MGMT 2130

Business Ethics and Social Responsibility

Session #8: Business and Communities

Review
• Stages of Org Learning

• Phases of Issue Maturity

• Changing Incentives for suppliers

• Companies internal incentives
• Contracts
• Government regulated transparency

• Transaction costs & trust

21
5 Stages of Org Learning
1) Defensive – Deny practices, responsibility, outcome

2) Compliance – Adopt policy based compliance as cost

of doing business

3) Managerial – Embed societal issue in core

management process

4) Strategic – Integrate societal issue into core business

strategy

5) Civil – Promote broad industry participation in

corporate responsibility
Four Stages of Issue Maturity

1) Latent – Activists involved, little scientific evidence,

business community ignores it

2) Emerging – Media attention, some

research/evidence, some companies experimenting
with dealing with it

3) Consolidating – Emerging common practices, sector-

wide voluntary participation, voluntary standards

4) Institutionalized – government regulation & norms

established, normal part of doing business
Government Can Help?

• Conflict minerals & transparency

• Reporting requirements

• Changes incentives?
Carbon Emissions?

• The US Securities and Exchange Commission…Last

week … proposed new rules that would require
public companies to start laying out all of their
greenhouse gas emissions—not just those they spew
themselves, but all the carbon required to keep their
businesses running.
• For the first time in the US, this would create a
standardized disclosure of every publicly traded
company’s carbon footprint, to be delivered to
investors regularly.
Companies & Contracts
Van Heerden’s Argument
• Governments not protecting human rights
• Unable to regulate or enforce

• Push burden onto companies

• Specify CSR terms into contacts

• Allow unannounced & frequent 3rd party audits

• This solution relies on companies (not governments)

Contracts & Business

• Business relationships primarily governed by

contracts.

• However,

• Complex contracts are incomplete

• Court ordering of conflicts is limited

• Contracts are not self enforcing

Transaction Costs

Drafting
Enforcing
Search contract Settling
Disputes
Negotiating
Haggling Unfair Exploitation by
Transaction Partner

Ex Ante Transaction Costs Ex Post

31
Trust and Business
• How reduce transaction costs? TRUST

• Trust increases efficiency (or reduces “transaction

costs”) in exchange as each party gains faith that the
other will act in a predictable and dependable manner.

• In general, how do we build trust with others?

32
Trustworthiness

34
 Course Structure
1) Introduction: What, Why, How
2) Macro: Role of Business in Society
Foundations
3) Micro: Psychology & Foundations of Corporate (Ir)responsibility

4) Business and Employees

5) Business and Employees
6) Business and Customers
7) Business and Suppliers
Stakeholders
8) Business and Communities
9) Guest Speaker
10) Business and the Natural Environment

11) Applying what we've learned

Final 12) Applying what we've learned
Presentations

35
What is a company’s community?

• Community refers to an organization’s area of local

influence, as well as more broadly to other groups
that are impacted by its actions.
 Community Types
Community Linkage

Site community Geographical location of a company’s operations,

offices, or assets

Fence-line community Immediate neighbors

Virtual communities People who buy from or follow the company online

Communities of Groups that share a common interest with the

interest company
Interests & Power of Community

• Breakout Groups: Three minutes

• Even Groups
• What does a community want from a business
• What sources of power does a community have?

• Odd Groups
• What does a business want from a community?
• What sources of power does a business have?
What community wants?
• Support Local Community / People
• Jobs & training
• Support local health
• Assist disadvantaged community members
• Pays taxes
• Support schools
• Support arts/culture
• Support parts & recreation
• Contribute to public safety
• Follow laws
• Overall promote economic development
What business wants?
• Employees & support
• Trained labor supply
• Recreational activities
• Schools
• Healthcare services
• Cultural activities

• Support for business

• Infrastructure
• Transport systems
• Public safety services
• Fair taxation
• Efficient government
Amazon’s New Headquarters?
Queens officials come out against
Amazon’s HQ2 in Long Island City
• “Offering massive corporate welfare from scarce
public resources to one of the wealthiest
corporations in the world at a time of great need in
our state is just wrong.”
• Against Amazon bypassing city review process
Ocasio-Cortez breaks with Cuomo
and de Blasio on Amazon welcome
• “Amazon is a billion-dollar company," Ocasio-Cortez
wrote on Twitter late Monday. "The idea that it will
receive hundreds of millions of dollars in tax breaks
at a time when our subway is crumbling and our
communities need MORE investment, not less, is
extremely concerning to residents here.”

• "Displacement is not community development.

Investing in luxury condos is not the same thing as
investing in people and families," she wrote.
"Shuffling working class people out of a community
does not improve their quality of life."
Amazon in NYC

• Why did Amazon choose to come to NYC?

• Why did some people in NYC want Amazon?

• Who were the various stakeholders?
• Why were some against amazon?

• What could Amazon have done differently?

 Break - 5 Minutes

Vote for favourite background from class

An Example:
Citi HK’s Strategic Philanthropy

Your team’s
company?

Youth Investment Hope Development

Education Program Accounts Program
Alternative Ways of Community
Engagement

Philanthropy

Integration Innovation
 Corporate Responsibility Action Types
Philanthropic Integrative Innovative

Emphasis on charity, Emphasis on conducting Developing new business

sponsorship, employee existing business operations models for solving social and
voluntarism, etc. more responsibly environmental problems

66
Alternative Argument
• What is the argument they are making?
• What/who are they criticizing?

• What are their assumptions about business overall

and how wealthy philanthropists got their money?

• In their argument, is “philanthropy” charitable or is

the philanthropist buying something?
Perception

Reality
Shared Value Discussion

• Team Groups

• Is there a value that you all share?

• Is there a value you can all agree on is important to

all members of the group?
 Guest Speaker
Ms. Yvonne Chan

Independent Commission Against

Corruption
https://www.icac.org.hk/en/home/index.html

Discuss topics of
Corruption
Bribery
Whistleblowing

What laws have changed corruption or enforcement?

Transparency?
Homework & Participation

• Homework:
• Review the website:
https://www.icac.org.hk/en/home/index.html
• Post 2 or more questions in the posted Qualtrics survey
• Students can ask their Qs during Q&A, etc.
• Discussion board (no need research)

• Submit any questions by TUESDAY

• Counts towards participation grade

• Next Week Zoom Backgrounds: Favorite location in

Hong Kong