Management’s Social and Ethical Responsibilities

Prepared by: Aldous Castuli-CHE/3 -EMG20/B5

Lecture Copyright: Prof. Emilia S. Bio, P.I.E.,IE-EMG Dept.,

The Changing Workplace

• As the social, political, economic, and technological environments of management have changed, the practice of management itself has changed. This is especially true for managers in the private business sector.

The Changing Workplace

• Today, it is far less acceptable for someone in business to stand before the public and declare that his or her sole job is to make as much profit as possible.

• The public is wary of the abuse of power and the betrayal of trust, and business managers—indeed, managers of all types of organizations—are expected to make a wide variety of economic and social contributions.

The Changing Workplace

•Demands on business that would have been considered patently unreasonable 30 or 40 years ago have become the norm today.

Social Responsibility: Definition and Perspectives

Corporate Social Responsibility

• It is the notion that corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law or union contract.

• In other terms, it is the idea that business has social obligations above and beyond making a profit.

Carroll’s Global Corporate Social Responsibility Pyramid

• Ethical responsibility

• Legal responsibility

• Economic responsibility

• Be a good global citizen

• Be ethical

• Obey the law

• Be profitable

• Do what is desired by global stockholders• Do what is

expected by global stockholders• Do what is

required by global stockholders

• Do what is required by global capitalism

Corporate Social Responsibility

•From the previous figure, global and transnational companies have four main areas of responsibility: economic, legal, ethical, and philanthropic.

Corporate Social Responsibility

• Working from bottom to top, this means that the global corporation should:Make a profit consistent with expectations for

international businessesObey the law of host countries as well as international

lawBe ethical in its practices, taking host-country and

global standards into considerationBe a good corporate citizen, especially as defined by

the host country’s expectations

CSR Requires Voluntary Action

• An implicit feature of the above definition and perspective is that an action must be voluntary to qualify as socially responsible.

“All businesses should commit to the triple bottom line—a measure of corporate success that takes int oaccount not just profit and loss but also social and environmental impact.”

-Paul Dolan, “True to Our Roots: Fermenting a Business Revolution”

What is the Role of Business in Society?

• Much of the disagreement over what social responsibility involves can be traced to a fundamental debate about the exact purpose of a business.

• “Is business an economic entity responsible only for making a profit for its stockholders? Or is it a socioeconomic entity obligated to make both economic and social contributions to society?”

The Stockholder Audit—the identification of all parties that might be affected by the organization.

• Customers

• Competitors

• Domestic and Foreign

suppliers and distributors

• Customers

• Stockholders

• Public-at-large

• Political Parties

• Financial Community

(bankers, brokers, and

investors)

• Neighbors of stores and facilities

(homeowners’ association)• All levels of

domestic and foreign

government

• Stockholders

• Public-at-large

• Political Parties

• WAL-MART

(for) Wal-Mart

Arguments For Social Responsibility

1. Business is unavoidably involved in social issues.

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

3. A better society means a better environment for doing business.

4. Corporate social action will prevent government intervention.

Arguments Against Social Responsibility

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

2. As an economic institiution, business lacks the ability to pursue social goals.

3. Business already has enough power.

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

Toward Greater Social Responsibility

The Iron Law of Responsibility

• Is it inevitable that management will assume greater social responsibility? Some scholars believe so. It has been said that business Is bound by an iron law of responsibility, which states that “in the long run, those who do not use power in a way that society considers responsible will tend to lose it.

Who Benefits from Corporate Social Responsibility?

• Is it accurate to say of social responsibility what used be said about home medicine, “It has to taste bad to be good”? In other words, does social responsibility have to be a hardship for the organization? Those who answer yes believe that it should be motivated by altruism, an unselfish devotion to the interests of others.

• This implies that businesses that are not socially responsible are motivated strictly by self-interest.

Who Benefits from Corporate Social Responsibility?

• On the basis of evidence alone, one would hard pressed to say that social responsibility pays. But research paints a brighter picture:

– A study of 243 companies for two years found a positive correlation between industry leadership in environmental protection/pollution control and profitability. The researchers concluded, “It pays to be green.”

– A second study found agood reputation for corporate social responsibility to be a competitive advantage in recruiting talented people.

Who Benefits from Corporate Social Responsibility?

• Enlightened self-interest, the realization that business ultimately helps itself by helping to solve societal problems, involves balancing short-run costs and long-run benefits. Advocates of enlightened self-interest contend that social responsbility expenditures are motivated by profit.

• Research into corporate philanthropy, the charitable donation of company resources ($12.7 billion in US in 2006), supports this contention.

An Array of Benefits for the Organization

• In addition to the advertising effect, other possible long-run benefits include:– Tax-free incentives to employees.

– Retention of talented employees by satisfying their altruistic motives.

– Help in recruiting talented and socially conscious personnel.

– Swaying public opinion against government intervention.

– Improved community living standards for employees.

– Attracting socially conscious investors.

– A nontaxable benefit for employees in which company funds are donated to their favorite causes.

The Ethical Dimension of Management

The Ethical Dimension of Management

• Ethics is the study of moral obligation involving the distinction between right and wrong.MoralImmoralAmoral Managers – managers who are neither moral nor immoral, but ethically lazy.

• Business ethics, sometimes referred to as management ethics or organizational ethics, narrows the frame of reference to productive organizations.

Practical Lessons from Business Ethics Research

• Ethical Hot Spots. – In a survey of 1,324 US employees from all

levels across several industries, 48 percent admitted to having performed at least one illegal or unethical act from a list of 25 questionable practices.

– The list included everything from calling in sick when feeling well through cheating on expense accounts, forging signatures, and giving or accepting kickbacks, to ignoring violations of environmental laws.

Practical Lessons from Business Ethics Research

• The top ten workplace hot spots responsible for triggering unethical conduct are:

1. Balancing work and family

2. Poor internal communications

3. Poor leadership

Practical Lessons from Business Ethics Research

4. Work hours, workload

5. Lack of management support

6. Need to meet sales, budget, or profit goals

7. Little or no recognition of achievements

Practical Lessons from Business Ethics Research

8. Company politics9. Personal financial

worries10. Insufficient resources

Management’s Social andEthical Responsibilities

Prepared by: Aldous Castuli-CHE/3 -EMG20/B5

Lecture Copyright: Prof. Emilia S. Bio, P.I.E.,IE-EMG Dept.,