managing ethics and social responsibility
Read the Case United Airlines Navigating a Social Media Storm at the end of Chapter 19 and response to the following:
What was the impact of the incidents described in the case on United Airlines reputation?
Did these incidents impact the firms corporate identity or corporate image, or both, as described in the chapter?
Did these incidents constitute a crisis, as defined in the chapter?
Did United Airlines engage in effective crisis management, and why or why not? If you were the public relations manager at United Airlines, what steps would you have recommended the company take when these incidents occurred?
What should the company do now to regain its customers trust?
law43665_fm_i-xx i 01/07/19 10:32 AM
Stakeholders, Ethics, Public Policy Sixteenth Edition
Anne T. Lawrence
San Jos State University
James Weber
Duquesne University
Business and
Society
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BUSINESS AND SOCIETY: STAKEHOLDERS, ETHICS, PUBLIC POLICY, SIXTEENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright 2020 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions 2017, 2014, and
2011. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a
database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not
limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LWI 21 20 19
ISBN 978-1-260-04366-2 (bound edition)
MHID 1-260-04366-5 (bound edition)
ISBN 978-1-260-14049-1 (loose-leaf edition)
MHID 1-260-14049-0 (loose-leaf edition)
Portfolio Manager: Laura Hurst Spell
Marketing Manager: Lisa Granger
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Buyer: Susan K. Culbertson
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Cover Image: View Apart/Shutterstock
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All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
Names: Lawrence, Anne T., author. | Weber, James (Business ethics professor),
author.
Title: Business and society: stakeholders, ethics, public policy / Anne T.
Lawrence, San Jose State University, James Weber, Duquesne University.
Description: Sixteenth edition. | New York, NY : McGraw-Hill Education, [2020]
Identifiers: LCCN 2018052591 | ISBN 9781260043662 (alk. paper) | ISBN
1260043665 (bound edition) | ISBN 9781260140491 (loose-leaf edition) |
ISBN 1260140490 (loose-leaf edition)
Subjects: LCSH: Social responsibility of business.
Classification: LCC HD60 .F72 2020 | DDC 658.4/08dc23 LC record available at https://lccn.loc
.gov/2018052591
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does
not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not
guarantee the accuracy of the information presented at these sites.
mheducation.com/highered
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Anne T. Lawrence San Jos State University
Anne T. Lawrence is professor of management emerita at San Jos State University. She
holds a Ph.D. from the University of California, Berkeley, and completed two years of post-
doctoral study at Stanford University. Her articles, cases, and reviews have appeared in many
journals, including the Academy of Management Review, Administrative Science Quarterly,
Case Research Journal, Journal of Management Education, California Management Review,
Business and Society Review, Research in Corporate Social Performance and Policy, and
Journal of Corporate Citizenship. Her cases in business and society have been reprinted
in many textbooks and anthologies. She has served as guest editor of the Case Research
Journal. She served as president of both the North American Case Research Association
(NACRA) and of the Western Casewriters Association and is a Fellow of NACRA, from
which she received a Distinguished Contributor Award in 2014. She received the Emerson
Center Award for Outstanding Case in Business Ethics (2004) and the Curtis E. Tate Award
for Outstanding Case of the Year (1998, 2009, and 2015). At San Jos State University,
she was named Outstanding Professor of the Year in 2005. In 2015, she received a Master
Teacher in Ethics Award from The Wheatley Institution at Brigham Young University. She
currently serves as chair of the board of the Case Research Foundation.
James Weber Duquesne University
James Weber is a professor of management and business ethics at Duquesne University,
where he also serves as the managing director of the Institute for Ethics in Business. He
holds a Ph.D. from the University of Pittsburgh and has taught at the University of San
Francisco, University of Pittsburgh, and Marquette University. His areas of interest and
research include personal, managerial, and organizational values and cognitive moral
reasoning. His work has appeared in Organization Science, Human Relations, Business &
Society, Journal of Business Ethics, and Business Ethics Quarterly. He received the SIM
Sumner Marcus Award for lifetime contribution to the Social Issues in Management
division of the Academy of Management in 2013 and the Best Reviewer Award from
Business & Society in 2015. He was recognized by the Social Issues in Management divi-
sion with the Best Paper Award in 1989 and 1994 and received the Best Article Award
from the International Association for Business and Society in 1998. He has served as
division and program chair of the Social Issues in Management division of the Academy
of Management. He has also served as president and program chair of the International
Association of Business and Society (IABS).
About the Authors
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Preface
In a world economy that is becoming increasingly integrated and interdependent, the rela-
tionship between business and society is becoming ever more complex. The globaliza-
tion of business, the emergence of civil society organizations in many nations, and rapidly
changing government regulations and international agreements have significantly altered
the job of managers and the nature of strategic decision making within the firm.
At no time has business faced greater public scrutiny or more urgent demands to act
in an ethical and socially responsible manner than at the present. Consider the following:
The rise of populist and nationalist political leaders in the United States and parts of
Europe and the Middle East have led to renewed debates on the proper role of govern-
ment in regulating business and protecting stakeholders. As environmental, financial,
employment, and consumer regulations have been rolled back, particularly in the United
States, businesses have had to choose whether to take advantage of loosened rules or to
follow a strategy of voluntary corporate responsibility. Long-standing trade relationships
have been upended by tariffs and other barriers on imports, helping some businesses and
hurting others. Changing immigration policy has required firms to rethink their policies
toward their foreign-born workers, including so-called Dreamers brought to the United
States illegally as children. In this rapidly changing environment, business firms have
been challenged to manage in a way that remains consistent with their values.
A host of new technologies have become part of the everyday lives of billions of the
worlds people. Advances in the basic sciences are stimulating extraordinary changes in
agriculture, telecommunications, transportation, and pharmaceuticals, which have the
potential to enhance peoples health and quality of life. Artificial intelligence can be
used to drive vehicles, diagnose illnesses, and manage investments. Technology has
changed how we interact with others, bringing people closer together through social
networking, instant messaging, and photo and video sharing. These innovations hold
great promise. But they also raise serious ethical issues, such as those associated with
the use of the Internet to exploit or defraud others, censor free expression, or invade
individuals privacy. Businesses must learn to harness powerful technologies for good,
while acting responsibly and ethically toward their many stakeholders.
Businesses in the United States and other nations are transforming the employment
relationship, abandoning practices that once provided job security and guaranteed pen-
sions in favor of highly flexible but less secure forms of employment. The rise of the
gig economy has transformed many workers into self-employed contractors. Many
jobs, including those in the service sector, are being outsourced to the emerging econo-
mies of China, India, and other nations. As jobs shift abroad, multinational corporations
are challenged to address their obligations to workers in far-flung locations with very
different cultures and to respond to initiatives, like the Responsible Business Alliance
Code of Conduct, which call for voluntary commitment to enlightened labor standards
and human rights. The #MeToo movement has focused a spotlight on sexual harassment
and abusive behavior in the workplace, and led to the fall of well-known executives and
media personalities and calls for change in workplace culture.
Severe weather eventshurricanes, floods, and wildfireshave urgently focused
attention on the human impact on natural systems, prompting both businesses and
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law43665_fm_i-xx v 01/07/19 10:32 AM
governments to act. An emerging consensus about the causes and risks of climate
change is leading many companies to adopt new practices, and once again the nations
of the world have experimented with public policies designed to limit the emissions
of greenhouse gases, most notably in the Paris Agreement. Many businesses have
cut air pollution, curbed solid waste, and designed products and buildings to be more
energy-efficient, saving money in the process. A better understanding of how human
activities affect natural resources is producing a growing understanding that economic
growth must be achieved in balance with environmental protection if development is to
be sustainable.
Many regions of the world and its nations are developing at an extraordinary rate. Yet,
the prosperity that accompanies economic growth is not shared equally. Access to health
care, adequate nutrition, and education remain unevenly distributed among and within
the worlds nations, and inequalities of wealth and income have become greater than
they have been in many years. These trends have challenged businesses to consider the
impact of their compensation, recruitment, and professional development practices on
the persistentand in some cases, growinggap between the haves and the have-nots.
Big corporate tax cuts in the United States have required companies to decide whether
to distribute their windfalls to their executives, shareholders, employees, or customers;
to invest in new jobs; or to buy back stock.
The opioid epidemic has focused attention on the role of drug companies, distributors,
and pharmaciesas well as government regulatorsin contributing to the scourge of
addiction, disability, and death caused by narcotics. The continuing pandemic of AIDS
in sub-Saharan Africa and the threat of a swine or avian flu, the Zika virus, or another
Ebola outbreak have compelled drug makers to rethink both their pricing policies and
their research priorities. Many businesses must consider the delicate balance between
their intellectual property rights and the urgent demands of public health, particularly in
the developing world.
In many nations, legislators have questioned businesss influence on politics. Business
has a legitimate role to play in the public policy process, but it has on occasion shaded
over into undue influence and even corruption. Technology offers candidates and politi-
cal parties new ways to reach out and inform potential voters, but it has also created new
opportunities for manipulation of the electoral process through deceptive messaging.
Businesses the world over are challenged to determine their legitimate scope of influ-
ence and how to voice their interests most effectively in the public policy process.
The new Sixteenth Edition of Business and Society addresses this complex agenda of
issues and their impact on business and its stakeholders. It is designed to be the required
textbook in an undergraduate or graduate course in Business and Society; Business, Gov-
ernment, and Society; Social Issues in Management; or the Environment of Business. It may
also be used, in whole or in part, in courses in Business Ethics and Public Affairs Manage-
ment. This new edition of the text is also appropriate for an undergraduate sociology course
that focuses on the role of business in society or on contemporary issues in business.
The core argument of Business and Society is that corporations serve a broad public
purpose: to create value for society. All companies must make a profit for their owners.
Indeed, if they did not, they would not long survive. However, corporations create many
other kinds of value as well. They are responsible for professional development for their
employees, innovative new products for their customers, and generosity to their communi-
ties. They must partner with a wide range of individuals and groups in society to advance
collaborative goals. In our view, corporations have multiple obligations, and all stakehold-
ers interests must be considered.
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A Tradition of Excellence
Since the 1960s, when Professors Keith Davis and Robert Blomstrom wrote the first edi-
tion of this book, Business and Society has maintained a position of leadership by discuss-
ing central issues of corporate social performance in a form that students and faculty have
found engaging and stimulating. The leadership of the two founding authors, and later of
Professors William C. Frederick and James E. Post, helped Business and Society to achieve
a consistently high standard of quality and market acceptance. Thanks to these authors
remarkable eye for the emerging issues that shape the organizational, social, and public
policy environments in which students will soon live and work, the book has added value
to the business education of many thousands of students.
Business and Society has continued through several successive author teams to be the
market leader in its field. The current authors bring a broad background of business and
society research, teaching, consulting, and case development to the ongoing evolution of
the text. The new Sixteenth Edition of Business and Society builds on its legacy of market
leadership by reexamining such central issues as the role of business in society, the nature
of corporate responsibility and global citizenship, business ethics practices, and the com-
plex roles of government and business in a global community.
For Instructors
For instructors, this textbook offers a complete set of supplements.
Instructor Library
The Connect Management Instructor Library is a repository for additional resources to
improve student engagement in and out of class. The instructor can select and use any asset
that enhances their lecture. The Connect Instructor Library includes an extensive instruc-
tors resource manualfully revised for this editionwith lecture outlines, discussion
case questions and answers, tips from experienced instructors, and extensive case teaching
notes. A computerized test bank and power point slides for every chapter are also provided.
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Create
With McGraw-Hill Create, create.mheducation.com, the instructor can easily rearrange
chapters, combine material from other content sources, and quickly upload self-developed
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select a print or eBook format.
For Students
Business and Society has long been popular with students because of its lively writing,
up-to-date examples, and clear explanations of theory. This textbook has benefited greatly
from feedback over the years from thousands of students who have used the material in the
authors own classrooms. Its strengths are in many ways a testimony to the students who
have used earlier generations of Business and Society.
The new Sixteenth Edition of the text is designed to be as student-friendly as
always. Each chapter opens with a list of key learning objectives to help focus student
reading and study. Numerous figures, exhibits, and real-world business examples (set
as blocks of colored type) illustrate and elaborate the main points. A glossary at the
end of the book provides definitions for bold-faced and other important terms. Inter-
net references and a full section-by-section bibliography guide students who wish
to do further research on topics of their choice, and subject and name indexes help
students locate items in the book.
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Studentsstudy more efficiently, retain more
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Effective, efficient studying.
Connect helps you be more productive with your
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x Preface
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New for the Sixteenth Edition
Over the years, the issues addressed by Business and Society have changed as the envi-
ronment of business itself has been transformed. This Sixteenth Edition is no exception,
as readers will discover. Some issues have become less compelling and others have taken
their place on the business agenda, while others have endured through the years.
The Sixteenth Edition has been thoroughly revised and updated to reflect the latest
theoretical work in the field and statistical data, as well as recent events. Among the new
additions are:
New discussion of theoretical advances in stakeholder theory, corporate citizenship,
public affairs management, public and private regulation, corporate governance,
social and environmental auditing, social investing, reputation management, business
partnerships, supply chain codes of conduct, social entrepreneurship, and corporate
philanthropy.
Treatment of practical issues, such as social networking, artificial intelligence and
robotics, gender diversity, political advertising and campaign contributions, public and
media relations, well as the latest developments in the regulatory environment in which
businesses operate.
New discussion cases and full-length cases on such timely topics as the role of busi-
ness in the unfolding opioid crisis, Wells Fargos unauthorized consumer accounts, the
Volkswagen diesel emissions scandal, the aftermath of the BP disaster in the Gulf of
Mexico, the massive Equifax data breach, the consumer boycott of Stoli vodka, the
business response to the movement for school safety, LaFarges dealings in the Syrian
war zone, the potential regulation of Facebook in the United States and Europe, political
action by the U.S. steel industry on the issue of tariffs, the rise of autonomous vehicles,
law enforcement access to mobile phone data, executive misconduct at Wynn Resorts,
business response to the threat to Dreamers, IKEAs sustainable supply chain, Sales-
forces integrated philanthropy, and social media criticism of United Airlines.
Finally, this is a book with a vision. It is not simply a compendium of information
and ideas. The new edition of Business and Society articulates the view that in a global
community, where traditional buffers no longer protect business from external change,
managers can create strategies that integrate stakeholder interests, respect personal values,
support community development, and are implemented fairly. Most important, businesses
can achieve these goals while also being economically successful. Indeed, this may be the
only way to achieve economic success over the long term.
Anne T. Lawrence
James Weber
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Acknowledgments
We are grateful for the assistance of many colleagues at universities in the United States
and abroad who over the years have helped shape this book with their excellent suggestions
and ideas. We also note the feedback from students in our classes and at other colleges and
universities that has helped make this book as user-friendly as possible.
We especially wish to thank two esteemed colleagues who made special contributions
to this edition. David M. Wasieleski, professor of management and business ethics at
Duquesne University, led the revisions of Chapters 5 and 6, to which he contributed his
knowledge of ethics theory and organizational practice. Vanessa D. Hill, associate profes-
sor of management at the University of Louisiana at Lafayette, generously shared with us
her expertise on the employment relationship and workplace diversity and inclusion. She
was the lead author of Chapters 15 and 16, which have greatly benefited from her insights.
For these contributions, we are most grateful.
We also wish to express our appreciation for the colleagues who provided detailed
reviews for this edition. These reviewers were Hossein Bidgoli, California State Uni-
versity, Bakersfield; Ryan Fehr, Foster School of Business, University of Washington,
Seattle; Scott Jeffrey, Monmouth University; Eun-Hee Kim, Gabelli School of Business,
Fordham University; Jet Mboga, William Paterson University; Stephen P. Preacher, South-
ern Wesleyan University; and A. J. Stagliano, Saint Josephs University. Their insights
helped guide our revision.
Thanks are also due Daniel Jacobs of Loyola Marymount University; Samir Kumar
Barua of the Indian Institute of Management Ahmedabad and Mahendra R. Gurarathi
of Bentley University; Grishma Shah, Janet Rovenpor, and Musa Jafar of Manhattan
College; Robyn Linde of Rhode Island College and H. Richard Eisenbeis of the Univer-
sity of Southern Colorado Pueblo (retired); Cynthia E. Clark of Bentley University; and
Debra M. Staab, a freelance writer and researcher, who contributed cases to this edition.
We are grateful to several individuals have made specific research contributions to this
project. Denise Kleinrichert, of the Center for Ethical and Sustainable Business Manage-
ment at San Francisco State University, provided new material on B Corporations and
social entrepreneurship for Chapter 3, which we appreciate. Natalie Hanna and Kelsey
Aemi of Duquesne University provided able research assistance. Thanks are due also to
Carolyn Roose Eagle, Ben Eagle, and Nate Marsh for research support. Emily Marsh, of
Colorbox Industries, provided graphic design services.
Debra M. Staab, in addition to authoring a case, provided research assistance and under-
took the complex task of preparing the instructors resource manual, test bank, and other
ancillary materials. Her contributions have been invaluable.
In addition, we are grateful to the many colleagues who over the years have gener-
ously shared with us their insights into the theory and pedagogy of business and soci-
ety. In particular, we would like to thank Cynthia E. Clark and Jill Brown of Bentley
University; Shawn Berman, Harry J. Van Buren III, Natalia Vidal, and Garima Sharma
of the University of New Mexico; Anke Arnaud of Embry Riddle Aeronautical Univer-
sity; Jennifer J. Griffin of Loyola University of Chicago; Ronald M. Roman, Asbjorn
Osland, Thomas Altura, and Matthew Maguire of San Jos State University; Heather
Elms of American University; Joseph A. Petrick of Wright State University; Kathleen
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xii Acknowledgments
Rehbein of Marquette University; Judith Schrempf-Stirling of the University of Geneva;
Michelle Westermann-Behaylo of the University of Amsterdam; Diane Swanson and
Bernie Hayen of Kansas State University; Cynthia M. Orms of Georgia College & State
University; Ali Al-Kazemi of Kuwait University; Sandra Waddock of Boston College;
Mary C. Gentile of the University of Virginia Darden School of Business; Michael E.
Johnson-Cramer and Jamie Hendry of Bucknell University; John Mahon and Stephanie
Welcomer of the University of Maine; Bradley Agle of Brigham Young University;
Gina Vega of Merrimack College; Craig Dunn and Brian Burton of Western Washington
University; Lori V. Ryan of San Diego State University; Bryan W. Husted of EGADE
Business School Monterrey; Sharon Livesey of Fordham University; Barry Mitnick of
the University of Pittsburgh; Virginia Gerde of Furman University; Matthew Drake of
Duquesne University; Robbin Derry of the University of Lethbridge; Jerry Calton of
the University of Hawaii-Hilo; Linda Klebe Trevio of Pennsylvania State University;
Mary Meisenhelter of York College of Pennsylvania; Amy Hillman and Gerald Keim
of Arizona State University; Barbara Altman of Texas A&M University Central Texas;
Randall Harris of Texas A&M University Corpus Christi; Richard Wokutch of Virginia
Tech University; Dawn Elm of University of St. Thomas; Lynda Brown of the Univer-
sity of Montana; Kathleen A. Getz of Loyola University Maryland; Gordon P. Rands
of Western Illinois University; Paul S. Adler of the University of Southern California;
Linda C. Rodriguez of the University of South Carolina Aiken; Emmanuel Raufflet
of HEC Montreal; Bruce Paton of Menlo College; Smita Trivedi, Tom E. Thomas,
Geoffrey Desa, and Murray Silverman (retired), of San Francisco State University; Jacob
Park of Green Mountain College; Armand Gilinsky of Sonoma State University; and
Tara Ceranic Salinas of the University of San Diego.
These scholars dedication to the creative teaching of business and society has been a
continuing inspiration to us.
We wish to express our appreciation to James E. Post, a former author of this book, who
has continued to offer valuable intellectual guidance to this project. We also wish to note,
with sadness and gratitude, the passing of our mentor and a former author of this book,
William C. Frederick, in 2018. His ideas live on in this book.
We continue to be grateful to the excellent editorial and production team at McGraw-
Hill. We offer special thanks to Laura Hurst Spell, our associate portfolio manager, for her
skillful leadership of this project. We also wish to recognize the able assistance of Marla
Sussman, executive editor, and of Jeni McAtee, content project manager, whose ability to
keep us on track and on time has been critical. Lisa Granger headed the excellent market-
ing team. Katie Reuter, content project manager (assessment); Susan K. Culbertson, buyer;
Richard Wright, copy editor; Traci Vaske, content licensing specialist; and Jessica Cuevas,
who designed the book cover, also played key roles. Each of these people has provided
professional contributions that we deeply value and appreciate.
As always, we are profoundly grateful for the ongoing support of our spouses, Paul
Roose and Sharon Green.
Anne T. Lawrence
James Weber
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Brief Contents
PART ONE
Business in Society 1
1. The Corporation and Its Stakeholders 2
2. Managing Public Issues and Stakeholder
Relationships 25
3. Corporate Social Responsibility and
Citizenship 47
4. Business in a Globalized World 71
PART TWO
Business and Ethics 93
5. Ethics and Ethical Reasoning 94
6. Organizational Ethics 115
PART THREE
Business and Public Policy 137
7. BusinessGovernment Relations 138
8. Influencing the Political Environment 161
PART FOUR
Business and the Natural
Environment 187
9. Sustainable Development and Global
Business 188
10. Managing for Sustainability 211
PART FIVE
Business and Technology 237
11. The Role of Technology 238
12. Regulating and Managing Technology 261
PART SIX
Business and Its Stakeholders 281
13. Shareholder Rights and Corporate
Governance 282
14. Consumer Protection 305
15. Employees and the Corporation 327
16. Managing a Diverse Workforce 350
17. Business and Its Suppliers 374
18. The Community and the
Corporation 396
19. Managing the Public and the Corporate
Reputation 419
CASES IN BUSINESS AND SOCIETY 441
1. Profiting from Pain: Business and the
U.S. Opioid Epidemic 442
2. Wells Fargos Unauthorized Customer
Accounts 453
3. The Carlson Company and Protecting
Children in the Global Tourism
Industry 462
4. BP Blowout: The Aftermath of the Gulf
Oil Disaster 471
5. Google and the Right to Be
Forgotten 480
6. General Motors and the Ignition Switch
Recalls 490
7. The Upper Big Branch Mine
Disaster 500
8. After Rana Plaza 510
9. The Boycott of Stoli Vodka 521
GLOSSARY 529
BIBLIOGRAPHY 542
I
