Part 5.3

Managements Social and Ethical Responsibilities
Prepared by: Prof. Emilia. S. Bio Source: Principles of Management by Krietner, 11th Edition
The Changing Workplace

As the social, political, economic, and technological environments of management have changed, the practice of management itself has changed. This is especially true for managers in the private business sector.
I find a universal belief in fairness, kindness, dignity, charity, integrity, honesty, quality, and patience. -Stephen R. Covey

Today, it is far less acceptable for someone in business to stand before the public and declare that his or her sole job is to make as much profit as possible. The public is wary of the abuse of power and the betrayal of trust, and business managers indeed, managers of all types of organizations are expected to make a wide variety of economic and social contributions.

Demands on business that would have been considered patently unreasonable 30 or 40 years ago have become the norm today.
The future is that there will be no letup in the demands of shareholders for financial performance. There will also be no letup in the demands of society that businesses behave responsibly. Management just has to better.
-Stuart Graham, CEO of Skanska
Social Responsibility: Definition and Perspectives
Corporate Social Responsibility

It is the notion that corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law or union contract. In other terms, it is the idea that business has social obligations above and beyond making a profit.
Carrolls Global Corporate Social Responsibility Pyramid

Do what is desired by global stockholders Do what is expected by global stockholders Do what is required by global stockholders Do what is required by global capitalism
Be ethical
Philanthropic responsibility
Be a good global citizen
Ethical responsibility
Obey the law
Legal responsibility
Be profitable
Economic responsibility

From the previous figure, global and transnational companies have four main areas of responsibility: economic, legal, ethical, and philanthropic.

Working from bottom to top, this means that the global corporation should:
Make a profit consistent with expectations for international businesses Obey the law of host countries as well as international law Be ethical in its practices, taking host-country and global standards into consideration Be a good corporate citizen, especially as defined by the host countrys expectations
CSR Requires Voluntary Action

An implicit feature of the above definition and perspective is that an action must be voluntary to qualify as socially responsible.
All businesses should commit to the triple bottom linea measure of corporate success that takes int oaccount not just profit and loss but also social and environmental impact. -Paul Dolan, True to Our Roots: Fermenting a Business Revolution
What is the Role of Business in Society?

Much of the disagreement over what social responsibility involves can be traced to a fundamental debate about the exact purpose of a business. Is business an economic entity responsible only for making a profit for its stockholders? Or is it a socioeconomic entity obligated to make both economic and social contributions to society?
The Stockholder Auditthe identification of all parties that might be affected by the organization.
Customers Neighbors of stores and facilities (homeowners association) All levels of domestic and foreign government
Stockholders Public-at-large
(for) Wal-Mart
Political Parties
Domestic and Foreign suppliers and distributors
WAL-MART
Competitors
Stockholders Financial Community (bankers, brokers, and investors) Customers Public-at-large
Political Parties
Arguments For Social Responsibility

1. 2. 3. 4. Business is unavoidably involved in social issues. Business has the resources to tackle todays complex societal problems. A better society means a better environment for doing business. Corporate social action will prevent government intervention.
Arguments Against Social Responsibility

1. 2. 3. 4. Profit maximization ensures the efficient use of societys resources. As an economic institiution, business lacks the ability to pursue social goals. Business already has enough power. Because managers are not elected, they are not directly accountable to the people.
Toward Greater Social Responsibility
The Iron Law of Responsibility

Is it inevitable that management will assume greater social responsibility? Some scholars believe so. It has been said that business Is bound by an iron law of responsibility, which states that in the long run, those who do not use power in a way that society considers responsible will tend to lose it.
Who Benefits from Corporate Social Responsibility?

Is it accurate to say of social responsibility what used be said about home medicine, It has to taste bad to be good? In other words, does social responsibility have to be a hardship for the organization? Those who answer yes believe that it should be motivated by altruism, an unselfish devotion to the interests of others. This implies that businesses that are not socially responsible are motivated strictly by self-interest.

On the basis of evidence alone, one would hard pressed to say that social responsibility pays. But research paints a brighter picture:
A study of 243 companies for two years found a positive correlation between industry leadership in environmental protection/pollution control and profitability. The researchers concluded, It pays to be green. A second study found agood reputation for corporate social responsibility to be a competitive advantage in recruiting talented people.

Enlightened self-interest, the realization that business ultimately helps itself by helping to solve societal problems, involves balancing short-run costs and long-run benefits. Advocates of enlightened self-interest contend that social responsbility expenditures are motivated by profit. Research into corporate philanthropy, the charitable donation of company resources ($12.7 billion in US in 2006), supports this contention.
In addition to the advertising effect, other possible long-run benefits include:

Tax-free incentives to employees. Retention of talented employees by satisfying their altruistic motives. Help in recruiting talented and socially conscious personnel. Swaying public opinion against government intervention. Improved community living standards for employees. Attracting socially conscious investors. A nontaxable benefit for employees in which company funds are donated to their favorite causes.
An Array of Benefits for the Organization
The Ethical Dimension of Management
The Ethical Dimension of Management

Ethics is the study of moral obligation involving the distinction between right and wrong.
Moral Immoral Amoral Managers managers who are neither moral nor immoral, but ethically lazy.
Business ethics, sometimes referred to as management ethics or organizational ethics, narrows the frame of reference to productive organizations.
Practical Lessons from Business Ethics Research

Ethical Hot Spots.
In a survey of 1,324 US employees from all levels across several industries, 48 percent admitted to having performed at least one illegal or unethical act from a list of 25 questionable practices. The list included everything from calling in sick when feeling well through cheating on expense accounts, forging signatures, and giving or accepting kickbacks, to ignoring violations of environmental laws.
Practical Lessons from Business Ethics Research

The top ten workplace hot spots responsible for triggering unethical conduct are:
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Balancing work and family Poor internal communications Poor leadership Work hours, workload Lack of management support Need to meet sales, budget, or profit goals Little or no recognition of achievements Company politics Personal financial worries Insufficient resources

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Managements Social and Ethical Responsibilities

The Changing Workplace

The Changing Workplace

The Changing Workplace

Social Responsibility: Definition and Perspectives

Corporate Social Responsibility

Carrolls Global Corporate Social Responsibility Pyramid

Be a good global citizen

Obey the law

Corporate Social Responsibility

Corporate Social Responsibility

CSR Requires Voluntary Action

What is the Role of Business in Society?

Domestic and Foreign suppliers and distributors

Stockholders Financial Community (bankers, brokers, and investors) Customers Public-at-large

Arguments For Social Responsibility

Arguments Against Social Responsibility

Toward Greater Social Responsibility

The Iron Law of Responsibility

Who Benefits from Corporate Social Responsibility?

Who Benefits from Corporate Social Responsibility?

Who Benefits from Corporate Social Responsibility?

In addition to the advertising effect, other possible long-run benefits include:

An Array of Benefits for the Organization

The Ethical Dimension of Management

The Ethical Dimension of Management

Practical Lessons from Business Ethics Research

Practical Lessons from Business Ethics Research

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