Using management theory to support your recommendations

Social responsibility

Organisational stakeholders:

are directly affected by the behaviour of the organisation and hold a stake in its performance

may include government, competitors, shareholders, customers, employees, civil society, suppliers, pressure groups and regulators.

Corporate social responsibility

The obligation of an organisation to act in ways that serve its own interests and the interests of its stakeholders.

Social responsibility

It is important to remember that all organisations exist in complex relationships with elements in their external environment.

An important frame of reference is the field of organisational stakeholders, those people, groups and other organisations directly affected by the behaviour of the organisation and holding a stake in its performance.

In this context, corporate social responsibility is defined as an obligation of the organisation to act in ways that serve both its own interests and the interests of its many external stakeholders. The organisation’s stakeholders comprise government, competitors, shareholders, customers, employees, civil society, suppliers, pressure groups and regulators.

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Stakeholder issues and practices

Leadership beliefs that guide socially responsible practices:

people do their best in healthy work environments

organisations perform best when located in healthy communities

organisations gain by treating the natural environment with respect

organisations must be managed and led for long-term success

reputation must be protected for support.

Stakeholder issues and practices

Consumers, activist groups, not-for-profit organisations and governments are increasingly vocal and influential in directing organisations towards socially responsible practices.

Ultimately, organisational leadership is a critical influence on behaviour by organisations and their members. The leadership beliefs that guide socially responsible organisational practices have been described as follows:

• people — belief that people do their best in healthy work environments with a balance of work and family life

• communities — belief that organisations perform best when located in healthy communities

• natural environment — belief that organisations gain by treating the natural environment with respect

• long term — belief that organisations must be managed and led for long-term success

• reputation — belief that the organisation’s reputation must be protected to ensure consumer and stakeholder support.

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Perspectives on social responsibility

The classical view holds that management’s only responsibility in running a business is to maximise profits.

The socioeconomic view holds that management of any organisation must be concerned for the broader social welfare and not just for corporate profits.

Perspectives on social responsibility

In academic and public-policy circles, two contrasting views of corporate social responsibility have stimulated debate.

The classical view holds that management’s only responsibility in running a business is to maximise profits. In other words — the business of business is business and the main concern of management should always be to maximise shareholder value.

The arguments against corporate social responsibility include fears that the pursuit of this goal will reduce business profits, raise business costs, dilute business purpose, give business too much social power, and do so without business accountability to the public.

In contrast, the socioeconomic view holds that management of any organisation must be concerned for the broader social welfare and not just for corporate profits.

Among the arguments in favour of corporate social responsibility are that it will add long-term profits for businesses, improve the public image of businesses, and help them to avoid more government regulation. Businesses have the resources and ethical obligation to act responsibly.

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Evaluating social performance

A social audit is a systematic assessment of an organisation’s accomplishments in areas of social responsibility.

Is the organisation’s:

economic responsibility met? Is it profitable?

legal responsibility met? Does it obey the law?

ethical responsibility met? Is it doing the ‘right’ things?

discretionary responsibility met? Does it contribute to the community?

Evaluating social performance

At the organisational level, a social audit can be used at regular intervals to report on and systematically assess an organisation’s resource commitments and accomplishments in these and other areas. You might think of social audits as attempts to assess the social performance of organisations, much as accounting audits assess their financial performance.

A formal assessment of corporate social performance might include questions posed at these four levels:

• Is the organisation’s economic responsibility met? Is it profitable?

• Is the organisation’s legal responsibility met? Does it obey the law?

• Is the organisation’s ethical responsibility met? Is it doing the ‘right’ things?

• Is the organisation’s discretionary responsibility met? Does it contribute to the broader community?

As you move up these levels, the assessment inquires into ever-greater demonstrations of social performance. An organisation is meeting its economic responsibility when it earns a profit through the provision of goods and services desired by customers. Legal responsibility is fulfilled when an organisation operates within the law and according to the requirements of various external regulations. An organisation meets its ethical responsibility when its actions voluntarily conform not only to legal expectations but also to the broader values and moral expectations of society. The highest level of social performance comes through the satisfaction of an organisation’s discretionary responsibility. Here, the organisation voluntarily moves beyond basic economic, legal and ethical expectations to provide leadership in advancing the wellbeing of individuals, communities and society as a whole.

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Social responsibility strategies

Obstructionist strategy: avoids social responsibility, reflects mainly economic priorities.

Defensive strategy: seeks to protect organisation by doing the minimum legally required.

Accommodative strategy: accepts social responsibility; tries to satisfy prevailing economic, legal and ethical performance criteria.

Proactive strategy: meets all criteria of social responsibility, including discretionary performance.

Social responsibility strategies

There are four strategies of corporate social responsibility:

An obstructionist strategy (‘fight the social demands’) reflects mainly economic priorities — social demands lying outside the organisation’s perceived self-interests are resisted. If the organisation is criticised for wrongdoing, it can be expected to deny the claims.

A defensive strategy (‘do the minimum legally required’) seeks to protect the organisation by doing the minimum legally necessary to satisfy expectations. Corporate behaviour at this level conforms only to legal requirements, competitive market pressure and perhaps activist voices.

Organisations pursuing an accommodative strategy (‘do the minimum ethically required’) accept their social responsibilities. They try to satisfy economic, legal and ethical criteria. Corporate behaviour at this level is congruent with society’s prevailing norms, values and expectations, but at times it may be so only because of outside pressures.

Finally, the proactive strategy (‘take leadership in social initiatives’) is designed to meet all the criteria of social performance, including discretionary performance. Corporate behaviour at this level takes preventive action to avoid adverse social impacts from company activities, and it even anticipates or takes the lead in identifying and responding to emerging social issues. One strategy might be charitable contributions, although cynics suggest that such philanthropic giving may be a legitimisation tool.

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Social responsibility strategies