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BusinessSocialResponsibilityWeek4Fall2017.pptx© 2014, 2015, 2016 David E. Frick.
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Management 515
Business
Social Responsibility
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Social Responsibility. What is it?
What obligations do corporations have to society as a whole?
Provide jobs?
Help the disadvantaged?
Protect the environment?
Provide safe products?
Support social agendas?
Make a profit?
Solve societal problems
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Social Responsibility Framework
An ethical framework which drives the way a firm’s managers and employees view their duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of stakeholders and society as a whole
Obstructionist
Defensive
Accommodative
Proactive
Social Responsibility
Some argue that moral standards compel firms to act in a socially responsible manner.
This is a commonly accepted framework for social responsibility. Definitions are on the next page.
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Definitions
Obstructionist approach. Firms choose not to behave in a social responsible way and behave unethically and illegality
Defensive approach. Firms and managers stay within the law and abide strictly with legal requirements but make no attempt to exceed those requirements
Accommodative approach. Firms behave legally and ethically and try to balance the interests of different stakeholders against one another so that the claims of stockholders are balanced in relation to the claims of other stakeholders
Proactive approach. Firms 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
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Corporate Social Responsibility
The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time (Archie Caroll, 1979)
Enterprises deciding to go beyond minimum legal requirements and obligations stemming from collective agreements in order too address societal needs (Commission of the European Communities, 2006)
A form of self-regulation that functions as a self-regulatory mechanism that ensures active compliance with the spirit of the law, ethical standards and national or international norms (Wikipedia)
Here are three generally accepted definitions of corporate social responsibility (CSR).
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Why Be Socially Responsible?
Some argue that:
Firms, as collections of individuals, have the same responsibility as individuals
Demonstrating social responsibility helps a firm build a good reputation
If all firms in a society act socially, the quality of life as a whole increases
Firms only exist to provide benefits to workers and society in general and that profit is evil (extremist view)
Many believe that the shear size of corporations and the resources they control obligates these firms to “share the wealth.” The analogy is that a rich man is obligated to care for the poor man simply because the rich man has more money.
This is a moral argument. This line of reasoning follows the Judeo-Christian philosophy, but none-the-less is a moral judgment.
View this video from Michael Porter, who developed the Five Forces Model.
http:// www.ted.com/talks/michael_porter_why_business_can_be_good_at_solving_social_problems
What do you think of Porter’s position?
The extreme view is a bit contradictory. This position is a moral argument, but a political one: capitalism is evil and socialism/communism is good.
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Another Viewpoint
Others argue that:
Firms only have an obligation to act within the law
Managers of firms have an obligation to their shareholders to act in a manner consistent with shareholder desires
Providing jobs in a manner that meets legal, ethical, and cultural standards and assumes all costs of operations is the limit of a firm’s social responsibility
Eliminate the effects of pollution
Keeping promises, e.g., retirement annuities
Fairness in hiring and unemployment practices
Please view this video:
The Social Responsibility of Business https://www.youtube.com/watch?v=Z5KZhm19EO0
http :// www.ted.com/talks/harish_manwani_profit_s_not_always_the_point
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Stakeholders vs. Stockholders
Stockholders. The owners of the firm’s assets, including individuals, mutual funds, and other firms.
Stakeholders. Individuals or organizations with an interest in (real or perceived) the firm’s operations. This incudes:
Employees, suppliers, customers
Governments
Special interest groups
The public
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Competing Theories
Stakeholder Theory: Corporations should satisfy the discretionary expectations of society.
Iron Law of Responsibility: Society should let business attempt to solve society’s problems because other institutions have clearly failed to do so (Davis, 2001)
Society ultimately acts to reduce the power of those who have not used it responsibility
Shareholder Theory: Business should simply obey the law and maximize shareholder wealth
Legitimacy Theory: Corporations have implicit contracts with stakeholders to provide for their long-term needs and wants
By providing for the desires of stakeholders, the corporation legitimizes its existence
Stakeholder theory argues that firms have an obligation to society,
Stockholder Theory argues that firms have an obligation to its owners.
I find Stakeholder Theory to be morally objectionable (but you are fully free to disagree with me). If you had the time, I would require you to read Atlas Shrugged by Ayn Rand. Ms. Rand divided people into two groups: the makers and creators versus the moochers and looters.
--The makers and creators were the people who worked hard to make a better life (capitalists).
--The moochers and looters were the government and welfare recipients who believed if you have more than me, then you are obligated to give to me (socialists).
Stakeholder theory runs directly counter to corporate governance.
Stakeholder theory transfers the firm’s focus from shareholders to the needs of stakeholders.
Firms are thereby denying their fiduciary responsibility to shareholders.
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Proponents argue that
CSR activities enhances a firm’s image
CSR may enhance customer loyalty leading to long-term profits
Governments have proven incapable of solving societal problems, so the burden “must” be shifted to firms. These people are unconcerned about the impact on these firms, as firm’s are not people
Can you think of other instances were acting in a socially responsible could have positive affects on the firm?
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Critics argue that
CSR distracts firms from their economic roles and will have a cost. This additional cost may put the firms at a competitive disadvantage and lead to their death
Destructive capitalism
Barriers to entry
CSR expectations are unrealistic. Failing to meet impossible goals reflects poorly on the firm
Unless these functions are absolutely separate, they will eventually be combined in every aspect. Corporations will eventually rule the world (Alarmist view)
Can you thin
Look at: https://www.youtube.com/watch?v=N8dXNz.CIVxg The End of Corporate Responsibility
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Philanthropy vs. Shared Value
Philanthropy. Acts that supposedly better mankind.
Charity. Acts that supposedly better individuals.
Shared value. The idea that corporate success and social welfare are interdependent. Firms need a healthy, educated workforce, sustainable resources and adept government to compete effectively. For “society” to thrive, profitable and competitive firms must be developed and supported to create income, wealth, and tax revenues. Philanthropy enhances society.
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