Management’s Social and Ethical Responsibilities

Fundamentals of Management
Chapter 5:Management’s Social and Ethical Responsibilities

Course Organizer: Rashedur Rob Chowdhury

Corporate Social Responsibility (CSR)

•      The idea that business has social obligations above and beyond making a profit

Carroll’s Global Corporate Social Responsibility

•      Philanthropic responsibility

–   Do what is desired by  global stakeholders

•      Ethical responsibility

–   Do what is expected by global stakeholders

•      Legal responsibility

–   Do what is required by global stakeholders

•      Economic responsibility

–   Do what is required by global capitalism

What is the Role of Business in Society?

•      The Classical Economic Model

–  “There is only one social responsibility of business . . . to increase its profits so long as it stays within the rules of the game.” (Friedman, 1970)

•      The Socioeconomic model

–  “A broader range of obligations toward society.” (Schwartz and Carroll, 2003)

Stakeholders

•      Stakeholders: people who are affected by a firm’s performance and who have claims on its performance (Hitt et al., 2001)

•      Stakeholder audit: identification of all parties that might be affected by the organization

A Sample Stakeholder Audit for Wal-Mart, the World’s Largest Retailer

Arguments For and Against
Social Responsibility

•      Arguments For

–   Business is unavoidably involved in social issues

–   Business has the resources to tackle today’s complex societal problems

–   A better society means a better environment for doing business

–   Corporate social action will prevent government intervention

Arguments For and Against
Social Responsibility (cont.)

•      Arguments Against

–   Profit maximization ensures the efficient use of society’s resources.

–   As an economic institution, business lacks the ability to pursue social goals.

–   Business already has enough power.

–   Because business managers are not elected, they are not directly accountable to the people.

Social Responsibility Strategies

•      Reactive social responsibility strategy: deny or ignore responsibility

•      Defensive social responsibility strategy: resisting additional responsibilities with legal and public relations tactics

•      Accommodative social responsibility strategy: assuming additional responsibilities in response to pressure

•      Proactive social responsibility strategy: taking the initiative with new programs that serve as models for the industry

Business Ethics

•      Ethics: the principles of behavior that distinguishes between right and wrong

•      Business ethics: the evaluation of business activities and behavior as right or wrong

•      Factors influencing ethical behavior

–   The business environment

–   The organization

–   The individual

Encouraging Ethical Behavior

•      Ethical training

•      Ethical advocate: ethics specialists who plays a role in top-management decision making

•      Code of ethics: a statement spelling out exactly what an organization considers ethical behavior

•      Whistle-blower: an employee who informs superiors, the media or a government regulatory agency about unethical behavior within an organization