Chapter 5 notes Managements Social & Ethical Responsibilities I. Social Responsibility: Definition and Perspectives A.

Corporate Social Responsibility: idea that business has social obligations above and beyond making a profit. 1. Voluntary Action An action must be voluntary to qualify as a socially responsible action. Ten Commandments of Corporate Social Responsibility: I. Thou shall take corrective action before it is required II. Thou shall work with affected constituents to resolve mutual problems III. Thou shall work to establish industry wide standards and self-regulation IV. Thou shall publicly admit your mistakes V. Thou shall get involved in appropriate social programs VI. Thou shall help correct environment problems VII. Thou shall monitor the changing social environment VIII. Thou shall establish and enforce a corporate code of conduct IX. Thou shall take needed public stands on social issues X. Thou shall strive to make profits on an ongoing basis. 2. An Emphasis on Means, Not Ends Corporate behavior should not, in most cases, be judged by the decisions actually reached, but by the process by which they were reached. B. Role of Business in Society 1. The Classical Economic Model Adam Smith, father of the classical economic model, an Invisible Hand According to this model, short-run profitability and social responsibility is the same thing. 2. The Socioeconomic Model In which business is seen as one subsystem among many in a highly interdependent society. Stakeholder audit: identifying all parties possibly impacted by the organization. C. Arguments for and Against Corporate Social Responsibility 1. Arguments For 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. (todays problems can be tomorrows profits) Corporate social action will prevent government intervention. 2. Arguments Against Profit maximization ensures the efficient use of societys resources As an economic institution, 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. Toward Greater Social Responsibility Iron law of responsibility: those who do not use power in a socially responsible way will eventually lose it A. Social Responsibility Strategies 1. Reaction Reactive social responsibility strategy: denying responsibility and resisting change. 2. Defense Defensive social responsibility strategy: resisting additional responsibilities with legal and public relations tactics. 3. Accommodation Accommodative social responsibility strategy: assuming additional responsibilities in response to pressure 4. Proaction Proactive social responsibility strategy: taking the initiative with new programs that serve as models for the industry.

II.

Reaction Deny responsibility

Accommodation Accept social responsibility in response to pressure

Low

Degree of social responsibility

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

Defense Put up a fight

B. Who Benefits from Corporate Social Responsibility? 1. Altruism: unselfish devotion to the interests of others. 2. Enlightened Self-Interest: a business ultimately helping itself by helping to solve societal problems. Corporate philanthropy: charitable donations of company resources. III. Encouraging Ethical Conduct A. Amoral managers: managers who are neither moral nor immoral, but ethically lazy. B. Ethical Advocates: An ethics specialist who plays a role in top-management decision making. C. Whistle-Blowing: reporting perceived unethical organizational practices to outside authorities.

Ten general ethical principles: I. Self-interest. Never take any action that is not in the long-term self-interests of yourself and/or of the organizations to which you belong. II. Personal virtues. Never take any action that is not honest, open, and truthful and that you would not be proud to see reported widely in national newspapers and on television. III. Religious injunctions. Never take any action that is not kind and that does not build a sense of community, as sense of all of us working together for a commonly accepted goal. IV. Government requirements. Never take any action that violated the law, for the law represents the minimal moral standards of our society. V. Utilitarian benefits. Never take any action that does not result in greater good than harm for the society of which you are a part. VI. Universal rules. Never take any action that you would not be willing to see others, faced with the same or closely similar situation, also be free to take. VII. Individual rights. Never take any action that abridges the agreed-upon and accepted rights of others. VIII. Economic efficiency. Always act to maximize profits subject to legal and market constraints, for maximum profits are the sign of the most efficient production. IX. Distributive justice. Never take any action in which the least [fortunate people] among us are harmed in some way. X. Contributive liberty. Never take any action that will interfere with right of all of us for self-development and selffulfillment. Terms: Ethics: study of moral obligation involving right versus wrong. Values: abstract ideals that shape ones thinking and behavior. Instrumental value: enduring belief in a certain way of behaving. Terminal value: enduring belief in the attainment of a certain end-state.