Business and Society Chapter Notes

Chapter 16

Business and Community Stakeholders

LEARNING OUTCOMES

After studying this chapter, you should be able to:

  1. Identify and discuss two basic ways of business giving.
  2. Discuss reasons for community involvement, various types of community projects, and management of community stakeholders.
  3. Explain the pros and cons of corporate philanthropy, provide a brief history of corporate philanthropy, and explain why and to whom companies give.
  4. Differentiate between strategic philanthropy, cause-related marketing, and cause branding.
  5. Characterize the nature of, magnitude of, reasons for, and impacts of outsourcing, offshoring and business or plant closings.
  6. Address steps that a business or plant might take before a decision to close is made.
  7. Identify strategies that a business or plant might employ after a decision to close has been made.

TEACHING SUGGESTIONS

INTRODUCTION – This chapter examines the relationship between business and its surrounding community. This relationship can have both positive and negative effects. Within the positive realm, the authors focus on community involvement and corporate philanthropy. Companies also can do damage to their communities, especially by outsourcing jobs and/or closing facilities. In both instances, the authors focus on ways to manage the process and interact ethically with the community.

KEY TALKING POINTS – As good corporate citizens, companies try to maximize the benefits of their resources for themselves and their communities. In broad terms, their resources consist of (wo)manpower and money. Sharing these resources with the community thus fall into the categories of community involvement (i.e., sharing time and effort resources with the community) and corporate philanthropy (giving money to community organizations). Both of these have recently become much more sophisticated processes.

Because current economic conditions are bleak for many workers in the United States, the negative side of the business/community relationship may be of more immediate concern to students. Outsourcing, offshoring and facilities closings have become important facts of life for many blue and white collar workers. This situation is due to two other trends—globalization and advances in technology. Globalization provides easy access to cheap labor, vastly reducing expenses. Technology provides the means to substitute machines for human labor.

These trends have become so pronounced that the Bureau of Labor Statistics now tracks mass layoffs on a monthly basis. Private firms, such as the outplacement firm Challenger, Gray, and Christmas, also track layoff statistics as well as provide services to the newly unemployed. While we all want corporations to provide philanthropic support to society, we also want them to provide meaningful employment opportunities. To the extent that they fail to do the second function (especially if the impetus is primarily to enrich shareholders at the expense of employees), corporate reputations suffer in the eyes of society.

PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:

Cases:

Wal-Mart: The Main Street Merchant of Doom

Something’s Rotten in Hondo

Coke and Pepsi in India: Issues, Ethics and Crisis Management

The Hudson River Cleanup and GE

Pizza Redlining: Employee Safety or Discrimination

Ethics in Practice Cases:

Tugging the Heart or Twisting the Arm?

Giving Back the Google Way

Search the Web:

Guidestar -

The FoundationCenter -

Video clips:

Halliburton CEO Shipping Out

Protesting Nike Sweatshops

Anita Roddick and The Body Shop

Power Point slides:

Visit for slides related to this and other chapters.

LECTURE OUTLINE

  1. COMMUNITY INVOLVEMENT
  2. Volunteer Programs
  3. Resource-Based Giving
  4. Managing Community Involvement
  5. Business Stake in the Community.
  6. Developing a Community Action Program.
  7. Step One: Knowing the Community
  8. Step Two: Knowing the Company’s Resources
  9. Step Three: Selecting Projects
  10. Step Four: Monitoring Projects
  1. CORPORATE PHILANTHROPY OR BUSINESS GIVING
  2. A Brief History of Corporate Philanthropy
  3. A Call for Transparency in Corporate Philanthropy
  4. Giving to the “Third Sector”—The Nonprofits
  5. Why Do Companies Give?
  6. To Whom Do Companies Give?
  7. Health and Human Services
  8. Education
  9. Civic and Community Activities
  10. Culture and the Arts
  11. Giving in Times of Crisis
  12. Managing Corporate Philanthropy
  13. Community Partnerships
  14. Strategic Philanthropy
  15. Cause-Related Marketing
  16. Global Philanthropy
  1. THE LOSS OF JOBS
  2. Outsourcing
  3. Business and Plant Closings
  4. Before the Decision to Close Is Made
  5. Diversification
  6. New Ownership
  7. Employee Ownership
  8. After the Decision to Close Is Made
  9. Community-Impact Analysis
  10. Advance Notice
  11. Transfer, Relocation, and Outplacement Benefits
  12. Gradual Phase-Outs
  13. Helping to Attract Replacement Industry
  14. Survivors—The Forgotten Stakeholders
  1. SUMMARY

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

Students should recognize that their answers to these discussion questions should be well reasoned and supported with evidence. Although some answers will be more correct than others, students should be aware that simplistic answers to complex questions, problems, or issues such as these will never be “good” answers.

  1. There are four steps to developing a community action program: 1) knowing the community, 2) knowing the company’s resources, 3) selecting projects, and 4) monitoring projects. The first step involves understanding the community in which the company resides—who lives there, what problems it faces, what kind of leadership it has, what its most pressing needs are, etc. Knowing the company’s resources requires one to identify what the firm has to offer—money, time, talent, expertise, etc. Selecting projects is a matter of trying to match the community’s needs with the firm’s resources. Finally, monitoring the projects is needed because the community’s needs must be met, and the company wants to make sure that its resources are being effectively utilized.
  1. Arguments for community involvement and philanthropy center on the fact that business has the resources and expertise to help meet social needs. Many also note that business should be responsible for the problems that it creates. In addition to these factors, it also is important to note that these activities also can help the firm and its employees through increased employee morale, better firm reputation, etc. Arguments against these programs emphasize the narrow profit motive of the firm. Activities that do not directly generate profits are considered to be outside the purview of the corporation and therefore illegitimate. Corporate philanthropy has been around since the early 20th century, but blossomed in the 1960s. Corporations give for a number of reasons, including to do good both for themselves and for the community. Contributions go to health and human services, education, civic and community activities, and the arts.
  1. Community partnerships entail a cooperative arrangement between a for-profit corporation and a non-profit organization for their mutual benefit. A building supply firm might partner with Habitat for Humanity to provide materials at a deep discount, while gaining favorable publicity. Strategic philanthropy is the process of tailoring a firm’s giving to best fit with its own mission and goals, by making contributions that hold the promise of helping the firm’s financial goals, giving to causes that align with corporate activities, and explicitly planning the giving process. An office supply store might make contributions to a school by donating discontinued supplies and equipment. Cause-related marketing ties sales of a firm’s products with a specific charity. Yoplait yogurt has an annual campaign that contributes money to breast cancer research for each jar of yogurt sold. Cause branding is similar to cause-related marketing, but is a longer-term project, and is generally more closely tied to the firm’s product line. LensCrafters collects used eyeglasses from its customers to donate to the Lion’s Club and for use in its own work with underprivileged children.
  1. The major tradeoff that most managers never address is the decision to increase profits, which primarily benefit shareholders and senior managers, at the expense of workers’ incomes. This tradeoff is not addressed because the managers have effective control of the corporation and have a way to enrich themselves; shareholders, on the other hand are a privileged class of stakeholder who are given preference over workers. The decision is presented in terms of the need to remain competitive, not the stark tradeoff mentioned above. In lieu of actually deciding to treat workers as equals to senior managers and shareholders, the firm should at the very least ameliorate the damages to workers and the community, along with providing outplacement benefits. Further, in certain cases, federal law requires companies to provide advanced notice in the event of mass layoffs.
  1. Businesses have a clear responsibility to workers and the community in the case of a plant closing because: 1) the company has received significant benefits from both, 2) business holds a significant power differential, and 3) it is simply the “right” thing to do. All rights and privileges carry corresponding duties, and entities that have large privileges have large responsibilities.

GROUP PROJECT

Divide students into groups of four to five students. Assign each group a well-known company. Ask each group to develop a community action program for the assigned company. Students should assume that the assigned company operates in the community where your school is located and should develop the community action program based on that community. Students should present the community action program to the entire class. Groups should be prepared to answer questions about potential problems and/or issues with their respective plans.