE Multinational Corporations and Globalization
Chapter 11 Multinational Corporations 352
The Coca-Cola Company 352 The Multinational Corporation 354
A Statistical Perspective 356 How Transnational Is a Corporation? 358 Breaking the Bonds of Country: Weatherford International 359
Foreign Direct Investment 362 FDI in Developing Economies 364
International Codes of Conduct 367 The OECD Guidelines for Multinational Enterprises 369
How the OECD Guidelines Work 369 Vedanta Resources 371
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Table of Contents ix
Consumerism 515 Consumerism as an Ideology 515 Consumerism Rises in America 516 Consumerism in Perspective 518 The Global Rise of Consumerism 522
In Defense of Consumerism 523 Consumerism as a Protective Movement 524
The Consumer’s Protective Shield 525 The Food and Drug Administration (FDA) 526 The Federal Trade Commission (FTC) 527 The Consumer Product Safety Commission (CPSC) 529 The National Highway Traffic Safety Administration (NHTSA) 530 Consumer Protection by Other Agencies 532
Product Liability 534 Negligence 534 Warranty 535 Strict Liability 536 Costs and Benefits of the Tort System 537
Concluding Observations 538 Case Study: Alcohol Advertising 538
PART EIGHT Human Resources
Chapter 16 The Changing Workplace 549
Ford Motor Company 549 External Forces Shaping the Workplace 552
Demographic Change 553 Technological Change 555 Structural Change 556 Competitive Pressures 558 Reorganization of Work 560
Government Intervention 562 Development of Labor Regulation in the United States 562
Work and Worker Protection in Japan and Europe 569
Japan 569 Europe 570
Labor Regulation in Perspective 572 Concluding Observations 572 Case Study: A Tale of Two Raids 575
Pollution 438 Human Health 439 The Biosphere 440
Industrial Activity and Sustainability 442 Ideas Shape Attitudes Toward the Environment 444
New Ideas Challenge the Old 445 Environmental Regulation in the United States 447
The Environmental Protection Agency 447 Principal Areas of Environmental Policy 448
Air 448 Water 458 Land 459
Concluding Observations 463 Case Study: A World Melting Away 464
Chapter 14 Managing Environmental Quality 476
The Commerce Railyards 476 Regulating Environmental Risk 479 Analyzing Human Health Risks 479
Risk Assessment 480 Risk Management 486
Cost–Benefit Analysis 487 Advantages 488 Criticisms 489
Control Options 491 Command-and-Control Regulation 491 Market Incentive Regulation 492
Voluntary Regulation 498 Managing Environmental Quality 499
Environmental Management Systems 500 A Range of Actions 501
Concluding Observations 503 Case Study: Harvesting Risk 503
PART SEVEN Consumerism
Chapter 15 Consumerism 512
Harvey W. Wiley 512
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PART NINE Corporate Governance
Chapter 18 Corporate Governance 630
Mark Hurd 630 What Is Corporate Governance? 633 The Corporate Charter 634 Power in Corporate Governance: Theory and Reality 636
Stockholders 636 Shareholder Resolutions 638 Assessing Shareholder Influence 639
Federal Regulation of Governance 639 Enron Corp. 640 Other Failures of Governance 644 The Sarbanes-Oxley Act 645 Lehman Brothers 646 The Dodd-Frank Act 650
Boards of Directors 651 Duties of Directors 652 Board Composition 652 Board Dynamics 653
Executive Compensation 655 Components of Executive Compensation 655 Problems with CEO Compensation 659
Concluding Observations 663 Case Study: High Noon at Hewlett- Packard 664
Chapter 17 Civil Rights, Women, and Diversity 585
The Employment Non-Discrimination Act 585 A Short History of Workplace Civil Rights 587
The Colonial Era 588 Civil War and Reconstruction 589 Other Groups Face Employment Discrimination 590 The Civil Rights Cases 591 Plessy v. Ferguson 592 Long Years of Discrimination 593
The Civil Rights Act of 1964 594 Disparate Treatment and Disparate Impact 595 The Griggs Case 596
Affirmative Action 597 Executive Order 11246 598
The Supreme Court Changes Title VII 599 The Affirmative Action Debate 601
Women at Work 602 Gender Attitudes at Work 604 Subtle Discrimination 605 Sexual Harassment 607 Occupational Segregation 610 Compensation 612
Diversity 614 Elements of Diversity Programs 616
Concluding Observations 618 Case Study: Adarand v. Peña 619
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Preface This 13th edition continues a long effort to tell the story of how forces in business, government, and society shape our world. As always, a stream of events dictated the need for extensive revision. In particular, a major financial crisis and a new presidential administration altered parts of the subject matter in important ways. Accordingly, we have updated the chapters to include new ideas, events, person- alities, and publications.
While current events move rapidly over the surface of our world, its underly- ing dynamics are largely undisturbed. As with every revision, we adapt to the flow of events, but we also continue the work of building insight into basic prin- ciples, institutions, and forces. So, while new events will doubtless erode the cur- rency of the discussions, we believe that certain insights about the relationships between business, government, and society should endure.
In what follows, we summarize new elements in this edition.
THE CHAPTERS Key revisions and additions in the chapters include these.
• Chapter 4, “Critics of Business,” has a new discussion of the rise of free market ideas that came to be called the Chicago School and their interaction with, first, Keynesian thinkers and, later, progressive thinkers.
• Chapter 7, “Business Ethics,” contains an expanded discussion of white-collar crime and criminal prosecution of both managers and corporations, including the growing use of deferred- and nonprosecution agreements. The chapter also has a new discussion of inner psychological processes interact that generate unethical behavior.
• Chapter 8, “Making Ethical Decisions in Business,” adds a new section on the neu- ral basis of ethical decisions. Studies of the brain using magnetic resonance imaging suggest that ethical decisions are fast, unconscious, and automatic processes. Their findings illuminate how individuals do (and should) make ethical decisions.
• Chapter 9, “Business in Politics,” includes an expanded discussion of lobbying ethics, including a more thorough discussion of the nature of bribery and inci- dents to illustrate its boundaries. The section on corporate money in elections is revised to explain changes in election law following the Citizens United v. Federal Election Commission decision. The chapter case study is now the story of Citizens United .
• Chapter 10, “Regulating Business,” adds a new fifth wave, “terrorism and fi- nancial crisis,” to the four historical waves of regulatory growth. This new wave covers the federal government’s aggressive expansion of regulation and changes in regulatory philosophy in the Barack Obama administration.
• Chapter 11, “Multinational Corporations,” has a new discussion of the Organisa- tion for Economic Co-Operation and Development’s Guidelines for Multinational
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