Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 9 Community Relations and Strategic Philanthropy
Community Stakeholders • A community includes those members of society who are aware of, concerned about, or in some way affected by the operations and output of the organization.
Community Stakeholders (cont.) • Issues of concern include: • Pollution of the environment • Land use • Economic advantages to the region • Discrimination • Exploitation of workers and consumers • Neighbor of choice • An organization that builds andsustains trust within the community
Community Relations • The organizational function dedicated to building and maintaining relationships andtrust with the community • Often supports local community through philanthropic activities • More strategic significance within the organization • Develops community mission statements to identify the needs of the people relative to the organization’s competence
Community Mission Statement: Aetna, Inc. • Aetna Employees Reaching Out (AERO), Aetna’s employee volunteering and giving program, integrates community involvement and business. When employees get involved in communities to teach underprivileged children dental hygiene, serve on hospital governance boards, and conduct other caring acts, they help Aetna to “build trusting, value-added relationships” with constituents, “anticipate the future” in health care, and invigorate other values expressed in The Aetna Way—Aetna’s business approach.
Common Myths about Community Relations • No local government/community consent is necessary. • Talking to the community will create trouble. • One-way communications efforts are sufficient to improve community relations. • Implementation is easier without community relations. • The community cannot add anything meaningful to this process because it is too technically complex. • Community leaders will request costly or unreasonable solutions.
Responsibilities to the Community • Economic issues • Legal issues • Ethical issues • Philanthropic issues
Economic Issues • Business is vital to the community. • Buyer-seller interaction stimulates the economy. • Companies hire, train, and buy supplies, raw materials, utilities, advertising services, and other local goods and services. • A company’s departure or retrenchment froma community can be devastating tothe local economy. • Downsizing • Plant closings
Legal Issues • A company must operate within legal and regulatory parameters. • Companies are granted a license to operate. • Business license • Sales tax number • Many mega-retailers have faced rejection because people believe they threaten small “mom & pop” businesses.
Ethical Issues • Companies may evaluate the role and impact of their decisions on communities from an ethical perspective. • Business leaders are taking greater responsibility for determining how they can assist in improving communities. • Improving public schools and education • Assisting in the development of mass transit • Supporting environmental initiatives
Philanthropic Issues • Historically this has meant providingsupport for worthy causes. • Gifts • Grants • Other resources • Volunteer programs • Employees donate time in support of social causes (volunteerism). • Communities benefit from the application of new skills and initiative toward problems; and companies develop better community relations.
Philanthropic Contributions • Philanthropy provides four major benefitsto society. • Improves the quality of life and helps make communities places where people want to do business, raise families, and enjoy life • Reduces government involvement by providing assistance to stakeholders • Develops employee leadership skills • Helps create an ethical culture and the valuescan act as a buffer to organizational misconduct
Strategic Philanthropy • The synergistic use of an organization’s core competencies and resources to address key stakeholders’ interests and to achieve both organizational and social benefits • Goes beyond traditional benevolent philanthropy • Involves both financial and non-financialcontributions to stakeholders • Involves employees, organizationalresources, and expertise
Strategic Philanthropy and Social Responsibility • Companies often consider philanthropy after meeting financial, legal, and ethical obligations. • Strategic philanthropy is often viewed as an investment that is tied to business strategies and implementation. • By incorporating philanthropy in strategic planning, the company can address the needs and concerns of key stakeholders. • Greater organizational accountability has led to organizational concern about performance and stakeholder accountability.
Cause-Related Marketing • An organization’s products are tied directly to a social concern. • Percentage of sales are usually donated to a cause appealing to a relevant target market. • Overall goal is to increase product sales for a defined periodof time. • Charity partners often assist in promoting the alliance(e.g., Habitat for Humanity partnered with Home Depot). • American Express pioneered this process in 1983 by donating a percentage of credit card sales to the Statue of Liberty and Ellis Island Restoration Fund.
Employees as Stakeholders • Key concern of most organizations isattracting, socializing, and retaining competent and qualified employees. • Strategic philanthropy initiatives give companies the opportunity to increase: • Employee commitment • Employee motivation
Customers as Stakeholders • Companies constantly seek to differentiate themselves in consumers’ minds. • Strategic alignments with social causes of interest to customers can help to create differentiation.
Business Partners as Stakeholders • Companies are increasingly asking business partners for: • Social audits of their companies • Adoption of industry codes of ethics • Socially responsible actions in their business practices
Community and Society as Stakeholders • Society expects businesses to be good corporate citizens and to contribute to the well-being of society. • Groups of companies and industry associations are working to extend the philanthropic efforts of their member companies.
Natural Environment as a Stakeholder • Environmental causes are of interest to all stakeholders. • Environmental abuses have damaged company and industry reputations and resulted in lost sales.
Implementation of Strategic Philanthropy • The implementation must have the endorsement and support of the CEO and other members of top management. • Top-level support allows organizational members and stakeholders to see the importance of the program to the company. • Companies need to find their unique method and not clone what competitors are doing. • Positioning in consumers’ minds • Alignment with corporate values and employee desires
Planning andEvaluating Strategic Philanthropy • Research • Should cover a company’s internal organization and programs, potential partnering organizations, sponsorship options, and events that might intersect with the interests and competencies of the organization • Organize and design • Classifies research information according to level of need and alignment with organizational competencies • Engage • Engage top management early • Spend • Decide where to invest resources