SOCIAL

RESPONSIBILITY OF
ENTREPRENEURS
Ms. Jennifer Bumanglag, MMBM
 “There is one, and only one social
responsibility of business – to use its
resources and engage in activities
designed to increase its profits so long as
it stays within the rules of the game,
which is to engage in open and free
competition without deception or fraud.”

- Milton Friedman

 MODELS AND
FRAMEWORKS OF

SOCIAL RESPONSIBILITY

 Social Responsibility
•  Social responsibility is an idea that suggests that
organizations behave ethically and with consideration
to social, cultural, economic, and environmental issues.

•  Outwardly, this could translate to a business entity

donating to a local charity or creating an outreach
program for the company to participate in. However, it
can also take on less obvious forms, such as spending
for better quality materials in order to ensure that its
product gives the customers their money’s worth or it
might be improving the benefits of one’s employees so
that they in turn will be more productive in work.

 What does it mean to be Socially

Responsible and Ethical?

ü  The theory of social responsibility is built on a

system of ethics, in which decisions and actions
must be ethically validated before proceeding.

ü  Moral values that are inherent in society create a

distinction between right and wrong.

 What does it mean to be Socially

Responsible and Ethical?

ü  Every individual has a responsibility to act in manner

that is beneficial to society and not solely to the
individual.

ü  Social responsibility and ethics applies in both individual and

group capacities.

ü  It should be incorporated into daily actions/decisions,

particularly ones that will have an effect on other persons
and/or the environment.

 What does it mean to be Socially

Responsible and Ethical?
ü  Businesses have develope d a system of social
responsibility that is tailored to their company
environment.

ü  If social responsibility is maintained within a company

then the employees and the environment are held equal
to the company’s economics.

ü  Often, the ethical implications of a decision/action are

overlooked for personal gain.

•  This frequently manifests itself in companies that

attempt to cheat environmental regulations. When
this happens, government interference is necessary.

How social responsibility is viewed depends largely on

what theory an entrepreneur adheres to.

STOCKHOLDER THEORY

STAKEHOLDER THEORY

Stockholder (or Shareholder) Theory

•  Milton Friedman is most associated with this theory

because of his statement that the company’s social
responsibility is to increase profit.

•  In this model, companies exist to serve the interests of

their stockholders and their primary obligation is to
make as much money as possible as long as their
practices conform to the law.

•  In simple terms, the sole purpose of the business is to

create and maximize profits because if it does not make
profit it will soon find itself bankrupt.

Invisible Hand

  

The Invisible Hand is a metaphor used in

economics to describe the unintended social
benefits of an individual’s pursuit of his/her own
interest. Applied in the light of the Stockholder
Theory, one might say that if a business is left
to pursue its goal, which is to make a profit, it
will inevitably end up doing good things for the
public.

Criticism of the Classical Model

•  The Stockholder Theory has been frequently

criticized for its supposed self-serving goal of
profit maximization. A singular focus on the
creation of profit can lead to disastrous
results for some companies.

 CASE: BASIC FAIRNESS

 
Martin Shkreli has single handedly changed the face of the
pharmaceutical industry, and not in a positive way. A former
hedge fund manager, Shkreli has become one of the most
hated executives in America. His company, Turing
Pharmaceuticals, bought the rights to Daraprim, a drug
developed in the 1950s, which is used by patients with HIV.
Upon acquiring the rights to the drugs, he immediately
announced that he was raising the price of the $13.50 pill to
$750.
 
When interviewed, Shkr eli told Forbes magazine,
“Shareholders want us to maximize profit, and lowering the
price of our product is a direct contrast to that objective.”
Sadly, pharmaceutical companies often raise the prices of the
most needed medicines, justifying that it is the insurance
companies that foot the bill and that most of the amount is
directed towards Research and Development.
Do Learning Activity 1
in Canvas
 Stakeholder Theory

•  The Stakeholder Theory is a more encompassing framework

that goes beyond the philosophy of maximizing profits for
the shareholders; rather, it states that a company should be
responsible, not just to its shareholders but to its
stakeholders as well.

•  Proponents such as R. Edward Freeman, believe that value

created for the stakeholders must not resort to tradeoffs
and that a truly great company is able to align the
stakeholders’ interests with its own mission and vision.

•  In the Stakeholder Theory, a typical company has many

stakeholders. A stakeholder is defined as any person, group,
or organization that has an interest or concern in the
enterprise.

Here are some stakeholders that a business needs to be answerable:

employees

society suppliers

media Company regulators

customers financiers

competitors
 CASE: CUSTOMER RELATIONS
 
In 1982, seven people died after swallowing cyanide-laced
capsules of Extra-Strength Tylenol. At that time Tylenol was
Johnson & Johnson’s best-selling product. Sales dropped
dramatically after the incident, but two months after, sales were
up, and Tylenol’s packaging was improved.
 
How was Johnson and Johnson’s (J&J) able to recover from this
crisis so quickly? It recalled 31 million bottles of Tylenol
capsules from store shelves and offered to replace the product.
Instead of looking for anyone to blame, it placed the consumer
first by doing the recall. It was very costly for the company to do
this and J&J reportedly spent more than $100 million for the
recall and re-launch of their product. But as a result of putting
its clients’ safety first, its stocks, which initially went down,
recovered in only a few months. J&J came out as a stronger
company after this deal.
Performance Task 1
•  Many companies now advocate Corporate Social
Responsibility (CSR), which recognizes the economic,
legal, ethical, and even philanthropic responsibilities of
corporations in the world today.

•  While there are companies who declare their CSR and

use this as a means of creating positive public
relations, there are a handful of companies that go
beyond what is government-mandated in order to
serve their community genuinely.

 Corporate Social
Responsibility [CSR]

ü CSR is a term used to describe a company’s

obligation to be sensitive to the needs of all
the stakeholders in its business operations.

Corporate Social Responsibility [CSR]

ü CSR means that companies take responsibility for the

impact of their (business) activities on society.

ü It is a question of finding the right balance between

the three P’s: People, Planet, and Profit.

•  This means that as a business, you not only strive

for profit, but you also take into account the
co nsequence s of yo u r activitie s fo r the
environment (planet) and the people inside and
outside your company.

 Corporate Social Responsibility [CSR]

ü  The term ‘corporate citizenship’ is often used

interchangeably with CSR.

ü  This concept states that the long-term interests of

businesses are best served when profitability and
g ro wth are acco mplishe d alo ng si de its social
responsibilities.

ü  Some of these ethical obligations inclu de the

improvement of communities, the safeguard for and
sustainability of the environment, and the enhancement
of the quality of life of its stakeholders.

 Manifestations of the practice of CSR

include the following:

1.  Social commitment to programs beyond the

immediate community of the enterprise.

2.  Rapport between the business and the

community.

3.  Health and safety, family welfare, and equal

opportunity programs, inclusive of reward
systems and legal reasonable working hours.

4.  Sustainable environment programs.

 Some benefits accrued from the practice of

CSR include the enhancement of the following:

1.  The business reputation and goodwill

2.  Awareness for the enterprise

3.  Product recognition

4.  Loyalty from clients

5.  Efficiency and dedication of employees

6.  Provision of tax benefits

 Examples of Corporate Social

Responsibility in Action

•  Reducing carbon footprints

•  Improving labor policies

•  Participating in fairtrade

•  Diversity, equity and inclusion

•  Charitable global giving

•  Community and virtual volunteering

•  Corporate policies that benefit the environment

•  Socially and environmentally conscious

investments

 Sample CSR programs:

1.  School building construction by Chevron (Caltex)

2.  Supplementary feeding programs of CDO-Foodsphere, United

Laboratories, and Odyssey Foundation, Inc.

3.  Collection and distribution of toys by Jollibee

4.  Waste Management programs of Nestlé

5.  Book donations of the SM Foundation

6.  Center for excellence in education support from the Ayala

Foundation

7.  Recycling projects of Tetra Pak Philippines with partner schools.

8.  Print for Smiles of Canon

9.  BDO FOUNDATION, INC. Financial Education Programme For

Public Schools in the Philippines

10.  PEPSI-COLA PRODUCTS PHILIPPINES, INC. Water For Peace in

Marawi

 Selected qualified beneficiaries

of CSR programs include the
following:

1.  Philippine government

2.  Academe

3.  Foreign institutions or international

o rgan izatio ns, in co mpliance w ith
a g re e m e nt u n d e r t h e P h i lip p i n e
government

4.  Philippine Council for nongovernmental

organization certification (PNCN) and/or
PCNC-certified organizations

5.  Other non-stock, nonprofit organizations

SUMMATIVE TEST
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