Carroll’s Pyramid of Social Responsibility

Source: A Carroll (1991) The pyramid of corporate social responsibility, Business

Horizons, July-August, pp 39-48

Compare with the Reidenbach and Robin Model

PHILANTHROPIC Responsibilities Be a good Corporate Citizen. Contribute resources to the community; improve quality of life.

ETHICAL Responsibilities Be ethical.Obligation to do what is right,

just and fair; Avoid harm.

LEGAL Responsibilities

Obey the Law Law is society’s codification of right and wrong;

Play by the rules

ECONOMIC Responsibilities

Be Profitable The foundation upon which all others rest

Source: Carroll (1991)

The Pyramid of Social Responsibility

Level 1 ECONOMIC

ResponsibilitiesBe profitable

The foundation upon which all other levels rest

Economic Components It is important to perform in a manner consistent

with maximising earnings per share It is important to be committed to being as

profitable as possible It is important to maintain a strong competitive

position It is important to maintain a high level of

operational efficiency It is important that a successful firm be defined as

one that is consistently profitable.

Level 2 LEGAL

ResponsibilitiesObey the Law

Law is society’s codification of right and wrong; Play by the rules

Legal Components It is important to perform in a manner consistent

with expectations of government and the law. It is important to comply with various national

and supra-national laws and regulations. It is important to be a law-abiding corporate

citizen. It is important that a successful firm be defines as

one that fulfils its legal obligations. It is important to provide goods and services that

at least meet the minimal legal requirements.

Level 3 ETHICAL

ResponsibilitiesBe Ethical

Obligation to do what is right, just and fair; Avoid harm.

Ethical Components It is important to perform in a manner that is

consistent with the expectations of societal mores and ethical norms.

It is important to recognise and respect new or evolving ethical/moral norms adopted by society.

It is important to prevent ethical norms from being compromised in order to achieve corporate goals.

It is important that good corporate citizenship be defined as doing what is expected morally or ethically.

It is important to recognise that corporate integrity and ethical behaviour go beyond mere compliance with laws and regulations.

Level 4 PHILANTHROPIC

ResponsibilitiesBe a Good Corporate Citizen

Contribute resources to the community; improve quality of life

Philanthropic Components It is important to perform in a manner consistent

with the philanthropic and charitable expectations of society.

It is important to assist the fine and performing arts. It is important that managers and employees

participate in voluntary and charitable activities within their local communities.

It is important to provide assistance to public and private educational institutions.

It is important to assist voluntarily those projects that enhance a community’s ‘quality of life’.

Moral Management and Stakeholders

Three Moral Types:Immoral ManagersAmoral ManagersMoral Managers

Immoral Managers

Characterised by: managers whose decisions, actions and

behaviour suggest an active opposition to what is deemed to be right and ethical

These managers care only about their or their organisation’s profitability or success

Legal issues are there to be circumvented Strategy is to exploit opportunities for

personal or organisational gain at any cost

Amoral Managers Amoral Managers are neither immoral nor

moral but are not sensitive to the fact that their everyday business decisions may have a deleterious effect on others.

These managers may lack an ethical perspective in their organisational lives.

Typically their orientation is to the ‘letter of the law’ as their ethical guide.

Sometimes we can have a sub category - the unintentional amoral manager

Un-intentional Amoral Manager

These managers are un-intentionally amoral in their behaviour. They tend to see ethical issues are for their private lives not their business lives, where different rules apply.

They tend to believe that business activity resides outside the sphere to which moral judgements may apply.

Amoral managers here may not consider a role for ethics in business.

The Moral Manager In moral management, ethical norms that adhere

to a high standard of right behaviour are employed

Moral managers not only conform to accepted and high levels of professional conduct, they also lead on issues of ethical behaviour.

The law is seen as giving a minimal guide to ethical behaviour. The ‘spirit of the law’ in more important than the ‘letter of the law’. The objective is to operate well above what the law mandates the firm to do.

The Moral Manager Moral mangers want to be profitable and

ethical. Moral mangers will use ethical principles to

base their judgements upon - justice, rights, the Golden Rule, utilitarianism etc.

When ethical dilemmas arise, moral managers and moral companies will tend to assume leadership in their companies and industries.

Compare this model with the Reidenbach & Robin Model

The Three Moral Types

Orientation towards Stakeholders: ShareholdersEmployeesCustomersLocal Community

Moral Types and Stakeholders

Our goal is to gain a fuller understanding of what it means to engage in moral management and what this implies in terms of relationships with key stakeholders.

The next four slides are in table form showing the orientation of moral types and stakeholder orientations.

Three Moral Types and Orientation Toward Stakeholder Groups:Owners and Shareholders

Type of Management Orientation Toward Owner/ShareholderStakeholders

Immoral Management Shareholders are minimally treated and givenshort shrift. Focus is on maximising positions ofexecutive groups - maximizing executivecompensation, perks, benefits. Goldenparachutes are more important than returns ofshareholders. Managers maximise their positionswithout shareholders being made aware.Concealment from shareholders is the operatingprocedure. Self-interest of management group isthe order of the day.

Amoral Management No special thought is given to shareholders; theyare there and must be minimally accommodated.Profit focus of the business is their reward. Nothought is given to ethical consequences ofdecisions for any stakeholder group, includingowners. Communication is limited to thatrequired by law.

Moral Management Shareholders’ interest (short- and long-term) is acentral factor. The best way to be ethical toshareholders is to treat all stakeholder claimantsin a fair and ethical manner. To protectshareholders, an ethics committee of the board iscreated. Code of ethics is established,promulgated, and made a living document toprotect shareholders’ and others’ interests.

Three Moral Types and Orientation Toward Stakeholder Groups:Employees

Type of Management Orientation Toward Employee Stakeholders

Immoral Management Employees are viewed as factors of production tobe used, exploited, manipulated for gain ofindividual manager or company. No concern isshown for employees’ needs/rights/expectations.Short term focus. Coercive, controlling,alienating.

Amoral Management Employees are treated as law requires. Attemptsto motivate focus on increasing productivityrather than satisfying employees’ growingmaturity needs. Employees still seen as factorsof production by remunerative approach used.Organization sees self-interest in treatingemployees with minimal respect. Organizationstructure, pay incentives, rewards all gearedtoward short- and medium-term productivity.

Moral Management Employees are a human resource that must betreated with dignity and respect. Goal is to use aleadership style such as consultative/participativethat will result in mutual confidence and trust.Commitment is a recurring theme. Employees’rights to due process, privacy, freedom ofspeech, and safety are maximally considered inall decisions. Management seeks out fairdealings with employees.

Three Moral Types and Orientation Toward Stakeholder Groups:Customers

Type of Management Orientation Toward Customer Stakeholders

Immoral Management Customers are viewed as opportunities to beexploited for personal or organizational gain.Ethical standards in dealings do not prevail;indeed, an active intent to cheat, deceive, and/ormislead is present. In all marketing decisions -advertising, pricing, packaging, distribution -customer is taken advantage of to the fullestextent.

Amoral Management Management does not think through the ethicalconsequences of its decisions and actions. Itsimply makes decisions with profitability withinthe letter of the law as a guide. Management isnot focused on what is fair from perspective ofcustomer. Focus is on management’s rights. Noconsideration is given to ethical implications ofinteractions with customers

Moral Management Customer is viewed as equal partner intransaction. Customer brings needs/expectationsto the exchange transaction and is treated fairly.Managerial focus is on giving customer fairvalue, full information, fair guarantee, andsatisfaction. Consumer rights are liberallyinterpreted and honoured.

Three Moral Types and Orientation Toward Stakeholder Groups:Local Community

Type of Management Orientation Toward Local CommunityStakeholders

Immoral Management Exploits community to fullest extent; pollutes theenvironment. Plant or business closings takefullest advantage of community. Activitydisregards community needs. Takes fullestadvantage of community resources withoutgiving anything in return. Violates zoning andother ordinances whenever it can for its ownadvantage.

Amoral Management Does not take community or its resources intoaccount in management decision making.Community factors are assumed to be irrelevantto business decisions. Community, likeemployees, is a factor of production. Legalconsiderations are followed, but nothing more.Deals minimally with community, its people,community activity, local government.

Moral Management Sees vital community as a goal to be activelypursued. Seeks to be a leading citizen and tomotivate others to do likewise. Gets activelyinvolved and helps institutions that need help -schools, recreational groups, philanthropicgroups. Leadership position in environment,education, culture/arts, volunteerism, and generalcommunity affairs. Firm engages in strategicphilanthropy. Management sees communitygoals and company goals as mutuallyinterdependent.

Finally

Though the concept of social responsibility may change from time to time, the pyramid model gives us a framework for understanding the evolving nature of the firm’s economic, legal, ethical and philanthropic performance.

Issues, Questions and Reflections

Marketing EthicsSocial ResponsibilityMoral Management

Marketing and Ethics

From Buyer Beware to Seller Beware

See:Smith, N.C., (1995) Marketing Strategies for the Ethics Era, Sloan Management Review, Summer, pp. 85-97.

Marketing Ethics Continuum

Producer Interests Producer InterestsFavoured Less favoured

Consumer Interests Consumer InterestsLess Favoured More Favoured

Caveat Industry Ethics Consumer CaveatEmptor Practice Codes Sovereignty Venditor

Profit General business Codes of Capability Consumermaximisation practice (average individual satisfaction

across all firms) firms Information

Subject to Practices of Industry Choicelegal constraints specific industries codes

Practice of Professional best firms codes

Source: N C Smith (1995)

Some Ethical Maxims

Marketers often rely on simple maxims to evaluate their marketing practices. While useful, they generally lack specific guidance.

Do unto others as you would have them do unto you. Would you be embarrassed in front of your family/ friends/

colleagues if the media publicised your decision ? Good ethics is in the long term interests of the firm. Would an objective panel of professional colleagues view

my actions as proper ? When in doubt, don’t.

Read the article in the reading list entitled ‘Ethics - a view from the trenches’

Social Responsibility

Look at the ‘principles’ of key companies - Shell, Lockheed Martin and Body ShopThe new Philanthropy

Shell’s ‘principles’ can be found in the Shell folder in Readings

Some Issues to Consider Compare the Carroll Model with the Reidenbach and

Robin Model. Look at the similarities and differences. Read the section in the Visions folder particularly on

the articles by: Malcolm McIntosh - particularly focus on the last

paragraph which quotes Timberland’s mission statement. See next slide

Glazebrook and Birch Go to the web sites of Shell, Lockheed Martin and

Body Shop. Compare their ‘principles of business’. Where would you place them on model ? Why?

Timberland’s Mission Statement

“We do not give money to charity. Instead we try to create a return. We create values for our customers, the community and the non-profit organisations we work with. The traditional notion of philanthropy is not adequate. It is not smart or wise to approach social problems with the financial leftovers of companies.”

Consider this statement carefully, and reflect on the issues that it addresses. To what extent can this statement be be said to be ‘enlightened’? What is your position about businesses and the community and how does this relate to Carroll’s model and moral types ?

Moral Management ‘Cartel’ - 1999 Style

Vitamins Inc - An International Cartel

Featuring Europe’s Top Companies

BASF - Germany

Roche - Switzerland

Rhone-Poulnec - France

This Cartel lasted 9 years and was busted in May 1999

Members were fined $ 725m under US Anti-trust laws and a Senior Executive was jailed for 4 months and fined $100,000

See FT cuttings in Readings/Cartel Folder

Vitamins Inc: How to Run an Efficient Cartel Hold and annual summit between ‘hot shot’

executives in late summer Negotiate a budget for the year, covering prices and

sales volumes around the world Fix quarterly meetings between mid-level managers

to watch each other’s figures Police the cartel’s targets with regular telephone

calls Review each year’s performance at a ‘shareholders’

meeting’ of top executives

Questions for Reflection Where would you classify these three companies on

the Carroll and the Reidenbach and Robin Model ? What would morale and attitudes of managers be in

other parts of the these firms ? Can firms like Roche and BASF be ‘moral’ and

‘ethical’ in their other SBUs, while at the same time be manipulating the market by running an illegal cartel ? Discuss.

Would you be attracted to such a firm for a managerial opportunity ?