Social and Ethical

Responsibility of Management

January 25, 2024 1

‘Fundamentals of Corporate Social
Responsibility’
 CSR is now a mainstream approach to
business:
“The movement for CSR has won the battle of
ideas …CSR commands the attention of
Executives Everywhere.” (Economist 2005)

 In 2006, as this movement gains momentum

and mainstream acceptance, it is time for
people that work or have an interest in this area
to take stock and take a closer at the
fundamentals of CSR.
‘Fundamentals of Corporate Social
Responsibility’
As part of this exercise, fundamental questions should be asked:

 What is CSR?

 How does it relate to other concepts? (e.g. sustainable

development, corporate governance, corporate responsibility,
corporate citizenship) Same/different/related?

 Is CSR purely voluntary or does it now have legal

dimensions?
 What is CSR?
 Concept of CSR often criticized because of lack of legally defined
or commonly accepted definition.

 Is this criticism justified?

 Should it matter that CSR is not legally defined or subject to a

single universal definition?

 By comparison, the term corporate governance is not in itself

legally defined or subject to a commonly accepted definition- the
term is associated with concepts, ideas and principles that evolve
over time.

 Arguably, CSR should never be given a fixed definition. This will

foster evolution.
 What is CSR?
 Despite the lack of a single definition, my own
research has shown that by examining different
definitions from around the world, it is clear that
there are commonly held understandings about
what constitutes CSR.

Let’s firstly examine some of these definitions-----

then I will address the common understanding.
 What is CSR?
Canadian Government:

“CSR is generally understood to be the

way a company achieves a balance or
integration of economic, environmental
and social imperatives while at the
same time addressing shareholder and
stakeholder expectations.”
 What is CSR?
UK Government:

“The Government sees CSR as the business

contribution to our sustainable
development goals. Essentially it is about
how business takes account of its economic,
social and environmental impacts in the
way it operates – maximising the benefits
and minimising the downsides.”
 What is CSR?
European Union:

“[CSR is] a concept whereby

companies integrate social and
environmental concerns in their
business operations and in their
interaction with their stakeholders on a
voluntary basis.”
 What is CSR?
World Business Council for Sustainable
Development:

“We define CSR as business' commitment

to contribute to sustainable economic
development, working with employees,
their families, the local community, and
society at large to improve their quality
of life.”
 What is CSR?
The Kennedy School of Government (Harvard
University), CSR Initiative:

“The term [CSR] is often used interchangeably with

others, including corporate responsibility,
corporate citizenship, social enterprise,
sustainability, sustainable development, triple-
bottom line, corporate ethics, and in some cases
corporate governance. Though these terms are
different, they all point in the same direction:
throughout the industrialized world and in many
developing countries there has been a sharp
escalation in the social roles corporations are
expected to play.”
 What is CSR?

 What do these definitions tell us about CSR?

 What are some of the common understandings

that emerge?

 How does CSR relate to other concepts?

 What other issues arise?

 What is CSR?

Common Understanding One:

CSR is an idea whereby companies

integrate economic, social and
environmental concerns in their
business operations
 Common Understanding:
Stakeholders
 Common Understanding: CSR relates to the idea
whereby a business addresses and balances the needs of
stakeholders.

 Who/what are stakeholders? “Individuals and groups

who may affect or be affected by the actions, decisions,
policies, practices or goals of an enterprise.”

Examples:
• Shareholders and other investors
• Employees
• Customers
• Governments
• Local communities
• NGOs
• Environment
Organization’s Social Responsibilities

Social responsibilities Discretionary

Don’t violate principles

of right and wrong Ethical

Obey the Law Legal

Make a Profit Economic

January 25, 2024 14

 What’s Social Responsibility?
 Corporate Social Responsibility
The idea that business has social obligations above
and beyond making a profit.
Business has an obligation to constituent groups in
society other than stockholders and beyond that
prescribed by law.

Social Responsibility is … the ethical accountability framework for

the industry which defines principles, policies and practices and
codes of conduct designed to ensure:
the protection of stakeholders,
the sustainability of industry, and
quality of life improvements in the communities in which it operates.
January 25, 2024 15
 Stakeholder Model
Primary
Primary Secondary
Secondary
Stakeholders:
Stakeholders: Stakeholders:
Stakeholders:
Shareholders
Shareholders Media
Media
Employees
Employees Trade
TradeAssociations
Associations
Customers
Customers
Suppliers
Suppliers
Governments
Governments
Local
LocalCommunities
Communities

January 25, 2024 16

 Responses to Demands
for Social Responsibility

Accommo-
Accommo-
Reactive
Reactive Defensive
Defensive Proactive
Proactive
dative
dative
Fight all Do only what Be Lead the
the way is required progressive industry

Public
Legal Problem
Withdrawal Relations Bargaining
Approach Solving
Approach

DO DO
NOTHING MUCH

January 25, 2024 17

 Approaches
Approaches To
To Corporate
Corporate Social
Social
Responsiveness
Responsiveness

Approach Posture or Strategy Performance

1. Reactive Deny responsibility Do less than required

2. Defensive Admit responsibility Do the least that is required

but fight it

3. Accommodative Accept responsibility Do all that is required

4. Proactive Anticipate responsibility Do more than is required

January 25, 2024 18

 Arguments Supporting Businesses Being
Socially Responsible
 Public expectations
 Long-run profits
 Ethical obligation
 Public image
 Better environment
 Discouragement of further government regulation
 Balance of responsibility and power
 Shareholder interests
 Possession of resources

January 25, 2024 19

 Arguments Against Businesses Being
Socially Responsible
 Violation of profit maximization
 Dilution of purpose
 Costs
 Lack of skills
 Lack of accountability

January 25, 2024 20

 Areas of Social Responsibility

•Stakeholders: customers, employees, and

investors.

•The natural environment: environmentally

sensitive products, recycling, and public safety.

•The general social welfare: charitable

contributions, and support for social issues such
as child labor and human rights.

January 25, 2024 21

 Dilemmas in Business
A dilemma exists when you have a choice
between two or more options.

A business dilemma exists when an

organizational decision maker faces a choice
between two or more options that will have
various impacts on (a) the organization’s
profitability and competitiveness and (b) its
stakeholders.
January 25, 2024 22
 ETHICS
 Ethics (also called  Business ethics is
moral philosophy), the application of
involves general ethical
systematizing, principles to
defending, and business
recommending dilemmas.
concepts of right
and wrong behavior.

January 25, 2024 23

 TYPES OF MANAGERIAL ETHICS
 Immoral management
Lacks ethical principles, concern for profit only

 Amoral management
Ignores, or oblivious to, ethical issues

 Moral management
Conscious attention to ethical standards and issues
January 25, 2024 24
WHAT INFLUENCES ETHICAL
BEHAVIOR?

THE ORGANIZATION’S ROLE

•Structure
•Culture

THE INDIVIDUAL’S ROLE

January 25, 2024 25

 Determinants
Determinants of
of Individual
Individual Ethics
Ethics

Family
Family Situational
Situational Values
Valuesand
and Peer
Peer
Experiences
Experiences
Influences
Influences Factors
Factors Morals
Morals Influences
Influences

Individual
Individual Ethics
Ethics

January 25, 2024 26

 ETHICAL GUIDELINES FOR
MANAGERS

 Obey the law.

 Tell the truth.
 Show respect for people.
 Above all, do no harm.
 Participation not paternalism.
 Responsibility requires action.

January 25, 2024 27

 MECHANISMS FOR ETHICAL
MANAGEMENT

 Increasing awareness of diversity

 Top management commitment
 Codes of ethics
 Ethics committees
 Ethics audits
 Ethics training

January 25, 2024 28

 Process of Rationalization
Mental strategies that allow employees (and others around them) to
view their corrupt acts as justified
 Denial of responsibility ..no choice…everyone does it
 Denial of injury…no one is really injured
 Denial of victim…the violated party deserves it
 Social weighting…comparison…others do worst things
 Appeal to higher authorities…loyalty to boss or co.
 Ledger approach…accrued credits…we deserve it

January 25, 2024 29

 THANK YOU

January 25, 2024 30