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Chapter 1
The Business and
Society
Relationship

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Learning Outcomes
1. Characterize business and society and their interrelationships.
2. Describe pluralism and identify its attributes, strengths, and
weaknesses.
3. Clarify how a pluralistic society becomes a special-interest
society.
4. Identify, discuss, and illustrate the factors leading up to
business criticism.
5. Pinpoint the major criticisms of business and characterize
business’s general response.
6. Describe the major themes of the book: managerial approach,
ethics, sustainability and stakeholder management.

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Chapter Outline
• Business and Society
• Society as the Macroenvironment
• A Pluralistic Society
• A Special-Interest Society
• Business Criticism and Corporate Response
• Focus of the Book
• Structure of the Book
• Summary
• Key Terms
• Discussion Questions

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Business and Society

Business -
• the collection of private, commercially oriented
organizations ranging in size from one-person
proprietorships to corporate giants.
Society -
• a community, a nation, or a broad group of people with
common traditions, values, institutions, and collective
activities and interests.
Macroenvironment -
• the total environment outside the firm, the
comprehensive societal context in which the
organization resides.
Society
• is the macroenvironment in which businesses operate.
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Conceptualizing the
Macroenvironment

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Segments of the Macroenvironment

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What is the greatest strength of

a pluralistic society?
What is the greatest weakness?
Do these characteristics work for
or against business?

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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, on the
one hand, and anarchy on the other.
• Creates a widely diversified set of loyalties to
many organizations, and minimizes the danger
that a leader of any one organization will be
left uncontrolled.
• 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.
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Business and Stakeholder

Relationships

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Special Interest Groups -

• Make life more complex for business and
government.
• Can number in the tens of thousands in some
societies.
• Pursue their own focused agendas.
• Are active, intense, diverse and focused.
• Can attract a significant following.
• Often work at cross purposes, with no unified
goals.
• A special-interest society is pluralism taken to
the extreme.
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Social Environment, Business Criticism

and Corporate Response
Affluence Education Awareness

Factors in the Social Environment

Rising Expectations Rights Movement

Entitlement Victimization
Mentality Philosophy

Business Criticism

Increased Concern for the

A Changed Social Contract
Societal Environment

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Factors in the Social Environment

Affluence and Education -
• Create higher expectations of major institutions.
• Growing public awareness through television,
movies, and the Internet.
The Revolution of rising expectations -
creates a social problem, a gap between societal
expectations for social conditions and social realities.
This can lead to:
• Entitlement mentality
• Rights movement
• Victimization philosophy

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Society’s Expectations Versus

Business’ Actual Social Performance
Society’s
Expectations
of Business
Performance
Expected and Actual
Social Performance:

Social Problem

Social Business’s Actual

Problem Social Performance

1960s 2010s
Time
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Business Criticism:
Use and Abuse of Power

Business Power -
• the ability or capacity to produce an effect
or to bring influence to bear on a situation
or people
Iron Law of Responsibility -
• In the long run, those who do not use
power in a manner society considers
responsible will tend to lose it
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Levels and Spheres of

Corporate Power
Macro Intermediate Micro Individual
Levels
Level Level Level Level
The business Several firms A single firm A Single Executive
Spheres system

Economic

Social/Cultural

Individual

Technological

Environmental

Political
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Elements in the Social Contract

Laws or Regulations:
“Rules of the Game”

Business Society or
Societal
Stakeholder
Groups
Two-Way
Shared Understandings
of Each Other

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Focus of the Book

Managerial
Approach

Business Stakeholder
Ethics Sustainability Management

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A Managerial Approach
• Managers are practical, and have begun to
deal with social and ethical concerns in ways
similar to those they use to manage
traditional business functions such as
marketing, finance, operations, & risk
management.
• As a result, managers have been able to
convert seemingly unmanageable concerns
into ones that can be dealt with in a balanced
and impartial fashion.
• At the same time, managers have had to
integrate traditional economic and financial
considerations with ethical and social
considerations.
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Urgent versus Enduring Issues

Short-Term -
• Issues or crises arise on the spur of the
moment and management must formulate
quick responses.
Long-Term -
• Issues or problems are a long-term
concern and management must develop a
thoughtful organizational response.

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A Business Ethics Theme

Ethical questions -
• inevitably and continually come into play
during business operations.
Ethics -
• refers to issues of right, wrong, fairness, and
justice.
Business Ethics -
• focuses on ethical issues that arise in the
commercial realm.
Ethical questions -
• permeate business’s activities as it attempts
to interact with major stakeholder groups.
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A Sustainability Theme
Sustainability - Has become one of businesses’
most pressing mandates.
Sustainable development - is a pattern of
resource use that aims to meet current needs while
preserving the environment for future generations.
Sustainability embraces criteria which are:
• Environmental
• Economic
• Social
Sustainability concerns the ability of businesses to
survive and thrive over the long term.
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Stakeholder Management Theme

Stakeholders -
• Individuals or groups with which business
interacts and who have a vested interest in the
firm.
• In this text, we consider:
• External stakeholders, such as government,
consumers, the natural environment,
community members
• Internal stakeholders, such as employees,
those involved in corporate governance, and
others.

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Structure of the Book (1 of 2)

Part One: Business, Society, and Stakeholders
1. The Business and Society Relationship
2. Corporate Citizenship: Social Responsibility, Performance and
Sustainability
3. The Stakeholder Approach to Business, Society, and Ethics

Part Two: Corporate Governance & Strategic Management Issues

4. Corporate Governance: Foundational Issues
5. Strategic Management and Corporate Public Policy
6. Issue, Risk and Crisis Management

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Structure of the Book (2 of 2)

Part Three: Business Ethics and Management
7. Business Ethics Fundamentals
8. Personal and Organizational Ethics
9. Business Ethics and Technology
10. Ethical Issues in the Global Arena

Part Four: External Stakeholder Issues

11. Business, Government, and Regulation
12. Business Influence on Government and Public Policy
13. Consumer Stakeholders: Information Issues and Responses
14. Consumer Stakeholders: Product and Service Issues
15. Sustainability and the Natural Environment
16. Business and Community Stakeholders
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Organization and Flow of the Book

Part Five: Internal Stakeholder Issues
17. Employee Stakeholders and Workplace Issues
18. Employee Stakeholders: Privacy, Safety, and Health
19. Employment Discrimination and Affirmative Action

Cases

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Key Terms
• affluence • rights movement
• business • social contract
• business ethics • social environment
• business power • social problem
• economic environment • society
• education • special-interest society
• entitlement mentality • stakeholder
• ethics management
• Iron Law of • stakeholders
Responsibility • sustainability
• macroenvironment • sustainable
• managerial approach development
• pluralism • technological
• political environment environment
• revolution of rising • victimization
expectations philosophy

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