to lack of compliance with minimum wage laws, were rampant in the 1990s. While Nike struggled to [3] win back confidence in buyers that were concerned with their business practices, TOMS social initiatives are a source of excellent publicity in pride in those who purchase their products. As further testament to their popularity, TOMS has engaged in partnerships with Nordstrom, Disney, and Element Skateboards. Although the idea of social entrepreneurship and the birth of firms such as TOMS Shoes are relatively new, a push toward social initiatives has been the source of debate for executives for decades. Issues that have sparked particularly fierce debate include CEO pay and the role of today’s modern corporation. More than a quarter of a century ago, famed economist Milton Friedman argued, “The social responsibility of business is to increase its profits.” This notion is now being challenged by firms such as TOMS and their entrepreneurial CEO, who argue that serving other stakeholders beyond the owners and shareholders can be a powerful, inspiring, and successful motivation for growing business. This chapter discusses some of the key issues and decisions relevant to understanding corporate and business ethics. Issues include how to govern large corporations in an effective and ethical manner, what behaviors are considered best practices in regard to corporate social performance, and how different generational perspectives and biases may hold a powerful influence on important decisions. Understanding these issues may provide knowledge that can encourage effective organizational leadership like that of TOMS Shoes and discourage the criticisms of many firms associated with the corporate scandals of the late 1990s and early 2000s. [1] Oloffson, K. 2010, September 29. In Toms’ Shoes: Start-up copy “one-for-one” model.Wall Street Journal. Retrieved from http://online.wsj.com/article/SB1000142405274870411 6004575522251507063936.html [2] Nicolas, S. 2011, February. The great giveaway. Director, 64, 37–39. [3] McCall, W. 1998. Nike battles backlash from overseas sweatshops. Marketing News, 9, 14. Boards of Directors 10.1 LEARNING OBJECTIVES
to lack of compliance with minimum wage laws, were rampant in the 1990s. [3] While Nike struggled to win back confidence in buyers that were concerned with their business practices, TOMS social initiatives are a source of excellent publicity in pride in those who purchase their products. As further testament to their popularity, TOMS has engaged in partnerships with Nordstrom, Disney, and Element Skateboards. Although the idea of social entrepreneurship and the birth of firms such as TOMS Shoes are relatively new, a push toward social initiatives has been the source of debate for executives for decades. Issues that have sparked particularly fierce debate include CEO pay and the role of today’s modern corporation. More than a quarter of a century ago, famed economist Milton Friedman argued, “The social responsibility of business is to increase its profits.” This notion is now being challenged by firms such as TOMS and their entrepreneurial CEO, who argue that serving other stakeholders beyond the owners and shareholders can be a powerful, inspiring, and successful motivation for growing business. This chapter discusses some of the key issues and decisions relevant to understanding corporate and business ethics. Issues include how to govern large corporations in an effective and ethical manner, what behaviors are considered best practices in regard to corporate social performance, and how different generational perspectives and biases may hold a powerful influence on important decisions. Understanding these issues may provide knowledge that can encourage effective organizational leadership like that of TOMS Shoes and discourage the criticisms of many firms associated with the corporate scandals of the late 1990s and early 2000s. [1] Oloffson, K. 2010, September 29. In Toms’ Shoes: Start-up copy “one-for-one” model.Wall Street Journal. Retrieved from http://online.wsj.com/article/SB1000142405274870411 6004575522251507063936.html [2] Nicolas, S. 2011, February. The great giveaway. Director, 64, 37–39. [3] McCall, W. 1998. Nike battles backlash from overseas sweatshops. Marketing News, 9, 14. 10.1 Boards of Directors LEARNING OBJECTIVES