PRINCIPLES OF

MANAGEMENT

Corporate Social
Responsibility and Business
Ethics
CSR: The managerial obligation to take action
that protects and improves both, the welfare of
society as a whole and the interests of the
organization.

• A manager must strive to achieve societal as well

as organizational goals.
DAVIS MODEL OF CSR:
• Prop.1: Social responsibility arises from
social power.

• Prop.2: Business shall operate as a two-

way open system, with open receipt of
inputs from society and open disclosure
of its operations to the public.

• Prop.3: The social costs and benefits of

an activity, product, or service shall be
thoroughly calculated and considered in
deciding whether to proceed with it.
A negative externality is a cost that is suffered by a third
party as a result of an economic transaction. In a
transaction, the producer and consumer are the first and
second parties, and third parties include any individual,
organization, property owner, or resource that is indirectly
affected.
Egs of Negative Externalities:
• Air pollution caused by factories
• Climate change due to Gas emissions
• Water Pollution by dumping of toxic waste
• Risk of storing nuclear waste by nuclear plants
A positive externality is a benefit that is
enjoyed by a third-party as a result of an
economic transaction. Third-parties include
any individual, organisation, property
owner, or resource that is indirectly
affected.

• Eg. of Positive Externalities:

• Education gets promoted when companies try to increase

qualifications of their workers
• They may be hiring minorities
• They may be producing products which make the environment
better
• They may be using very clean and safe methods of production
• Spreading the use of new technology
• Prop.4: The social costs related to each activity,
product, or service shall be passed on to the
consumer.

• Prop.5: Business Institutions, as citizens, have

the responsibility to become involved in certain
social problems that are outside their normal
areas of operation.
Arguments for CSR:
• Business exerts significant influence, so it has a
responsibility to maintain and improve overall
welfare of society.
• Profitability and growth go hand in hand with
responsible treatment of employees, customers,
and the community.
• Performing CSR = greater profit
Arguments against CSR:
• Milton Friedman – making business managers
responsible for reaching profit objectives, as well as
enhancing society welfare at the same time leads to a
conflict of interest that could potentially cause the
demise of business.
• This demise will certainly occur if business is
continually forced to perform socially responsible
actions that directly conflict with private organizational
objectives.
• May be unethical – spending the company’s money on
society and customers
CONCLUSIONS about CSR:
• Business should perform all legally required
socially responsible activities

• Voluntarily performing Social Responsibility

activities

• Communicating the degree of Social

Responsibility Involvement
Social Responsiveness
• The degree of effectiveness and efficiency an
organization displays in pursuing its social
responsibilities
• Greater efficiency = more socially responsive
• Clearly, business should be responsible towards is
stakeholders
• Must determine which social responsibilities to
pursue, and how to pursue them.
• They must decide in order not to waste
organizational resources
• Determining If a Social Responsibility (S.R.) Exists-
determine which specific social obligations are implied by their
business situation
• Social Responsiveness and Decision Making-what SR
should do and deciding how to pursue them
• Approaches to Meeting Social Responsibilities
▫ Socially responsive approach:
1. Incorporate social goals into the annual planning process
2. Seek comparative industry norms for social programs
3. Present reports to org members,BOD,stockholders on SR
progress
4. Experiment with different approaches for measuring SR
progress
5. Attempt to measure the cost of social programs as well as
return on investment
Management approaches to meet social
obligations:
1. Social obligation approach-business having eco
purposes and confines SR
2. Social Responsibility approach-business having eco and
societal goals
3. Social responsiveness approach-anticipate social
problems and work towards preventing
Planning Socially Responsible Activities:
Environ Long Short Manag
mental
Forecas -Run -Run ement
ts Plans Plans Action

Policy: Management Tool that furnishes broad guidelines

for channeling management thinking in specific directions.

Management should establish policies in the social

responsibility areas, just as they do in all other areas.
Social Responsibility Activities and
Management Functions
SOCIAL AUDIT: the process of measuring the
present social responsibility activities of an
organization to assess its progress in this area –
monitoring, measuring and appraising all
aspects of an organization’s social responsibility
performance.
How society can help….
• Jerry Mc Afee, CEO, Gulf oil corporation

1. Set rules that are clear and consistent

2. Keep the rules technically feasible
3. Make sure the rules are economically feasible
4. Make the rules proactive, not retroactive (Don’t
make them pay for the past)
5. Make the rules goal-setting
CASE IN POINT: UNILEVER PAKISTAN
• Unilever Sustainable Living Plan (USLP)
• Poverty, malnutrition, climate change and
water scarcity: these are some of the big
challenges facing the world and our business
today. 
• USLP has been created to develop new ways of
doing business, which will increase the social
benefits from Unilever’s activities while at the
same time reducing our environmental
impacts.
• Our Sustainable Living Plan aims to help
everyone enjoy a good quality of life while
respecting the planet.
• Unilever Sustainable Living Plan was created
to help achieve three global goals by 2020.
1. Halve the environmental footprint of our
products
2. Help more than 1 billion people take
action to improve their health
and well-being
3. Source 100% of our agricultural raw
materials sustainably
Unilever Pakistan has created its own focused USLP goals for the upcoming years
based on the current needs of the country.
1. Reduce the Environmental foot print of our products through reduction of
greenhouse gases,  optimisation of water usage and waste management
2. Enhancing livelihoods by rural programmes and creating opportunities through
enhanced distribution and empowerment through education
3. Help more than 68 million people take action to improve their health and well being
though our personal care products. Nutrition enhancement to reduce salt and calories
in our food brands
• Improving education in Pakistan  (The Unilever-
TCF partnership )
• Pakistan: Blue Band & World Food Programme
partnership
• Lifebuoy programmes set out to achieve lasting
improvements in health and hygiene 
• Lifebuoy’s newest campaign is a "School of 5"
Program which will coach children to adopt a
conscious habit of washing hands with soap 
• The drip irrigation project in collaboration with
Acumen Fund is aimed at facilitating the rural
communities of Pakistan
• In Bangladesh, a Unilever-sponsored hospital
ship is bringing health care to people.
• On 9 December 2004, Unilever signed an
agreement with UNICEF to work together
towards making a measurable difference to
childhood mortality by 2015
• Pakistan: Sehat First franchise for the rural
communities
• Ghana: Unilever Foundation for Education &
Development
The challenge: sustainably feed a growing
population
2bn
870m
people go to bed
more people
by 2050
hungry

70%
of them depend
on farming

Every day the world’s population increases by 200’000

The dilemmas world face
more arable land What impact will this have on
rainforests and national parks?
is needed

Agriculture already uses 70% of the

more water is needed world’s fresh water withdrawals

Urbanization is causing
more human labor increasing labor scarcity
is needed
Business Ethics
The capacity to reflect on values in the corporate decision-
making process, to determine how these values and
decisions affect various stakeholder groups, and to
establish how managers can use these observations in
day-to-day company management.
• Ackers: A company which is not ethical cannot be
competitive in either national or international markets
• Productivity: Ethical practices towards stakeholders =
happier employees
• Stakeholder Relations (outside stakeholders)
• Government Regulations (Co.s acting unethically=
greater demand by public for legislation)
Code of Ethics:
A formal statement that acts as a guide for the
ethics of how people within a particular
organization should act and make decisions.
Address issues such as conflict of interest,
competitors, privacy of information, gift giving,
forbidding bribery, etc.
Encourages ethical practices within an
organization.