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UNIT THREE – BUSINESS, STAKEHOLDERS, SOCIAL
RESPONSIBILITY, AND SUSTAINABILITY
SECTION 3A – BUSINESS AND SOCIETY: THE TOUGH ISSUES OF
ECONOMICS, SOCIAL RESPONSIBILITY, AND BUSINESS
This section discusses the relationship between and among, ethics, stakeholders, moral responsibility,
social responsibility, and sustainability. There is also discussion about various economic systems, such
as capitalism, and ethics. The section explores whether the attitude of “What’s good for GM or Razorfish
is good for the country” is the proper role of business in an ethical and social responsibility sense.
READING 3.1 – THE SOCIAL RESPONSIBILITY OF BUSINESS IS TO INCREASE
ITS PROFITS
Milton Friedman
Use PowerPoint Slide 92.
Answers and Key Discussion Items
1. Mr. Friedman compares the discussions about social responsibility of business to the story of the
Frenchman who was surprised to learn he had been speaking “prose” all of his life. Mr. Friedman
2. The corporate executive is selected by the shareholders (or, more accurately, the shareholders elect
a board and the board is in charge of the officers) as an agent of the shareholders and as such, the
executive is accountable to those shareholders. He is an employee of those shareholders and has
3. When unions engage in restraining wages in the name of the social good, the likely result is wildcat
Compare & Contrast
Yes, Mr. Friedman does support voluntary actions on the part of the corporation if the corporation can
show that there will be benefits that workers, shareholders or customers can gain through the voluntary
conduct. For example, if a town where a business plant is located has become so contaminated with
pollution that the company can’t attract and keep long-term employees, then voluntary action in order to
clean up is something Mr. Friedman would support despite no legal requirement to do so. Dr. Friedman
did support business involvement in changing the education system (he was a proponent of voucher
READING 3.2 – A LOOK AT STAKEHOLDER THEORY
Use PowerPoint Slides 93 and 94.
Answers and Key Discussion Items
1. Stakeholders include customers, suppliers, vendors, contractors, employees, members of the
2. Management’s role in the stakeholder model is to play the role of King Solomon in balancing the
interests that often conflict while preserving the corporation. King Solomon is used to show the
3. Use the example of Yucca Mountain and spent nuclear fuel to cover the diagram of stakeholders:
a. The homeowners near the facility
b. Owners and shareholders in companies that own nuclear plants
c. Businesses that could expand with continuing growth
d. Those who live around existing nuclear plants where the spent fuel is currently being stored
In short, have the students go up and down the economic chain.
GROUPS FOR EXPANSION GROUPS AGAINST EXPANSION
City (more revenues) Landowners (safety)
Nuclear industry Anti-nuclear groups
Employees of power plants Other utilities – they can sell more power if nuclear
plants are shut down
Use the example of the proposal to build a mosque at Ground Zero – where the WTC towers were
once located. The stakeholders in the mosque at Ground Zero are:
a. Families of the victims of 9-11
b. Members of the religious group that seeks to build the mosque
c. The Muslim faith
d. Local contractors – work available
The example illustrates one of the flaws of stakeholder theory – in emotionally charged issues such
as this one – who takes priority on the decision process?
READING 3.3 – BUSINESS WITH A SOUL: A REEXAMINATION OF WHAT COUNTS
IN BUSINESS ETHICS
John Entine and Marianne M. Jennings
Use PowerPoint Slides 95 and 96.
Answers and Key Discussion Items
1. The authors grapple with the simplicity of the social responsibility movement and that it is difficult to
put “white hats” and “black hats” on companies. The authors also propose a way to evaluate
2. The traditional measures of social responsibility can be addressed on the surface in a superficial
manner – the screens are very simple. However, the questions require a deeper and harder look at
3. Yes, tobacco companies could be labeled an honest company, provided they did not behave as they
did initially by withholding information about the harmful effects of the product. The questions require
READING 3.4 – APPEASING STAKEHOLDERS WITH PUBLIC RELATIONS
Robert Halfon
Use PowerPoint Slide 97.
Answers and Key Discussion Items
1. Halfon sees risk management, in advance of decisions, as the proper means for corporations to
Once businesses have seen and evaluated the risk, it is incumbent upon them to develop a public
relations campaign to address the issues that result from the perceived political risk.
2. The downside to the Halfon approach consists of several factors: (1) the failure to anticipate all of the
objections; (2) the failure to accurately assess the strength and resolve of stakeholder groups; (3) the
READING 3.5 – CONSCIOUS CAPITALISM: CREATING A NEW PARADIGM FOR
BUSINESS
Be sure to contrast the views of Kelly and Friedman for the students in the discussion of this reading –
use PowerPoint Slides 98 and 99.
Answers and Key Discussion Items
1. Mr. Mackey believes that most entrepreneurs do not start businesses for profit – they start businesses
because they have an idea, because they think they can make society better with a product or
2. Mr. Mackey believes that you don’t have customers unless you have good products and good
services. Likewise, you won’t have employees if you don’t treat them well and allow them to provide
the service that you need for retaining and getting customers. He sees it all as a logical flow running
Compare & Contrast
Mr. Mackey is between the two – he believes that one cannot operate successfully by ignoring
constituencies, but he is not anti-profit. Rather, he believes that profits come because of a sensitivity to
the needs of all the constituencies.
READING 3.6 – MARJORIE KELLY AND THE DIVINE RIGHT OF CAPITAL
Kelly provides the contrast for Friedman and Novak. But, point out to the students that she is also
different in her philosophies of stakeholder theories – use PowerPoint Slide 99.
Answers and Key Discussion Items
1. Kelly believes that the wealth of corporations comes from the employees, but because they don’t
Kelly believes that corporations are governments of the property class and that they exercise power
over Americans, more power than kings ever did. She feels that corporations take away rights that
She believes that only a small group of wealthy people are happy (the shareholders) and the rest are
2. Kelly wants economic democracy through the elimination of economic aristocracy. Employees would
be on the same level as shareholders/owners of corporations. Wealth belongs to those who create
READING 3.7 – SCHOOLS OF THOUGHT ON SOCIAL RESPONSIBILITY
Use PowerPoint Slide 100.
Answers and Key Discussion Items
1. Yes. Dr. Friedman is a bit of a blend. He believes managers should manage the business and
society will benefit. He also believes, however, that it is in the business's and society's best interests
to think about long-term costs and impact on the ability to do business, recruit talent, and continue
2. The voluntary change in the wood might not satisfy the customers, who are stakeholders. However,
there are other stakeholders – the countries from which the wood is harvested and the impact of the
continual harvesting on their ecosystems. Some might say that if the wood is not to be used, then
those who are stakeholders should step up and get the necessary laws in place to protect it. The
