Chapter 16
Business and Community Stakeholders
LEARNING OUTCOMES
After studying this chapter, you should be able to:
1.
2.
3.
4.
5.
6.
7.
Identify and discuss two basic ways of business giving.
Discuss reasons for community involvement, various types of community projects, and
management of community stakeholders.
Explain the pros and cons of corporate philanthropy, provide a brief history of corporate
philanthropy, and explain why and to whom companies give.
Differentiate between strategic philanthropy, cause-related marketing, and cause branding.
Characterize the nature of, magnitude of, reasons for, and impacts of offshore outsourcing
and business or plant closings.
Address steps that a business or plant might take before a decision to close is made.
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 become much more sophisticated processes over the last decade (e.g., PepsiCo
recently designed a creative way to engage in corporate philanthropy by having members of the
community vote for causes to be funded by the company through its Pepsi Refresh Project).
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. Offshore outsourcing 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.
Business and Society
Chapter Notes
These trends have become so pronounced that the Bureau of Labor Statistics 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
The Benefit Corporation: Making a Difference while Making Money
Something’s Rotten in Hondo
Coke and Pepsi in India: Issues, Ethics and Crisis Management
The Hudson River Cleanup and GE
The BP Oil Spill and Mental Health
Felony Franks: Home of the Misdemeanor Weiner
Goodbye, Indiana- Hello Mexico: The Whirlpool Plant Closing
Ethics in Practice Cases:
Tugging the Heart or Twisting the Arm?
Giving Back the Google Way
Spotlight on Sustainability:
Greening the Workforce
Power Point slides:
Visit http://academic.cengage.com/management/carroll for slides related to this and other
chapters.
LECTURE OUTLINE
I.
COMMUNITY INVOLVEMENT
A. Volunteer Programs
B. Managing Community Involvement
1. Business Stake in the Community
2. Developing a Community Action Program
a. Step One: Knowing the Community
b. Step Two: Knowing the Company’s Resources
c. Step Three: Selecting Projects to Support
d. Step Four: Monitoring Projects
II.
CORPORATE PHILANTHROPY OR BUSINESS GIVING
A. A Brief History of Corporate Philanthropy
B. A Call for Transparency in Corporate Philanthropy
Business and Society
C.
Chapter Notes
Giving to the “Third Sector”: The Nonprofits
1. Why Do Companies Give?
2. To Whom Do Companies Give?
a. Health and Human Services
b. Education
c. Civic and Community Activities
d. Culture and the Arts
e. Giving in Times of Crisis
3. Managing Corporate Philanthropy
a. Community Partnerships
b. Strategic Philanthropy
c. Cause-Related Marketing
d. Global Philanthropy
III.
THE LOSS OF JOBS
A. Offshore Outsourcing
B. Business and Plant Closings
1. Before the Decision to Close Is Made
a. Diversification
b. New Ownership
c. Employee Ownership
2. After the Decision to Close Is Made
a. Community-Impact Analysis
b. Advance Notice
c. Transfer, Relocation, and Outplacement Benefits
d. Gradual Phase-Outs
e. Helping to Attract Replacement Industry
3. Survivors—The Forgotten Stakeholders
IV.
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 to support, 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
to support is a matter of trying to match the community’s needs with the firm’s resources.
Business and Society
Chapter Notes
Finally, monitoring the projects is necessary because the community’s needs must be met,
and the company wants to make sure that its resources are being effectively utilized.
2.
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, the arts and crisis areas.
3.
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. An example that students may recognize is the National Football
League’s partnership with the United Way. Through this partnership, both groups benefit.
The NFL raises the profile of the United Way, and the United Way provides organized
community service activities in which NFL players participate (improving the image of the
NFL as whole). 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.
4.
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, and shareholders 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.
Business and Society
5.
Chapter Notes
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 ACTIVITIES
Group Activity 1 – Community Action Programs
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.
Group Activity 2 - Outsourcing Movie Night
(Note: This Activity also may be used in conjunction with Chapter 10.)
Invite groups of students to watch the Outsourcing episode of the FX reality series 30 Days
(Season 2, Episode 2). In this episode, Christopher (Chris) Jopin, an unemployed computer
programmer, travels to India where his job was outsourced. While in India, Chris lives with an
Indian family who works in outsourced jobs, and he obtains an outsourced job. The episode
examines American perceptions / attitudes regarding outsourcing, as well as the impact of
outsourced jobs to India’s economy and culture.
Students should explore the economic, legal and ethical dilemmas that result from the
outsourcing of jobs to less developed countries. Have students prepare a movie review where
they express their opinion regarding the issues this movie raises. In their analysis, students
should explore the economic, legal and ethical impact that this practice has on both the U.S. and
India.
INDIVIDUAL ASSIGNMENT
(Note: This Assignment also may be used in conjunction with Chapter 2)
Distribute the following instructions to each student:
Research the history and motivation behind PepsiCo’s “Pepsi Refresh” project (see
http://www.refresheverything.com/). Provide a brief description of the goals of the project and
note the different categories that have received funding. Select an idea that received funding and
research and describe the outcomes achieved as a result of funding (if any). Finally, evaluate this
model of corporate philanthropy. Is this an example of strategic philanthropy? Should PepsiCo
be using corporate resources in this way?