Social Responsibility

Competing Theories
 The Pyramid of Social
Responsibility
Voluntary
Responsibilities
being a
“good corporate citizen;”
contributing to the
community and quality of life

Ethical Responsibilities
being ethical; doing what is right, just,
and fair; avoiding harm

Legal Responsibilities
obeying the law (society’s codification
of right and wrong)

Economic Responsibilities
being profitable

Source: Adapted from Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral
Management of Organizational Stakeholders.” Business Horizons 34 (July/August 1991): 42.
 Arguments for Social
Responsibility
1. Business helped to create many of the social problems
that exist today, so it should play a significant role in
solving them
2. Businesses should be more responsible because they
have the financial and technical resources to help
solve social problems
3. As members of society, businesses should do their fair
share to help others
4. Socially responsible decision making by businesses
can prevent increased government regulation
5. Social responsibility is necessary to ensure economic
survival; for example, sustainability in the marketplace
 The Case Against Social
Responsibility
• Milton Friedman: economist
• No right to spend somebody else’s money
• Belongs to the shareholders not the
company
• Fiduciary duty is to maximize profits for the
shareholders
Four Schools of Thought On Ethical
Behavior
• Differences are based on how two questions are
answered:
• Whose interest should the corporation serve?
• To whom should a corporation be responsive in
order to best serve that interest?
• “Shareholders only” or the “Society-at-large” or
some combination of the two explains the
theories!
 Theories of Social Responsibility
• Inherence: shareholders only (Friedman)
• Enlightened Self-Interest: responsive to
shareholders but more profitable if serves
society as well
• The Invisible Hand: responsive to society
but more profitable if serves shareholders
only (regulators set societal obligations)
• Social Responsibility: responsive to
society and more profitable if serve society