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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

Answers to ‘Shareholder Approach’ Questions (p. 122)

1. Costco’s compensation philosophy has led to “one of the most productive and loyal workforces in

all of retailing. Only 6% of employees leave after the first year. That saves tons, since Walmart

2. Beaver’s bottom line is that “the American public does not appear to be that dissatisfied with

corporate America’s focus on shareholders. … [M]ore and more people are benefiting from the

stock market, and the economy remains strong.” However, Beaver’s comments were published in

1999, before the considerable economic downturn that is being experienced now (which may

3. The students could have a discussion based on this question.

Answers to ‘Case One: Guns’ Questions (p. 124)

a. Students’ answers will vary. Robert Hass meant that distributors of guns should be careful

b. Students’ answers will vary. Some of them may agree with Hass and say that distributors

c. Students’ answers will vary. “A responsible and consistent program of monitoring their own

sales practices, enforcing good practices by contract, and the entirely practicable supervision

a. These decisions appear to represent a stakeholder approach to management.

b. Students’ answers will vary.

3. Students’ answers will vary. Some of them may say that this is a good idea as people who use

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

Answers to ‘Case Two: Fast-Food Pay Unfair/Unconscionable?’ Question (p.

125)

a. Students’ answers will vary. Some of them may say that companies cannot afford to do so as

b. Students’ answers will vary. Some of them may say that the free market has provided

2. Yes, there is something morally amiss because these are the people who work for longer hours

3. Students’ answers will vary. Some of them may say that consumers should stop demanding

Answers to ‘Case Three: Pay More Than the Law Requires?’ Questions (p. 126)

1. Retail analyst Michael Souers said the decision made sense for Hobby Lobby because the

economy is stabilizing, and the policy was a great reward for employees:

2. Students’ opinions will vary.

Answers to ‘Case Four: Making a Profit—Reduce Wages?’ Questions (p. 126)

1. Snapple says they would fail in their responsibilities to their various stakeholders if they didn’t try

to reduce labor costs: “The union contends that a profitable company shouldn’t seek concessions

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

2. Students’ opinions will vary. Traditionally, wage cuts have been sought only when a company is in

financial distress, but here Snapple felt the change was necessary to be competitive going

Answers to Chapter Questions (p. 127)

a. According to a survey done in July 1993, employers are more concerned with profits than

quality. In “Profits Outrank Quality,” HR Focus 70, No. 7, July 1992, p. 15, the results of two

b & c. The students could have a discussion based on these questions.

2. The students could have a discussion based on this question.

a. Students’ opinions will vary. Giles Gibson, managing director of Good Business says that

polling data overwhelming shows consumers saying that advertising directed to children is

b. Students’ answers will vary. Critics say that San Francisco has veered toward a “nanny”

government by addressing issues that are better left to parents.

4. Students’ answers will vary.

a & b. Students’ opinions will vary.

c. Chick-fil-A’s president affirmed the company’s commitment to all people, but noted that

a. Strengths: Teaching children communication skills, establishment of two-way communication

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

b. The students could have a discussion based on this question.

7. The students could have a discussion based on this question.

a. The following are two opinions about the Alta Gracia approach:

“They have to brand this well—simply, clearly, elegantly—so college students can

understand it very fast,” says Kellie A. McElhaney, a professor of corporate social

b & c. The students could have a discussion based on this question.

9. The students could have a discussion based on this question

10. The students could have a discussion based on this question.

11.

a. Students’ answers will vary. Drawing from the example of Samsung, some students may

say that they envision a future where a relatively small number of corporations dominate

b. Students’ answers will vary. Some of them may say that oligopoly results in inequality,

12.

a. Students’ answers will vary. Some of them may say that plus-sized women is no more a

b & c. Students could have a discussion based on this question.

13.Students’ answers will vary. Alana Semuels, “Sponsors Shift to Avoid Scandals,” latimes.com

http://articles.latimes.com/2007/jul/27/business/fi-sponsor27 :

For all sponsors’ worries, fans have shown a high tolerance for athletes who stray. Even after

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

14. The students could have a discussion based on this question. For a variation on Kinsley’s theme

see Tim W. Ferguson, “Squeezing Shareholders for Some Statist Causes,” The Wall Street

15. The central theme here is whether the businessperson should simply rely on free market

principles in operating a retail establishment.

a. Can (must) a businessperson take a paternalistic approach toward his/her customers?

b. One alternative would be to provide consumers with the scientific data and let them decide

c. This question is designed to remind the students that information is a product for which

16. The students could have a discussion based on this question. Some of them may say that a

“Sustainability Bill of Rights” is required in all communities because it creates a platform for

17. Students’ answers will vary. Liberal intellectual and former Clinton Labor Secretary Robert Reich

18.

a. Students may say that as long as the American workforce remains skilled and flexible the

b. Students’ answers will vary.

19. The students could have a discussion based on this question.

20. The students could have a discussion based on this question. Results of Brenner and Molander

HBR survey:

a. 23% agreed

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

Supplementary Materials

I. Politics (p. 97)

We certainly have a commercial society and there are numerous PACs representing commercial

interests and giving substantial funds to political campaigns, as well as commercial interests spending

funds in lobbying efforts. But that is only part of the picture. Many major corporations have

independent and separate foundations funded by the for-profit corporation. These foundations may not

give money specifically to enhance corporate earnings if they want to retain certain favorable tax

characteristics; but they can and do give money to further social goals the corporation deems

important. This is known as strategic philanthropy.

To put the dollars in context: The volume of voluntary giving (from all sources, not just business) in the

U.S. is far in excess of that in most countries. In 1995, according to the AAFRC Trust for Philanthropy,

as reported in their publication, “Giving USA 1996,” $144 billion was donated. Of that amount, $7.4

billion came from corporations. Compare that $7.4 billion to the over $1.2 billion spent in the 2000

elections. Also compare the $7.4 billion to the figure of $1.4 billion, given in 1998 by lobbyists

registered with the federal government.

II. Lobbying (p. 100)

The article that follows is another good case study of lobbying in practice. Jill Abramson, “Auto Makers

Lobbied Hard Against Stricter Fuel Rules,” The Wall Street Journal, April 4, 1990, p. A17 (reprinted by

permission of The Wall Street Journal).

WASHINGTON. On Feb. 1, 1990 a group identifying itself as “Nevadans for Fair Fuel

Economy Standards” sent more than 10,000 letters urging Nevada residents to write

Democratic Sen. Richard Bryan to oppose the stricter fuel-economy standards he was

advocating as part of the overhaul of clean-air legislation.

At the same time, letters from “West Virginians for Fair Fuel Economy Standards” were

blanketing Democratic Sen. Jay Rockefeller’s state in an effort to blunt his support for the

stricter fuel standards.

The letter-writing ploy was part of a multimillion-dollar lobbying effort waged by the auto

industry over clean-air legislation. Although none of the recipients could tell from the

letterheads, the real sponsors of the campaign were the Big Three auto makers. They jointly

hired a Washington consulting firm to direct a so-called “grass-roots” lobbying campaign

against Sen. Bryan’s fuel-economy-standards amendment, which was ultimately dropped from

the clean-air bill.

Other industry coalitions, including chemical manufacturers and utilities, conducted parallel

efforts aimed at provisions of the legislation that affected them. More than 150 different

organizations and law firms registered to lobby on the issue, making this one of the most

heavily lobbied pieces of legislation in the 101st Congress.

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

The auto industry put on a showcase effort. While Chrysler Corp., Ford Motor Co., and

General Motors Corp. each maintains a large Washington office staffed with professional

lobbyists, the companies added extra heft with outside lawyers and consultants. Ford, for

example, called on former Transportation Secretary William Coleman, now a partner at a

Washington law firm, and Lloyd Cutler, the Democratic lawyer who was White House counsel

during the Carter administration.

Some of the lobbying itself became controversial. Sen. Bryan accused the auto makers of

coming into his state “under false colors” in their letter-writing campaign. William Noack, a

spokesman for GM, defended the effort as “a very straightforward, aboveboard educational

program.”

The highly technical nature of most of the clean-air provisions drew particularly intensive

lobbying, much like a piece of major tax legislation, according to several Capitol Hill staff

members. Rep. Mike Synar, (D. Okla.) believes there was so much lobbying on all sides that it

all tended to cancel each other out.

Nobody knows how much was spent on clean-air lobbying and nobody ever will, since

lobbyists are required only to make limited disclosures of their fees. But it almost certainly

involved tens of millions of dollars. Just one utility-lobbying coalition, Citizens for Sensible

Control of Acid Rain, reported collecting more than $500,000 from industry executives for its

1989 efforts, according to the group’s lobbying disclosure.

‘Superbowl of Lobbying’

“This was the Super Bowl of lobbying,” says Zoe Schneider, who lobbied on clean air for the

U.S. Public Interest Research Group, a group affiliated with consumer activist Ralph Nader. It

was also a superbowl for campaign fund-raising. In 1989, a year in which he did not face an

election, Sen. Carl Levin (D., Mich.) collected $72,000, mainly from auto-related

political-action committees, industry executives and others involved in the clean-air fight. In

December, 16 Chrysler executives ponied up $500 a head at an industry fund-raiser hosted by

Chairman Lee Iacocca at the Detroit Club. Sen. Levin, in a tough battle for re-election this

year, was the auto industry’s point man on clean air.

William Blacklow, a spokesman for Sen. Levin, says his boss’s stands on clean air had

nothing to do with his campaign contributions. “The reverse is true,” says Mr. Blacklow, “they

contribute because of his stands. Levin is nobody’s man but his own.”

Rep. Synar, who does not accept PAC contributions, says such contributions “do not buy

amendments or votes. They buy access.” However, the Oklahoma Democrat said nobody

needed to buy access on the clean-air bill. “Members were diligently trying to hear from all

sides anyway.”

III. A New Ideology (p. 111)

The following history of social responsibility was deleted from the text because of space constraints.

Professors Robert Hay and Edmund Gray have developed a three-part analysis of the growth

of the social responsibility doctrine in America.1

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

Phase I. Profit-Maximizing Management. Throughout the nineteenth and early twentieth

centuries, the profit-maximization view of social responsibility was in powerful ascendancy. In

that era, America sought growth and prosperity. Concerns over child-labor abuse, unsafe

products, discrimination, and so on were, in a sense, luxuries which the nation could not yet

afford.

Phase II. Trusteeship Management. During the 1920s and 30s, the profit-maximizing mode

was gradually replaced with a management approach that recognized claims on the

organization beyond the pecuniary interests of the owners. Rather than simply maximizing the

stockholders’ wealth, managers began to seek an equitable balance between the competing

claims of customers, employers, suppliers, creditors and the community. The manager thus

became a trustee of sorts for the interests of various claimants. Hay and Gray attribute the

Phase II development to: “(a) The increasing diffusion of ownership of the shares of American

corporations and (b) the development of a pluralistic society…”2 Stock ownership diffusion

meant that owners had little voice in company affairs. Rather, management gained control and

became responsible, not so much to the myriad stockholders, each with relatively modest

holdings, but to all those contributing to the firm—that is, stockholders, customers, suppliers,

employees, et al. Pluralism is the notion of power dispersed among many competing groups,

each influencing and counteracting the others. In the 20s and 30s, labor and government

emerged as powerful countervailing forces against big business with the result that

management had to learn to accommodate the authority of forces outside the firm.

Phase III. “Quality of Life” Management. By the 1950s, America had achieved a level of

affluence that substantially eliminated the aggregate scarcity of goods and services as the

paramount economic problem. America had become the world’s wealthiest nation, but the

process of achieving general prosperity had given rise to a new set of difficulties–e.g.,

pollution, consumer abuse, and lingering pockets of poverty. The contradiction of personal

plenty, in the midst of a declining physical and social environment, led to demands for an

improved “quality of life.” Given its vast resources and its evident role in many of the “quality of

life” problems, business seemed to be the logical institution to which society could turn to

solve these infectious problems. Thus business was called upon to assume broad new

responsibilities, well beyond the earlier profit maximization and trusteeship roles. Hence the

birth and the continuing influence of the social responsibility doctrine.

1 Robert D. Hay and Edmund R. Gray, “Social Responsibilities of Business Managers,”

Academy of Management Journal, Vol. 17, No. 1, March 1974, p. 135.

2 Ibid., p. 136.

Selected Bibliography

Associated Press, “Wal-Mart Rules Prompt Changes in Music,” Des Moines Register, Nov. 19, 1996,

p. 8S.

Paul Brodeur, Outrageous Misconduct (New York: Pantheon Books, 1985).

Edward Bowman and Howard Kunreuther, “Post-Bhopal Behavior at a Chemical Company,” Journal of

Management Studies 25, No. 4, (July 1988), p. 387.

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

Teresa Burney, “NationsBank Offers Benefits to Wider Family,” St. Petersburg Times, April 17, 1998, p.

1E.

Stephanie Cook, Pierre Marcoux, “Money Wins Friends, Influences Elections,” Waterloo-Cedar Falls

Courier, December 6, 1998, p. A1.

Jim Drinkard, “Politics Under the Influence: ‘Soft Money’ Donors Gave Big, Now What Do They Want?”

The Chattanooga Free Press, Dec. 10, 1996, p. A3.

Editorial, “Microsoft’s Bad Lobbying,” Washington Post, October 24, 1999, p. B6.

Editorial, “Political-Industrial Complex,” The Wall Street Journal, March 28, 1990, p. A12.

Elizabeth Ehrlich, “Business is Becoming a Substitute Teacher,” Business Week, September 19, 1988,

p. 134.

Larry Elliott, “Nike on the Run as Sit-Ins spread Across the U.S.,” London Guardian, June 25, 1999, p.

16.

Jim Hopkins, “Ben & Jerry’s Co-Founder to Try ‘Venture Philanthropy’,” USA Today, August 7, 2001, p.

1B.

Institute for Business, Ethics, and Public Issues, “Child Care, Elder Care, and Employee

Effectiveness,” Proceedings, Spring 1989 Conference, College of Business Administration, University

of Houston, Houston, Texas.

Joel Joseph, “We Are Aiding and Abetting Child Slavery,” Waterloo-Cedar Falls Courier, May 26, 1996,

p. F1.

James Keogh, ed., Corporate Ethics: A Prime Business Asset (New York: The Business Roundtable,

1988).

Mary Lamey, “Ben & Jerry’s Taste Irony,” Montreal Gazette, June 10, 1999, p. C1.

Hilary Mackenzie, “Commodity Versus Culture: Battle Lines Drawn,” Montreal Gazette, March 16,

1999, p. B1.

Michael McCarthy, “Women Take Stage In Beer Ads,” USA Today, April 30, 2001, p. 5B.

Noam M. M. Neusner, “He Argues Lean Requires ‘Mean’,” The Tampa Tribune, September 8, 1996,

Business and Finance Section, p. 1.

Bonnie Miller Rubin, “It’s Mom Vs. Nike: Reading, ‘Riting and Responsibilities,” Waterloo-Cedar Falls

Courier, Sept. 15, 1996, p. F1

R. Clayton Trotter, Susan G. Day, Amy E. Love, “Bhopal, India and Union Carbide: The Second

Tragedy,” Journal of Business Ethics 8, (1989), p. 439.

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Chapter 03 – The Corporation and Public Policy: Expanding Responsibilities

Richard E. Wokutch, “Corporate Social Responsibility Japanese Style,” Academy of Management

Executive, Vol. 4, No. 2, (1990), p. 56.

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