ACCT6194 Ethics and Corporate Governance: Week 10 Business and Community Stakeholders

ACCT6194
Ethics and Corporate Governance
Week 10
Business and Community Stakeholders
Community Involvement
Business and
Community Stakeholders
• The actions of a business affect a range of communities. Managers
must be aware of these impacts, and manage in a way that respects
community stakeholders.
• We focus on the immediate locale, but instant communication
means that the relevant community includes the region, nation, or
the world.
• For business and community stakeholders, there are two major
kinds of relationships:
• The positive contributions business can make to the community.
• The harm business can cause to community stakeholders.
• We discuss here community involvement and corporate philanthropy
Community Involvement
• Business involvement in the community represents enlightened self-
interest, because businesses help themselves in the process of
helping others.
• Volunteer Programs - such programs reflect the resourcefulness and
responsiveness to communities, and are essential for attracting and
retaining the best talent in the workforce.
• Employees want to work for the “good guys.”
• Managing Community Involvement – focuses on the contribution of
managerial and employee time and talent.
Standards of Excellence
in Corporate Community
Involvement
1. Leadership
2. Strategy
3. Integration
4. Infrastructure
5. Performance Measurement
6. Communication
7. Community Relationships
Benefits of Employee
Volunteerism
Benefits to the Benefits to the Benefits to the
employee corporation community
Improves morale Builds company Addresses
image and community needs
reputation
Increases Improves Saves community
meaningfulness of employee resources
work attraction and
retention
Develops Develops Builds pool of
teamwork and employee skills future volunteers
leadership skills and contributors
Improves mental Builds awareness
and physical of community
health needs
Builds
relationship with
and loyalty from
consumers
Developing a Community
Action Plan
1. Knowing the community.
2. Assess the company’s resources.
3. Design a community action program making the
community needs and resources available.
4. Monitor performance of the community actions program
and make adjustments
Corporate Community
Involvement
8
Corporate Philanthrophy
Corporate Philanthropy
or Business Giving
• Philanthropy - a desire to help mankind as indicated by acts of charity;
love of mankind.
• Corporate Philanthropy - Business giving, the motive for which can be
difficult to assess.
• A Brief History of Corporate Philanthropy –
• Community chest efforts dominated early giving
• Since 1960, giving has grown to address a variety of initiatives
• Now, the watchword is “strategic philanthropy” which benefits both
society and the business.
A Call for Transparency
• Companies need not disclose direct donations to charities,
but proposed legislation would require disclosure.
• Proponents say the money belongs to the shareholders, and they
should make the decision, not managers giving to their favorite
charities, which would not benefit the business
• Some fear that disclosure would result in fewer donations, and
would reveal company strategy.
• Non-disclosure has led to a rise in “dark money” political

funding to nonprofits from undisclosed sources.
Giving to the Third Sector:
Nonprofits
• Business and government – are supported by profits and
taxes
• The third sector – (churches, museums, hospitals, libraries,
colleges, and more) depends on philanthropy.
• Why do companies give?
• Charitable – (no expected benefit for the business)
• Community – (gifts support business goals)
• Commercial – (giving that benefits the business)
To Whom Do Companies
Give?
• During any budget year, firms receive numerous requests
for contributions from a variety of applicants, and decide
which to honor.
• Estimates of most business giving -
1. Health and human services
2. Education
3. Civic and community activities
4. Culture and the arts
Managing Corporate
Philanthropy-
• Two aspects to the pressure on businesses to be more
businesslike in their philanthropy:
• Base giving on business skills, resources, and
capabilities to enhance philanthropic outcomes.
• Focus on philanthropy that will enhance corporate
profitability and also make a difference in the
community (a strategic approach).
• Community Partnerships – Broad response to growing
need to reconcile financial and social goals.
Managing Corporate
Philanthropy-
• Strategic Philanthropy – corporate giving and other philanthropic
endeavors are designed in a way that best fits overall mission, goals,
or objectives.
• Factor (Supply) Conditions – the available inputs for production
• Demand Conditions – concerned with the nature of the
company’s customer and the local market
• Context for Strategy and Rivalry – businesses are helping to build
a better competitive environment—one that rewards fair
competition.
• Related and Supporting Industries – can also be strengthened
through strategic giving
Managing Corporate
Philanthropy-
• Cause-Related Marketing – a direct linking of a firm’s
product or service to a specified charity; each time a
consumer buys the product, a donation is given to the
charity by the business (is this really philanthropy?)
• Global Philanthropy – depends on the size of the firm’s

workforce in international markets
Detrimental Impacts on
Communities
• A negative consequence of a firm's actions; has a detrimental impact
on the community.
• Offshoring and Reshoring –
• Offshoring - The relocation of business processes to a different
country.
• Popular when tech jobs became cheaper to do overseas – thanks to high-
speed data and the Internet.
• Began with blue-collar, factory jobs, more recently effected white-collar jobs
• Reshoring – returning of business processes to their original location;

the costs often outweighed the benefits.
Business and Plant Closing
Business and Plant Closings
• Business and plant closings have dramatic impact in the community.
• What rights and responsibilities does business have in relation to
employee and community stakeholders? Consider:
• Before the Decision to Close is Made –
• Is this the only option?
• Diversification
• New ownership or employee ownership
2-Business and Plant Closings
Diversification
Before Deciding
to Close
New ownership
New owner
Employee ownership
Business and Plant Closings
• After the Decision to Close is Made –

• Community-Impact Analysis
• Advance notice to employees or community
• Transfer, Relocation, and Outplacement Benefits
• Gradual Phase-Outs
• Helping to Attract Replacement Industry
3-Business and Plant Closings
Conduct a community impact analysis
Provide advance notice to employees/

community
After Deciding Provide transfer, relocation, and

to Close outplacement benefits
Phase out the business gradually
Help attract replacement industry

Reference
• Carroll, B.A., Brown, J., Bucholtz, A.K., (2018). Business and
Society: Ethics, Sustainability, and Stakeholder
Management. 10th. Cengage Learning. ISBN:
9781305959828
• Tricker, B.. (2015). Corporate Governance: Principles,
Policies, and Practices. 03. Oxford University Press. ISBN:
9780198747468.
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ACCT6194

Ethics and Corporate Governance

• Non-disclosure has led to a rise in “dark money” political

• Global Philanthropy – depends on the size of the firm’s

• Reshoring – returning of business processes to their original location;

• After the Decision to Close is Made –

Conduct a community impact analysis

Provide advance notice to employees/

After Deciding Provide transfer, relocation, and

Phase out the business gradually

Help attract replacement industry

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