Chapter 3 - Managements Social and Ethical Responsibilities Kreitner/Eliason Foundations of Management

Social Responsibility !efinition and !ebate "he idea that firms ha#e obligations to society beyond their economic obligations to o$ners or stoc%holders and also beyond those prescribed by la$ or contract& E'ample (ohn ! Roc%efeller $as the founder of Standard )il Company* $ith some ad#ice from a public relations e'pert& Roc%efeller began handing out dimes to ro$s of eager children to counteract his $idespread reputation as a monopolist& "he dime campaign turned out unsuccessful* but Roc%efeller #ie$ed it as if he $as fulfilling a social responsibility by handing out money to hungry children& "he concept of social responsibility has further de#eloped since Roc%efellers time and many companies are no$ in#ol#ed in such programs& +hat !oes Social Responsibility ,n#ol#e Social responsibility is a relati#ely ne$ concern for the business community and the idea of corporate social responsibility is e#ol#ing& -o$e#er* there are many disputes o#er the e'act nature and scope of managements social responsibilities& .oluntary /ction "he central feature of corporate social responsibility is that an action has to be #oluntary to 0ualify as socially responsible& -o$e#er* $hen companies do not respond to societal needs* la$suits and court orders can be issued* $hich ma%es actions mandatory* not #oluntary& /n Emphasis on Means* 1ot Ends Corporate beha#ior should not* in most cases* be 2udged by the decisions 3ends4 ultimately reached* but by the process 3means4 in $hich they $ere reached& /rguments for and /gainst Corporate Social Responsibility "he role of business in society has spa$ned many arguments for and against corporate social responsibility& Four ma2or arguments on both sides re#eal the principal issues& /rguments For 5& 6usinesses are una#oidably in#ol#ed in social issues& 6usinesses are either part of the solution or part of the problem& 3E'ample unemployment* inflation* and pollution&4 7& 6usinesses ha#e the resources to tac%le todays comple' societal problems& 8ri#ate business sectors can play a decisi#e role in sol#ing societys more troubling problems&

3& / better society means a better en#ironment for doing business& 6usiness can enhance its long-run profitability by ma%ing an in#estment in society today& 9& Corporate Social action $ill pre#ent go#ernment inter#ention& :o#ernment $ill force business to do $hat it fails to do #oluntarily& / Sta%eholder /udit identifies all parties possibly impacted by the organi;ation* since many groups in society besides stoc%holders ha#e a sta%e in corporate affairs& /rguments /gainst 5& 8rofit ma'imi;ation ensures the efficient use of societys resources& +hen consumers purchase goods and ser#ices* they ultimately dictate $here assets should be deployed& 7& /s economic institutions* businesses generally lac% the ability to pursue social goals& :ross inefficiencies can be e'pected if managers di#ert their attention from the pursuit of economic goals& 3& 6usinesses already ha#e enough po$er& 6usinesses already e'ercise influence o#er $here and ho$ $e $or%* li#e* purchase goods and percei#e #alue& "here is no need to hand them o#er more po$er& 9& Since mangers are not elected* they are not directly accountable for the people& Corporate social programs can easily become misguided& "he assumption is that businesses should stic% to pursuing profit by producing mar%etable goods and ser#ices& )ther institutions* such as family* school* and go#ernment* should handle social goals& "o$ard :reater Social Responsibility /n iron la$ of responsibility states that* in the long run* those businesses $ho do not use their po$er in a $ay that society considers responsible $ill e#entually lose their po$er& Social Responsibility Strategies "he social responsibility continuum is mar%ed by four strategies reaction* defense* accommodation* and proaction& Reaction / reacti#e social responsibility strategy is denying responsibility and resisting change& !efense

/ defensi#e social responsibility strategy is resisting additional responsibility $ith legal and public relations tactics& /ccommodation /n accommodati#e social responsibility strategy is assuming additional responsibilities in response to pressure& 8roaction / proacti#e social responsibility strategy is ta%ing the initiati#e $ith ne$ programs that ser#e as models for industry& +ho 6enefits from Corporate Social Responsibility< Social responsibility should be moti#ated by altruism* $hich is an unselfish de#otion to the interest of others& Research paints a bright picture& / study of 793 companies o#er t$o years found a positi#e correlation bet$een industry leadership in en#ironmental protection/pollution control and profitability& "he researches conclude =,t pays to be green&> / second study found a good reputation for corporate social responsibility to be a competiti#e ad#antage in recruiting talented people& Enlightened Self- ,nterest Enlightened self-interest states that a business is ultimately helping itself by helping to sol#e societal problems& /d#ocates contend that social responsibility e'penditures by businesses are moti#ated by profit& Researchers support this contention by researching into corporate philanthropy* $hich is the charitable donation of company resources& /n /rray of 6enefits for the )rgani;ation "a'-free incenti#es to employees& Retention of talented employees by satisfying their altruistic moti#es& -elp in recruiting talented and socially conscious personnel& S$aying public opinion against go#ernment inter#ention& ,mpro#ed community li#ing standards for employees& /ttracting socially conscious in#estors&

/ nonta'able benefit for employees in $hich company funds are donated to their fa#orite causes& =Social responsibility can be a $in-$in proposition&> "he Ethical !imension of Management Ethics is defined as the study of moral obligation in#ol#ing right #ersus $rong& 6usiness ethics are sometimes referred to as management ethics or organi;ational ethics& ,t narro$s the frame of reference to producti#e organi;ations& 8ractical ?essons from 6usiness Ethics Research Empirical research permits us to go beyond mere intuition and speculation to determine more precisely $ho* $hat* and $hy& "hree practical insights for managers ha#e been produced ethical hot spots* pressure from abo#e* and discomfort $ith ambiguity&

Ethical hot Spots "op ten $or%place hot spots responsible for triggering unethical and illegal conduct 6alancing $or% and family 8oor internal communications 8oor leadership +or% hours* $or%load ?ac% of management support 1eed to meet sales* budget* or profit goals ?ittle or no recognition of achie#ements Company politics 8ersonal financial $orries ,nsufficient resources 8ressure from /bo#e Studies ha#e unco#ered the problem of percei#ed pressure to produce results& Most $or%ers feel some pressure to act unethically or illegally on the 2ob 3@AB4* but far fe$er 35CB4* feel a high le#el of pressure to do so Mid-le#el managers most often reported a high le#el of pressure to act unethically or illegally 37DB4& Employees of large companies cited such pressure more than those at small business 375B #s& 59B4

-igh le#els of pressure $ere reported more often by those $ith a high school diploma or less 375B4 #ersus college graduates 6y simply being a$are of pressures from higher-le#el mangers* employees can $illfully a#oid putting undue pressure on others and prepare themsel#es to deal $ith e'cessi#e organi;ational pressure& E'cessi#e pressure to achie#e specified results is a serious problem since it can ma%e ethical employees ta%e unethical shortcuts to %eep their 2obs& /mbiguous Situations "hose $ho often face ethically ambiguous situations $ant formal guidelines to help sort things out& / Call to /ction E#ery one of us can begin the process of impro#ing business ethics by loo%ing in a mirror& :eneral Ethical 8rinciples E#eryones ethical beliefs ha#e been shaped by many factors* such as family and friends* the media* culture* schooling* religious instruction* and general life e'periences& +e use ethical principles both consciously and unconsciously $hen dealing $ith ethical dilemmas& "he ten ethical principles are as follo$s Self ,nterest 8ersonal .irtues Religious in2unctions :o#ernment re0uirements Etilitarian benefits Eni#ersal rules ,ndi#idual rights Economic efficiency !istributi#e 2ustice Contributing liberty Encouraging Ethical Conduct "here are four specific $ays to encourage ethical conduct $ithin the organi;ation& Ethics "raining Managers $ho lac% ethical a$areness are labeled as amoral managers& /moral managers are managers $ho are neither moral or nor immoral* but ethically la;y& Key features of effecti#e ethics training programs include "op-management support&

)pen discussion of realistic ethics cases or scenarios& / clear focus on ethical issues specific to the organi;ation& ,ntegration of ethics themes into all training& / mechanism for anonymously reporting ethical #iolations& /n organi;ational climate that re$ards ethical conduct&

Ethical /d#ocates /n ethical ad#ocate is a business ethics specialist $ho plays a role in topmanagement decision-ma%ing& "he idea is to assign someone the specific role of critical 0uestioner& 8roblems such as groupthin% and blind conformity are less li%ely to sho$ up $hen ethical ad#ocates test managements thin%ing about ethical implications during the decisionma%ing process& Codes of Ethics / code of ethics is a published statement of moral e'pectations for employee conduct& Some specify penalties for offenders& /n effecti#e code of ethics must satisfy t$o re0uirements "hey should refer to specific practices such as %ic%bac%s* payoffs* recei#ing gifts* falsifying records* and ma%ing misleading product claims& ,t must be firmly supported by top management and e0uitably encored through the re$ard and punishment system& / code of ethics is more important than e#er in todays comple' global economy& +histle-6lo$ing +histle-6lo$ing is the practice of reporting percei#ed unethical organi;ational practices to outside authorities& ,t is a highly contro#ersial topic among managers& ,t generally puts ones 2ob/career on the line& "he challenge for management is to create an organi;ational climate in $hich the need to blo$ the $histle is reduced& Some $ays of doing this are Encourage the free e'pression of contro#ersial and dissenting #ie$points& Streamline organi;ations grie#ance procedure so that problems recei#e a prompt and fair hearing& Find out $hat employees thin% about the organi;ations social responsibility policies and ma%e appropriate changes& ?et employees %no$ that management respects and is sensiti#e to their indi#idual consciences& Recogni;e that treating a $histle-blo$er harshly $ill probably lead to an ad#erse public opinion&

Reference Kreitner* Robert 37DD@4 Foundations of Management basics and best practices* -oughton Mifflin Company* 1e$ For%&