Home Learning Week 81.) What is Corporate Social Responsibilit

Home Learning Week 8
1.) What is Corporate Social Responsibility and why are
companies engaged in it?
2.) Discuss the evolving phases of Corporate Social
Responsibility
3.) Describe Carroll’s four-part definition of CSR and contrast
it to Firedman’s “the business of business is business”
4.) Discuss why companies are engaged in Corporate Social
Reporting
Senior Seminar in Business Administration
BUS 499
Corporate Governance
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.

Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions
Describe how corporate governance affects strategic decisions.
Supporting Topics
Separation of Ownership and Managerial Control
Ownership Concentration
Board of Directors
Market for Corporate Control
International Corporate Governance
Governance Mechanisms and Ethical Behavior
In order to achieve these objectives, the following supporting
topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and

Governance mechanisms and ethical behavior.
What is Corporate Governance
Shareholders
Purchase stock
Managing of their investment risk
Agency Relationships
Problems
Different interests and goals
Managerial Opportunism
Agency Costs
To start off the lesson, corporate governance is defined as a set
of mechanisms used to manage the relationship among
stakeholders and to determine and control the strategic direction
and performance of organizations. Corporate governance is
concerned with identifying ways to ensure that decisions are
made effectively and that they facilitate strategic
competitiveness. Another way to think of governance is to
establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and
their descendants. As firms became larger the managerial
revolution led to a separation of ownership and control in most
large corporations. This control of the firm shifted from
entrepreneurs to professional managers while ownership became
dispersed among unorganized stockholders. Due to these
changes modern public corporation was created and was based
on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows

shareholders to purchase stock. This in turn entitles them to
income from the firm’s operations after paying expenses. This
requires that shareholders take a risk that the firm’s expenses
may exceed its revenues.
Shareholders specialize in managing their investment risk.
Those managing small firms also own a significant percentage
of the firm and there is often less separation between ownership
and managerial control. Meanwhile, in a large number of family
owned firms, ownership and managerial control are not
separated at all. The primary purpose of most large family firms
is to increase the family’s wealth.
The separation between owners and managers creates an agency
relationship. An agency relationship exists when one or more
persons hire another person or persons as decision- making
specialists to perform a service. As a result an agency
relationship exists when one party delegates decision- making
responsibility to a second party for compensation. Other
examples of agency relationships are consultants and clients and
insured and insurer. An agency relationship can also exist
between managers and their employees, as well as between top-
level managers and the firm’s owners.
The separation between ownership and managerial control can
be problematic. Research has shown a variety of agency
problems in the modern corporation. Problems can surface
because the principal and the agent have different interests and
goals. Problems also surface when an agent makes decisions
that result in pursuing goals that conflict with those of the
principals.
Managerial opportunism is the seeking of self- interest with
guile. Opportunism is both an attitude and a set of behaviors.
Principals do not know beforehand which agents will or will not
act opportunistically. As a result, principals establish

governance and control mechanisms to prevent agents from
acting opportunistically. The agency relationship suggests that
any time principals delegate decision- making responsibilities to
agents; the opportunity for conflicts of interest exists.
The potential conflict between shareholders and top- level
managers shown along with the fact that principals cannot
easily predict which managers might act opportunistically,
demonstrates why principals establish governance mechanisms.
However, the firm incurs costs when it uses one or more
governance mechanisms. Agency costs are the sum of incentive
costs, monitoring costs, enforcement costs, and individual
financial losses incurred by principals.
4
What is Ownership Concentration
Large block shareholders
The total percentage of the firm’s shares they own
Replaced by institutional owners
Institutional Owners
Mutual funds
Pension funds
Ownership concentration is defined by the number of large-
block shareholders and the total percentage of the firm’s shares
they own. Large- block shareholders typically own at least five
percent of a company’s issued shares. However, in recent years,
the number of individuals who are large- block shareholders has
declined. Institutional owners have replaced individuals as
large- block shareholders.

Ownership of many modern corporations is now concentrated in
the hands of institutional investors rather than individual
shareholders. Institutional owners are financial institutions such
as mutual funds and pension funds that control large- block
shareholder positions. Due to these prominent owner-ship
positions, institutional owners, as large- block shareholders,
have the potential to be a powerful governance mechanism.
Research has shown that institutional and other large- block
shareholders are becoming more active in their efforts to
influence a corporation’s strategic decisions. This is unless they
have a business relationship with the firm.
5
Board of Directors
Elected by shareholders
Responsibilities
Monitoring and controlling top level managers
Provide resources to firms served
How They Are Grouped
Insiders
Related outsiders
Outsiders
Making Changes for Greater Accountability and Performance
Shareholders elect the members of a firm’s board of directors.
The board of directors is a group of elected indivi duals whose
primary responsibility is to act in the owners’ best interests by
formally monitoring and controlling the firm’s top- level
managers. Those elected to a firm’s board of directors are
expected to oversee managers and ensure that the corporation
operates in ways that will best serve the stakeholders’ and
owners’ interests. Evidence has shown however that boards

have not been highly effective in monitoring and controlling
top- level managers’ decisions and subsequent actions.
In addition to their monitoring role, board members increasingly
are expected to provide resources to the firms they serve. These
resources might include personal knowledge, expertise or
relationships with a wide variety of organizations. Generally,
board members are classified into one of three groups. Insiders
are active top- level managers in the company who are elected
to the board because they are a source of information about the
firm’s day- to-day operations. Related outsiders have some
relationship with the firm that may create questions about their
independence. However, these individuals are not involved with
the corporation’s day- to- day activities. Outsiders provide
independent counsel to the firm and may hold top- level
managerial positions in other companies or may have been
elected to the board prior to the beginning of the current CEO’s
tenure.
A situation in which an individual holds both the CEO and chair
of the board title is called CEO duality. Yet, having a board that
actively monitors top- level managers’ decisions and actions
does not ensure high performance. The value that the directors
bring to the company also influences the outcomes. Having a
large number of outside board members can also create some
problems. Outsiders can, however, obtain valuable information
through frequent interactions with inside board members and
during board meetings to enhance their understanding of
managers and their decisions. Because they work with and lead
the firm daily, insiders have access to information that
facilitates forming and implementing appropriate strategies.
Evidence shows that boards with a critical mass of insiders
typically are better informed about intended strategic
initiatives, the reasons for the initiatives, and the outcomes
expected from pursuing them.

Because of the importance of boards of directors in corporate
governance and as a result of increased scrutiny from
shareholders, the performances of individual board members
and of entire boards are being evaluated more formally and with
greater intensity. The demand for greater accountability and
improved performance is stimulating many boards to voluntarily
make changes. Some of these changes in clued the following:
Increase in the diversity of the backgrounds of board members;
Strengthening of internal management and accounting control
systems;
Establishing and consistently using formal processes to evaluate
the board’s performance;
Modifying the compensation of directors; and
Creating the lead director role.
6
Board of Directors, continued
Executive Compensation
Seeks to align interests of managers and owners
Salaries, bonuses, and long term incentives
Complicated
Long-Term Incentive Plans
Links managerial compensation to wealth of common
shareholders
Potential Issues

The compensation of top- level managers, and especially of
CEOs, generates a great deal of interest and strongly held
opinions. Some believe that top- management team members
and certainly CEOs have a great deal of responsibility for a
firm’s performance and that they should be rewarded
accordingly. On the other hand some think that these
individuals are greatly overpaid and that their compensation is
not as strongly related to firm performance. There are three
internal governance mechanisms that seek to deal with these
issues. Executive -compensation is a governance mechanism
that seeks to align the interests of managers and owners through
salaries, bonuses, and long- term incentives. Long- term
incentive plans are an increasingly important part of
compensation packages for top- level managers, especially those
leading U. S. firms. Using long- term incentives facilitates the
firm’s efforts to avoid potential agency problems by linking
managerial compensation to the wealth of common
shareholders. Effectively designed long- term incentive plans
have the potential to prevent large- block stockholders from
pressing for changes in the composition of the board of
directors and the top- management team. Effectively using
executive compensation as a governance mechanism is
particularly challenging for firms implementing international
strategies.
As an internal governance mechanism, executive compensation
is complicated. The strategic decisions top- level managers
make are complex and nonroutine, meaning that direct
supervision is likely to be ineffective as a means of judging the
quality of their decisions. The result is a tendency to link top-
level managers’ compensation to outcomes the board can easily
evaluate. Another issue is that the effects of top- level man-
agers’ decisions are stronger on the firm’s long- term than its
short- term performance. This makes it hard to assess the effects
of their decisions on a regular basis. Lastly, a number of other
factors affect a firm’s performance besides top- level

managerial decisions and behavior. Unpredictable changes in
segments in the firm’s general environment can make it difficult
to separate out the effects of top- level managers’ decisions and
the effects of changes in the firm’s performance. Properly
designed and used incentive compensation plans for top- level
managers may increase the value of a firm in line with
shareholder expectations, but such plans are subject to
managerial manipulation.
7
External Governance Mechanism
Active when internal governance mechanisms fail
Hedge Fund
Activist Pension Funds
Activist Hedge Funds
Which One is Better
The market for corporate control is an external governance
mechanism that is active when a firm’s internal governance
mechanisms fail. The market for corporate control is composed
of individuals and firms that buy ownership positions. They may
also purchase potentially undervalued corporations for the
purpose of forming new divisions in established companies or
merging two separate firms. An effective market for corporate
control ensures that ineffective or opportunistic top- level
managers are disciplined.
A hedge fund is a fund that can pursue many different
investment strategies such as the following:

Taking long and short positions;
Using arbitrage; and
Buying and selling undervalued securities for the purpose of
maximizing investors’ returns.
Activist pension funds, on the other hand, are reactive in nature,
taking actions when they conclude that a firm is
underperforming. In contrast, activist hedge funds are proactive,
identifying a firm whose performance could be improved and
then investing in it. You could say that hedge funds are better at
identifying undervalued companies, locating potential acquirers
for them, and removing opposition to a takeover.
8
Market for Corporate Control, continuedDefense
StrategyCategoryPopularity among firmsEffectiveness as a
defenseStockholder wealth effectsPoiso n
pillPreventiveHighHighPositiveCorporate charter
amendmentPreventiveMediumVery lowNegativeGolden
parachutePreventiveMediumLowNegligibleLitigationReactiveM
ediumLowPositiveGreenmailReactiveVery
lowMediumNegativeStandstill
agreementReactiveLowLowNegativeCapi tal structure
changeReactiveMediumMediumInconclusive
Hostile takeovers are the major activity in the market for
corporate governance mechanism. Not all hostile takeovers are
prompted by poorly performing targets, and firms targeted for
hostile takeovers may use multiple defense tactics to fend off
the takeover attempt. Historically, the increased use of the

market for corporate control has enhanced the sophistication
and variety of managerial defense tactics that are used to reduce
the influence of this governance mechanism.
The table on the slide lists a number of defense strategies.
How Globalization Factors In
Germany
Single shareholder dominate
Two tiered board structure
Japan
Obligation, family, and consensus
Main bank has closest relationship
Bank-based financial and corporate structure
China
Large, socialist, and marketed economy
Moving toward Western model
Stock market is still young
Corporate governance is an increasingly important issue in
economies around the world, including emerging economies.
The globalization of trade, investments, and equity markets
increases the potential value of firms using similar mechanisms
to govern corporate activities. Because of globalization, major
companies want to attract foreign investment. This occurs when
foreign investors are confident that adequate corporate
governance mechanisms are in place to protect their
investments. Recognizing and understanding differences in
various countries’ governance systems along with noting
changes taking place within those systems improves the chances

that a firm will be able to compete successfully in the
international markets.
In many private German firms, the owner and manager may be
the same individual. In these instances, agency problems are not
present. Even in publicly traded German corporations, a single
shareholder is often dominant. Traditionally banks occupied the
center of the German corporate governance system. This is the
case in other European countries as well. German firms with
more than two thousand employees are required to have a two-
tiered board structure that places the responsibility for
monitoring and controlling managerial decisions and actions in
the hands of a separate group. All the functions of strategy and
management are the responsibility of the management board;
however, appointment to the board is the responsibility of the
supervisory tier. Corporate governance practices used in
Germany are changing. A manifestation of these changes is that
a number of German firms are beginning to gravitate toward U.
S. governance mechanisms. German firms with listings on U. S.
stock exchanges have increasingly adopted executive stock
option compensation as a long- term incentive pay policy.
The concepts of obligation, family, and consensus affect
attitudes toward corporate governance in Japan. In Japan, an
obligation may be to return a service for one rendered or it may
derive from a more general relationship. As part of a company
family, individuals are members of a unit that envelops their
lives. Many critics however believe that relationships like this
slow decision making. Consensus, another important influence
in Japanese corporate governance, calls for the expenditure of
significant amounts of energy to win the hearts and minds of
people whenever possible. Consensus is highly valued, even
when it results in a slow and cumbersome decision- making
process. Like in Germany, banks in Japan have an important
role in financing and monitoring large public firms. The main
bank has the closest relationship with a firm’s top-level

managers because it owns the largest share of stocks and holds
the largest amount of debt. The main bank provides financial
advice to the firm and also closely monitors managers. Due to
this, Japan has a bank- based financial and corporate
governance structure whereas the United States has a market-
based financial and governance structure.
China has a unique and large, socialist, market- oriented
economy. The government has done much to improve the
corporate governance of listed companies. The corporate
governance practices in China are changing and the country is
experiencing increasing privatization of businesses and the
development of equity markets. However, the stock markets in
China remain young and underdeveloped. There has been a
gradual decline in China in the equity held in state owned
enterprises. However the number and percentage of private
firms has grown, but the state still relies on direct and/ or
indirect controls to influence firms. Some research has
suggested that corporate governance in China may be moving
toward the Western model. Corporate governance in Chinese
companies will continue to evolve and interact to form
governance mechanisms that are best for their nation, business
firms, and citizens.
10
Agents of Firm
Want to serve best interest of all stakeholders
Shareholders most significant stakeholders
Board of Directors Influence
Decisions and actions
Effective deterrent to unethical behaviors

Act as an internal governance mechanism
The three internal and single external governance mechanisms
are designed to ensure that the agents of the firm’s owners make
strategic decisions that best serve the interests of all
stakeholders. In the United States, shareholders are commonly
recognized as the company’s most significant stakeholders.
Top- level managers however are expected to lead their firms in
ways that will also serve the needs of product market
stakeholders and organizational stakeholders. As a result, the
firm’s actions and the outcomes should result in at least
minimal satisfaction of the interests of all stakeholders. Without
achieving a minimal satisfaction of its interests, an unsatisfied
stakeholder will withdraw their support from the firm and
provide it to another.
The decisions and actions of the board of directors can be an
effective deterrent to unethical behaviors by top- level
managers. Research suggests that the most effective boards set
boundaries for their firms’ business ethics and values. Once the
boundaries for ethical behavior are determined the board’s
ethics- based expectations must be clearly communicated to the
firm’s top- level managers and to other stakeholders. As agents
of the firm’s owners, top- level managers must understand that
the board, acting as an internal governance mechanism, will
hold them fully accountable for developing and supporting an
organizational culture in which ethical behaviors are permitted.
Through effective governance, top- level managers are able to
help their firm select and use strategies with a high probability
of resulting in strategic competitiveness and earning above-
average returns.
Please go to the next slide
11

Check Your Understanding
12
Summary
Board of Directors
We have reached the end of this lesson. Let’s take a look at
what we have covered.
First, we discussed separation of ownership and managerial
control. We defined corporate governance as a set of
mechanisms used to manage the relationship among
and performance of organizations. We learned that originally U.
S. firms were managed by founder- owners and their
descendants. It wasn’t until firms became larger that the
managerial revolution led to a separation of ownership and
control in most large corporations. We saw that the separation
of ownership and managerial control allows shareholders to
purchase stock. We later discussed the importance of managing
investment risk and agency relationships. We also took a closer
look at some issues that may arise from the separation between

ownership and managerial control.
Next, we went over ownership concentration. We saw that
ownership concentration is defined by the number of large-
they own. We noted that large- block shareholders typically own
at least five percent of a company’s issued shares. We also
learned that the ownership of many modern corporations are
now concentrated in the hands of institutional investors rather
than individual shareholders.
Then we looked at the board of directors. We saw that
shareholders elect the members of a firm’s board of directors.
The board of directors has the responsibility to act in the
owners’ best interests by formally monitoring and controlling
the firm’s top- level managers. In addition to their monitoring
role, board members increasingly are expected to provide
resources to the firms they serve. We went over some various
types of resources and three group classifications of board
members. We then talked about changes that are trying to be
implemented to enhance board member accountability as well as
compensation of top-level managers and CEOs.
Later we focused our attention on the market for corporate
control. We saw that the market for corporate control is an
external governance mechanism that is active when a firm’s
internal governance mechanisms fail. We noted that the market
for corporate control is composed of individuals and firms that
buy ownership positions. We later talked about different types
of funds such as a hedge fund. We also discussed the occurrence
of hostile takeovers and defense strategies.
We then discussed international corporate governance. We
looked at German, Japanese, and Chinese corporation structure
along with how they function. We noted different characteristics
of each and gained a better understanding of how each country

completes its business.
Finally to conclude the lesson we looked at governance
mechanisms and ethical behavior. We learned about three
internal and one external governance mechanisms that are
designed to ensure that the agents of the firm’s owners make
stakeholders.
This completes this lesson.
PROPERTIES
On passing, 'Finish' button: Goes to Next SlideOn failing,
'Finish' button: Goes to Next SlideAllow user to leave quiz: At
any timeUser may view slides after quiz: At any timeUser may
attempt quiz: Unlimited times
1
5Week 3 Strategic Management and Strategic
Competitiveness Assignment
Heather Daniels
Strayer University
BUS499 Business Administration Capstone
Dr. Brian C. Grizzell
January 27, 2021
Week 3 Strategic Management and Strategic Competitiveness
Assignment

Apple Inc. is among the top technology companies in the world.
The company is based in the United States and deals with
designing, manufacturing, and distributing consumer
electronics, computer software, and online services. This paper
will look at how the changes in globalization and technology
have impacted the company's operations. The report will also
apply both the Industrial Organization Model and Resource-
based model to show how Apple will earn above-average
returns. An assessment of the vision and mission statements
should be able to ascertain their impacts on the overall success
of Apple, Inc. The paper will conclude with an evaluation of the
different stakeholders' impact on the company's
success.Globalization
Globalization is the process where a business starts trading at
an international level. Apple Inc. is a multinational corporation
where the organization's products and services are delivered
globally. Over the years, its retail footprint has expanded,
leading to operations in the Americas, Europe, Greater China,
Japan, Middle East, Africa, and the Rest of Asia Pacific (Apple
Annual Report, 2019). The company has been expanding
globally to maintain its position as one of the leading
technology companies. This includes investments in the latest
manufacturing technology and talent.
Globalization is known to increase the interactions between the
different populations and regions. Katerina et al., (2014)
highlighted that globalization encourages companies to increase
their volumes of transactions. Globalization has had an impact
on Apple Inc. The company has manufacturing plants in various
countries like India, China, and the United States. This has
facilitated interaction and an increase in the volume of the
products by the company. Through the various manufacturing
plants, the company has increased its products' production and
distribution. There are changes in supply chain management due
to globalization. This is due to the increased movement of
goods and services across borders.
The competition landscape is also changing due to globalization

(Hitt, Ireland& Hoskisson, 2020). There are emerging
companies that are competing with Apple in the technology
industry. They have been facilitated by globalization as the
movement of goods and services becomes more manage able.
Companies like Samsung, ASUS, Huawei, and Dell technologies
have grown over the last decade due to globalization threatening
Apple's consumer electronics market. The company has
responded to the competition through significant innovations
that have propelled the company to new heights. Technology
Apple is in the technology industry, and technology changes
have been a factor in the company's success. The company has
leveraged technologies like mobile technology, e-commerce,
program apps, and analytics. The iPhone is the main product of
the company and is considered the most potent hand device. The
number of Smartphone users in the world keeps increasing,
which increases the market for the iPhone. The advancements in
technology have positively impacted the company, which
thrives on innovation and creativity.
Lindh and Dahlin (2008) suggested that technology has
enhanced business relations. Technology has ensured
interactions between companies facilitating mergers and
acquisitions. Apple has had to acquire or merge with other
companies to improve their products. Acquiring a stake in
companies like Silicon Valley Data and Intel has been
facilitated due to advancements in technology. Disruptive
technologies change products that were once complicated and
expensive into affordable and open to more people. Apple has
been regarded as a master of disruptive technology with
technologies like Macintosh and the Apple watch. Industrial
Organization Model
Apple can use the industrial organization model in maintaining
a big portion in a highly segmented market. This can be done
by focusing on the unique resources and capabilities at the
company's disposal. The company can use this unique resource
and capabilities in creating a competitive advantage. Apple has
unique capabilities where the company is innovative. The

company has relied on innovative technology capacity as a
strategic asset brought about by technology changes (Son et al.,
2018). The innovative technology capacity has allowed the
company to develop unique products to maintain a big market
portion. The capability and resources have been used to create
unique effects. The iPhone is an example of a product by the
company created through unique capabilities. The organization
has used the industrial organization model here to increase its
revenue. Resource-Based Model
The company can use the resource-based model to drive
competitive advantage (Almarri & Paul, 2014). An organization
can apply the model by identifying its unique resources,
assessing whether the unique resources will pass the VRIO
criteria, and nurturing the resources. The model has long been
used by the organization, especially in project management.
Apple has unique resources like a strong brand, reputation,
patents, trademarks, and innovative corporate culture. However,
the most important resource available for the organization is the
brand. The company has spent years developing the Apple
brand, making it one of the world's strongest brands. Leveraging
on the brand can drive a competitive advantage for the
organization, increasing the organization's revenue. Vision
Apple’s Vision is “We believe that we are on the face of the
earth to make great products and that's not changing" (Dwivedi,
n.d). The statement communicates the company's intention as i t
assures the stakeholders of the organization's intentions. Apple
uses the vision statement to make some of the strategic
decisions in the organization. The company is innovative and
has ensured that they present new products every time. The
products are usually of high quality and the envy of their
competitors. The innovation objective is communicated in the
vision statement. The elements associated with the statement
include innovation, market specialization, and the integration of
partners. The employees are provided with the best resources to
be innovative, and through teamwork and collaboration, they
can produce some of the best technological advancements.

Mission
The organization's mission statement is “to bringing the best
user experience to its customers through its innovative
hardware, software, and services” (Dwivedi, n.d). The Chief
Executive Officer, Tim Cook, communicated this mission
statement while presenting the financial results in 2018. The
statement outlines that the organization exists to serve the
customers. The statement shows the number one priority for the
organization is the customer. They will continue serving the
customer and will not stop any time soon. The mission
statement includes; user experience, empowerment of the
public, quality products, and improving people's lives.
Stakeholders
The different stakeholders in the organization include;
investors, employees, suppliers, and the government. These
stakeholders have a key role to play in the overall success of the
company. The stakeholders can also be divided into internal
stakeholders, the employees, and the external, like the
suppliers, customers, government, and the community. Internal
stakeholders have a vested interest in the company. The interest
can be financial, like the investors who invest in the company.
They ensure the investment will meet the needs of the
organization and allow it to succeed. They help in decision-
making, especially with a major decision like acquisition and
liquidation. The external stakeholders are concerned with the
decisions of the company. They may present information that is
valuable to the board while reviewing ideas and issues.
Sources
Almarria Khalid and Paul Gardiner. (2014) Application of
resource-based view to project management research: supporters
and opponents. Social and Behavioral Sciences 119 437 – 445.
Available online at www.sciencedirect.com
Apple Inc. (2019). Financial Statements. United States
Securities and Exchange Commission. Available at
https://www.annualreports.com/HostedData/AnnualReports/PDF
/NASDAQ_AAPL_2019.pdf

Nishant Dwivedi. (n.d). IGCSE Business Studies : Analysis of
Apple's Vision and Mission Statement. Available at
https://www.academia.edu/29725749/IGCSE_Business_Studies_
Analysis_of_Apples_Vision_and_Mission_Statement
Hitt, Ireland, &Hoskisson. 2020. Strategic management:
Concepts and cases: Competitiveness and globalization (13th
ed.). Mason, OH: South-Western Cengage Learning
Lindh, Cecilia & Dahlin, Peter. (2008). How Does Information
Technology Impact on Business Relationships? The Need for
Personal Meetings. Available at
https://www.researchgate.net/publication/228462711_How_Doe
s_Information_Technology_Impact_on_Business_Relationships_
The_Need_for_Personal_Meetings
Katerina Ristovska and Aneta Ristovska. (2014). Impact of
Globalization on the Business. Economic Analysis Vol. 47, No.
3-4, 83-89). Available at
https://core.ac.uk/download/pdf/33812244.pdf
Running head: EXTERNAL AND INTERNAL ENVIRONMENT
INTERNAL AND EXTERNAL ENVIRONMENT 8
Internal and External environment
Heather Daniels
Strayer University
BUS499 Business Administration Capstone
Dr. Brian C. Grizzell
February 14, 2021

Apple Inc is among the leading multinational corporations in
the United States. The company is among the five largest
companies in the information technology industry in the United
States. Like in many other companies in the United States, there
are various segments of the general environment that impacts
Apple Inc.’s operations.
The political segment comprises one of the segments of the
general environment that has a significant impact on the
operations of Apple Inc. the political environment encompasses
the intervention of politics and the role of government in
shaping businesses. Government executes various operations
such as tax policies and changes in the trade tariffs and
restrictions (Gürel & Tat, 2017). The stability of the
government has significant impacts on the operations of Apple
Inc. the increase in the federal corporate income taxes tend to
significantly raise the levels of unemployment and the capacity
of multinational corporations to employ more people.
Statistics indicate that the rate of unemployment when the
federal corporate income taxes are highest. When the federal
government raises taxes, multinational corporation's operations
are deterred. The stability of the United States federal and state
governments has played a significant role in the success of
Apple Inc. multinational corporations in countries with unstable
governments are less likely to achieve their mission and vision.
Multinational corporations also carry out business across the
borders in the contemporary world dominated by globalization
(Kuznetsova et al., 2017). Multinational corporations favor
carrying out operations in countries with high levels of
government stability compared to those countries with unstable
governments.
Politics has a significant impact on immigration. Apple Inc
embraces diversity and a multicultural workforce. The
immigration policies influence the availability of diverse
workforce, skills, and competencies. Immigration policies
determine the availability of legal and illegal immigrants in the

United States. The tightening of immigration policies reduces
the supply of multicultural and diverse workforce in many
multinational corporations (Kuznetsova et al., 2017). Apple Inc
and other multinational corporations employ legal immigrants.
The government plays a significant role in availing legal
immigrants in the United States. To increase multicultural
diversity, immigrants need to possess sufficient immigration
documents to access employment.
The second segment of the general environment is the economic
segment. The economic segment encompasses the environmental
condition in which Apple Inc operates. The essential economic
segment factors in this segment include the rate of interest, rate
of inflation, rate of unemployment, the gross domestic product,
and general decline or growth of the economy. The economic
crisis experienced in the year 2002 had detrimental impacts on
Apple Inc and many other multinational corporations in the
United States (Gürel & Tat, 2017). The declining levels of
unemployment discouraged many consumers from purchasing
Apple products and other nonessential goods such as television
and automobiles. The trade markets were tightened by the bank
failures during the economic crisis.
An increase in the interest rates implies that Apple Inc existing
and potential customers have limited income. The impact of
changes in interest rates varies from one multinational
corporation to another. A rise in the rate of interest has a
tremendous negative impact on multinational companies selling
luxury goods such as Apple Inc. consumers tend to cut back
their consumption of their nonessential as their disposable
income declines (Pearson et al., 2018). High-interest rates imply
that financial institutions reduce their lending capacity as the
banks mitigate the risk of financial losses.
The general decline or growth in the rate of the economy has a
significant impact on the operations of multinational
corporations. The growth of the economy facilitates the
operations of Apple Inc by increasing access to essential
resources and the market for Apple Inc products. As the rate of

the economy grows, consumers have the financial capacity to
purchase luxury products produced by Apple Inc.
There are five forces of competition that operate in Apple Inc,
as outlined by Porter. The five forces play a critical role in
analyzing competition in the technology industry. Porters 5
forces include the threat of new entrants, supplier's bargaining
power, bargaining power of buyers, rivalry in the industry, and
the threat of substitute products. One of the major forces is the
threat of new entrants. In the modern world, the recent
advancements in technology have resulted in increased
innovation and creativity in the technology industry. New
entrants tend to introduce new capacity with an increased desire
to expand their market share. The threat of new entrants is
determined by the barriers to entry that exist in the industry
(Kuznetsova et al., 2017). The threat is minimal where the
barriers to entry are higher. Apple Inc solves this threat by
utilizing economies of scale. Apple is able to produce products
on a large scale, which save significant production costs. The
costs saved in the production are utilized to ensure that the
prices of Apple products remain significantly low and
affordable. The other approach that Apple Inc utilizes to curb
this force is high consumer loyalty. Apple Inc has engaged in
the production of high-quality products that have gained
increased customer loyalty. Apple Inc can sustain this through
engaging in research and innovation to determine the changes in
consumer needs and preferences.
The second force is the bargaining power of suppliers. The
supplier power in Apple Inc changes regularly. Suppliers have
the ability to significantly raise the prices to reduce the quality
of the goods and services they deliver. The reduction in the
quality of supplied materials and a rise in the price of supplies
influence profitability at Apple Inc. some of the factors that
influence supplier power is the availability of substitute
suppliers and supplier concentration. Apple Inc benefits from a
high number of suppliers.
Another critical aspect is the buyer's bargaining power. This

market force evaluates the ability of customers to put Apple Inc
under pressure to keep the price of their products low.
Consumers are highly sensitive to price changes. The rise in the
price of apple products implies that some price sensitive
consumers will switch to alternative companies (Pearson et al.,
2018). Apple Inc solves this force by increasing customer
experience and offering high-quality products that meet the
needs and preferences of the consumers. Another strategy
deployed by Apple Inc is the implementation of customer
loyalty programs and product differentiation.
In the near future, Apple Inc needs to invest more in research
and development. Research and development are critical in the
modern world, where globalization has made the world a global
village. The needs and the preferences of the consumers are
changing rapidly. The research will enable the company to
evaluate the supplier base and ways of building customer
loyalty.
Apple Inc faces several external threats, just like many other
multinational corporations in the world. One of the major
external threats is aggressive competition. Other multinational
corporations such as Amazon, Samsung, and Microsoft pose
huge competition to Apple Inc. the other external threats is the
increased costs of labor. There has been a rise in the costs of
labor in the United States and in the world. The increasing labor
costs reduce the revenue and profits at Apple Inc. the increasing
costs of labor results in a high rate of employee turnover as
employees move on to high-paying corporations. On the other
hand, Apple Inc has several business opportunities. One of the
major opportunities is consistency in customer growth (Wu,
2020). Apple has had a large customer base in many parts of the
world and the United States. The corporation has a diversity of
qualified personnel. The company personnel possesses skills
and competencies in the management of apple products. Apple
Inc has an expansive distribution network. Customers in various
parts of the world have access to apple products through the
well-established network of product distributors. Apple Inc can

utilize the greatest opportunity by investing in further
expansion of the distribution network.
Apple Inc faces various strengths as well as weaknesses. One of
the most significant strengths is the highly valuable brand.
Apple Inc's brands are popular in the United States and in the
world. The brand value is approximately $322 billion (Gürel &
Tat, 2017). The other greatest strength is top technology. Apple
was among the leading corporations to introduce innovative
products such as iPads and iPhones. On the other hand, Apple
Inc is not without weaknesses. The price of Apple products is
one of the weaknesses at Apple Inc. Apple products are
considered luxuries due to premium prices. The prices
associated with apple products are ideal for middle income to
high-income people. People in the low-income bracket in the
economy are less likely to afford apple products. The other
weakness has been the limitation of promotions and
advertisements. Many multinational corporations emphasize
advertisement and promotions to increase brand awareness.
Apple Inc, however, tends to use the established customer
loyalty and retail stores.
Apple Inc can deploy several tactics and strategies to maximize
on strengths while minimizing the weaknesses. Apple should
continue to increase the brand value and quality. To remain
competitive, Apple Inc should maintain a high brand value.
Constant investment in technology is another tactic that apple
can deploy to maintain innovation and creativity in product
design.
The expansion of Sino-U.S. resulted in the expansion of the cost
implication and production capacity in apple. The strategic
management insight outline innovation in mobile technology,
strong marketing teams, and excellent customer service as the
major core competencies in apple inc. The other core
competency at apple inc is the strong reputation of its brands
such as Apple TV, iPad, iPhone, and other hardware and
software.

From the discussion above, Apple Inc is affected by both
internal and external environment just like other corporations in
the world. Some of the external challenges facing apple inc
result from the operations of the multinational corporation
across the border. However, Apple has deployed several
strategies to maximize the available opportunities as well as
minimizing on the corporation's weaknesses. Apple Inc has
well-structured core competencies that enable the corporation to
achieve its mission and vision. The satisfaction of consumers
through the provision of quality goods is a major point of focus
at Apple Inc.
References
Gürel, E., & Tat, M. (2017). SWOT analysis: a theoretical
review. Journal of International Social Research, 10(51).
Kuznetsova, N. V., Rahimova, L. M., Gafurova, V. M.,
Simakov, D. B., Zinovyeva, E. G., & Ivanova, L. A. (2017).
External environment as a factor of ensuring the
competitiveness of organizations in the regional market of
medical services.
Pearson, A. R., Schuldt, J. P., Romero-Canyas, R., Ballew, M.
T., & Larson-Konar, D. (2018). Diverse segments of the US
public underestimate the environmental concerns of minority
and low-income Americans. Proceedings of the National
Academy of Sciences, 115(49), 12429-12434.
Wu, Y. (2020, February). The Marketing Strategies of IKEA in
China Using Tools of PESTEL, Five Forces Model and SWOT
Analysis. In International Academic Conference on Frontiers in
Social Sciences and Management Innovation (IAFSM 2019) (pp.
348-355). Atlantis Press.

BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
2
Objectives
Describe how corporate governance affects strategic decisions.
3
Supporting Topics
In order to achieve these objectives, the following supporting
topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.

4
To start off the lesson, corporate governance is defined as a set
of mechanisms used to manage the relationship among
and performance of organizations. Corporate governance is
concerned with identifying ways to ensure that decisionsare
made effectively and that they facilitate strategic
competitiveness. Another way to think of governance is to
establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and
their descendants. As firms became larger the managerial
revolution led to a separation of ownership and control in most
large corporations. This control of the firm shifted from
entrepreneurs to professional managers while ownership became
dispersed among unorganized stockholders. Due to these
changes modern public corporation was created and was based
on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows
shareholders to purchase stock. This in turn entitles them to
income from the firm’s operations after paying expenses. This
requires that shareholders take a risk that the firm’s expenses
may exceed its revenues.
Shareholders specialize in managing their investment risk.
Those managing small firms also own a significant percentage
of the firm and there is often less separation between ownership
and managerial control. Meanwhile, in a large number of family
owned firms, ownership and managerial control are not
separated at all. The primary purpose of most large family firms
is to increase the family’s wealth.
The separation between owners and managers creates an
agencyrelationship. An agency relationship exists when one or

more persons hire another person or persons as decision-
making specialists to perform a service. As a result an agency
relationship exists when one party delegates decision- making
responsibility to a second party for compensation. Other
examples of agency relationships are consultants and clients and
insured and insurer. An agency relationship can also exist
between managers and their employees, as well as between top-
level managers and the firm’s owners.
The separation between ownership and managerial control can
be problematic. Research has shown a variety of agency
problems in the modern corporation. Problems can surface
because the principal and the agent have different interests and
goals. Problems also surface when an agent makes decisions
that result in pursuing goals that conflict with those of the
principals.
Managerial opportunism is the seeking of self- interest with
guile. Opportunism is both an attitude and a set of behaviors.
Principals do not know beforehand which agents will or will not
act opportunistically. As a result, principals establish
governance and control mechanisms to prevent agents from
acting opportunistically. The agency relationship suggests that
any time principals delegate decision- making responsibilities to
agents; the opportunity for conflicts of interest exists.
The potential conflict between shareholders and top- level
managers shown along with the fact that principals cannot
easily predict which managers might act opportunistically,
demonstrates why principals establish governance mechanisms.
However, the firm incurs costs when it uses one or more
governance mechanisms. Agency costs are the sum of incentive
costs, monitoring costs, enforcement costs, and individual
financial losses incurred by principals.

5
Ownership concentration is defined by the number of large-
they own.Large- block shareholders typically own at least five
percent of a company’s issued shares. However, in recent years,
the number of individuals who are large- block shareholders has
declined. Institutional owners have replaced individuals as
large- block shareholders.
Ownership of many modern corporations is now concentrated in
the hands of institutional investors rather than individual
shareholders. Institutional owners are financial institutions such
as mutual funds and pension funds that control large- block
shareholder positions. Due to these prominent owner-ship
positions, institutional owners, as large- block shareholders,
have the potential to be a powerful governance mechanism.
Research has shown that institutional and otherlarge- block
shareholders are becoming more active in their efforts to
influence a corporation’s strategic decisions. This is unless they
have a business relationship with the firm.
6
Board of Directors
Shareholders elect the members of a firm’s board of directors.
The board of directors is a group of elected individuals whose
primary responsibility is to act in the owners’ best interests by
formally monitoring and controlling the firm’s top- level
managers. Those elected to a firm’s board of directors are
expected to oversee managers and ensure that the corporation
operates in ways that will best serve the stakeholders’ and
owners’ interests. Evidence has shown however that boards
have not been highly effective in monitoring and controlling
top- level managers’ decisions and subsequent actions.

In addition to their monitoring role, board members increasingly
are expected to provide resources to the firms they serve. These
resources might include personal knowledge, expertise or
relationships with a wide variety of organizations. Generally,
board members are classified into one of three groups. Insiders
are active top- level managers in the company who are elected
to the board because they are a source of information about the
firm’s day- to-day operations. Related outsiders have some
relationship with the firm that may create questions about their
independence. However, these individuals are not involved with
the corporation’s day- to- day activities. Outsiders provide
independent counsel to the firm and may hold top- level
managerial positions in other companies or may have been
elected to the board prior to the beginning of the current CEO’s
tenure.
A situation in which an individual holds both the CEO and chair
of the board title is called CEO duality. Yet, having a board that
actively monitors top- level managers’ decisions and actions
does not ensure high performance. The value that the directors
bring to the company also influences the outcomes. Having a
large number of outside board members can also create some
problems. Outsiders can, however, obtain valuable information
through frequent interactions with inside board members and
during board meetings to enhance their understanding of
managers and their decisions. Because they work with and lead
the firm daily, insiders have access to information that
facilitates forming and implementing appropriate strategies.
Evidence shows that boards with a critical mass of insiders
typically are better informed about intended strategic
initiatives, the reasons for the initiatives, and the outcomes
expected from pursuing them.
Because of the importance of boards of directors in corporate
governance and as a result of increased scrutiny from
shareholders, the performances of individual board members

and of entire boards are being evaluated more formally and w ith
greater intensity. The demand for greater accountability and
improved performance is stimulating many boards to voluntarily
make changes. Some of these changes in clued the following:
Increase in the diversity of the backgrounds of board members;
Strengthening of internal management and accounting control
systems;
Establishing and consistently using formal processes to evaluate
the board’s performance;
Modifying the compensation of directors; and
Creating the lead director role.
7
Board of Directors, continued
The compensation of top- level managers, and especially of
CEOs, generates a great deal of interest and strongly held
opinions. Some believe that top- management team members
and certainly CEOs have a great deal of responsibility for a
firm’s performance and that they should be rewarded
accordingly. On the other hand some think that these
individuals are greatly overpaid and that their compensation is
not as strongly related to firm performance. There are three
internal governance mechanisms that seek to deal with these
issues. Executive compensation is a governance mechanism that
seeks to align the interests of managers and owners through
salaries, bonuses, and long- term incentives. Long- term
incentive plans are an increasingly important part of
compensation packages for top- level managers, especially those
leading U. S. firms. Using long- term incentives facilitates the

firm’s efforts to avoid potential agency problems by linking
managerial compensation to the wealth of common
shareholders. Effectively designed long- term incentive plans
have the potential to prevent large- block stockholders from
pressing for changes in the composition of the board of
directors and the top- management team. Effectively using
executive compensation as a governance mechanism is
particularly challenging for firms implementing international
strategies.
As an internal governance mechanism, executive compensation
is complicated. The strategic decisions top- level managers
make are complex and nonroutine, meaning that direct
supervision is likely to be ineffective as a means of judging the
quality of their decisions. The result is a tendency to link top-
level managers’ compensation to outcomes the board can easily
evaluate. Another issue is that the effects of top- level man-
agers’ decisions are stronger on the firm’s long- term than its
short- term performance. This makes it hard to assess the effects
of their decisions on a regular basis. Lastly, a number of other
factors affect a firm’s performance besides top- level
managerial decisions and behavior. Unpredictable changes in
segments in the firm’s general environment can make it difficult
to separate out the effects of top- level managers’ decisions and
the effects of changes in the firm’s performance. Properly
designed and used incentive compensation plans for top- level
managers may increase the value of a firm in line with
shareholder expectations, but such plans are subject to
managerial manipulation.
8
The market for corporate control is an external governance
mechanism that is active when a firm’s internal governance

mechanisms fail. The market for corporate control is composed
of individuals and firms that buy ownership positions. They may
also purchase potentially undervalued corporations for the
purpose of forming new divisions in established companies or
merging two separate firms. An effective market for corporate
control ensures that ineffective or opportunistic top- level
managers are disciplined.
A hedge fund is a fund that can pursue many different
investment strategies such as the following:
Taking long and short positions;
Using arbitrage; and
Buying and selling undervalued securities for the purpose of
maximizing investors’ returns.
Activist pension funds, on the other hand, are reactive in nature,
taking actions when they conclude that a firm is
underperforming. In contrast, activist hedge funds are proactive,
identifying a firm whose performance could be improved and
then investing in it. You could say that hedge funds are better at
identifying undervalued companies, locating potential acquirers
for them, and removing opposition to a takeover.
9
Market for Corporate Control, continued
Hostile takeovers are the major activity in the market for
corporate governance mechanism. Not all hostile takeovers are
prompted by poorly performing targets, and firms targeted for
hostile takeovers may use multiple defense tactics to fend off
the takeover attempt. Historically, the increased use of the
market for corporate control has enhanced the sophistication
and variety of managerial defense tactics that are used to reduce
the influence of this governance mechanism.

The table on the slide lists a number of defense strategies.
10
Corporate governance is an increasingly important issue in
economies around the world, including emerging economies.
The globalization of trade, investments, and equity markets
increases the potential value of firms using similar mechanisms
to govern corporate activities. Because of globalization, major
companies want to attract foreign investment. This occurs when
foreign investors are confident that adequate corporate
governance mechanisms are in place to protect their
investments. Recognizing and understanding differences in
various countries’ governance systems along with noting
changes taking place within those systems improves the chances
that a firm will be able to compete successfully in the
international markets.
In many private German firms, the owner and manager may be
the same individual. In these instances, agency problems are not
present. Even in publicly traded German corporations, a single
shareholder is often dominant. Traditionally banks occupied the
center of the German corporate governance system. This is the
case in other European countries as well. German firms with
more than two thousand employees are required to have a two-
tiered board structure that places the responsibility for
monitoring and controlling managerial decisions and actions in
the hands of a separate group. All the functions of strategy and
management are the responsibility of the management board;
however, appointment to the board is the responsibility of the
supervisory tier. Corporate governance practices used in
Germany are changing. A manifestation of these changes is that
a number of German firms are beginning to gravitate toward U.
S. governance mechanisms. German firms with listings on U. S.

stock exchanges have increasingly adopted executive stock
option compensation as a long- term incentive pay policy.
The concepts of obligation, family, and consensus affect
attitudes toward corporate governance in Japan. In Japan, an
obligation may be to return a service for one rendered or it may
derive from a more general relationship. As part of a company
family, individuals are members of a unit that envelops their
lives. Many critics however believe that relationships like this
slow decision making. Consensus, another important influence
in Japanese corporate governance, calls for the expenditure of
significant amounts of energy to win the hearts and minds of
people whenever possible. Consensus is highly valued, even
when it results in a slow and cumbersome decision- making
process. Like in Germany, banks in Japan have an important
role in financing and monitoring large public firms. The main
bank has the closest relationship with a firm’s top-level
managers because it owns the largest share of stocks and holds
the largest amount of debt. The main bank provides financial
advice to the firm and also closely monitors managers. Due to
this, Japan has a bank- based financial and corporate
governance structure whereas the United States has a market-
based financial and governance structure.
China has a unique and large, socialist, market- oriented
economy. The government has done much to improve the
corporate governance of listed companies. The corporate
governance practices in China are changing and the country is
experiencing increasing privatization of businesses and the
development of equity markets. However, the stock markets in
China remain young and underdeveloped. There has been a
gradual decline in China in the equity held in state owned
enterprises. However the number and percentage of private
firms has grown, but the state still relies on direct and/ or
indirect controls to influence firms. Some research has
suggested that corporate governance in China may be moving

toward the Western model. Corporate governance in Chinese
companies will continue to evolve and interact to form
governance mechanisms that are best for their nation, business
firms, and citizens.
11
The three internal and single external governance mechanisms
are designed to ensure that the agents of the firm’s owners make
stakeholders. In the United States, shareholders are commonly
recognized as the company’s most significant stakeholders.
Top- level managers however are expected to lead their firms in
ways that will also serve the needs of product market
stakeholders and organizational stakeholders. As a result, the
firm’s actions and the outcomes should result in at least
minimal satisfaction of the interests of all stakeholders. Without
achieving a minimal satisfaction of its interests, an unsatisfied
stakeholder will withdraw their support from the firm and
provide it to another.
The decisions and actions of the board of directors can be an
effective deterrent to unethical behaviors by top- level
managers. Research suggests that the most effective boards set
boundaries for their firms’ business ethics and values. Once the
boundaries for ethical behavior are determined the board’s
ethics- based expectations must be clearly communicated to the
firm’s top- level managers and to other stakeholders. As agents
of the firm’s owners, top- level managers must understand that
the board, acting as an internal governance mechanism, will
hold them fully accountable for developing and supporting an
organizational culture in which ethical behaviors are permitted.
Through effective governance, top- level managers are able to
help their firm select and use strategies with a high probability

of resulting in strategic competitiveness and earning above-
average returns.
Please go to the next slide
12
Check Your Understanding
13
Summary
We have reached the end of this lesson. Let’s take a look at
what we have covered.
First, we discussed separation of ownership and managerial
control. We defined corporate governance as a set of
mechanisms used to manage the relationship among
and performance of organizations. We learned that originally U.
S. firms were managed by founder- owners and their
descendants. It wasn’t until firms became larger that the
managerial revolution led to a separation of ownership and
control in most large corporations. We saw that the separation
of ownership and managerial control allows shareholders to
purchase stock. We later discussed the importance of managing
investment risk and agency relationships. We also took a closer
look at some issues that may arise from the separation between
ownership and managerial control.
Next, we went over ownership concentration. We saw that
ownership concentration is defined by the number of large-
they own. We noted that large- block shareholders typically own
at least five percent of a company’s issued shares. We also
learned that the ownership of many modern corporations are
now concentrated in the hands of institutional investors rather
than individual shareholders.

Then we looked at the board of directors. We saw that
shareholders elect the members of a firm’s board of directors.
The board of directors has the responsibility to act in the
owners’ best interests by formally monitoring and controlling
the firm’s top- level managers. In addition to their monitoring
role, board members increasingly are expected to provide
resources to the firms they serve. We went over some various
types of resources and three group classifications of board
members. We then talked about changes that are trying to be
implemented to enhance board member accountability as well as
compensation of top-level managers and CEOs.
Later we focused our attention on the market for corporate
control. We saw that the market for corporate control is an
external governance mechanism that is active when a firm’s
internal governance mechanisms fail. We noted that the market
for corporate control is composed of individuals and firms that
buy ownership positions. We later talked about different types
of funds such as a hedge fund. We also discussed the occurrence
of hostile takeovers and defense strategies.
We then discussed international corporate governance. We
looked at German, Japanese, and Chinese corporation structur e
along with how they function. We noted different characteristics
of each and gained a better understanding of how each country
completes its business.
Finally to conclude the lesson we looked at governance
mechanisms and ethical behavior. We learned about three
internal and one external governance mechanisms that are
designed to ensure that the agents of the firm’s owners make
stakeholders.
This completes this lesson.

Dr Udo C Braendle
Topic 8: Corporate Social Responsibility – CSR
An Introduction to CSR (Reporting)
Reference:
Braendle,
CSR- More than
Corporate
Storytelling?
Page 2
Dr Udo C Braendle
Introduction
Did you ever expect a corporation to have a conscience, w hen it
has no
soul to be damned, and no body to be kicked?
Edward, First Baron Thurlow 1731-1806

Lord Chancellor during King George III’s reign.
Page 3
Dr Udo C Braendle
Introduction (Continued)
▪ Craig Carter, Rahul Kale and Curtis Grimm define corporate
social
responsibility as follows
– “[Corporate] social responsibility deals with the managerial
consideration
of non-market forces or social aspects of corporate activity
outside of a
market or regulatory framework and includes considerati on of
issues such
as employee welfare, community programs, charitable
donations, and
environmental protection.”
Page 4
Dr Udo C Braendle
Corporate Power and Responsibility

Corporate Power: Capability of corporations to
influence government, the economy, and society,
based on their organizational resources.
The tremendous power of the world's leading
corporations has both positive and negative effects.
Positive
• More resources.
• Lower cost production.
• New products.
• Technologies.
Negative
• Disproportionate political
system.
• Dominant public course.
• Divide markets.
• Squash competition.
Page 5
Dr Udo C Braendle
Comparison of Annual Sales Revenue and the GDP

for Select Multinational Enterprises and Nations in $
Billions
Access the text alternative for these images.
Page 6
Dr Udo C Braendle
Corporate Power and Responsibility1
Iron law of responsibility says in
the long run, those who do not
use power in ways that society
considers responsible will tend to
lose it.
Page 7
Dr Udo C Braendle
The Meaning of
Corporate Social Responsibility
Act in a way that enhances
society and its inhabitants and be
held accountable.
Acknowledge any harm to people

and society and correct it if
possible.
May forgo some profits if its
social impacts hurt its
stakeholders or if its funds is
usable for a positive social
impact.
Page 8
Dr Udo C Braendle
The Origins of
Corporate Social Responsibility
• In the United States, the idea of corporate social
responsibility appeared around the start of the 20th
century.
• Corporations under attack for being too big, too
powerful, and guilty of antisocial and anticompetitive
practices.
• To use their power and influence voluntarily for broad
social purposes rather than for profits alone.
→ Example: Steelmaker Andrew Carnegie, Henry Ford.
→ Example: “new” philanthropists —Mark Zuckerberg,
Priscilla Chen.

Dr Udo C Braendle
Phases of Corporate Social Responsibility
• Frederick provides expanded framework for
understanding the evolution of the CSR concept.
• Divided into 4 phases:
Corporate
Social
stewardship
(1950s-
1960s)
Corporate
social
responsiven
ess (1960s–
1970s)
Corporate/
business

ethics (1980s
– 1990s)
Corporate/
global
citizenship
(1990s –
2000s)
Page 10
Dr Udo C Braendle
Evolving Phases of Corporate Social
Responsibility
Access the text alternative for these images.
Page 11
Dr Udo C Braendle
Characteristics of Sustainability – Triple Bottom Line
•Environmental

•Economic
•Social
Responsibilities of a Business Firm
Page 12
Dr Udo C Braendle
An Expanding CSR Agenda
– Eco-efficiency & environmental protection
– Occupational health and safety
– Child labour
– Community assistance (“corporate social investment” –
health and education);
– CSR in the supply chain
– Ethical investment
– Labour rights
– Human rights
– Ethical & Fair trade
– Poverty reduction

Dr Udo C Braendle
▪ Carroll’s four-part definition – Responsibilities of a Business
Firm
– “The social responsibility of business encompasses the
economic, legal,
ethical and philanthropic [discretionary] expectations placed on
organizations by society at a given point in time”.
Responsibility Societal
Expectation
Examples
Economic Required Be profitable.
Maximize sales,
minimize costs, etc.
Legal Required Obey laws and
regulations.
Ethical Expected Do what is right, fair
and just.
Discretionary

(Philanthropic)
Desired/
Expected
Be a good corporate
citizen.
Responsibilities of a Business Firm
Page 14
Dr Udo C Braendle
Enlightened Self-Interest
Economic and social goals come
together in companies that practice
enlightened self-interest.
The company’s self-interest in the long
term to provide:
• True value to its customers.
• Help for its employees to grow and
behave responsibility.
→ Example: Nestlé.

Dr Udo C Braendle
The Corporate Social Responsibility
Question
In Support for Corporate Social
Responsibility
Concerns about Corporate Social
Responsibility
• Balances corporate power with
responsibility.
• Discourages government
regulation.
• Promotes long-term profits for
business.
• Improves stakeholder
relationships.
• Enhances business reputation.
• Lowers economic efficiency and

profit.
• Imposes unequal costs among
competitors.
• Imposes hidden costs passed on
to
• stakeholders.
• Requires skills business may lack.
• Places responsibility on business
rather than individuals.
Page 16
Dr Udo C Braendle
Advantages of CSR
Public Image
May help in
growth
Attracts better
human resources
Fulfills public

expectations of
business
Provides better
environment for
business
Helps in avoiding
government
regulation
Maintains
balance of
responsibility
with power
Page 17
Dr Udo C Braendle
Limitations of CSR
What about
profit
maximization?
Lack of social
skills
Business has

enough power
Social
overhead cost
Lack of
accountability
Lack of board
support
Page 18
Dr Udo C Braendle
Balancing Multiple Responsibilities
Multiple responsibilities of business include:
• Economic responsibilities.
• Social responsibilities.
• Legal responsibilities.
Challenge is to balance all three.
Successful firm is one which finds ways to
meet each of its critical responsibilities and
develops strategies to enable the
obligations to help each other.
Economic

responsibilities
Legal
Responsibiliti
es
Page 19
Dr Udo C Braendle
Business Reputation
Reputation refers to desirable or undesirable qualities
associated with an organization or its actors that may
influence the organization’s relationships with its
stakeholders.
The Reputation Index measures a company’s social
reputation.
• It evaluates critical intangible assets that constitute corporate
reputation.
• Rating Research, a British firm, distributes the index and
ratings to interested parties.
Page 20

Dr Udo C Braendle
Sustainability Reporting – Global
Reporting Initiative (GRI)
▪ http://www.globalreporting.org
▪ Goal
– to produce a report that “reflect[s] the organization’s
economic, environmental and social impacts” and should
include all material information
• materiality is defined as information that could “substantivel y
influence the assessments and decisions of stakeholders”
▪ UNEP sponsored but independent
▪ Facilitate comparisons
– over time
– across organizations
http://www.globalreporting.org/
Page 21
Dr Udo C Braendle
Social Reporting

• When a company decides to publicize information
collected in a social audit.
• Transparency: When companies clearly and openly
report their performance—financial, social, and
environmental.
→ Examples:
Australia.
New Zealand.
• An emerging trend in corporate reporting is the
integration of legally required financial information
with social and environmental information into a single
integrated report.
Page 22
Dr Udo C Braendle
Trends in Corporate Social Reporting
• By 2017, a majority of the largest companies included
information of corporate social responsibility in their
annual financial reports.
• This reflected a dramatic rise in integrated reporting,
from 8 percent in 2008 and 51 percent in 2013 to 78
percent by 2017.
• Ethical drivers replaced economic considerations (80
percent versus 50 percent) as the primary motivator
for publishing reports over the past decade.

• Stakeholder engagement increased from about 33
percent to nearly 66 percent, with financial analysts
and investors now getting involved.
Page 23
Dr Udo C Braendle
To conclude: CSR survey with European
Business Students
▪ Project title: “Strengthening a culture of Corporate Social
Responsibility in
European Universities”
– Cooperation of Austrian ICEP, Italian NGDO, sponsored by
the European
Commission
▪ Objective: Raise awareness in students
▪ Questionnaires with 14 closed questions to determine the
status quo of the
perception of CSR within the student community
– 942 questionnaires were returned after 25 presentations
▪ Question 1: Are you aware of CG/CSR

– 50% awareness in 2005
– ? in 2019
Page 24
Dr Udo C Braendle
CSR survey – Q&A
Question 2: What is CSR in
your opinion?
Question 2: What is CSR?
11%
27%
51%
9%
2%
0%
A Marketing tool
A management
strategy

Value approach
New trend
Hot air
No answer
Source: Braendle/Gruber

Home Learning Week 81.) What is Corporate Social Responsibilit

Recommended

Recommended

More Related Content

Similar to Home Learning Week 81.) What is Corporate Social Responsibilit

Similar to Home Learning Week 81.) What is Corporate Social Responsibilit (20)

More from SusanaFurman449

More from SusanaFurman449 (20)

Recently uploaded

Recently uploaded (20)

Home Learning Week 81.) What is Corporate Social Responsibilit