© 2018 Cengage 1

Chapter 16
Business and
Community
Stakeholders

© 2018 Cengage 2
 Learning Outcomes
1. Discuss reasons for community involvement,
various types of community projects, and
management of community stakeholders.
2. Explain the pros and cons of corporate
philanthropy, provide a brief history of corporate
philanthropy, and explain why and to whom
companies give.
3. Differentiate between strategic philanthropy,
cause-related marketing, and cause branding.
4. Characterize the loss of jobs in the contexts of
offshoring, reshoring, and plant closings.

© 2018 Cengage 3
 Chapter Outline

• Community Involvement
• Corporate Philanthropy or Business Giving
• Detrimental Impacts on Communities
• Summary
• Key Terms

© 2018 Cengage 4
 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 © 2018 Cengage 5
 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.
© 2018 Cengage 6
 Standards of Excellence
in Corporate Community Involvement
1. Leadership
2. Strategy
3. Integration
4. Infrastructure
5. Performance Measurement
6. Communication
7. Community Relationships

© 2018 Cengage 7
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 employee Saves community
meaningfulness of attraction and resources
work retention

Develops teamwork Develops employee Builds pool of future

and leadership skills skills volunteers and
contributors
Improves mental and Builds awareness of
physical health community needs

Builds relationship
with and loyalty
from consumers

© 2018 Cengage 8
 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.

© 2018 Cengage 9
Corporate Community Involvement

© 2018 Cengage 10
 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.
© 2018 Cengage 11
 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.
© 2018 Cengage 12
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)

© 2018 Cengage 13
 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
© 2018 Cengage 14
 Managing Corporate Philanthropy-
(1 of 3)

• 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.
© 2018 Cengage 15
 Managing Corporate Philanthropy-
(2 of 3)

• 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
© 2018 Cengage 16
Managing Corporate Philanthropy- (3 of 3)

• 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

© 2018 Cengage 17
 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.
© 2018 Cengage 18
 Business and Plant Closings (1 of 2)
• 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

© 2018 Cengage 19
 2-Business and Plant Closings
Diversification

Before Deciding
to Close

New ownership

New owner

Employee ownership

© 2018 Cengage 20
 Business and Plant Closings (2 of 2)
• 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

© 2018 Cengage 21
3-Business and Plant Closings (continued)
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

© 2018 Cengage 22
 Community Impact Analysis

What groups will be How will they be What is the duration

affected? affected? of the impact?

To what extent will

What is the timing of
What is magnitude of the impact be
initial and later
the effect? diffused in the
effects?
community?

© 2018 Cengage 23
 WARN Advance Notice

Worker Adjustment and Retraining

Notification Act (WARN)
• Requires firms with 100 or more workers to
provide 60 days advance notice before
shutting down or conducting layoffs.
• Regular federal, state, and local government
entities that provide public services are not
covered by WARN.
• Legislators have tried to strengthen the law by
closing loopholes.
© 2018 Cengage 24
Communicating With Employees Who are Being Laid
Off

 Be complete
 Be consistent
 Inform affected employees first
 Inform retained employees

Survivors: The Forgotten Stakeholders, need-

• Emotional support
• Directional support
• Tactical support
• Informational support
© 2018 Cengage 25
Survivors– The Forgotten Stakeholders

Emotional support

Directional support
The Needs of
Survivors
Tactical support

Informational support

© 2018 Cengage 26
 Key Terms
• • offshoring
CECP
• • Outsourcing
cause branding
• • Paid release time
cause-related marketing
• • Philanthropy
community action
program • Philanthropy hackers
• community involvement • Reshoring
• community partnerships • Skills-based pro bono
• Corporate philanthropy service
• • strategic philanthropy
Company-wide day of
service • third sector
• Dollars for doers • Worker Adjustment and
• employee owned Retraining Notification
Act (WARN)
© 2018 Cengage 27