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

The Changing Workplace

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 economi
and social contributions.
I find a universal belief in fairness, kindness, dignity, charity,
integrity, honesty, quality, and patience.
-Stephen R. Covey

The Changing Workplace

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

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

Social Responsibility:
Definition and Perspectives

Social Responsibility
A Prelude

Since the 1900s, the concept of social

responsibility has grown and matured to the
point where many of todays companies are
intimately involved in social programs that have
no direct connection with the bottom line.
But like all aspects of management, social
responsibility needs to be carried out in an
effective and efficient manner.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

Corporate Social Responsibility

Desktop\fig13.JPG

Figure 5.1. Carrolls Global Corporate Social

Responsibility Pyramid
I find a universal belief in fairness, kindness, dignity, charity,
integrity, honesty, quality, and patience.
-Stephen R. Covey

Corporate Social Responsibility

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

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

Corporate Social Responsibility

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

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

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

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

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?

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

The Classic Economic Model

According to Adam Smith, father of the classic
economic model, an invisible hand promoted the
public welfare.
Smith believed the efforts of comepting entrepreneurs
had a natural tendency to promote the public interest
when each tried to maximize short-run profits.
In other words, Smith believed that the public interest
was served by individuals pursuing their own
economic self-interests.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

The Socioeconomic Model

According to the socioeconic model proposed as an
alternative to the classical economic model, business
is just one subsystem among many in a highly
interdependent society.
Advocates of this model point out that many groups
in society besides stockholders have a stake in
corporate affairs. Companies using this model should
conduct a stockholder auditthe identification of all
parties that might be affected by the organization.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

The Stockholder Audit for

Wal-Mart
Customers
Neighbors of stores
and facilities
(homeowners
association)
All levels of
domestic and
foreign
government

Domestic and
Foreign suppliers
and distributors

WAL-MART

Stockholders
Public-at-large
Political Parties
Competitors
Stockholders

Financial
Community
(bankers,
brokers, and
investors)

Public-at-large
Political Parties
Customers

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

The Continuum of Social

Responsibility
Accomodation
Reaction
Deny or ignore
social responsibility

Accept social
responsibility in
response to pressure

Low

High

Degree of Social Responsibility

Defense
Put up a fight

Proaction
Take the initiative;
establish a positive
model for the industry

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

Social Responsibility Strategies

1.

Reactive Social Responsibility Strategy

2.

Defensive Social Responsibility Strategy

3.

resisting additional responsibilities with legal and public

relations tactics

Accomodative Social Responsibility Strategy

4.

denying responsibility and resisting change

assuming additional responsibilities in response to pressure

Proactive Social Responsibility Strategy

taking the initiative with new programs that serve as models

for the industry

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

Who Benefits from Corporate

Social Responsibility?

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

Who Benefits from Corporate

Social Responsibility?

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

An Array of Benefits for the

Organization

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

The Ethical Dimension of

Management

The Ethical Dimension of

Management

Ethics is the study of moral obligation involving

the distinction between right and wrong.
Business ethics, sometimes referred to as
management ethics or organizational ethics,
narrows the frame of reference to productive
organizations.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

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.

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey

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

I find a universal belief in fairness, kindness, dignity, charity,

integrity, honesty, quality, and patience.
-Stephen R. Covey