Chapter 3

What is Organizational Responsibility?

Organizational responsibility refers to the responsibilities an organization has in order to have an effective performance.

Specific organizational responsibilities exist in

the following areas:Anticipating the future in terms of

the changing environment: Anticipating changes in customer demands and perceptions; recognizing changes in production and service technology etc.

Investment as a continued investment: In the areas of product development; quality improvement; management and staff training and development; production and service technology; the well-being of the customer.

Organizational Development: In terms of its skills, knowledge, capabilities, attitudes and expertise; customer satisfaction etc.

Training and Development: of both management and staff in the skills, qualities, attributes and expertise necessary to secure the future.

Recognition of the fact that all organizations currently operate in a changing and turbulent environment: That historic and current issues, efficiency, effectiveness and profitability is no guarantee that this will extend into the future.

Openness: People respond to uncertainty and turbulence much better if they understand its extent and why they must constantly update and develop. Organizations therefore, have a clear duty to inform, consult and provide detail on all aspects of performance in general.

Ethics: Long term existence, the ability to secure the employment of staff, and establishing a regular and profitable customer base which are enhanced by talking, accepting and understanding a view of the world as it really is.

The way a company’s managers and employees view their duties or obligation to make decisions that protect, enhance, and promote the welfare and well-being of stakeholders and societies as a whole.

(Stakeholders can affect or be affected by the organization's actions, objectives and policies e.g employees, customers, owners etc. )

Obstructionist Approach: Companies and their managers choose not to behave in a socially responsible way and instead behave unethically and illegally.

Defensive Approach: Companies and their managers behave ethically to the degree that they stay within the law and abide strictly with legal requirements.

Accommodative Approach: Companies and their managers behave legally and ethically and try to balance the interests of different stakeholders as the need arises.

Proactive Approach: Companies and their managers actively embrace socially responsible behavior, going out of their way to learn about the needs of different stakeholder groups and utilizing organizational resources to promote the interests of all stakeholders.

When business people speak about “business ethics” they usually mean one of three things: (1) avoid breaking the criminal law in one’s work-related activity; (2) avoid action that may result in civil law suits against the company; and (3) avoid actions that are bad for the company image.

Business Ethics can be defined as the study and evaluation of decision making by businesses according to moral concepts and judgments. Ethical questions range from practical, narrowly defined issues, such as a company's obligation to be honest with its customers, to broader social and philosophical questions, such as a company's responsibility to preserve the environment and protect employee rights. 

Managers must balance the ideal against the practical—the need to produce a reasonable profit for the company's shareholders with honesty in business practices, safety in the workplace, and larger environmental and social issues.

Ethical issues in business have become more complicated because of the global and diversified nature of many large corporations and because of the complexity of government regulations that define the limits of criminal behavior. 

 Example: Multinational corporations operate in

countries where bribery, sexual harassment, racial discrimination, and lack of concern for the environment are neither illegal nor unethical or unusual.

The company must decide whether to adhere to constant ethical principles or to adjust to the local rules to maximize profits. As the costs of corporate and white-collar crime can be high, both for society and individual businesses, many business and trade associations have established ethical codes for companies, managers, and employees.

For example the suppliers:A business cannot claim to be ethical firm if it ignores unethical practices by its suppliers – e.g.

Use of child labour and forced labour Production in sweatshops Violation of the basic rights of workers Ignoring health, safety and

environmental standards

An ethical business has to be concerned with the behavior of all businesses that operate in the supply chain – i.e.

SuppliersContractorsDistributorsSales agents

Businesses and industries increasingly find themselves facing external pressure to improve their ethical track record.  An interesting feature of the rise of consumer activism online has been increased scrutiny of business activities.Pressure groups are a good example of this. Pressure groups are external stakeholders they

Tend to focus on activities & ethical practice of multinationals or industries with ethical issues

Combine direct and indirect action can damage the target business or industry

Direct consumer action is another way in which business ethics can be challenged. Consumers may take action against:

Businesses they consider to be unethical in some ways (e.g. animal furs)

Business acting irresponsibly Businesses that use business practices

they find unacceptable Consumer action can also be positive –

supporting businesses with a strong ethical stance & record.  

Advantages:Higher revenues – demand from

positive consumer support Improved brand and business

awareness and recognitionBetter employee motivation and

recruitmentNew sources of finance – e.g. from

ethical investors

Disadvantages Higher costs – e.g.

sourcing from Fairtrade (good reputation) suppliers rather than lowest price

Higher overheads – e.g. training & communication of ethical policy

A danger of building up false expectations