Chapter 1

The Business and

Society
Relationship

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