The four social responsibilities of a

business
Posted on December 26, 2015 by Mathew Emmanuel Pineda

Social responsibility is an ethical framework that obliges every member of the society to act and behave in a manner
that benefits the entirety. Even business organisations have a social responsibility. According to the socioeconomic
model of corporate social responsibility, a business has a responsibility to promote and uphold the interest not
only of its shareholders but also of its entire stakeholders—including customers, employees, suppliers, and the
public.

The social responsibility to these stakeholders is actually an assortment of specific responsibilities that follow a
successive fashion, thus highlighting their interdependence. Below are the four social responsibilities of a business:

1. ECONOMIC RESPONSIBILITY OF A BUSINESS

The most basic responsibility of a business organisation is to maximise its profitability not only to attend to the
interests of its shareholders but also to contribute to the progress of the economy.

A business is thereby an integral actor in economic development and nation building. The more traditional economic
model of corporate social responsibility echoes this role. American economist Milton Friedman once mentioned that
prime responsibility of a business is to maximise profits and to ensure that it is able to pay all taxes levied by the
government.

It is important to note that if a business is unable to produce profitable products and maintain sustainability, it is
impossible to attend to all other succeeding social responsibilities.

2. LEGAL RESPONSIBILITY OF A BUSINESS

The concept of laissez-faire business is virtually inexistent in modern free-market economies. In the United States,
particularly before 1930, businesses were free to act as they pleased without restrains or restrictions. This resulted in
deplorable practices that made labourers and consumers vulnerable to exploitation.

Governments have now become regulators of businesses in order to maintain the integrity of business practices and
protect the interest of the public. Like individual members of the citizenry, a business also has an obligation to
follow all written and codified laws that concern its existence.
Some of the laws affecting a business include basic business permits and requirements, tax laws, labour rights,
intellectual property rights, consumer protection, contracts and obligations, and anti-trust and competition laws,
among others.

3. ETHICAL RESPONSIBILITY OF A BUSINESS

The decisions and actions of a business organisation affect the stakeholders in several and varied ways. This fact
makes it a moral actor. It also gives a business an obligation to follow ethical standards, norms, and values of the
communities wherein it operates.

An ethically responsible business is able to recognise, interpret, and act upon multiple principles and values
according to standards prescribed by a particular context or within a given field. It is able to distinguish right from
wrong and make decisions and actions that serve the interests of concerned parties.

Several business organisations have adopted a written Code of Conduct to standardise the way managers and
employees act or behave within an identified ethical boundary. However, there are businesses that do not have any
written code. In this case, managers become the prime moral actors and they base their decisions on their own
standards of morality.

4. PHILANTHROPIC RESPONSIBILITY OF A BUSINESS

The fourth social responsibility of a business is dependent on whether it sees itself as an active member and
contributing entity in the society. This philanthropic responsibility implies that a business has a duty to give back in
some ways and contribute to the betterment of the society.

Take note that the first three responsibilities are straightforward. Businesses organisations are obligated to fulfil their
economic, legal, and ethical obligations in order to ensure their survival. However, the fourth responsibility is not a
mandatory. There are businesses that do not have any philanthropic programs. This is especially true for smaller or
struggling businesses with limited resources. But over the years, some businesses take pride of their philanthropic
works. This responsibility gives them a sense of purpose while also promoting their public image.

Of course, philanthropy does not necessarily mean giving cash donations. There are several ways an organisation
can become philanthropic without spending too much. Some large businesses hold capacity-building seminars for
budding and emerging entrepreneurs. Others participate in fundraising activities.

Stakeholders and Corporate Social Responsibility

Filed under: General Business Management Posts — Tags: corporate citizenship, corporate social
responsibility, discretionary responsibility, economic responsibility, ethical responsibility, external
stakeholders, internal stakeholders, legal responsibility, responsible business, stakeholders — Ferhan
Syed @ 6:40 pm

Let’s begin this topic with quotation of Robert W. Lane, the Chairman and CEO of Deere & Company,
“If you don’t have honesty and integrity, you won’t be able to develop effective relationships with any
of your stakeholders.”

These stakeholder groups form the basis of success and failure of the business. Stakeholders are
individuals or groups that have interests, rights, or ownership in an organization and its activities.
Customers, suppliers, employees, and shareholders are example of primary stakeholder groups.
Each has interest in how an organization performs or interacts with them. These stakeholder groups
can benefit from a company’s success and can be harmed by its mistakes.

Secondary stakeholders are also important because they can take action that can damage or assist
the organization. Secondary stakeholders include governments (especially through regulatory
agencies), unions, nongovernmental organizations (NGOs), activities, political action groups, and the
media.

In orders to serve their stakeholders in an ethical and social manner, more and more organizations
are adapting the model of corporate social responsibility. The term Corporate Social Responsibility
goes by many other terms such as corporate citizenship, responsible business or simply corporate
responsibility.
 Stakeholders of Organization

When an organization builds ethical and social elements in its operating philosophy and
integrate them in its business model, it is said to have possessed a self-regulating mechanism that
guides, monitor and ensure its adherence to law, ethics, and norms in carrying out business activities
that ensures the serving the interest of all external and internal stakeholders. In other words, the
objective of being socially responsible business is achieved when its activities meet or exceed the
expectations of all its stakeholders.

Here is a model for evaluating an organization’s social performance. The model indicates that total
corporate social responsibility can be subdivided into four criteria-economic, legal, ethical and
discretionary responsibilities.

These responsibilities are ordered from bottom to top in the following illustration. Let’s discuss each
one them briefly.
 Total Corporate Social Responsibility

Economic responsibilities:

The first criterion of social responsibility is economic responsibility. The business institution is, above
all, the basic economic unit of society. Its responsibility is to produce goods and services that a
society wants and to maximise profit for its owners and shareholders. Economic responsibilities,
carried to the extreme, is called profit-maximizing view; it was advocated by Nobel economist Milton
Friedman. This view argued that a company should be operated on a profit-oriented basis, with its
sole mission to increase its profits so long as is stays withing the rule of the game.

The purely profit-maximizing view is no longer considered an adequate criterion of performance in

the world in general. Treating economic gain in the social as the only social responsibility can lead
companies into trouble.

Legal responsibilities

All modern societies lay down ground rules, laws and regulations that businesses are expected to
follow. Legal responsibilitydefines what society deems as important with respect to appropriate
corporate behavior. Businesses are expected to fulfil their economic goals within the legal
framework. Legal requirements are imposed by local councils, state and federal governments and
their regulating agencies. Organizations that knowingly break the law are poor performers in this
 category. Intentionally manufacturing defective goods or billing a client for work not done is illegal.
Legal sanctions may include embarrassing public apologies or corporate ‘confessions’.

Ethical responsibilities

Ethical responsibility include behavior that is not necessarily codified into law and may not serve the
organization’s direct economic interests. To be ethical, organization’s decision makers should act
with equity, fairness and impartiality, respect the rights of individuals, and provide different
treatments of individual only when differences between them are relevant to the organization’s goals
and tasks. Unethical behavior occurs when decisions enable an individual or organization to gain
expense of society.

Discretionary responsibilities

Discretionary responsibility is purely voluntary and guided by an organization’s desire to make social
contributions not mandated by economics, laws or ethics. Discretionary activities include generous
philanthropic contributions that offer no payback to the organization and are not expected.
Discretionary responsibility is the highest criterion of social responsibility, because it goes beyond
societal expectations to contribute to the community’s welfare.

Source:

What is Corporate Social

Responsibility?
By Nicole Fallon, Business News Daily Managing EditorDecember 29, 2017 11:00 am EST

 0
 0
 0
 0
 0
 MORE
Credit: Kokliang/Shutterstock

To survive in the modern business world, your company needs to take stand – a social stand, that
is.

Today's consumers are looking for more than just high-quality products and services when they
make a purchase. They're prioritizing corporate social responsibility (CSR), and holding
corporations accountable for effecting social change with their business beliefs, practices
and profits.
"While the tenants of social responsibility will continue to be grounded in tangible, operational
elements – such as ethical workplace practices or energy efficiency – companies are now
demanded to share more intangible values – such as what they stand for and what they are
willing to stand up for," Stacy Anderson wrote in a blog post on WeFirst.
To illustrate how critical CSR has become, a 2017 study by Cone
Communications found that more than 60 percent of Americans hope businesses will drive
social and environmental change in the absence of government regulation. The majority of
consumers surveyed (87 percent) said they would purchase a product because a company
supported an issue they care about. More importantly, a whopping 76 percent will refuse to buy
from a company if they learn it supports an issue contrary to their own beliefs.
But consumers aren't the only ones who are drawn to businesses that give back. Susan Cooney,
global diversity and inclusion program manager at Symantec, said that a company's CSR
strategy is a big factor in where today's top talent chooses to work.

"The next generation of employees is seeking out employers that are focused on the triple bottom
line: people, planet and revenue," Cooney told Business News Daily. "Coming out of the
recession, corporate revenue has been getting stronger. Companies are encouraged to put that
increased profit into programs that give back."

Liz Maw, CEO of nonprofit organization Net Impact, noted that CSR is becoming more
mainstream as forward-thinking companied embed sustainability into the core of their business
operations to create shared value for business and society.
"Sustainability ... is [now] vital for business success," said Maw, whose company connects
students and professionals who want to use their business skills to do social good. "Communities
are grappling with problems that are global in scope and structurally multifaceted. The business
case for engaging in corporate social responsibility is clear and unmistakable."

Ways to practice CSR

Recognizing how important social responsibility is to their customers, many companies now
focus on and practice a few broad categories of CSR:

1. Environmental efforts: One primary focus of corporate social responsibility is the

environment. Businesses regardless of size have a large carbon footprint. Any steps they can take
to reduce those footprints are considered both good for the company and society as a whole.
2. Philanthropy: Businesses can also practice social responsibility by donating money,
products or services to social causes. Larger companies tend to have a lot of resources that can
benefit charities and local community programs.
3. Ethical labor practices: By treating employees fairly and ethically, companies can
also demonstrate their corporate social responsibility. This is especially true of businesses that
operate in international locations with labor laws that differ from those in the United States.
4. Volunteering: Attending volunteer events says a lot about a company's sincerity. By
doing good deeds without expecting anything in return, companies are able to express their
concern for specific issues and support for certain organizations.

Four Types of Corporate Social

Responsibility
by Scott Krohn; Updated January 10, 2018

Corporate social responsibility initiatives are standards and measures that businesses
put in place to benefit society. Generally speaking, these initiatives are based
on sustainability in four different categories.

Environmental Responsibility
Environmental sustainability initiatives enacted by businesses generally focus on two
main areas: limiting pollution and reducing greenhouse gases. As the awareness of
environmental issues grows, businesses that take steps to reduce air, land and water
pollution can increase their standing as good corporate citizens while also benefiting
society as a whole. For example, Cisco Systems, a multinational technology company,
has taken a variety of steps to reduce its carbon footprint, including the installation of
photovoltaic systems at production facilities and developing platforms that allow
employees to work from remote locations rather than commuting to the office.
Philanthropic Initiatives
Philanthropic initiatives include the donation of time, money or resources to charities
and organizations at local, national or international levels. These donations can be
directed to a variety of worthy causes including human rights, national disaster relief,
clean water and education programs in underdeveloped countries. For example,
Microsoft co-founder Bill Gates has donated billions of dollars to the Bill and Melinda
Gates Foundation, which supports numerous causes including education, the
eradication of malaria and agricultural development. In 2014, Bill Gates was the single
largest giver in the world, donating $1.5 billion in Microsoft stock to the Bill and Melinda
Gates Foundation.

Ethical Business Practices

The primary focus on ethics is to provide fair labor practices for businesses’ employees
as well as the employees of their suppliers. Fair business practices for employees
include equal pay for equal work and living wage compensation initiatives. Ethical labor
practices for suppliers include the use of products that have been certified as meeting
fair trade standards. For example, Ben and Jerry’s Ice Cream uses fair trade-certified
ingredients like sugar, cocoa, vanilla, coffee and bananas.

Economic Responsibility
Economic responsibility focuses on practices that facilitate the long-term growth of the
business, while also meeting the standards set for ethical, environmental and
philanthropic practices. By balancing economic decisions with their overall effects on
society, businesses can improve their operations while also engaging in sustainable
practices. An example of economic responsibility is when a company modifies its
manufacturing processes to include recycled products, which could benefit the company
by potentially lowering the cost of materials and also benefit society by consuming
fewer resources.

Sustainability and corporate social responsibility initiatives will continue to be prevalent

in years to come.

Responsibilities a Business Owner Has to Its Stakeholder

Groups
by Neil Kokemuller; Updated April 13, 2018
 RELATED ARTICLES

 The Impact of Stakeholders

 The Competitive Strengths of a Restaurant
 Keys to Success in the Property Management Business
 What Impact Can Shrinkage Have to a Company?
 Tangible Benefits of Reducing Turnover
 Advantages of Business Integrity

Being a business owner brings more responsibilities than you might imagine. While your goal is to
earn money for you and other owners of the business, you have customers, community members,
suppliers, employees and business partners who have needs or requirements of your. Appeasing
these stakeholders helps your business thrive and avoid negative backlash.

To Customers
Customers or clients are definitely a critical stakeholder group for your business. In general, your
responsibility is to operate fairly and consistently while providing customers with a satisfactory
experience. This includes openness and transparency in marketing and follow through on promises
made. If your company offers promotions or deals, it must hone them. Understanding expectations
your customers have and delivering a quality, honest and fair experience bodes well for building a
loyal customer base.

To the Community
Customers are a part of your community, but the community stakeholder group is a bit different.
Your community responsibilities include actively participating in community activities and giving back
in some way. Joining local chambers of commerce and service clubs helps you establish a
community presence. Giving to local charitable organizations and allowing employees paid time off
to volunteer in service programs shows your commitment to being an active community member.
Expectations of this stakeholder group have grown in the early 21st century as watch groups have
pushed to make businesses more accountable to populations from whom they derive income.

To Your Employees
Employees have always been integral to company operations, but your responsibilities to them have
increased. Fair labor laws have legalized your duties to offer fair, non-discriminatory hiring and
employment. More importantly, more workplace diversity means you need to promote a culture
where tolerance and acceptance of differences are coached and appreciated. Plus, employees
generally accept to be valued as key assets to your business. If you don't treat them as such, they
will constantly see out alternative employment.

To Your Suppliers and Partners

Your suppliers aren't just companies you buy from anymore. To maintain loyal, trusting relationships
where you look out for each other's interests, you have to operate fairly and honestly with suppliers.
Being up front with your intentions and building trust allows you to coordinate more efficient
distribution processes which minimize inventory costs and reduce stock outs. Business partners also
expect that you meet your obligation to do business legally and ethically. If you pollute the
environment or cheat on your business taxes, your business cohorts may suffer guilt by association.

The four social responsibilities of a

business
Posted on December 26, 2015 by Mathew Emmanuel Pineda
Social responsibility is an ethical framework that obliges every member of the society to act
and behave in a manner that benefits the entirety. Even business organisations have a
social responsibility. According to the socioeconomic model of corporate social responsibility, a
business has a responsibility to promote and uphold the interest not only of its shareholders
but also of its entire stakeholders—including customers, employees, suppliers, and the
public.

The social responsibility to these stakeholders is actually an assortment of specific

responsibilities that follow a successive fashion, thus highlighting their interdependence.
Below are the four social responsibilities of a business:

1. ECONOMIC RESPONSIBILITY OF A BUSINESS

The most basic responsibility of a business organisation is to maximise its profitability not only to attend to the
interests of its shareholders but also to contribute to the progress of the economy.

A business is thereby an integral actor in economic development and nation building. The
more traditional economic model of corporate social responsibility echoes this role.
American economist Milton Friedman once mentioned that prime responsibility of a business
is to maximise profits and to ensure that it is able to pay all taxes levied by the
government.

It is important to note that if a business is unable to produce profitable products and

maintain sustainability, it is impossible to attend to all other succeeding social
responsibilities.

2. LEGAL RESPONSIBILITY OF A BUSINESS

The concept of laissez-faire business is virtually inexistent in modern free-market economies. In the United States,
particularly before 1930, businesses were free to act as they pleased without restrains or restrictions. This resulted in
deplorable practices that made labourers and consumers vulnerable to exploitation.

Governments have now become regulators of businesses in order to maintain the integrity
of business practices and protect the interest of the public. Like individual members of the
citizenry, a business also has an obligation to follow all written and codified laws that
concern its existence.
Some of the laws affecting a business include basic business permits and requirements, tax
laws, labour rights, intellectual property rights, consumer protection, contracts and
obligations, and anti-trust and competition laws, among others.

3. ETHICAL RESPONSIBILITY OF A BUSINESS

The decisions and actions of a business organisation affect the stakeholders in several and varied ways. This fact
makes it a moral actor. It also gives a business an obligation to follow ethical standards, norms, and values of the
communities wherein it operates.

An ethically responsible business is able to recognise, interpret, and act upon multiple
principles and values according to standards prescribed by a particular context or within a
given field. It is able to distinguish right from wrong and make decisions and actions that
serve the interests of concerned parties.

Several business organisations have adopted a written Code of Conduct to standardise the
way managers and employees act or behave within an identified ethical boundary. However,
there are businesses that do not have any written code. In this case, managers become the
prime moral actors and they base their decisions on their own standards of morality.

4. PHILANTHROPIC RESPONSIBILITY OF A BUSINESS

The fourth social responsibility of a business is dependent on whether it sees itself as an active member and
contributing entity in the society. This philanthropic responsibility implies that a business has a duty to give back in
some ways and contribute to the betterment of the society.

Take note that the first three responsibilities are straightforward. Businesses organisations
are obligated to fulfil their economic, legal, and ethical obligations in order to ensure their
survival. However, the fourth responsibility is not a mandatory. There are businesses that
do not have any philanthropic programs. This is especially true for smaller or struggling
businesses with limited resources. But over the years, some businesses take pride of their
philanthropic works. This responsibility gives them a sense of purpose while also promoting
their public image.

Of course, philanthropy does not necessarily mean giving cash donations. There are several
ways an organisation can become philanthropic without spending too much. Some large
businesses hold capacity-building seminars for budding and emerging entrepreneurs. Others
participate in fundraising activities.
What is economic responsibility of business?
Ad by Lusha

Professional contact information at your fingertips.

Lusha is the easiest way to find email addresses and phone numbers from anywhere on
the web.

Free trial at lusha.co

5 Answers

Sultan Alahmar, Master MSc International Business & Corporate Social Responsibility, De Montfort
University (2016)
Answered Dec 10 2017
Businesses are meant to be economic units before anything else; the following are some of
their economic responsibilities:

1-value creation from the products and services they make, which societies benefits from
them by increasing their lives welfare.

2-Employing people and pay them money in the form of salaries. This money is spent in
something else (another business), which employs and pays other people. Simply,
businesses keep the livelihood wheels goes on.

3- Paying taxes to the governments, who in their turn collects them and give them back to
the societies through public services (Healthcare, Transportation, Education).

Does an Organization Have Any Ethical Responsibility to a

Particular Stakeholder Group?
by Neil Kokemuller
Stakeholders are people with an interest in the operation of a business. Employees, customers, communities,
the government, business partners and suppliers, building landlords and law enforcement are some of the
common stakeholders in the operation of a small business. Along with operating your business legally, you do
carry an informal ethical responsibility toward several key stakeholder groups. If you ignore this, it can lead to
public backlash and negatively affect your bottom line.
Employees

Companies have both legal and moral obligations to offer non-discriminatory hiring and employment
practices. Ethically, it is important to offer screening processes that lead to the most capable candidate being
hired, regardless of demographic traits. Additionally, companies are generally expected to provide fair and
reasonable working conditions where employees are free from harassment, bullying and abuse. Some
companies take a more proactive interest in providing an environment where employees have a voice and can
learn and grow.

Community Members

One of the most critical informal ethical commitments your company makes is to treat your customers and
other community members fairly. This begins with basic honesty and transparency in the way you do business.
Ethical companies are upfront with citizens and community officials when seeking building permits and other
legal recognition. Honest promotional messages that don't exaggerate company or product claims is also key.
Additionally, extremely ethical organizations meet community expectations that you support them financially
and through your civic actions.

Business Associates

In the past, companies often viewed themselves as virtual lone rangers trying to get money from consumers or
other businesses. In the early 21st century, manufacturers, distributors and retailers recognize the long-term
need for trusting, mutually beneficial business relationships. Trade channel partners collaborate and often share
inventory data to optimize product quality, costs and efficiency in meeting end customer demand. These
relationships require a high level of trust and mutual concern for each other's welfare. Additionally, people
often find guilt by association among business partners. You not only owe it to the marketplace to operate
fairly, but if you cheat or use poor ethical judgment, your business partners may suffer public backlash as well.

Others

One of the longest held ethical obligations of a company is to operate a business to achieve profits for
shareholders or company owners. This is a virtual commitment you make when you except investor money. If
you rent a building, you have an ethical obligation to pay your bills and take care of the building and space you
use. Honest relationships with city or local government officials also puts you in a much better position to gain
insight into future actions and to offer perspective on those that would affect you.

What Ethical Responsibilities Does an Organization Have to a

Different Stakeholder?
by John Cromwell

An organization does not operate in a vacuum. To be successful, any business needs to appeal to a variety of
different stakeholders. Stakeholders are generally defined as groups of people who have a relationship with the
business. Examples of a small business's stakeholders include its employees, vendors, customers, owners and
the residents of the community in which it operates. The basis of each relationship varies and can range from
statutes and contracts to informal understandings. Each group requires the business to meet a certain set of
ethical standards. Failure to meet these ethical standards can lead to anything from decline in sales to legal
penalties.
Definition of a Stakeholder

The term "stakeholder" encompasses a vast array of groups that have an interest in the organization. An
interest does not have to be a formal relationship where the other party receives financial compensation or a
product, but an informal relationship with someone who could be affected by the business. For example, an
ordinary citizen who does not buy a company’s product or its shares can still be a stakeholder because the
business’s actions affect his community. By employing people and paying taxes, the business’s presence could
indirectly benefit the citizen. If the business pollutes the community’s water supply, the citizen could be
harmed. So despite a lack of a formal relationship, it is still possible for an individual to be a stakeholder in an
organization.

Good Faith and Fair Dealing

Much of what a business does is defined by the contracts it has with vendors, employees and its own
customers. Beyond the explicit rights and obligations defined by the contract, the organization also has an
implied covenant of good faith and fair dealing. This covenant is an ethical obligation that courts attempt to
enforce. This standard obliges all contracting parties to not do anything that would make fulfilling the terms of
the contract impossible. Examples of acting in good faith include granting the other party access to physical
resources under the organization’s control or providing timely information to complete a contracted task. To
assess what constitutes good faith, a court will rely on the doctrine of equity, which requires the court to
resolve a case based on principles of fairness and justness as defined by the circumstances of the situation.
Therefore, "good faith" is merely the legal establishment of ethics into contractual good faith.

Employment Law

The employee is an important stakeholder: While it is the employees who provide the necessary labor, they are
in a subservient position to the organization. As a result, state and federal laws have been implemented to
ensure that employees are treated with respect and are fairly compensated. There are eight rights employment
law provides employees: the ability to organize; minimum pay; equal compensation regardless of sex; safe
work environments; unemployment benefits; nondiscriminatory hiring; family and medical leave; and the
ability to voice concerns without employer retaliation. Employment law cases are also decided using equity
principles. While the employment law code provides the framework necessary to analyze employment law
situations, it is the principles of equity and ethics that allow the court to interpret the elements of the case to
arrive at its decision.

Social Responsibility

An organization owes a duty not only to the people it operates directly with, but to anyone who may be
affected by the business’s activities. An organization has a responsibility to support the public interest when it
can, or at the very least minimize any negative impact it has on its surrounding community. An organization
can meet these goals in a variety of ways, such as by promoting charitable acts by its employees and
minimizing pollution during the production of its products. By being socially responsible, the entity cannot
only meet its ethical obligations, but promote its public image and possibly avoid violating laws.

Social Responsibility

Social responsibility is the duty and obligation of a business to other stakeholders.

Social responsibility for one group can conflict with other groups, especially between
shareholders and stakeholders.

Ethics

Ethics refers to the moral rights and wrongs of any decision a business makes. It is
a value judgement that may differ in importance and meaning between different
individuals.
Businesses may adopt ethical policies because they believe in them or they believe that
by showing they are ethical, they improve their sales.

Two good examples of businesses that have strong ethical policies are The Body Shop
and Co-Op.

Some examples of ethical policies are:

 Reduce pollution by using non-fossil fuels.

 Disposal of waste safely and in an environmentally friendly manner.
 Sponsoring local charity events.
 Trading fairly with developing countries

Does an Organization Have Any Ethical Responsibility to

a Particular Stakeholder Group?
by Brian Hill
 RELATED ARTICLES

 Corporate Social Responsibility and Ethical Leadership

 What Are the Key Elements of Ethical Leadership in an Organization?
 About Ethical Communication in Business
 The Value of Strong Ethical Business Practices and Social Responsibility
 Social Responsibility of a Sole Proprietorship
 Examples of a Primary Stakeholder

Stakeholders are individuals and entities that are affected by the actions taken by a business
organization. A small business can affect its stakeholders in both positive and negative ways, forcing
the management team to make tough choices. Actions taken to keep the company’s owners or
investors happy by maximizing profits, for example, may not be viewed in a positive light by
employees who want to share in the company’s financial success. A business has an ethical
responsibility to uphold with each of its stakeholders.

Being Honest With Customers

Good business ethics dictate that a business should tell customers the truth from the moment it
makes contact with a customer and in all subsequent dealings, including after a purchase. The
pressure to make a sale may cause a salesperson to exaggerate the benefits of or need for a
product. A heating and cooling system maintenance company, for example, might tell a homeowner
she needs a new system when only routine repairs are necessary. An even more serious breach of
ethical responsibility would be knowingly selling a product that is unsafe or of inferior quality.

Providing Fair Returns for Investors

Investors in private companies want the company to maximize profits, because that increases the
value of the business and of their ownership share in the company. A company that spends lavishly
on executive compensation and perks could be viewed by the investors as not living up to its ethical
responsibility to provide the highest possible returns on their investment.

Treating Employees Fairly

A business owner’s efforts to increase profitability can result in an excessive workload for employees
and deadlines that are impossible for employees to meet. Employees expect to be compensated
with wages and benefits that are at least up to industry standards. A company owner may choose
instead to maximize his own compensation and not live up to his obligations to employees.
Employees also seek opportunities for career advancement, which may require the company to
provide additional education or training. An unethical organization may decide that employee
satisfaction and training aren't the company's concern. The business owner will choose instead to let
unhappy employees leave and replace them with new hires.

Giving Back to the Community

Companies increasingly recognize that they have an ethical responsibility to the towns or cities
where they do business and to society as a whole. Maintaining the highest ethical standards can
cost money and reduce profits -- for example, investing in equipment to reduce greenhouse
emissions to a degree that goes beyond the minimum compliance required by government
regulation. The most ethical companies recognize that their financial and human resources can be
used to help those less fortunate in their local communities. They use their name recognition to
encourage people in the community to get involved in good causes and may also sponsor charitable
events.

Dealing Fairly With Suppliers

The most ethical companies treat their vendors, suppliers and independent contractors as part of
their team. They do their best to pay invoices on time, express appreciation for the quality products
and services the vendors provide and keep vendors and contractors informed of changes to
business operations that may affect them. For example, if a company knows it will be reducing
purchases by 25 percent in the upcoming year because of a business slowdown, letting the vendor
know in advance will allow that company to adjust its operations accordingly.