Social Obligations to Social

Responsiveness to Social
Responsibility
 From Social Obligations to Responsiveness
to Responsibility
Social Obligation
• The obligation of a business to meet its economic and legal
responsibilities and nothing more.

Social Responsiveness
• The capacity of a firm to adapt to changing societal conditions
through the practical decisions of its managers in responding to
important social needs.

Social Responsibility
• A firm’s obligations as a moral agent extends beyond its legal and
economic obligations, to the pursuit of long-term goals that are
good for society.
Social obligation is when a firm engages in social actions
because of its obligation to meet certain economic and legal
responsibilities.
• The organization does what it’s obligated to do and
nothing more.
• This idea reflects the classical view of social
responsibility, which says that management’s only social
responsibility is to maximize profits.
• The most outspoken advocate of this approach is
economist and Nobel laureate Milton Friedman. He
argued that managers’ primary responsibility is to operate
the business in the best interests of the stockholders,
whose primary concerns are financial.
Socioeconomic view says that managers’ social responsibilities go
beyond making profits to include protecting and improving
society’s welfare.
• Corporations are not independent entities responsible only to
stockholders.
• Firms have a moral responsibility to larger society to become
involved in social, legal, and political issues.
• “To do the right thing”
Social responsiveness is when a company engages in social actions
in response to some popular social need. Managers are guided by
social norms and values and make practical, market-oriented
decisions about their actions.
• For example Ford Motor Company became the first automaker
to endorse a federal ban on sending text messages while driving.
• A socially responsible organization goes
beyond what it’s obligated to do or chooses to
do because of some popular social need and
does what it can to help improve society
because it’s the right thing to do.
• Social responsibility as a business’s intention,
beyond its legal and economic obligations, to
do the right things and act in ways that are
good for society.
• For example a U.S. business that meets federal
pollution control standards or that doesn’t
discriminate against employees over the age
of 40 in job promotion decisions is meeting its
social obligation because laws mandate these
actions.
• Child care facility or packaging with recycled
papers are some examples that indicate the
socially responsive organizations
Arguments For and Against Social Responsibility
For:
Public expectations
Public opinion now supports businesses pursuing economic and social goals.

Long-run profits
Socially responsible companies tend to have more secure long-run profits.

Ethical obligation
Businesses should be socially responsible because responsible actions are the right thing to do.

Public image
Businesses can create a favorable public image by pursuing social goals.

Better environment
Business involvement can help solve difficult social problems.

Discouragement of further governmental regulation

By becoming socially responsible, businesses can expect less government regulation.

Balance of responsibility and power

Businesses have a lot of power and an equally large amount of responsibility is needed to balance against that
power.

Stockholder interests
Social responsibility will improve a business’s stock price in the long run.

Possession of resources
Businesses have the resources to support public and charitable projects that need assistance.

Superiority of prevention over cures

Businesses should address social problems before they become serious and costly to correct.
Arguments For and Against Social Responsibility… Cont’d

Against:

Violation of profit maximization

Business is being socially responsible only when it pursues its economic
interests.

Dilution of purpose
Pursuing social goals dilutes business’s primary purpose — economic
productivity.

Costs
Many socially responsible actions do not cover their costs and someone must
pay those costs.

Too much power

Businesses have a lot of power already and if they pursue social goals they
will have even more.

Lack of skills
Business leaders lack the necessary skills to address social issues.

Lack of accountability
There are no direct lines of accountability for social actions
 Does Social Responsibility Pay?
• Studies appear to show a positive relationship between
social involvement and the economic performance of firms.

• Difficulties in defining and measuring “social responsibility”

and “economic performance” raise issues of validity and
causation in the studies.

• Mutual funds using social screening in investment decisions

slightly outperformed other mutual funds.

• A general conclusion is that a firm’s social actions do not

harm its long-term performance.
 The Greening of Management
• The recognition of the close link between an
organization’s decision and activities and its
impact on the natural environment.

• Global environmental problems facing

managers:
– Air, water, and soil pollution from toxic wastes
– Global warming from greenhouse gas emissions

• Natural resource depletion

 How Organizations Can Go Green?
Legal (of Light Green) Approach:
• Firms simply do what is legally required by obeying laws, rules, and
regulations willingly and without legal challenge.

Market Approach:
• Firms respond to the preferences of their customers for
environmentally friendly products.

Stakeholder Approach:
• Firms work to meet the environmental demands of multiple
stakeholders—employees, suppliers, and the community.

Activist Approach:
• Firms look for ways to respect and preserve environment and be
actively socially responsible.
 Values Based Management

Values-Based Management:
• An approach to managing in which managers establish and
uphold an organization’s shared values.

The Purposes of Shared Values:

• Serving as guideposts for managerial decisions
• Shaping employee behavior
• Influencing the direction of marketing efforts
• Building team spirit

The Bottom Line on Shared Corporate Values:

• An organization’s values are reflected in the decisions and
actions of its employees.
 Shared Organisational
Values

Guide Managers Actions Influence Marketing

Shape Employee Behavior Build Team Spirit
and Decisions Efforts
 What is Managerial Ethics?
Ethics Defined
• The rules and principles that define right and
wrong conduct.

Four Views of Ethics:

• The utilitarian view
• The rights view
• The theory of justice view
• The integrative social contracts theory
 Ethics Contd…
The Utilitarian View:
• Ethical decisions are made solely on the basis of their
outcomes or consequences such that the greatest good is
provided for the greatest number.
– Encourages efficiency and productivity and is consistent with the
goal of profit maximization.

Rights View:
• Concerned with respecting and protecting individual
liberties and privacy.
• Seeks to protect individual rights of conscience, free
speech, life and safety, and due process.
The Theory of Justice:
• Organizational rules are enforced fairly and
impartially and follow all legal rules and regulations.
– Protects the interests of underrepresented stakeholders
and the rights of employee.

Integrative Social Contracts Theory:

• Ethical decisions should be based on existing ethical
norms in industries and communities in order to
determine what constitutes right and wrong.
• Based on integration of the general social contract
and the specific contract between community
members.
 Factors Affecting Employee Ethics

Moral Development:
• A measure of independence from outside influences
– Levels of Individual Moral Development
• Preconventional level
• Conventional level
• Principled level

Stage of moral development interacts with:

– Individual characteristics
– The organization’s structural design
– The organization’s culture
– The intensity of the ethical issue
 Factors Affecting Contd….
Moral Development
• Research Conclusions:
– People proceed through the stages of moral
development sequentially.
– There is no guarantee of continued moral
development.
• Most adults are in Stage 4 (“good corporate
citizen”).
 Individual Characteristics Affecting Ethical
Behaviors
• Values:
• Basic convictions about what is right or wrong
on a broad range of issues
• Stage of Moral Development:
• A measure of an individual’s independence
from outside influences
 Individual Characteristics
Personality Variables:
• Ego strength
– A personality measure of the strength of a person’s
convictions
• Locus of Control
– A personality attribute that measures the degree
to which people believe they control their own life.
– Internal locus: The belief that you control your
destiny.
– External locus: The belief that what happens to
you is due to luck or chance.
 Organizational Characteristics
Organizational characteristics and mechanisms
that guide and influence individual ethics:
• Performance appraisal systems
• Reward allocation systems
• Behaviors (ethical) of managers
• An organization’s culture
• Intensity of the ethical issue
• Good structural design minimizes ambiguity
and uncertainty and fosters ethical behavior.
 Ethics in an International Context
• Ethical standards are not universal.
• Social and cultural differences determine
acceptable behaviors.
• Foreign Corrupt Practices Act
• Makes it illegal to corrupt a foreign official yet
“token” payments to officials are permissible
when doing so is an accepted practice in that
country.
 The Global Compact
Human Rights:
• Principle 1: Support and respect the protection of international
human rights within their sphere of influence.
• Principle 2: Make sure business corporations are not complicit in
human rights abuses.

Labor Standards:
• Principle 3: Freedom of association and the effective recognition of
the right to collective bargaining.
• Principle 4: The elimination of all forms of forced and compulsory
labor.
• Principle 5: The effective abolition of child labor.
• Principle 6: The elimination of discrimination in respect of
employment and occupation.
Environment:
• Principle 7: Support a precautionary approach
to environmental challenges.
• Principle 8: Undertake initiatives to promote
greater environmental responsibility.
• Principle 9: Encourage the development and
diffusion of environmentally friendly
technologies.
 Code of Ethics
A formal statement of an organization’s primary
values and the ethical rules it expects its
employees to follow.
• Be a dependable organizational citizen
• Don’t do anything unlawful or improper that
will harm the organization
• Be good to customers
 Effective Use of Code of Ethics
• Develop a code of ethics as a guide in handling
ethical dilemmas in decision making.
• Communicate the code regularly to all employees.
• Have all levels of management continually
reaffirm the importance of the ethics code and
the organization’s commitment to the code.
• Publicly reprimand and consistently discipline
those who break the code.
How Managers Can Improve Ethical Behavior
in an Organisation?
1. Hire individuals with high ethical standards.
2. Establish codes of ethics and decision rules.
3. Lead by example.
4. Delineate job goals and performance appraisal
mechanisms.
5. Provide ethics training.
6. Conduct independent social audits.
7. Provide support for individuals facing ethical
dilemmas.
 The Value of Ethics Training
1. Training in ethical problem solving can make a
difference in ethical behaviors.
2. Training in ethics increase employee awareness
of ethical issues in business decisions.
3. Ethics training clarifies and reinforces the
organization’s standards of conduct.
4. Employees become more confident that they
will have the organization’s support when
taking unpopular but ethically correct stances.
 Ethical Leadership
Managers must provide a good role model by:
• Being ethical and honest at all times.
• Telling the truth; don’t hide or manipulate
information.
• Admitting failure and not trying to cover it up.
• Communicating shared ethical values to employees
through symbols, stories, and slogans.
• Rewarding employees who behave ethically and
punish those who do not.
• Protecting employees (whistleblowers) who bring to
light unethical behaviors or raise ethical issues.
Business Practices and Social Issues
Social Impact Management
• The field of inquiry at the intersection of
business practice and wider societal concerns
that reflects and respects the complex
interdependency of those two realities.
• The question of how to go about increasing
managers’ awareness within their decision-
making processes of how society is impacted
by the conduct and activities of their firms.