Business Interview Insights

with a maximum of 2000 words.
This course is about Business and Society. You (each student)
are to visit (meet with, interview) a person outside your own
company (also no relatives or personal friends allowed) who is
engaged in a business activity that you can interview about
material and content covered in this course. Examples of
business positions that the interviewee could be engaged in
include:
Administrator (e.g. office administrator, non-profit
organization administrator, university or other learning
institution administrator, hospital administrator, etc.)
Agent or Broker (e.g. advertising agent, financial broker,
insurance agent, real estate broker, travel agent, purchasing
agent, etc.)
Business Owner (e.g. small business owner, owner of bank,
consulting firm owner, franchise owner, etc.)
Consultant (e.g. business consultant, financial consultant,
management consultant, project consultant, research consultant,
public relations consultant, etc.)
Distributor (e.g. retailer, wholesaler, shipping firm, etc.)
Manager (e.g. bank manager, office manager, small business
manager, hotel manager, franchise manager, sales force
manager, financial manager, accounting manager, marketing
manager, operations manager, project manager, etc.)
Professional - business (e.g. CPA accountant, banker, economic
advisor, financial advisor, management advisor, marketing
researcher, sales representative, loan officer, medical caregiver,
human resources personnel, etc.)
Service provider (e.g. accounting services, financial services,
marketing services, management services, Internet provider,
other electronic services provider, legal services, medical
services, oil and gas services, project services, utility services,
etc.)
Any other similar business position

First, to prepare for the interview, develop a list of questions or
topics you would like to discuss with your contact that pertain
to this course. A discussion board topic (in March) will be
devoted to a discussion of possible interview questions. The
interview should cover appropriate material (depending on the
interviewee) in this course. Read ahead the material in chapters
not yet covered in the course if this material is appropriate to
discuss with your chosen interviewee.
Second, write up the interview by answering the following 8
sets of questions/instructions: (make each set of
questions/instructions #1, #2, #3, #4, #5, #6, #7 and #8
appendix a section of the paper with a specific recognizable
section heading for each in the paper):
#1) Summarize the more interesting responses to your
interview concerning topics discussed in the interview that
pertain to the content and material in this course. Were there
any surprises? Explain. Do NOT include a word-for-word
transcript of the interview. I am interested in reading your
summary of the interview specifically as it pertains to content
and material in this course. (Remember to use appropriate
business terms and weave course concepts and material into
your answers for questions #1 through #6).
#2) Critically analyze the interviewee responses. Do you feel
your contact really understands his/her field as it pertains to
content and material in this course? Explain. Did your contact
reinforce points in the text or contradict the text? If so, in your
opinion, which is correct? Be convincing.
#3) Did you learn anything from the interview that pertains to
content and material in this course? Explain. Be specific.
#4) Develop a rating scale before the interview and rate the
interviewee (after you have left the interview) on job
performance and any other criteria (items) you feel are

appropriate given the course material and the interviewee’s job
activity. Give your results and explain in some detail why you
chose the specific criteria (items) on the rating scale and what
the interview scored on each criterion (item) of your rating
scale. (I would suggest you do NOT mention this aspect of the
write-up to your interviewee.) [Note: rating items are not
ranking items. With ratings, one uses a scale such as 1-5 where
1 is poor and 5 is very good. Ranking is where one lists the
items in some type of order such as from bad to good.]
#5) Given what you have learned in this course, what concepts
or techniques covered in this course would you recommend your
interviewee adopt? Explain. Be specific and convincing.
Write this part as if you were a consultant hired by your
interviewee to review his or her work and make
recommendations.
#6) Would you recommend this type of business activity (the
job activity your interviewee discussed) to a fellow graduate
student seeking employment? Explain.
#7) Give the name, company and location of your contact.
#8) In an appendix to the paper, list the questions you asked
the interviewee. The words in this appendix do not count in the
2000 word limit of the paper.
If you feel that your first interview does not give you enough
material to write a complete paper, contact a second person and
add the results of the second interview to your write-up. But,
remember, do not go over the 2000 word limit with the two
interviews.
Grading
1) Missing scope in that not all eight questions/sections of the
paper are answered (5 to 50% off depending on extent of what is
missing) and/or paper does not include appropriate,

recognizable section headings that make it unclear which part of
the paper is dedicated to answering which of the above 8
questions/sections (5 to 20% off).
2) Paper does not include appropriate course concepts and
material or only a few references to pertinent course content is
included (5 to 20% off). I specifically read
project papers and say ‘does this paper read as if someone who
has mastered the appropriate course material has written it?’
3) Paper fails to be convincing with little analysis and/or
specificity (5 to 20% off).
4) Paper does not include several thoughtful recommendations
that are well justified and flow logically from the write-up and
project material presented (5 to 20% off).
5) Paper is not well written, not consistent or clear; paper
includes grammar and spelling errors, typos, etc. (5 to 30% off
depending on extent). When answering the project questions, a
bullet (list) format or other similar formats that comprise your
answer are not appropriate. A list format rarely conveys to the
reading audience the full message the author intends. Well-
constructed sentences and paragraphs are necessary for clarity
when writing (5 to 20% off depending on extent) your answers.
Paper does not adhere to the word limit (5 to 15% off depending
on severity). Paper not submitted on time (10% off for each day
late for the first five days late and after five days late, the paper
will not be accepted and students receive a zero for the paper).
MBA530
Case Preparation Guidelines
General Guidelines:

During this course you will select and analyze three cases. The
first case is due in Module 3, the
second case is due in Module 5, and the third case is due in
Module 7. Choose one of the two
cases listed below under each module for your assignment:
For Module 3 (choose one):
Case 1, Chapter 2: Netflix: Push and Pushback in Streaming
Video
Case 2, Chapter 5: Compensation Controversies at AIG
Case 1, Chapter 9: Achieving Success in Virtual Teams
Case 2, Chapter 13: Customer Service at Nordstrom: A Way to
Mitigate Potential
Conflict
Case 1, Chapter 11: Oracle’s Larry Ellison: A Profile of Power,
Influence, and

Dominance
Case 2, Chapter 14: Alternative Work Arrangements: What Does
the Future Hold?
The case study assignment is intended to be completed as an
individual effort. Thus,
collaboration with anyone else on these case assignments is
considered a violation of the
academic honor code. Each case a nalysis is due at the end of
the module in which it is assigned
and must be turned into the course room Dropbox before Sunday
night at 11:59 PM EST/EDT).
Be certain to pay close attention to the case studies since
together they represent the largest point
contribution toward your final grade. In addition, keep in mind
that since you are graduate
students your instructor’s expectations are high. Before you
begin each case study, make sure
that you have worked through all the module materials and have
read the assigned reading along
with any relevant instructor notes or announcements that may
have been posted. After you have

submitted each case, be sure to read the instructor’s feedback so
that you can improve
subsequent case submissions.
Per Saint Leo University standard practice, all case papers are
submitted to Turnitin where they
will be automatically evaluated for percentage of original work
and potential plagiarism.
When you submit the case paper to the Dropbox, it will
automatically be submitted to Turnitin.
Hence, there is no additional work required on your part for the
assignments to be graded by
Turnitin.
You must use either Microsoft Word (*.docx) or R ich Text
Format (*.rtf) to submit your
assignments. RTF files can be created by all major word
processors and will allow you to see
changes made by using the "track changes" feature. Please keep
in mind that Plain Text (*.txt)
format is not acceptable for any assignment. Note that Turnitin
may assign this extension if it

does not understand what file type has been submitted.
Throughout the course you are
responsible for making sure that your assignment uploaded
successfully and that the assignment
has been received as a *.docx, or *.rtf file.
It is critical to remember that you are training to be a
management scientist and not a casual
observer. These cases are your opportunity to practice being
analytical and comprehensive as you
construct evidence-based arguments. To accomplish this
objective, an average question in a case
often requires several well-organized paragraphs (double-
spaced), creating a finished document
of two to four pages in length or a minimum of 1,000 words for
each case study submission. Most
of the answers to the case questions contain a number of
applicable theories and you are expected
to address each theory in your analysis in addition to
illustrating how these theories apply in the
real world.
Content Guidelines:
In your case analysis content remember that thoroughly
answering the case questions is a

requirement, but thoroughness is not always sufficient to earn a
passing grade on a case
analysis. The minimum scope your case analysis must contain a
minimum of 1,000 words.
However, the analysis must be of sufficient depth that you are
able to demonstrate significant
knowledge and analytical skills in the process. The best way to
demonstrate these critical
thinking skills is to begin with a clear explanation of the
relevant theories, ideally in your own
words. Using some quotes from the textbook in proper APA
Style can help, but can also leave
the instructor wondering if you understand the material enough
to explain it to someone else.
Hence, use more of your own individual work and no more than
15% - 18% direct quotations.
After explaining all relevant concepts to the reader, you may
begin to answer the questions
accurately and thoroughly. While addressing the case questions
you must demonstrate the ability
to apply the theory to a real situation. Sometimes it helps to
envision the answer as a matrix of
points to comment on. For example if there are three sub-points

to a theory being applied, and
four elements (people, situations, etc.) presented in the case,
then there are 12 possible points of
discussion in that one answer alone. If you just include a sample
of these possible areas of
comment, you will not earn an “A” grade. Cases are intended to
be mechanisms for you to
demonstrate mastery of chapter concepts by methodically
describing all the applicable theoretical
concepts in the correct terminology. In addition, the cases study
provide a detailed framework of
real-world situational issues for you to thoroughly analyze and
provide a detailed assessment of
how all the issues are explained within the theoretical
framework you are currently studying. The
result of this case analysis endeavor is that both the author and
the reader attain a better
understanding of the applicable theories and how they apply in
the real world.
In a case analysis you must assume that the reader (your
audience or the instructor) knows
nothing about the case or the relevant theories.

Hence, if you make a premise that is not explained and/or
supported with case evidence, the
instructor will assume that you don’t know enough about the
premise to elaborate the point.
Similarly, if you make a short generalized statement, the
instructor will assume that you only
possess a superficial understanding of the concept and that you
are unaware of the details and the
specific issues. Your answers should be clear, concise, and
thorough enough for anyone to
understand. Also, your premise must be persuasive enough to
convince a stubborn adversary.
Treat these cases with the same rigor and approach as research
papers and be certain that the
papers are thoroughly documented with scholarly evidence for
each assertion or premise that you
make. Imagine that the case responses are arguments in a court
of law and it is your job to back
up everything you say with previous case evidence and/or facts.
Each case analysis assignment must be supported by research of
the concepts being presented that

is beyond what is covered in the courses textbook. This research
should assist you in improving
your ability to understand course concepts or case details and
assist you in constructing detailed
and well-reasoned answers to the case questions. Your needs
will depend on your own experience
and comprehension relative to the specific case. Choose sources
that are credible and directly
relevant to the case and do not rely on quoting other people’s
opinions without your own
explanation. When any theory or evidence comes from an
outside source (e.g., course textbook,
research article, etc.), you must give credit by using a formal
references section with properly
formatted citations and quotations. Thus, each case assignment
will always contain a reference
section which also includes the course textbook as a source in
addition to any other journals or
books used as a source. All case documents must strictly adhere
to APA formatting and style
which is explained more thoroughly in the following section.
APA Requirements:

Make sure to follow the basic APA page format for your cases.
Basic APA requirements require
the use of:
1. One-inch margins all around the document
2. Times New Roman Font that is 12-point size
3. Consistent double-spacing throughout the document between
all items including headings
and paragraphs. There is no extra white space in an APA
document
4. A "Reference" section (do not use “Works Cited”,
“Bibliography”, “Sources”, or any
other heading titles)
5. Standard essay type formatting with indented first line in
paragraphs
6. Headings and sub-headings to break up your case analysis
such as Introduction or
Background, Current Issues or Analysis, Recommendations or
Conclusion, and
Reference section (use one or the other of the aforementioned
headings…not both; case
analyses are not presented in question and answer layout)
7. A minimum of five citations in the case analysis assignment
with a minimum of one
direct quote
8. A minimum of three sources in the Reference section (one is
the textbook) and be sure

to list your sources in the Reference section
You are expected to use proper writing techniques and correct
course terminology in your
answers. This standard is essential in order for you to be clear
and accurate in your comments.
As a part of this precision, you should avoid grandiose
statements, exaggerations, and
statements that generalize certain case conditions to other
situations. Even if a cause-and-
effect relationship seems to be true in one case situation, you
cannot make the general
statement that, for example, happy employees are more
productive, unless you cite data to
support your position. Common sense can be wrong, and every
situation is different; an
effective set of policies for the given situation may or may not
work elsewhere. Every factual
assertion will be inspected for validity in light of the relevant
academic research and case
facts.

Although there is no maximum limit to the number of sources
that may be referenced, each
case analysis should be supported by at least three relevant and
credible sources. Additionally,
there are approximate limits on quotations for this course which
means that you should not use
more that 15% - 20% direct quotes. When more than 20% of a
paper is not original, it often
indicates a problem, even after noting that the Turnitin scores
include an accumulation of
random matches. Even when sources are properly cited and
some of the words are changed, it
raises the question as to how much original thinking was used
for the paper.
There is a big difference (in learning and difficulty) between
starting with a blank page and
writing your thoughts, and building the paper around quotes,
paraphrased sources, and the
altered wording of another author. As an author, you only have
two choices when using
someone else’s work: include it in entirely in your own words
and cite the source, or include it

as a direct quotation (with exact wording and punctuation) using
quotation marks and a
citation with a page number to cite the source. When simply
changing someone else’s words,
you can end up somewhere between these two choices. Thus, in
addition to plagiarism, high
scores in turnitin.com can result from incorrect
quotation/citation methodology, or from using
rearranged words similar to your sources, causing it to look
much like other papers.
Unfortunately, these are not characteristics of graduate-level
writing; when an argument relies
largely on a collection of words or thoughts from elsewhere, it
loses uniqueness,
professionalism, and impact.
Chapter 2 – Managing Public Issues and Stakeholder
Relationships
In the Chapter 2 lecture notes, we cover the following topics:
Discussion of public affairs management
The concept of environmental scanning

Description of the external environment
Managing the external environment
PUBLIC AFFAIRS MANAGEMENT
Public affairs management is the active management of the
company’s external
relationships. External relationships are all things external to
the company such as
suppliers, competitors, governments, the media, the public, and
so on. Much of public
affairs is communications between the company and the many
external groups just
mentioned. (Note that, in most companies, external relations
with customers/
consumers are handled by the marketing department.)
It is recommended that companies manage their communications
and dealings with
outside groups, not just react to outside pressures. Certainly
Johnson & Johnson /
McNeil, the maker of Tylenol, did a much better job managing
the arsenic crisis (1982)
than Merck did handling the Vioxx crisis in about 2004
(arthritis medicine that may or
may not have a side effect of causing heart problems). But,
Johnson & Johnson seems
to have done an incredibly poor job managing the more recent
crisis (2011) of Tylenol
having a moldy smell.

ENVIRONMENTAL SCANNING
One way to keep in front of potential problems or opportunities
is to identify public
issues that may require attention and action. Continuously
analyzing the external
environment provides leaders and managers with the
information necessary to make
effective decisions. Pfizer, for example, heavily advertised
Celebrex, a similar drug to
Vioxx, when Merck’s Vioxx was being withdrawn from the
market. When making
Celebrex business decisions, hopefully, Pfizer managers
considered what would
happen to Pfizer if future medical trials showed that Celebrex
creates some of the same
side effects as Vioxx or other side effects equally as worrisome.
The Volkswagen emissions scandal is an incredible story of
profits over environmental
concerns. The massive Takata air bag recall has caused the
company to file for
bankruptcy. The US Food and Drug Administration (FDA)
recalls drugs. In some cases,
companies suppress early indications of a problem, but, in the
end, have a bigger
problem. Why, because the company could have fixed the
problem during the early
warning period and not had a massive issue later. Sometimes,
current managers need
to deal with mistakes of previous managers, and this can be

very difficult to do.
EXTERNAL ENVIRONMENT
Each textbook seems to divide the external environment into
different groups or factors.
Our text covers numerous external environmental factors
including:
Competitor
Customer and demographic trends
Economic
Geophysical (natural)
Legal
Ethical
Political (governments - federal, state and local)
Social (culture, language and beliefs)
Technological
Global (international)
I have added (to the textbook environmental factors) the items
in blue, which make the

list of environmental factors a little more complete. These
factors will be discussed in
greater detail in later chapters to this course.
The firm does NOT have control of the factors and forces that
exist outside the firm.
And, these outside factors and forces seem to be always
changing. Therefore, the firm
must be aware of these uncontrollable factors and forces and
design its business
strategies and public affairs activities to meet the challenges
brought about by these
ever-changing outside factors and forces.
Yes, the firm can try and influence factors and forces that exist
outside the firm. This
can be done through such actions as lobbying lawmakers and
educating the public.
These actions will be discussed later in the course.
MANAGING THE EXTERNAL ENVIRONMENT
Part of managing the external environment is to understand
where the external
environment fits with the Strategic Planning Process. To begin
the thought process,
effective managers develop a plan. The term Strategy usually is
reserved for long-term
plans of at least 1 year but could be 2, 5, 10 or more years in
the future. The term
Tactics usually applies to plans that are short-term, 1 year or
less.

Below is a typical outline of the Strategic Business Process.
This outline shows how
the company mission and goals coupled with an analysis of the
external and internal
environment lead to developing strategies that build on
strengths and opportunities and
minimize threats and weaknesses. Note that in the ultimate
strategic plan, the
successful organization exploits its strengths and opportunities
and changes its threats
into opportunities and its weaknesses into strengths. Obviously
this is not easy to do in
a competitive world.
1. Business goals, objectives and mission
2. Situation analysis
a) Factors external to the firm
i) Environmental factors such as economic, geophysical, legal,
political,
social, and technological
ii) Industry analysis – competitors, suppliers and distributors
iii) Customer and market analysis – both business customers
and ultimate
consumers plus demographic trends
b) Factors internal to the firm
i) Company situation – resources, skills, competitive
advantages, capital
investment, and financial position

ii) SWOT analysis – strengths, weaknesses, opportunities and
threats
3. Strategic alternative formulation
4. Strategic business program
a) Specific goals and objectives of the plan
b) Financial plan
c) Operations plan
d) Marketing plan
e) Personnel plan
f) Organizational plan
5. Strategic plan financial projections, implementation and
control
Strategy is a carefully developed plan created by the firm to
meet its business goals and
objectives. This plan is usually long-term in nature and, if
pursued, is costly to reverse.
Competitive companies develop strategic plans regularly
(annually, bi-annually, etc.).
The purpose of these plans is to determine how the firm will
meet its goals and
objectives over the next several years.
Firms should consider all the relevant environmental factors
before making any strategic

decisions. It is possible for some environmental factors to be
favorable to the firm’s
situation and, at the same time, some to be unfavorable. The
firm needs to weigh all
the pros and cons before determining its best alternatives.
Environmental factors that are of particular importance or have
a major influence on a
company are called driving forces. Typically, there are three to
five environmental
factors that greatly impact the company’s strategic plans. In the
case of Merck and
Pfizer, factors such as new medical research (technology),
consumers importing drugs
from Canada (global), and the Food & Drug Administration
(FDA) procedures for drug
testing (political – government) have a profound influence on
the strategy of both
companies. Similarly, in the case of Volkswagen, factors such
as laws about pollution
(legal), technology availability to by-pass emissions tests,
consumers outside of
Germany buying Volkswagen cars (global), and regulatory
organizations (political –
government) had an influence on the strategy of the company.
COMPANY IMAGE
The overall image of a company can help or hinder the firm’s
public affairs
management. Part of a company’s strategy to influence the
external environment
should be to develop a favorable corporate image. Corporate
image is the overall

perceptions that stakeholders have about the company. In all
probability, a company
has an image whether the company has had a hand in developing
that image or not.
The actions a company takes are bound to create an image in
stakeholders’ minds
about the organization. Since companies most likely want a
favorable image among its
stakeholders, managing the perceived company image of its
stakeholders is a very
good idea. Poor management can change a company’s image.
Certainly, the
Volkswagen scandal, the Tylenol recalls, and the many recalls
Toyota faced over the
past five years have changed some minds about the quality of
products created and
sold by these companies.
Copyright © 2017 by Linda A. Hayes, Ph.D. All rights
reserved. Portions of these
notes are based on ‘Business and Society: Stakeholders, Ethics,
Public Policy,’
Lawrence and Weber, 15th, McGraw-Hill, New York: 2017.

Chapters 5 & 6 – Ethics and Ethical Reasoning
Businesses are not perceived by the public has having a good
track record in the area
of business ethics. Every industry and every business discipline
seems to be plagued
with wrong ethical decisions that have made the news headlines.
In Chapters 4 and 5,
we discuss business ethics with the goal of giving our students
the background
necessary to make good ethical business decisions in the future.
In these Chapter lecture notes, we will cover the following
topics:
What is ethics?
Why study ethics?
Why do ethical problems occur in business?
An example of an ethical business decision
Ethical philosophy
Ethical reasoning
Applications of ethical reasoning
Building ethical guidelines into an organization
Litmus tests of ethical conduct

Additional readings on ethical theories
WHAT IS ETHICS
Ethics is the study of rightness and wrongness in human actions
and the goodness and
badness of motives and ends. A Principle is a fundamental law
or doctrine, a guiding
sense of the requirements and obligations of right conduct.
Ethical principles are
guides to good and right behavior.
In the United States, ethics is not typically taught in schools. It
is usually acquired by
individuals from dealings with family, friends, church, role
models, groups, and so on.
There is no one ethic in the United States. This does complicate
the matter of ethics
and ethical behavior in business practices. Everyone has a
different idea what is
ethical, and everyone has a different background with different
experiences that have
influenced these ideas.
To me, ethics is right and good behavior that is beyond the law.
In the United States,
federal, state and local communities enact many laws that apply
to businesses.

Companies are expected to abide by the laws of the
communities they serve. Abiding
by laws, though ethical, is not what this course is all about
when discussing ethics. This
course discusses ethical issues and situations that are not
covered by current laws but
are times when businesses need to make decisions where present
legal requirements
do not really apply.
Business ethics, then, is the application of general guidelines
for good and right
behavior (that is beyond just obeying the law).
WHY STUDY ETHICS
Before we actually study ethics, we need to answer the question
why should businesses
be ethical? There are many reasons why businesses should be
ethical.
1) The first one is why not be ethical? Why not study ethics?
Is it automatically
true that unethical companies make more profits than ethical
ones? It is
somewhat bizarre to me that many people assume that unethical
behavior is the
more profitable (over ethical behavior).
2) Ethical behavior enhances trust in employees, shareholders,
the public, etc.,
all of the organization’s stakeholders. Trust is an important
commodity that

makes business dealings so much easier.
3) If an employee is caught and convicted of doing something
criminally illegal, a
strong ethics code of conduct in the organization may reduce
the jail time
imposed on the employee(s). Also, if a firm is caught doing
something illegal and
needs to pay monetary fines, sincere effort in ethical behavior
may help reduce
the dollar amount of the fines.
4) Ethical or right behavior minimizes harm to others. I do not
think any company
wants to cause the death of any of its stakeholders.
5) The added goodwill and more positive corporate image
resulting from being
known as an ethical company may help the company sell more
of its goods and
services. It may also give the company an advantage when
hiring highly
qualified people who are looking for ethical firms to work for.
EVERY BUSINESS DISCIPLINE HAS ETHICAL ISSUES
Unfortunately, every business discipline has its share of ethical
problems. Accounting
has been in the headlines a lot with the scandals of Enron,
WorldCom, Arthur Anderson,
etc. The financial discipline has also seen its share of headlines
with insider trading,

mutual fund late trading, stock exchange improper floor trading,
etc. Bernie Madoff is
one such person in the financial world who has been at the heart
of a major financial
scandal. Marketing always gets headlines such as
pharmaceutical companies offering
doctors gifts worth thousands of dollars so that these same
doctors will prescribe their
medicines for conditions not approved by the FDA.
I could go on. But, I think you get the point. There are a lot of
ethical issues out there in
the real world, and it involves every industry and every
discipline.
WHY ETHICAL PROBLEMS OCCUR IN BUSINESS
Business people are people who operate under the same self-
interest model we have
been discussing since Chapter 1 of this course. The conflict
comes when the self-
interest of the employee and the interest of the company may
not be the same. And
when this interest diverges at the time ethical decisions need to
be made, problems can
result. Two problem situations can occur here when interests
diverge. The individual
employee believes that personal gain is more important than
corporate guidelines and
promotes what will impact positively on his or her position even
if it is a possible
detriment to the company. But, the reverse can also happen,
where companies ask
ethical individuals to do something wrong (for the ‘good’ of the

company or group).
Competitive pressure is often cited as a reason for doing
something that is ethically
questionable. We need to do it because everyone else is doing
it. If we do not do what
the rest of the industry is doing, our stock price will go down
or, even worse, the
company will go bankrupt.
Short-term thinking is used with the belief that today is so much
more important than
tomorrow. We must make our quotas today. We cannot show a
decrease in profits this
quarter. The United States has been criticized by many
countries for our obsession with
small deviations in quarterly profits. Thus, when the company
tries to smooth out
earnings over several quarters, the Securities and Exchange
Commission says that
these companies are cooking the books.
Ethical issues can result from conducting business globally.
Some practices that are
allowed in one country are not looked on favorable in the U.S.
and vice versa. For
example, Nike has been accused of out sourcing the
manufacturing of their shoes to
companies in foreign countries that use sweat-shop labor. Or,
U.S. companies
aggressively advertise cigarettes to people in other nations of
the world when similar
practices may not be allowed in the Unites States.

Financial rewards may be based on unethical practices. For
example, managers and
professionals may be paid more by showing a bottom line that is
more attractive to
stockholders even though the real financial health of the
business is not being
represented.
Lack of knowledge can cause the wrong decision to be made.
At times ethical issues
may not appear to be as important as other company issues.
Often, little time is put into
studying the problem and developing the knowledge needed to
make an informed,
ethical decision.
Example of an ethical business decision:
The economy is down and so are profits. You believe that the
economy will turn around
in the next six months, but you think your stockholders are not
willing to wait that long
for company profits to turnaround. Do you lay off some of your
workforce, now, to lower
costs and increase the quarterly profits you report to your
shareholders? Or, do you
keep your workforce whole, at this time, with no lay offs,
because you believe that the
economy will pick up soon so that your entire workforce will be
busily employed with
company work in the near future?
A personal example: I think everyone can agree that
ExxonMobile (previously named
Standard Oil Company, Esso and Exxon) has been a very stable,

profitable company
for over 145 years (Standard Oil Co. founded in 1870). When I
first started working for
ExxonMobil, it was known as a cradle-to-grave company. The
story told to employees
was that, even during the depression of the 1930s, hardworking
and loyal employees
were not laid off by the company, if at all possible. Employees
were viewed as a major
asset (a priority) and were kept on, if possible, even during hard
times. Quarterly profits
went up and down, but employees were not laid off to even out
earnings reports. By the
time I left ExxonMobil 16 years later, the corporation had
completed at least three
rounds of lay offs (with some areas of the company workforce
reduced as much as 30-
50%). The management and philosophy of the company had
changed.
In today’s business environment, when times get even slightly
rough, it seems to me
that employees are the first to go in companies, not the last
resort when all other
attempts to increase revenue and/or lower costs have failed.
Given ExxonMobil’s track
record of profits for the past 145 years, I am not sure that the
current trend of U.S.
corporations laying off hardworking, loyal workers as
frequently as they do is the right,
ethical thing to do. Remember (as discussed in earlier lecture
notes for this class), part
of what society is looking for in the corporate form of business
is to provide stable jobs
for the workforce.

What do you think of the current trend of corporate cost cutting
to ensure a favorable
short-term profit picture?
ETHICAL THEORIES AND REASONING
It is a fact that business, at times, is judged by the general
standards of society. Since
Michael Milken’s (Wharton MBA) brush with the law, people
have been very critical
about what students are being taught in MBA programs. This
criticism has been
reinforced with other business scandals such as Enron (e.g.
Jeffrey Skilling, Harvard
MBA). Though our MBA program includes business ethics
topics in many of our
courses, we devote significant time in Bus6351 to cover this
topic.
Everyone seems to have different ideas concerning what is
ethical. In this course, our
goal is not to push some specific ideas as being more ethical
than others. Rather, our
goal is to stress material concerning ethical reasoning and the
process of making ethical
business decisions so that our students are able and willing to
make ethical decisions in
real life business situations.

ETHICAL PHILOSOPHY
Over at least the last 3000 years, thoughts and opinions about
ethics and ethical
reasoning have existed. Ethical reasoning is a process to decide
what ‘ought’ or
‘should’ be done. Modern study of ethics typically begins with
the Greek philosophers
such as Socrates, Plato and Aristotle. An example of an ethical
philosophy of that time
is the Hippocratic Oath and other writings of Hippocrates (460-
377 BC). Probably one of
the most famous of Hippocrates’ ethical doctrines is “First, do
no harm.”
Many religious books and creeds written in the past 3000 years
include thoughts on
ethics and ethical reasoning. The Golden Rule of “Do unto
others as you would have
them do unto you” is an example of ethical reasoning. Another
example is the Noble
Eightfold Path of Buddhism. Religious teachings from all over
the globe emphasize
virtues and the virtuous life with the idea that virtuous
individuals make ethical
decisions.
Immanuel Kant (1724-1804 AD) used logic to find what he
believed are universal,
rational and objective ethical principles. He reasoned that there
are categorical
imperatives and people should live by these imperatives.
Kant’s ‘Categorical Imperative I’ states that one should “Act as
if the maxim of your
action were to become through your will a general natural law.”

Kant’s ‘Categorical
Imperative II’ states that individuals should “Act in such a way
that you always treat
humanity… never simply as a means, but always at the same
time as an end.” For
Kant, an ethical decision is a two-step process: 1) determine
whether the principle to be
acted on can be made universal; and 2) determine if the action
treats individuals
involved as ends in themselves, not merely as means. The action
must pass both steps
to be ethical. Niccolo Machiavelli (1469-1527) basically
argued that the end justifies the
means, which is contrary to Kant’s second imperative that the
means (process used to
obtain an end result) may be as important as the end result.
Jeremy Bentham (1748-1832) developed the concept of
utilitarianism and this concept
was further defined by John Stuart Mill (1806-1873). This
doctrine concentrates on the
idea that the better ethical choice is the one that delivers the
greater good for the
greater number of people. John Locke (1632-1704)
concentrated on what he believed
are the inalienable rights of individuals.
See the end of these lecture notes for more readings on
Utilitarianism, Kant and rights.
ETHICAL REASONING

Ethical reasoning can be broken down into a number of
approaches. In these notes, we
cover three ethical reasoning approaches identified in the text as
follows: 1) principles
including utilitarian reasoning; 2) human rights; and 3) justice
and fairness.
Principles
A Principle is a fundamental law or doctrine, a guiding sense of
the requirements and
obligations of right conduct. Ethical principles are guides to
good and right behavior.
The Hippocratic Oath doctrine of “First, do no harm” can be
considered a principle and
so can the Golden Rule be considered a principle.
There are examples of CEOs standing for principles they feel
are important. J. C.
Penney opened up his stores in manufacturing towns of the
United States to be an
alternative source of goods in the ‘company’ town. His goods
were usually less
expensive than those sold in the ‘company’ store. He was very
aware of the average
worker’s need for quality goods at a reasonable price. In the
1960s, when credit cards
were first introduced, Mr. Penney did not allow the company to
accept them since he
believed that the use of credit cards would increase the cost of
goods sold and,
possibly, cause people to buy more than they could afford at
that moment. He did not
want people to go into debt when purchasing products, even if

his company made a
profit from the transaction. His guiding principles were to help
consumers acquire
goods without causing consumers harm by giving those
consumers an opportunity to
financially over-extent themselves. Eventually, the company
board overruled Mr.
Penney’s position and introduced credit cards to Penney’s
stores. I wonder how many
J.C. Penney-type companies there are in today’s business
environment, where the
world is awash with financial crises at the national, state and
household level.
ExxonMobil’s not laying-off workers in the depression years, if
at all possible, was a
guiding principle embraced by many company CEO’s. The
principle of helping good,
hardworking employees allowed a lot of families to make it
through a rough time in U.S.
history. It obviously did not hurt ExxonMobil, since the
company continues to report
profits yearly. Today, it seems that companies, when trying to
reduce costs, lay off
workers first. Is there some logic here that I am missing with
today’s first rule of cost
cutting is reducing the workforce?
Some Whistle-blowers use principles to guide their actions.
One example is reporting
on how pharmaceutical companies actually market to doctors.

Utilitarian Reasoning (a specific principle)
One specific principle often used is called Utilitarian Theory.
The basic maxim of this
theory is to deliver the ‘greater good for the greater number of
people.’ This really
sounds good. How can this fail as an ethical principle? This
sounds like an unbeatable
principle. However, it is in the details that this principle may
not do it all. Utilitarian
theory reasons that one adds up all the pluses and minuses, good
and bad, positive and
negatives, and picks the alternative that has the most pluses and
positives and does the
most good. Examples of Utilitarian thinking are:
1) Cost/benefit analysis
2) Environmental impact study
3) Majority rules
To make decisions using Utilitarian Theory, we need to:
1) List all alternatives.
2) List all the consequences to each alternative.
3) List all people affected by each alternative.
4) List criteria by which alternatives and consequences will be
assessed (what is

good and what is bad).
5) List how each criterion will affect (good or bad) each group
of individuals.
6) Rate or rank criteria in order of importance or priority (what
is most good,
second most good, worst, etc).
7) Calculate each alternative in terms of total goodness and
badness and by total
of people affected.
8) Find alternative that delivers the greatest good to the greatest
number of
people affected by decision.
As one can see, the above steps to find the alternative that
delivers the greatest good to
the greatest number is not an easy task. As we attempt to
measure each alternative,
we find that there are many problems with the approach
including:
1) We try to be as objective as possible when we attempt to
evaluate the
consequences. However, this may lead to a preference (or bias)
toward
quantifiable information beyond what is best. This quantifiable
bias may lead

decision makers to look at problems in a particular way to the
exclusion of other
possible and equally attractive alternatives. For example, when
hiring MBA’s,
companies may be more impressed with grade-point average or
GMAT scores
rather than by equally important but difficult to measure
characteristics such as
interpersonal skills or loyalty.
2) Since human minds are not infinite in ability, can we actually
think up all the
alternatives and consequences of our actions and properly place
a worth on
these alternatives and consequences? In the United States,
companies are
known to be very short-sighted in their analysis because of the
emphasis on
quarterly earnings.
3) The principle may actually promote the manipulation of
ratings, rankings and
priorities placed on criteria. Leaders may have a ‘gut feel’ what
the result should
be and the analysis is manipulate to give the desired result.
This happens, for
example, when communities develop environmental impact
statements about
developments they are already predisposed to want or not want.
4) The Utilitarian principle does not typically recognize the
satiation point in
humans (a point where more is not necessarily always better).
Greed and
gluttony can appear to bring more happiness than a life of
moderation and self-

restraint. Given the more is better philosophy, for example,
people eating two
hamburgers in a meal is better than one, eating three
hamburgers is better than
two, eating four is better than three, and so on. But, is it really
good for anyone
to eat four hamburgers at one meal and is four hamburgers at
one time really
four times the benefit of eating one hamburger?
5) There is no means to break a tie. Great injustices can result
in the distribution
of goods. For example, the maximum production of good might
be achieved by
awarding all or most to one group of people and none or very
little to other
groups. There is no guiding principle as to how to break ties in
this analysis.
6) It is often difficult to convince others that the completed
analysis is the best
one. Since there are multiple alternatives, multiple
consequences and multiple
people affected, how do we know that the final analysis is
actually the best one
available? In real life, time constraints typically end analyses
and force
decisions, perhaps before the analysis is fully completed.
In reality, I am not sure businesses often make decisions using
utilitarian theory of the

greatest good to the greatest amount of people. I am not sure it
is even a typical goal of
many businesses. Actually, businesses, as we have discussed
previously, typically
have the goal of maximizing shareholder wealth, which may be
in direct conflict with
utilitarian reasoning. In most cases, I believe that utilitarian
reasoning favors
maximizing the benefit considering all stakeholders.
Human Rights
A right is an entitlement. Human rights means that human
beings are entitled to
something. What these entitlements are vary from country to
country. Certainly in the
U.S., society recognizes that human beings are entitled to life,
liberty and the pursuit of
happiness (the Declaration of Independence, 1776). Other
rights that have evolved are
stated in the Bill of Rights of the U.S. Constitution (the first 10
amendments to the U.S.
Constitution) such as freedom of speech, a speedy trial, due
process, and so on.
As an example of human rights translated into business ethics,
in about 1961, President
John Kennedy (JFK) delivered a speech where he summarized
what he thought were
basic Consumer Rights. These Consumer Rights include the
right of safety, right of
information, right of choice, and right to be heard (more
information on this subject is
covered in Chapter 15 of this course). Here consumer is

defined as the buyer for the
household. There are more than 325 million people in the US
and about 115 million
households in the United States.
Basic survival instincts are behind consumers demanding safe
goods and services.
Information, or the lack there of, can also be a survival issue.
Certainly, people who
have severe allergic reactions to certain foods need reliable
information to avoid these
foods or suffer the consequences. The right to be heard (or
ability to sue) is directly
from the Bill of Rights (the first ten amendments of the US
Constitution). And, choice is
the need to be free to choose in an economic exchange (not
forced), which can be a
business application to the thoughts behind the Declaration of
Independence’s right to
liberty.
Since JFK, as a nation, we have begun looking into what may
constitute the rights of
patients in health care matters (Patients’ Bill of Rights). Here
congress and the country
continue to debate what rights patients have concerning medical
safety, information,
choice and court action.
http://www.forbes.com/sites/amino/2016/03/21/heres-
everything-you-need-to-know-about-the-patients-bill-of-
rights/#22f207867a3e
There have also been discussions on a Stockholders’ Bill of
Rights.

Many federal, state and local laws have been enacted to foster
consumer rights. Often,
these laws have come about, unfortunately, when it has been
shown that businesses,
left to their own devices, may not have provided consumers all
that consumers wanted
in the areas of safety, information, choice and ability to be
heard.
Justice and Fairness
Human beings are constantly asking whether a situation is fair
or just. But, what is
fairness? What is justice? John Rawls has an interesting way
of determining what is
fair and just. His theory of Distributive Justice is not so much a
doctrine of what is fair
and just, but how to go about finding out what is fair and just.
He proposes that all ethical decisions should be made with
decision makers in ‘the
original position.’ For him, this original position is where
people are behind a ‘Veil of
Ignorance.’ In this original position behind the ‘Veil of
ignorance’, decision makers do
not know their gender, race, social class, wealth, age, physical

appearance, physical
handicaps, parents, country of birth, socio-economic class, etc.
In other words, behind
the ‘Veil of Ignorance’ one does not know any particulars about
oneself. Rawls argues
that only in this position can a person make ethical and fair
decisions.
Here are a couple of examples of Rawls process of deciding
what is fair and just. If a
person does not know what position he or she holds in life,
because of self-interest, that
person would not deny the handicap access to buildings or
schools. A person behind
the ‘Veil of Ignorance’ would not choose discriminatory actions
of any kind since the
person making the decisions does not know what group he or
she belongs to in society.
Such a person would not squander precious resources since the
person does not know
what generation he or she belongs to. In other words, people
need to be in a neutral
position to make fair and just decisions about others.
APPLYING ETHICAL REASONING
The authors of the text believe (Figure 4.6) that ethical
reasoning should include a
review of virtues, principles (utility), rights, and justice. If all
four approaches (virtues,
principle of utility, rights and justice) lead to the same decision,
then the decision is
probably ethical. If the approaches lead to different
conclusions, then managers need
to prioritize the approaches and answers to come to a final

conclusion. Note that this
conclusion may appear unethical to some stakeholders.
If different ethical approaches lead to different conclusions, an
ethical dilemma may
result. An ethical dilemma is one where the choices are equally
unsatisfactory.
Sometimes, businesses need to make decisions even when the
alternatives are not
satisfactory. In these situations, decisions are made by
prioritizing the issues and
breaking the tie between the unsatisfactory choices.
REFINING ETHICAL DECISIONS
Okay, so a company cannot be perfect all the time. What
happens when a company’s
ethical decisions are questioned? What does a company do?
Obtaining information
and communicating with stakeholders is an important part of
relooking at decisions to
determine their effectiveness. This relook should include the
following steps:
1) Define the disagreement.
2) Engage in dialogue with stakeholders.
3) Develop good reasons for and against decision.

4) Value differences of the stakeholders.
5) Uncover assumptions of both the company’s position and the
stakeholders’
position.
6) Evaluate alternative views.
7) Modify decision if needed.
Also, when discussing ethical issues with stakeholders, a
manager should:
1) Be empathetic – Put oneself in the others’ shoes.
2) Show respect – Respecting others is a must in effective
human relations and
negotiation.
3) Be non-judgmental – Try to understand their point of view
even though you
may decide against it.
4) Be realistic – The company’s decisions may not really work
and need to be
changed.
BUILDING ETHICAL GUIDELINES INTO A COMPANY

Codes of Conduct are a great way for a company to convey its
principles to its
stakeholders. It is also a roadmap for employee conduct. In
addition, many companies
have procedures including mechanisms such as hotlines for
reporting ethical and other
employee issues and concerns. Ethical training is a must in
many organizations. Some
firms have appointed ethical officers or ombudspersons to
coordinate issues dealing
with ethics. The passage laws such as the Sarbanes-Oxley Act
may prompt companies
to consider developing a comprehensive ethics program.
GOING GLOBAL
Tackling ethical issues internationally adds another layer of
difficulty. Each country has
its own value system. Values are emotionally charged priorities
of what is worthwhile or
desirable. As businesses use the Utilitarian approach to ethical
decision making,
prioritizing issues is often necessary. Internationally, these
priorities may change from
country to country. Therefore, understanding what people value
in each country a
company enters is very important. Though a company can have
an international Code
of Conduct, organizations need to know the priority people in
each country place on the
issues included in the Code of Conduct. Cultural risk for the
organization, then, is the
amount of potential problems that may result from intercultural
interactions and

differences.
In addition, each industry in a country may have its own
cultural values. A common
practice or priority in one industry may not be the same in
another. For example, labor
issues may be much more of a priority in heavily unionized
industries in the United
States rather than in industries that have mostly open-shop
labor.
LITMUS TESTS FOR ETHICAL CONDUCT
In their article (‘Doing the right thing: business ethics and
board of directors,’ Director’s
Monthly, 1994, Vol. 18, No. 11, p.3), Driscoll and Hoffman
summarize what they believe
are litmus tests to determine whether conduct is likely ethical.
The Skunk Test – Does the conduct smell bad? Is it
questionable behavior?
The Child Test – Would I advise my own child (friend,
colleague, etc.) to do this?
The Newspaper Test – Would I like my board of directors
(parents, friends,
constituents, etc.) to read about this?

For additional readings concerning material and concepts in
Chapters
4 and 5, see the following: (Please note, for the exam, students
should know the names of the following philosophers and their
major
contribution to ethics, which can be found in these lecture notes
and
the assigned textbook readings. Students are not expected to
know
the details included in the following links for the exam.)
Jeremy Bentham and John Stuart Mill –
https://en.wikipedia.org/wiki/Utilitarianism
Immanuel Kant -
http://en.wikipedia.org/wiki/Categorical_imperative
John Locke - http://odur.let.rug.nl/~usa/B/locke/locke.htm
John Rawls -
http://www.wku.edu/~jan.garrett/ethics/johnrawl.htm
Again, please note that I checked the WWW links (URL
addresses) included in this
course’s lecture notes at the beginning of this semester to
determine if they are active.
If you find a WWW link in this course that does not work,
please email me and I will
correct the situation. Thank you, Linda Hayes
What do you think?

Are the following ethical? Why or why not?
1) Sending unsolicited credit cards in the mail to people with
poor credit.
2) Genetically altering food and not placing this fact on the
product label.
3) Advertising to youngsters.
4) Over-stating food costs on a business expense account.
5) Downloading music on the Internet without paying a fee.
6) Telling a small untruth in a job interview.
notes are based on ‘Business and Society: Stakeholders, Ethics,
Public Policy,’
Lawrence and Weber, 14th, McGraw-Hill, New York: 2014.
https://en.wikipedia.org/wiki/Utilitarianism
http://en.wikipedia.org/wiki/Categorical_imperative
http://odur.let.rug.nl/%7Eusa/B/locke/locke.htm
http://www.wku.edu/%7Ejan.garrett/ethics/johnrawl.htm
Chapter 1 – The Corporation and Its Stakeholders
For this course, we are using the text 'Business and Society:
Stakeholders, Ethics, and

Public Policy' by Lawrence and Weber, 15th edition to form the
basis for discussing
business and its role in society. We will be covering Chapters
1-11, 13, 14, 18, and 19
in this course. The text and the chapters that we will be
covering are divided into the
following sections:
Business, the corporation and society - Chapters 1, 2, 3 & 4
Business and the ethical environment - Chapters 5 & 6
Business and Public Policy - Chapters 7 & 8
Business and other environmental forces - Chapters 9, 10, & 11
Building relationships with stakeholders - Chapters 13, 14, 18,
& 19
OBJECTIVES OF CHAPTER 1
In Chapter 1 lecture notes, we cover the following topics:
The relationship between business and society
Motivations of people (society)
A look at our economic system
The corporation is one form of business
The relationship between businesses and their stakeholders
Forces change continuously and reshape the relationship

between business and society
Value creation and the value chain
BUSINESS A PART OF SOCIETY
The authors of this course’s textbook are almost apologetic in
their position that
business is part of society. I do not take this position nor do I
apologize for my position.
Society is people, and business is made up of people. (I do not
know of one business
entity that does not have at least one person involved in its
inception or operations.)
Therefore, business is part of society. Whether we or our
business leaders want to
acknowledge this or not, it is a fact of life and must be
understood and dealt with to be
competitive in a global environment.
Okay, we now acknowledge that business is part of society. But
what part does
business play and what part should business play in society?
These two questions
basically form the focus of this course. As discussed in the
introduction, in this course
students will be introduced to many concepts and material of
modern thinking that will
help students form opinions about these two questions. This
course will hopefully

prepare our students, our future business leaders, to
successfully navigate the many
troubled waters of today's business ventures and come out on
top in a global,
competitive environment.
WHO IS SOCIETY
Society, as we have learned, is people. And, people are
organized into different
societal groups. Take me for example. I own stock in several
companies (a very small
number of stocks). I work for the University of Houston -
Victoria. I purchase goods
and services. And, I live in Houston. I am part of society, and
I am also a member of
several groups that make up society. I have multiple roles in
society including the roles
of stockholder, employee, customer and the public. You, too,
are part of society and
have multiple roles in society.
In these societal roles, I interact on a daily basis with
businesses. As a stockholder, I
vote on the nominees for board of directors of companies that I
own stock in. As an
employee (professor and director of program assessment), I
work with businesses to
improve the academic programs in the School of Business
Administration. As a
customer, I shop at businesses on a regular basis. And, as a
member of the public, I
work with businesses to improve the subdivision I live in. In
each case, I am part of

society and interact with businesses regularly. I am sure you,
too, in your many societal
roles, interact with businesses on a regular basis.
WHAT MOTIVATES PEOPLE (SOCIETY)?
Think about what the average person wants. The typical person
is motivated by the
self-interest to survive. This interest to survive, first and
foremost, translates into the
need for security for both the individual and the individual's
family. The typical person,
in trying to survive, wants to provide him/herself and his/her
family the basics of survival
such as food, clothing and shelter. (In the modern world, the
typical person wants to go
beyond purely survival needs and improve the conditions of
him/herself and his/her
family by providing educational opportunities, an increased
standard of living, and so
on.)
People band together to enhance the probability of their family's
security and to
successfully provide for their family. As people formed groups
to provide these needs,
they adopted economic systems to improve the chances of
obtaining their needs.
People also realized that the structure of businesses impacted
their ability to meet these

needs.
In the modern world, it is the current belief of many nations
(and certainly the United
States) that a capitalistic economic system with businesses
made up of corporations
and privately held companies form the best combination to
deliver what people need
and want.
A SHORT HISTORY OF OUR ECONOMIC SYSTEM –
CAPITALISM
Since the dawn of mankind, some type of economic exchange
has taken place to assist
people in survival. The cave dweller trades the catch-of-the-
day for a sharper stone.
The harvester trades wheat for meat. The nomad trades a shiny
stone for flint. This
has all taken place in the history of people and society.
We skip all of this history, including the Greeks, Romans,
Renaissance Europe, etc. and
start our course economic history with the beginning of
Capitalism. One of the earliest
summaries of the concept of a capitalistic economic system (and
arguably the most
famous) is Adam Smith’s (1776) book, Wealth of Nations
(http://en.wikipedia.org/wiki/Adam_Smith). Adam Smith was a
Scottish moral philosopher
(not an economist) who wanted to explain how whole societies
(nations) could get
wealthier by capitalizing on the self-interest of individuals to
survive.

Adam Smith proposed that individuals, in pursuit of their own
individual self-interest,
actually can develop, promote, and maintain an entire national
economic system whose
total wealth surpasses the sum of each individual's efforts.
Coupling this concept with
the theories of the invisible hand, labor specialization,
accumulation of capital, and
ownership (see Addendum at the end of these Chapter 1 notes),
Adam Smith basically
http://en.wikipedia.org/wiki/Adam_Smith
established (or at least summarized) the theoretical groundwork
for our capitalistic
economic system.
Capitalism is an economic system where investment and
subsequent ownership of
production, distribution and exchange is made and maintained
mainly by private
individuals or corporations (Webster's College Dictionary). It
is the belief of many in the
United States that capitalism is the economic system that best
delivers what individuals
need. At the same time, capitalism can produce, through
individual self-interest, an
increased level of wealth to an entire nation and its people.
Since Adam Smith, there have been many economists (e.g. John
Keynes, John
Galbraith, and Milton Friedman to name a few) who have
further defined and attempted
to perfect our economic system. Some issues that continue to

be of interest in
determining exactly what type of economic system we have
include:
Is our economic system the best way to provide the needs of the
American
people? If not, what is the best economic system?
What role does the government play in our economic system?
What role should
our government play?
How is wealth distributed in our economic system? How should
it be distributed?
What role do business entities play in our economic system?
What role should
businesses play?
If our current economic system falls short in providing people
(society) with what they
need, people (society) will create another economic system that
will provide these
needs.
Can you recite the Preamble to the U.S. Constitution? I learned
it when I was a kid and
remembered about 90% of it by memory. What does it say?
The Preamble provides, in
a few words, the major reasons why the United States was
formed.
“We the People of the United States, in Order to form a more
perfect Union, establish Justice, insure domestic Tranquility,

provide for the common defense, promote the general
Welfare, and secure the Blessings of Liberty to ourselves and
our Posterity, do ordain and establish this Constitution for the
United States of America”.
People join forces to improve on defense, general welfare,
justice and liberty. The
belief is that the group (people of the United States in this
case), working together, can
give the individual more than what the individual, alone, could
supply to him or herself.
This is the basis of civilization and the basis of social activities,
that the group can
supply more of some things to the individual than the individual
acting alone can supply.
BUSINESS ENTITIES
To meet the needs of the new capitalistic system, forms of
business evolved and
changed. As people accumulated wealth stemming from their
labors, they were
encouraged to take risks by venturing into new areas of
commerce such as finding
additional natural resources, manufacturing new products, and
distributing goods and
services. The idea was that if these risks could be held to a
reasonable amount, more
people would venture into newer and newer enterprises. From
this, the corporation was

born, an entity where the corporation is usually held to liability
claims but the owners of
these corporations are not usually personally held liable (see
below and material
throughout this course for more information about
corporations). This allowed owners
(in the form of stockholders) to risk more and more of their
capital on newer and newer
ventures.
To summarize, the history and evolution of our current
economic system and business
structure are captured in the three steps of human self-interest
leading to an economic
system of capitalism which leads to the current form of
businesses (corporations).
Self-interest -----> Economic System -----> Business Form
THE CORPORATION IS ONE FORM OF BUSINESS
Though it is true that, currently, several legal forms of business
organizations do exist,
the corporate form of organization is the main structure of most
large United States
companies. Corporations have some legal advantages over
other forms of business
partnerships and proprietorships. At a glance, four legal forms
of business
organizations include (from Foundations of Finance, 4th
edition, Keown, Martin, Petty
and Scott, Prentice Hall: Upper Saddle River, New Jersey,
2003):

Sole Proprietorship - a business owned by one individual. The
owner
maintains title to the business, its assets and any profits (or
losses). No legal
requirement must be met for this type of business, though local
laws may require
business permits. The individual is liable for all liens, losses
and liability against
the business.
General Partnership - an association of two or more persons co-
owning a
business. Each partner is fully responsible for any liens, losses
and liabilities
incurred by the business. Any partner's faulty conduct renders
the remaining
partners liable also. The relationship among the partners is
usually by written
agreement.
Limited Partnership - Each U.S. state may have different laws
governing limited
partnerships. But in general, one or more partners may have
limited liability in
the partnership, with the limitation being the amount of capital
invested in the
firm. But, at least one general partner must take full
responsibility for all
liabilities, liens and losses against the business. And, limited
partners must not
be managers of the firm.

Corporation - This is a much different form of business than
either the sole
proprietorship or partnerships described above. Chief Justice
John Marshall
(1819) described a corporation as 'an artificial being, invisible,
intangible, and
existing only in the contemplation of law.' A corporation
'legally functions
separate and apart from its owners.' Ownership is reflected in
common stock
designation. Owners elect boards of directors. Boards of
directors appoint
management. Owner (stockholder) liability is limited to the
amount of the stock.
This prevents creditors from taking the personal assets of
stockholders. (This is
a very important advantage of owning stock in a corporation.)
The corporation
can sue and be sued. The corporation can buy, sell and own
property. And, a
corporation's personnel can be subject to criminal punishment,
though this is rare
in the United States.
STAKEHOLDER THEORY AND THE FIRM
A stockholder is a person who owns shares of a corporation. A
stockholder is also
known as a shareholder. Since the stockholder or shareholder
of a corporation is the
owner, a main goal of corporations usually is to maximize
shareholder wealth. Many
corporations translate this goal into maximizing profits of the
corporation.

Many great minds contend that just considering shareholders is
a very limited view for
setting goals for any business. Corporations and other forms of
businesses have many
stakeholders. A stakeholder is a person or group that affects or
is affected by an
organization's decisions, policies or operations. (Please read
any test question carefully
to make sure you understand whether the question is asking
about stockholders,
shareholders or stakeholders.) In this course we want to cover
the point that it may be
very important for businesses to consider the affect decisions
have on all company
stakeholders and perhaps include some (beyond just
shareholders) or all stakeholders
in the goals of the firm.
Stakeholders include:
Owners (e.g. Stockholders, shareholders, partners, etc.)
Employees
Customers (B2B customers and consumers)
Suppliers
Distributors (retailers and wholesalers)
Creditors

Communities
Media
Government
Public
The text does a good job delineating the many types of
stakeholders including market
and non-market stakeholders. Market stakeholders are those
people or groups that
have to do with the company's manufacturing, distributing or
selling of goods and/or
services. Market stakeholders include suppliers, customers,
distributors, employees,
creditors, stockholders and competitors. The nonmarket
stakeholders are people or
groups that do not have a direct exchange relationship with the
company. They include
the general public (not in the role as customer), special groups,
the media, and federal,
state and local governments (not in the role as purchaser of
business products but in
the role as representative of the public).
In real life, the questions each business needs to answer are how
the business impacts
each stakeholder group and how stakeholder groups affect the
business. It may be
that, at times, stakeholder groups make little difference on the
decisions of the firm.
But, at other times, stakeholders (other than stockholders) may
have a very great

impact on the firm's goals and decision making. For example,
insurance companies in
Texas are somewhat regulated by the state and must look to the
state government of
Texas before making many of their decisions. Car
manufacturers need to consider
agencies that test automobile safety since a bad test result can
influence future sales.
Pharmaceutical companies need to understand the latest findings
of the American
Medical Association and other medical groups to determine
what ethical drugs will be
researched and sold. Utility companies should consider public
sentiment about air
pollution when determining what type of fuel is used in
generating electricity.
Therefore, a firm's goals may be modified to take into
consideration other stakeholders
beyond stockholders and other owners of the firm. For
example, a utility plant may
have several goals, one being increasing company profits 10%
and, at the same time,
reducing air pollution by 15% over the next 2 years. Or, a car
manufacturer may have
goals to increase profits 5% this year and also double the
research effort into car safety.
THE TIMES THEY ARE A CHANGIN'
As the old saying goes 'Time and tide wait for no one.' And,

Bob Dylan (Nobel Prize
winner) is right about change -- 'then you better start swimmin'
or you'll sink like a
stone.' For businesses that means that they will sink into
bankruptcy if they do not keep
up with the changing times and tide.
Businesses need to constantly be aware of what is changing in
their internal and
external environment. (We will be covering this topic in more
depth in Chapter 2 under
environmental scanning.) Competitive advantage is born out of
change. We believe
that change is so important to successful leadership that we
have included the course
Mgmt6354 (Leadership and Organizational Change) in the
Strategic MBA core
curriculum to more thoroughly cover this topic.
Business is always going through a process of change. As an
example, many
businesses are trying to determine how best to incorporate the
latest electronic
technology into the business model. The process of changing
business as electronic
technology changes is not new. Business has gone through
several renaissance
periods such as the invention of the telephone, the adoption of
new media such as radio
and television, the computer, and now the Internet. All of these
eras and inventions
mark new ways for companies to conduct business and
communicate with their
stakeholders (customers, stockholders, suppliers, employees, the
public, etc.).

VALUE CREATION
The concept of value is one of the most important concepts in
our economic system.
Humans, because of self-interest, exchange with others to create
some type of value for
themselves. Therefore, companies, in order to participate in the
exchange, must create
a good or service that has value to the self-interested human.
That is how our
economic system, our market-driven economy, works. Market
here means customer,
and the ultimate customer is the self-interested human being,
the consumer.
For the most part, firms need to focus on those activities that
create value to their
customers. Businesses will not sell many items if their
customers do not value the
company’s products. Thus, value is ultimately set by the firm’s
customers. Prosperous
firms deliver the value that their customers need, want and/or
expect. Customer value
is the worth or importance the customer places on the exchange.
In economic models,
the term used is Utility versus the term value that we will be
using in this course.
THE VALUE CHAIN

The Value chain includes all the organizations that help to
make, deliver and market a
good or service to the ultimate consumer (the self-interest
human). Who is the ultimate
consumer? The Consumer is the household buyer, a person
buying for personal or
family consumption. According to current estimates based on
the U.S. census, there
are approximately 325 million (325,000,000) persons in the U.S.
and about 115 million
households. In today’s terms, consumers make up the B2C
market, or business-to-
consumer market.
A Customer is any buyer, be it a consumer (household), a
business, non-profit
organization and/or government agency. Buyer is also a
general term that can include
the consumer, business, non-profit and/or government agencies.
Thus, using the terms
customers and buyers for the B2C market or the B2B market
(businesses selling
directly to businesses) is appropriate. However, the term
consumer is more specific
than the term customer. The term consumer only applies to an
individual purchasing for
his or her own use or own household use.
What does a typical value chain look like? Rarely does one
business develop all the
pieces necessary to supply a good or service to the consumer.
Most businesses are
part of a joint effort with other companies to deliver these
products to consumers. To

show this, let us discuss the Value chain for a typical product.
For definitions:
Products include both goods and services.
Goods are tangible objects (e.g. TVs, cars, T-bone steak, etc.)
Services are intangible actions (e.g. airline flight, haircut,
lawyer’s advice,
medical exam, etc.)
To illustrate how most companies are involved in a group effort
to deliver products to
consumers, let us start with a value chain for a typical good
(also called supply chain
and supply chain management).
RM >> CS >> M >> D >> R >> C
RM are the Raw material producers (ExxonMobil is a producer
of oil (where I put
in 16 years of my life) and farmers are producers of vegetables).
CS are the Component suppliers that make and supply
component parts to the

manufacturers for the final car or computer sold to the ultimate
consumer. For
example, Goodyear is a component supplier that supplies tires
to General
Motors. Or, Intel supplies processing computer chips and
Microsoft supplies the
operating systems to Dell, who assembles the total computer
sold to consumers.
M are the Manufacturers (Sony TVs), final assemblers (Dell
computers), or
processors (Kraft foods). This is the stage of the value chain
where the physical
good first looks like the final, whole item the consumer will
ultimately buy. Out
the back door of the manufacturer or assembler is the first time
the car looks like
a car and is fully functional. This is the first time the computer
actually works.
Prior to this stage in the value chain, there are only pieces and
components of
cars and computers.
D are the Distributors (including wholesalers) that receive (buy)
the goods from
the manufacturer and store them regionally until retailers buy
these goods from
the distributors to fill retail shelves.
R are the Retailers. By definition, retailers are those companies
that sell directly
to the consumer (Macy’s, Kroger’s, Amazon, Wal-Mart, Barnes
and Noble,

Burger King, Tommy Vaughn Ford Dealer, etc.).
C are Consumers, self-interested individuals who purchase
goods and services
for themselves and their households.
Most goods in the U.S. economy go through a value chain
similar to the one shown to
deliver goods to the ultimate consumer. There are times when
the chain is longer, and
there are times when the chain is shorter. For example,
exporting goods overseas
usually includes several D’s, multiple sets of distributors that
represent the exporting
country and the importing country.
All the value chain functions (raw material production,
component supply, final
manufacture and assembly of the product, distribution, retailing,
etc.) must be
undertaken before the consumer buys and receives the final
good. However, a
company can take on several functions. For instance, Wal-
Mart, the retailer, can also
be the distributor by taking on the function of shipping and
storing the manufacturer’s
goods prior to Wal-Mart’s retail sales to the consumer. When a
company adds value
chain functions to its inhouse operations, this is called vertical
integration.

At every link or function in the value chain (unless a company
vertically integrates
several functions), there are buyer-seller exchanges or
transactions between
businesses (except the retailer/consumer link which is
considered the consumer market
or B2C and is an exchange between business and consumers).
That is, there are
buyer-seller transactions between the:
Raw material producers/component suppliers
Component suppliers/manufacturers
Manufacturers/distributors
Distributors/retailers
In each of these transactions, the buyer (buying firm) takes
possession of the goods.
The transactions are final, the seller (selling firm) relinquishes
title and control, and the
seller gets paid by the buyer within a designated time period.
This often takes place
possibly months before the consumer actually buys the final
product.
Notice, that the goods ultimately get to the consumer via the
functions of the value
chain. The companies involved are working together to deliver
value to the consumer
via goods and services. Therefore, and this is very important,
in our economic system,

THE SELF-INTERESTED HUMAN (CONSUMER) SETS THE
VALUE in the value
chain. We have a MARKET-DRIVEN ECONOMY, which
means that the ultimate
consumer (the market) steers the entire economy and sets what
has value and how
much that value is.
To say it another way, the consumer (people) determines the
value of most goods and
services in the U.S. economy. If a company makes a high
quality item but the
consumer does not ultimately buy it, the product has no (zero)
value. If a manufacturer
makes a low quality item but the consumer buys it, then the
product has the value that
the consumer pays for the product. Of course, in the context of
Busi6351, the
consumer is the self-interested human who has created an
economic system and
business entities to be able to obtain those items needed for
survival.
For the consumer, value is the ratio of:
VALUE = what consumer gets from product / what it takes to
acquire it
VALUE CHAIN SHOWING OTHER IMPORTANT CONCEPTS

The value chain is a very good vehicle to show several other
business and economic
concepts. First, it identifies B2B and B2C businesses and
marketing.
RM >> CS >> M >> D >> R >> C
|__________B2B_________| |_B2C_|
The value chain also shows how the Gross Domestic Product of
the U.S. is and is not
calculated. GDP is the market value of all goods and services
that have been bought
for final use during a period of time (usually a year). U.S. GDP
is about 18 trillion
dollars ($18,000,000,000,000).
If we look at the value chain, for example, we see that a U.S.
Gross Domestic Product
of about $18 trillion is calculated by adding the following
(using method similar to
Business Week, March 2001 and also shown in the CIA World
Factbook) – note the
numbers in the calculation are for illustration purposes only:
Consumer spending (about $12.3 trillion) (C)
+ exports – imports (adding exports and subtracting imports
nets

approximately a minus (-) $0.5 trillion)
+ government consumption spending ($3.2 trillion)
(government spends for the
public/people)
+ new capital investment and inventories ($3.0 trillion)
(business invests in new
products for ultimate end-user consumers)
https://www.cia.gov/library/publications/the-world-
factbook/geos/us.html
Notice, that the GDP never adds any buying and selling between
the businesses
(business-to-business) in the value chain (except for that
attributed to new capital
spending). It only attempts to tally the spending of the end
users (consumer and
government) in the U.S. plus an adjustment for exports and
imports (an adjustment for
consumers in the U.S. buying foreign products and consumers in
foreign lands buying
U.S. products). Adding the transactions between businesses
(B2B) would double and
triple count the same products (goods and services).
https://www.cia.gov/library/publications/the-world-
factbook/geos/us.html
Think about the aluminum that goes into the aluminum framing

of a car. If we added the
many times the aluminum actually is bought and sold in the
value chain between
businesses, we would count the same aluminum at least 4 times
before the car was
bought by the consumer. Remember, the transactions between
firms in the value chain
are purchases with invoices and money exchanged.
1. RM to CS
2. CS to M
3. M to D
4. D to R
The total monetary amount of B2B buying and selling in the
U.S. is over $30 trillion,
much more than the GDP of $18 trillion.
RM >> CS >> M >> D >> R >> C
|__________B2B_________| |_B2C_|
B2B marketing is well over $30 trillion but is just buying and
selling of the same
products (goods and services) or pieces of goods and services
that the GDP ends up
summing up as shown above.
FULL CIRCLE

We have come full circle in these Chapter 1 lecture notes. We
began with human self-
interest (society) leading to our capitalistic economic system
and the forms of business
we use today. We then discuss value creation with the
conclusion that businesses must
create value to the same self-interested humans (who created the
economic system
and business entities) or the self-interested humans (society)
will create other economic
systems and forms of businesses that will generate value for
them.
Self-
self-inte
-
notes are based on ‘Business and Society,’ 15th edition, by
Lawrence and Weber,
McGraw-Hill: New York, 2017.
Addendum to Chapter 1 Lecture Notes

THE WISDOM OF ADAM SMITH (not on the exam but part of
the modern MBA
educational experience)
Adam Smith's Wealth of Nations was published in 1776 (over
240 years ago), the same
year as our United States Declaration of Independence was
signed. Smith was
documenting and explaining another revolution that was taking
place throughout the
world, an economic revolution. This revolution dealt with the
concept that human self-
interest could fuel whole national economies with little
interference from external
sources. Excerpts from Wealth of Nations, below, show the
great understanding Smith
had about human nature and its ability to develop a new
economic system.
https://www.adamsmith.org/adam-smith-quotes/
Human nature and economic growth:
Consumption is the sole end and purpose of all production; and
the interest of the
producer ought to be attended to, only so far as it may be
necessary for promoting that
of the consumer.
The Wealth of Nations, Book IV Chapter VIII

Man was made for action, and to promote by the exertion of his
faculties such changes
in the external circumstances both of himself and others, as may
seem most favourable
to the happiness of all.
The Theory of Moral Sentiments, Part II Section III Chapter 3
Such is the delicacy of man alone, that no object is produced to
his liking. He finds that
in everything there is need for improvement.... The whole
industry of human life is
https://www.adamsmith.org/adam-smith-quotes/
employed not in procuring the supply of our three humble
necessities, food, clothes and
lodging, but in procuring the conveniences of it according to the
nicety and delicacy of
our tastes.
Lectures on Justice, Policy, Revenue and Arms
The invisible hand:
Every individual...generally, indeed, neither intends to promote
the public interest, nor
knows how much he is promoting it. By preferring the support
of domestic to that of
foreign industry he intends only his own security; and by
directing that industry in such a
manner as its produce may be of the greatest value, he intends

only his own gain, and
he is in this, as in many other cases, led by an invisible hand to
promote an end which
was no part of his intention.
The Wealth of Nations, Book IV Chapter II
The rich ... divide with the poor the produce of all their
improvements. They are led by
an invisible hand to make nearly the same distribution of the
necessaries of life which
would have been made, had the earth been divided into equal
proportions among all its
inhabitants.
The Theory of Moral Sentiments, Part IV Chapter 1
Man has almost constant occasion for the help of his brethren,
and it is in vain for him to
expect it from their benevolence only.
The Wealth of Nations, Book I Chapter 1
It is not from the benevolence of the butcher, the brewer, or the
baker, that we expect
our dinner, but from their regard to their own interest. We
address ourselves, not to their
humanity but to their self-love, and never talk to them of our
necessities but of their
advantages.
The Wealth of Nations, Book I Chapter II

How selfish soever man may be supposed, there are evidently
some principles in his
nature, which interest him in the fortune of others, and render
their happiness necessary
to him, though he derives nothing from it, except the pleasure of
seeing it.
The Theory of Moral Sentiments, Part I Section I Chapter I
The division of labour or labor specialization:
The greatest improvement in the productive powers of labour,
and the greater part of
the skill, dexterity and judgement with which it is any where
directed, or applied, seem
to have been the effects of the division of labour.
The Wealth of Nations, Book I, Chapter I
The difference between the most dissimilar characters, between
a philosopher and a
common street porter, for example, seems to arise not so much
from nature, as from
habit, custom, and education.
The Wealth of Nations, Book I, Chapter II
As it is the power of exchanging that gives occasion to the
division of labour, so the
extent of this division must always be limited by the extent of

that power, or, in other
words, by the extent of the market.
The Wealth of Nations, Book I, Chapter III
A gardener who cultivates his own garden with his own hands,
united in his own person
the three different characters, of landlord, farmer, and labourer.
His produce, therefore,
should pay him the rent of the first, the profit of the second, and
the wages of the third.
The Wealth of Nations, Book I, Chapter VI
The whole annual produce of the land and labour of every
country...naturally divides
itself into three parts; the rent of the land, the wages of labour,
and the profits of stock.
The Wealth of Nations, Book I, Chapter XI
The role of government:
In the midst of all the exactions of government, capital has been
silently and gradually
accumulated by the private frugality and good conduct of
individuals, by their universal,
continual, and uninterrupted effort to better their own condition.
It is this effort, protected
by law and allowed by liberty to exert itself in the manner that

is most advantageous,
which has maintained the progress of England towards opulence
and improvement in
almost all former times...
The Wealth of Nations, Book II, Chapter III
According to the system of natural liberty, the sovereign has
only three duties to attend
to ... first, the duty of protecting the society from the violence
and invasion of other
independent societies; secondly, the duty of protecting, so far as
possible, every
member of the society from the injustice or oppression of every
other member of it, or
the duty of establishing an exact administration of justice, and
thirdly, the duty of
erecting and maintaining certain public works and certain public
institutions, which it can
never be for the interest of any individual, or small number of
individuals, to erect and
maintain...
The Wealth of Nations, Book IV, Chapter IX
The real and effectual discipline which is exercised over a
workman is ... that of his
customers. It is the fear of losing their employment which
restrains his frauds and
corrects his negligence.
The Wealth of Nations, Book I Chapter X

Monopoly and competition:
Monopoly...is a great enemy to good management.
The Wealth of Nations, Book I Chapter XI Part I
The monopolists, by keeping the market constantly
understocked, by never fully
supplying the effectual demand, sell their commodities much
above the natural price.
The Wealth of Nations, Book I, Chapter VII
The price of monopoly is upon every occasion the highest which
can be got.
People of the same trade seldom meet together, even for
merriment and diversion, but
the conversation ends in a conspiracy against the public, or in
some contrivance to raise
prices. It is impossible indeed to prevent such meetings, by any
law which either could
be executed, or would be consistent with liberty and justice. But
though the law cannot
hinder people of the same trade from sometimes assembling
together, it ought to do
nothing to facilitate such assemblies; much less to render them
necessary.

The Wealth of Nations, Book I, Chapter X
The natural price, or the price of free competition ... is the
lowest which can be taken,
not upon every occasion indeed, but for any considerable time
together...[It] is the
lowest which the sellers can commonly afford to take, and at the
same time continue
their business.
Demand and value:
The desire of food is limited in every man by the narrow
capacity of the human stomach;
but the desire of the conveniences and ornaments of building,
dress, equipage and
household furniture, seems to have no limit or certain boundary.
The Wealth of Nations, Book I, Chapter XI, Part II
By necessaries I understand, not only the commodities which
are indispensably
necessary for the support of life, but whatever the custom of the
country renders it
indecent for creditable people, even of the lowest order, to be
without.
The Wealth of Nations, Book V, Chapter II, Part II
The distribution of wealth:

What improves the circumstances of the greater part can never
be regarded as an
inconveniency to the whole. No society can surely be
flourishing and happy, of which
the far greater part of the members are poor and miserable.
The Wealth of Nations, Book I Chapter VIII
Capital accumulation:
Parsimony, and not industry, is the immediate cause of the
increase of capital. Industry,
indeed, provides the subject which parsimony accumulates. But
whatever industry might
acquire, if parsimony did not save and store up, the capital
would never be the greater.
The Wealth of Nations, Book II, Chapter III
Free trade and specialization:
It is the maxim of every prudent master of a family, never to
attempt to make at home
what it will cost him more to make than to buy...What is
prudence in the conduct of
every private family, can scarce be folly in that of a great

kingdom. If a foreign country
can supply us with a commodity cheaper than we ourselves can
make it, better buy it of
them with some part of the produce of our own industry,
employed in a way in which we
have some advantage.
The Wealth of Nations, Book IV Chapter II
The property which every man has in his own labour; as it is the
original foundation of
all other property, so it is the most sacred and inviolable… To
hinder him from
employing this strength and dexterity in what manner he thinks
proper without injury to
his neighbour is a plain violation of this most sacred property.
The Wealth of Nations, Book I, Chapter X, Part II
THE VALUE CHAINVALUE CHAIN SHOWING OTHER
IMPORTANT CONCEPTS
Chapter 3 – Corporate Social Responsibility
These lecture notes include comments and material for Chapter
3 concerning corporate
social responsibility and corporate citizenship.

In Chapter 3 lecture notes, we cover the following topics:
Corporate social responsibility
How emigration to cities changed our economic system.
Implementing corporate citizenship strategies.
Corporate social performance audit.
The triple bottom line.
CORPORATE SOCIAL RESPONSIBILITY
In these lecture notes, we will cover many topics that concern
businesses. Let me
again state (up front) what this course is and is not about. This
course is not about
telling students what businesses should do. Instead, this course
is designed to cover
important current topics in the social, political and ethical
environment to give our MBA
students the background and knowledge necessary to make
successful business
decisions.
As this course progresses, I hope students become more aware
of the many topics and
issues in today’s business climate and begin formulating plans
and procedures
concerning how to make business decisions if confronted with
these issues in real life. I
hope that, as alumni, our students will look back on this course

and feel they acquired a
strong foundation that aided them in making sound decisions in
their real lives.
EMIGRATION TO CITIES CHANGED ECONOMIC SYSTEM
I assume you have read Chapter 3 in the textbook and are now
familiar with the material
and concepts in this chapters. In Chapter 1 lecture notes, we
covered the idea that
people are motivated by self-interest. To continue with this
concept, what role do
people expect businesses (companies and corporations) to play
in this self-interest
model? Self-motivated people (society) created the economic
system we have and the
business forms we use (e.g. corporations). So, what do we
(people) want businesses to
do to help us with our own self-interest?
When people farm their own land, they are somewhat self-
sufficient. They typically do
not need major organizations to help with food and shelter.
Neighbors trade with
neighbors (often barter) so that attaining food and shelter is
very possible. But, during
the Industrial Revolution when labor specialization became
more prominent and
manufacturing grew, people left their farms and moved to cities.
During this time, the
United States population moved away from its food sources (in

1820 about 72% of
workers were employed in farm occupations whereas today it is
about 2.5%, The World
Almanac) to industrial cities, away from rural areas into urban
areas. This caused a
great need for massive safe food shipments and storage in cities,
local housing
developments, and reliable work so that people had the
resources (money) available to
purchase the shipped-in food and local housing. (People living
in cities do not have
their own farms where they can grow their own crops to eat and
chop their own wood to
use for building shelter and as fuel for warmth. City dwellers
need jobs that provide the
wages (salaries) that allow them to buy the food, fuel, and
shelter they need to survive.)
Along with labor specialization, people moving away from
farms, the creation of large
cities, the need for basic goods and services in cities, and so on,
society has developed
new economic systems and business forms to provide what it
needs. It turns out that,
so far, the corporate form of business, on average, is one of the
most reliable entities to
provide safe products and stable jobs to city dwellers who need
to survive away from
farms. And, as people advance in their work, they tend to make
higher wages (salaries)
and this increases their ability to buy more products and
increases their standard of
living, which is the ability to buy goods and services.
(Fact check -- Today, over 76% of the U.S. population lives in
urban areas. Also, of the

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