Definition of Corporate Social Responsibility

Carroll, Archie B.

The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders, Business Horizons, July-August 1991

For the better part of 30 years now, corporate executives have struggled with the issue

of the firm’s responsibility to its society. Early on it was argued by some that the

corporation's sole responsibility was to provide a maximum financial return to

shareholders. It became quickly apparent to everyone, however, that this pursuit of

financial gain had to rake place within the laws of the land. Though social activist groups

and others throughout the 1960s advocated a broader notion of corporate responsibility,

it was not until the significant social legislation of the early 1970s that this message

became indelibly clear as a result of the creation of the Environmental Protection

Agency (EPA), the Equal Employment Opportunity Commission (EEOC). the

Occupational Safety and Health Administration (OSHA), and the Consumer Product

Safety" Commission (CPSC).

These new governmental bodies established that national public policy now officially

recognized the environment. employees, and consumers to be significant and legitimate

stakeholders of business. From that time on, corporate executives have had to wrestle

with how they balance their commitments to the corporation's owners with their

obligations to an ever-broadening group of stakeholders who claim both legal and

ethical rights.

This article will explore the nature of corporate social responsibility (CSR) with an eye

toward understanding its component parts. The intention will be to characterize the

firm's CSR in ways that might be useful to executives who wish to reconcile their

obligations to their shareholders with those to other competing groups claiming

legitimacy. This discussion will be framed by a pyramid of corporate social

responsibility. Next, we plan to relate this concept to the idea of stakeholders. Finally,

our goal will be to isolate the ethical or moral component of CSR and relate it to

perspectives that reflect three major ethical approaches to management—immoral,

amoral, and moral. The principal goal in this final section will be to flesh our what it

means to manage stakeholders in an ethical or moral fashion.

EVOLUTION OF CORPORATE SOCIAL RESPONSIBILITY

What does it mean for a corporation to be socially responsible? Academics and

practitioners have been striving to establish an agreed-upon definition of this concept for

30 years. In 1960, Keith Davis suggested that social responsibility refers to businesses'

"decisions and actions taken for reasons at least partially beyond the firm’s direct

economic or technical interest." At about the same time, Eells and Walton (1961)

argued that CSR refers to the "problems that arise when corporate enterprise casts its

shadow on the social scene, and the ethical principles that ought to govern the

relationship between the corporation and society.”

Figure 1 Economic and Legal Components of Corporate Social Responsibility

Economic Components (Responsibilities)

Legal Components (Responsibilities)

1. It is important to perform in a manner consistent with maximizing earnings per share

1. It is important to perform in a manner consistent with expectations of government and law.

2. It is important to be committed to being as profitable as possible.

2. It is important to comply with various federal, state, and local regulations.

3. It is important to maintain a strong competitive position.

3. It is important to be a law-abiding corporate citizen.

4. It is important to maintain a high level of operating efficiency.

4. It is important that a successful firm be defined as one that fulfills its legal obligations.

5. It is important that a successful firm be defined as one that is consistently profitable.

5. It is important to provide goods and services that at least meet minimal legal requirements.

In 1971 the Committee for Economic Development used a "three concentric circles"

approach to depicting CSR. The inner circle included basic economic functions—

growth, products, jobs. The intermediate circle suggested that the economic functions

must be exercised with a sensitive awareness of changing social values and priorities.

The outer circle outlined newly emerging and still amorphous responsibilities that

business should assume to become more actively involved in improving the social

environment.

The attention was shifted from social responsibility to social responsiveness by several

other writers. Their basic argument was that the emphasis on responsibility focused

exclusively on the notion of business obligation and motivation and that action or

performance were being overlooked. The social responsiveness movement, therefore.

emphasized corporate action, proaction, and implementation of a social role. This was

indeed a necessary reorientation.

The question still remained, however, of reconciling the firm’s economic orientation with

its social orientation. A step in this direction was taken when a comprehensive definition

of CSR was set forth. In this view, a four-part conceptualization of CSR included the

idea that the corporation has not only economic and legal obligations, but ethical and

discretionary (philanthropic) responsibilities as well (Carroll 1979). The point here was

that CSR, to be accepted as legitimate, had to address the entire spectrum of

obligations business has to society, including the most fundamental—economic. It is

upon this four-part perspective that our pyramid is based.

In recent years, the term corporate social performance (CSP) has emerged as an

inclusive and global concept to embrace corporate social responsibility, responsiveness,

and the entire spectrum of socially beneficial activities of businesses. The focus on

social performance emphasizes the concern for corporate action and accomplishment in

the social sphere. With a performance perspective, it is clear that firms must formulate

and implement social goals and programs as well as integrate ethical sensitivity into all

decision making, policies, and actions. With a results focus, CSP suggests an all-

encompassing orientation towards normal criteria by which we assess business

performance to include quantity, quality, effectiveness, and efficiency. While we

recognize the vitality of the performance concept, we have chosen to adhere to the CSR

terminology for our present discussion. With just a slight change of focus, however, we

could easily be discussing a CSP rather than a CSR pyramid. In any event, the long-

term concern is what managers do with these ideas in terms of implementation.

THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY

For CSR to be accepted by a conscientious business person, it should be framed in

such a way that the entire range of business responsibilities are embraced. It is

suggested here that four kinds of social responsibilities constitute total CSR: economic,

legal, ethical. and philanthropic. Furthermore. these four categories or components of

CSR might be depicted as a pyramid. To be sure. ail of these kinds of responsibilities

have always existed to some extent. but it has only been in recent years that ethical and

philanthropic functions have taken a significant place. Each of these four categories

deserves closer consideration.

Economic Responsibilities

Historically. business organizations were created as economic entities designed to

provide goods and services to societal members. The profit motive was established as

the primary incentive for entrepreneurship. Before it was anything else, business

organization was the basic economic unit in our society. As such, its principal role was

to produce goods and services that consumers needed and wanted and to make an

acceptable profit in the process. At some point the idea of the profit motive got

transformed into a notion of maximum profits, and this has been an enduring value ever

since. All other business responsibilities are predicated upon the economic

responsibility of the firm, because without it the others become moot considerations.

Figure 1 summarizes some important statements characterizing economic

responsibilities. Legal responsibilities are also depicted in Figure 1, and we will consider

them next.

Legal Responsibilities

Society has not only sanctioned business to operate according to the profit motive; at

the same time business is expected to comply with the laws and regulations

promulgated by federal, state, and local governments as the ground rules under which

business must operate. As a partial fulfillment of the "social contract" between business

and society firms are expected to pursue their economic missions within the framework

of the law. Legal responsibilities reflect a view of "codified ethics" in the sense that they

embody basic notions of fair operations as established by our lawmakers. They are

depicted as the next layer on the pyramid to portray their historical development, but

they are appropriately seen as coexisting with economic responsibilities as fundamental

precepts of the free enterprise system.

Figure 2 Ethical and Philanthropic Components of Corporate Social Responsibility

Ethical Components (Responsibilities)

Philanthropic Components (Responsibilities)

1. It is important to perform in a manner consistent with expectations of societal mores and ethical norms.

1. It is important to perform in a manner consistent with the philanthropic and charitable expectations of society.

2. It is important to recognize and respect new or evolving ethical moral norms adopted by society.

2. It is important to assist the fine and performing arts.

3. It is important to prevent ethical norms from being compromised in order to achieve corporate goals.

3. It is important that managers and employees participate in voluntary and charitable activities within their local communities.

4. It is important that good corporate citizenship be defined as doing what is expected morally or ethically.

4. It is important to provide assistance to private and public educational institutions.

5. It is important to recognize that corporate integrity and ethical behavior go beyond mere compliance with laws and regulations.

5. It is important to assist voluntarily those projects that enhance a community’s "quality of life."

Ethical Responsibilities

Although economic and legal responsibilities embody ethical norms about fairness and

justice, ethical responsibilities embrace those activities and practices that are expected

or prohibited by societal members even though they are not codified into law. Ethical

responsibilities embody those standards, norms, or expectations that reflect a concern

for what consumers, employees, shareholders, and the community regard as fair, just,

or in keeping with the respect or protection of stakeholders' moral rights.

In one sense, changing erl1ics or values pre- cede the establishment of law because

they become the driving force behind the very creation of laws or regulations. For

example, the environmental, civil rights, and consumer movements reflected basic

alterations in societal values and thus may be seen as ethical bellwethers

foreshadowing and resulting in the later legislation. In another sense, ethical

responsibilities may be seen as embracing newly emerging values and norms society

expects business to meet, even though such values and norms may reflect a higher

standard of performance than that currently required by law. Ethical responsibilities in

this sense are often ill-defined or continually under public debate as to their legitimacy,

and thus are frequently difficult for business to deal with.

Superimposed on these ethical expectations emanating from societal groups are the

implied levels of ethical performance suggested by a consideration of the great ethical

principles of moral philosophy. This would include such principles as justice, rights, and

utilitarianism.

The business ethics movement of the past decade has firmly established an ethical

responsibility as a legitimate CSR component. Though it is depicted as the next layer of

the CSR pyramid, it must be constantly recognized that it is in dynamic interplay with

the legal responsibility category. That is, it is constantly pushing the legal responsibility

category to broaden or expand while at the same time placing ever higher expectations

on businesspersons to operate at levels above that required by law. Figure 2 depicts

statements that help characterize ethical responsibilities. The figure also summarizes

philanthropic responsibilities, discussed next.

Philanthropic Responsibilities

Philanthropy encompasses those corporate actions that are in response to society’s

expectation that businesses be good corporate citizens. This includes actively engaging

in acts or programs to promote human welfare or goodwill. Examples of philanthropy

include business contributions to financial resources or executive time, such as

contributions to the arts, education, or the community. A loaned-executive program that

provides leadership for a community’s United Way campaign is one illustration of

philanthropy.

The distinguishing feature between philanthropy and ethical responsibilities is that the

former are not expected in an ethical or moral sense. Communities desire firms to

contribute their money, facilities, and employee time to humanitarian programs or

purposes, but they do not regard the firms as unethical if they do not provide the desired

level. Therefore, philanthropy is more discretionary or voluntary on the part of

businesses even though there is always the societal expectation that businesses

provide it.

One notable reason for making the distinction between philanthropic and ethical

responsibilities is that some firms feel they are being socially responsible if they are just

good citizens in the community. This distinction brings home the vital point that CSR

includes philanthropic contributions but is not limited to them. In fact, it would be argued

here that philanthropy is highly desired and prized but actually less important than the

other three categories of social responsibility, In a sense, philanthropy is icing on the

cake—or on the pyramid, using our metaphor.

The pyramid of corporate social responsibility is depicted in Figure 3. It portrays the four

components of CSR, beginning with the basic building block notion that economic

performance undergirds all else. At the same time, business is expected to obey the law

because the law is society's codification of acceptable and unacceptable behavior. Next

is business's responsibility to be ethical. At its most fundamental level, this is the

obligation to do what is right, just, and fair, and to avoid or minimize harm to

stakeholders (employees, consumers, the environment, and others). Finally, business is

expected to be a good corporate citizen. This is captured in the philanthropic

responsibility, wherein business is expected to contribute financial and human

resources to the community and to improve the quality of life.

No metaphor is perfect, and the CSR pyramid is no exception. It is intended to portray

that the total CSR of business comprises distinct components that, taken together,

constitute the whole. Though the components have been treated as separate concepts

for discussion purposes, they are not mutually exclusive and are not intended to

juxtapose a firm’s economic responsibilities with its other responsibilities. At the same

time, a consideration of the separate components helps the manager see that the

different types of obligations are in a constant but dynamic tension with one another.

The most critical tensions, of course, would be between economic and legal, economic

and ethical, and economic and philanthropic. The traditionalist might see this as a

conflict between a firm’s "concern for profits versus its "concern for society," but it is

suggested here that this is an oversimplification. A CSR or stakeholder perspective

would recognize these tensions as organizational realities, but focus on the total

pyramid as a unified whole and how the firm might engage in decisions, actions, and

programs that substantially fulfill all its component parts.

In summary, the total corporate social responsibility of business entails the

simultaneous fulfillment of the firm's economic, legal, ethical, and philanthropic

responsibilities. Stated in more pragmatic and managerial terms, the CSR firm should

strive to make a profit, obey the law, be ethical, and be a good corporate citizen.

Upon first glance, this array of responsibilities may seem broad. They seem to be in

striking contrast to the classical economic argument that management has one

responsibility: to maximize the profits of its owners or shareholders. Economist Milton

Friedman, the most outspoken proponent of this view, has argued that social matters

are not the concern of business people and that these problems should be resolved by

the unfettered workings of the free market system. Friedman's argument loses some of

its punch, however, when you consider his assertion in its totality. Friedman posited that

management is "to make as much money as possible while conforming to the basic

rules of society, both those embodied in the law and those embodied in ethical custom"

(Friedman 1970). Most people focus on the first part of Friedman's quote but not the

second part. It seems clear from this statement that profits, conformity to the law, and

ethical custom embrace three components of the CSR pyramid—economic, legal, and

ethical. That only leaves the philanthropic component for Friedman to reject. Although it

may be appropriate for an economist to take this view, one would not encounter many

business executives today who exclude philanthropic programs from their firms' range

of activities. It seems the role of corporate citizenship is one that business has no

significant problem embracing. Undoubtedly this perspective is rationalized under the

rubric of enlightened self interest.

We next propose a conceptual framework to assist the manager in integrating the four

CSR components with organizational stakeholders.

CSR AND ORGANIZATIONAL STAKEHOLDERS

There is a natural fit between the idea of corporate social responsibility and an

organization's stakeholders. The word "social" in CSR has always been vague and

lacking in specific direction as to whom the corporation is responsible. The concept of

stakeholder personalizes social or societal responsibilities by delineating the specific

groups or persons business should consider in its CSR orientation. Thus, the

stakeholder nomenclature puts "names and faces" on the societal members who are

most urgent to business, and to whom it must be responsive.

By now most executives understand that the term "stakeholder" constitutes a play on

the word stockholder and is intended to more appropriately describe those groups or

persons who have a stake, a claim, or an interest in the operations and decisions of the

firm. Sometimes the stake might represent a legal claim, such as that which might be

held by an owner, an employee, or a customer who has an explicit or implicit contract.

Other times it might be represented by a moral claim, such as when these groups assert

a right to be treated fairly or with due process, or to have their opinions taken into

consideration in an important business decision.

Management's challenge is to decide which stakeholders merit and receive

consideration in the decision-making process. In any given instance, there may be

numerous stakeholder groups (shareholders, consumers, employees, suppliers,

community, social activist groups) clamoring for management's attention. How do

managers sort out the urgency or importance of the various stakeholder claims? Two

vital criteria include the stakeholders' legitimacy and their power. From a CSR

perspective their legitimacy may be most important. From a management efficiency

perspective, their power might be of central influence. Legitimacy refers to the extent to

which a group has a justifiable right to be making its claim. For example, a group of 300

employees about to be laid off by a plant-closing decision has a more legitimate claim

on management's attention than the local chamber of commerce, which is worried about

losing the firm as one of its dues-paying members. The stakeholder's power is another

factor. Here we may witness significant differences. Thousands of small, individual

investors, for example, wield very little power unless they can find a way to get

organized. By contrast, institutional investors and large mutual fund groups have

significant power over management because of the sheer magnitude of their

investments and the fact that they are organized.

With these perspectives in mind, let us think of stakeholder management as a process

by which managers reconcile their own objectives with the claims and expectations

being made on them by various stakeholder groups. The challenge of stakeholder

management is to ensure that the firm’s primary stakeholders achieve their objectives

while other stakeholders are also satisfied. Even though this "win-win" outcome is not

always possible, it does represent a legitimate and desirable goal for management to

pursue to protect its long-term interests.

Figure 4 Stakeholder/Responsibility Matrix Types of CSR Stakeholders Economic Legal Ethical Philanthropic Owners - - - - Customers - - - - Employees - - - - Community - - - - Competitors - - - - Suppliers - - - - Social Activist Groups - - - -

Public at Large - - - - Others - - - -

This matrix is intended to be used as an analytical tool or template to organize a

manager's thoughts and ideas about what the firm ought to be doing in an economic,

legal, ethical, and philanthropic sense with respect to its identified stakeholder groups.

By carefully and deliberately moving through the various cells of the matrix, the

manager may develop a significant descriptive and analytical data base that can then

be used for purposes of stakeholder management. The information resulting from this

stakeholder/responsibility analysis should be useful when developing priorities and

making both long-term and short-term decisions involving multiple stakeholder's

interests.

To be sure, thinking in stakeholder responsibility terms increases the complexity of

decision making and may be extremely time consuming and taxing, especially at first.

Despite its complexity, however, this approach is one methodology management can

use to integrate values—what it stands for—with the traditional economic mission of the

organization. In the final analysis, such an integration could be of significant usefulness

to management. This is because the stakeholder/responsibility perspective is most

consistent with the pluralistic environment faced by business today. As such, it provides

the opportunity for an in-depth corporate appraisal of financial as well as social and

economic concerns. Thus, the stakeholder/responsibility perspective would be an

invaluable foundation for responding to the firm’s stakeholder management question

about strategies, actions, or decisions that should be pursued to effectively respond to

the environment business faces.

MORAL MANAGEMENT AND STAKEHOLDERS

At this juncture we would like to expound upon the link between the firm's ethical

responsibilities or perspectives and its major stakeholder groups. Here we are isolating

the ethical component of our CSR pyramid and discussing it more thoroughly in the

context of stakeholders. One way to do this would be to use major ethical principles

such as those of justice, rights, and utilitarianism to identify and describe our ethical

responsibilities. We will take another alternative, however, and discuss stakeholders

from the context of three major ethical approaches—immoral management, amoral

management, and moral management. These three ethical approaches were defined

and discussed in an earlier Business Horizons article (Carroll 1987). We will briefly

describe and review these three ethical types and then suggest how they might be

oriented toward the major stakeholder groups. Our goal is to profile the likely orientation

of the three ethical types with a special emphasis upon moral management, our

preferred ethical approach.

Three Moral Types

If we accept that the terms ethics and morality are essentially synonymous in the

organizational context, we may speak of immoral, amoral, and moral management as

descriptive categories of three different kinds of managers. Immoral management is

characterized by those managers whose decisions, actions, and behavior suggest an

active opposition to what is deemed right or ethical. Decisions by immoral managers are

discordant with accepted ethical principles and, indeed, imply an active negation of what

is moral. These managers care only about their or their organization's profitability and

success. They see legal standards as barriers or impediments management must

overcome to accomplish what it wants. Their strategy is to exploit opportunities for

personal or corporate gain.

An example might be helpful. Many observers would argue that Charles Keating could

be described as an immoral manager. According to the federal government, Keating

recklessly and fraudulently ran California's Lincoln Savings into the ground, reaping $34

million for himself and his family. A major accounting firm said about Keating: "Seldom

in our experience as accountants have we experienced a more egregious example of

the misapplication of generally accepted accounting principles" ("Good Timing, Charlie"

1989).

The second major type of management ethics is amoral management. Amoral

managers are neither immoral nor moral but are not sensitive to the fact that their

everyday business decisions may have deleterious effects on others. These managers

lack ethical perception or awareness. That is, they go through their organizational lives

not thinking that their actions have an ethical dimension. Or they may just be careless or

inattentive to the implications of their actions on stakeholders. These managers may be

well intentioned, but do not see that their business decisions and actions may be hurting

those with whom they transact business or interact. Typically their orientation is towards

the letter of the law as their ethical guide. We have been describing a sub-category of

amorality known as unintentional amoral managers. There is also another group we

may call intentional amoral managers. These managers simply think that ethical

considerations are for our private lives, not for business. They believe that business

activity resides outside the sphere to which moral judgments apply. Though most

amoral managers today are unintentional, there may still exist a few who just do not see

a role for ethics in business.

Examples of unintentional amorality abound. When police departments stipulated

applicants must be 5'10" and weigh 180 pounds to qualify for positions, they just did not

think about the adverse impact their policy would have on women and some ethnic

groups who, on average, do not attain that height and weight. The liquor, beer, and

cigarette industries provide other examples. They did not anticipate that their products

would create serious moral issues: alcoholism, drunk driving deaths, lung cancer,

deteriorating health, and offensive secondary smoke. Finally, when McDonald's initially

decided to use polystyrene containers for food packaging it just did not adequately

consider the environmental impact that would be caused. McDonald's surely does not

intentionally create a solid waste disposal problem, but one major consequence of its

business is just that. Fortunately, the company has responded to complaints by

replacing the polystyrene packaging with paper products.

Moral management is our third ethical approach, one that should provide a striking

contrast. In moral management, ethical norms that adhere to a high standard of right

behavior are employed. Moral managers not only conform to accepted and high levels

of professional conduct, they also commonly exemplify leadership on ethical issues.

Moral managers want to be profitable, but only within the confines of sound legal and

ethical precepts, such as fairness, justice, and due process. Under this approach, the

orientation is toward both the letter and the spirit of the law. Law is seen as minimal

ethical behavior and the preference and goal is to operate well above what the law

mandates. Moral managers seek out and use sound ethical principles such as justice,

rights, utilitarianism, and the Golden Rule to guide their decisions. When ethical

dilemmas arise, moral managers assume a leadership position for their companies and

industries.

There are numerous examples of moral management. When IBM took the lead and

developed its Open Door policy to provide a mechanism through which employees

might pursue their due process rights, this could be considered moral management.

Similarly, when IBM initiated its Four Principles of Privacy to protect privacy rights of

employees, this was moral management. When McCullough Corporation withdrew from

the Chain Saw Manufacturers Association because the association fought mandatory

safety standards for the industry, this was moral management. McCullough knew its

product was potentially dangerous and had used chain brakes on its own saws for

years, even though it was not required by law to do so. Another example of moral

management was when Maguire Thomas Partners, a Los Angeles commercial

developer, helped solve urban problems by saving and refurbishing historic sites,

putting up structures that matched old ones, limiting building heights to less than the law

allowed, and using only two-thirds of the allowable building density so that open spaces

could be provided.

Orientation Toward Stakeholders

Now that we have a basic understanding of me three ethical types or approaches, we

will propose profiles of what the likely stakeholder orientation might be toward the major

stakeholder groups using each of the three ethical approaches. Our goal is to

accentuate the moral management approach by contrasting it with the other two types.

Basically, there are five major stakeholder groups that are recognized as priorities by

most firms, across industry lines and in spite of size or location: owners (shareholders),

employees, customers, local communities, and the society-at-large. Although the

general ethical obligation to each of these groups is essentially identical (protect their

rights, treat them with respect and fairness), specific behaviors and orientations arise

because of the differing nature of the groups. In an attempt to flesh out the character

and salient features of the three ethical types and their stakeholder orientations, Figures

5 and 6 summarize the orientations these three types might assume with respect to four

of the major stakeholder groups. Because of space constraints and the general nature

of the society-at-large category, it has been omitted.

Figure 5 Three Moral Types and Orientation Toward Stakeholder Groups: Owners and Employees Type of Management Orientation Toward Owner/Shareholder Stakeholders

Immoral Management

Shareholders are minimally treated and given short shrift. Focus is on maximizing positions of executive groups- maximizing executive compensation, perks, benefits. Golden parachutes are more important than returns to shareholders. Managers maximize their positions without shareholders being made aware. Concealment from shareholders is the operating procedure. Self-interest of management group is the order of the day.

Amoral Management

No special thought is given to shareholders: they are there and must be minimally accommodated. Profit focus of the business is their reward. No thought is given to ethical consequences of decisions for any stakeholder group, including owners. Communication is limited to that required by law.

Moral Management

Shareholders' interest (short- and long-term) is a central factor. The best way to be ethical to shareholders is to treat all stakeholder claimants in a fair and ethical manner. To protect shareholders, an ethics committee of the board is created. Code of ethics is established. promulgated. and made a living document to protect shareholders' and others' interests.

Type of Management Orientation Toward Employee Stakeholders

Immoral Management

Employees are viewed as factors of production to be used, exploited, manipulated for gain of individual manager or company. No concern is shown for employees' needs/rights/expectations. Short-term focus. Coercive, controlling, alienating.

Amoral Management

Employees are treated as law requires. Attempts to motivate focus on increasing productivity rather than satisfying employees' growing maturity needs. Employees still seen as factors of production but remunerative approach used. Organization sees self-interest in treating employees with minimal respect. Organization structure, pay incentives, rewards all geared toward short- and medium-term productivity.

Moral Management

Employees are a human resource that must be treated with dignity and respect. Goal is to use a leadership style such as consultative/participative that will result in mutual confidence and trust. Commitment is a recurring theme. Employees' rights to due process, privacy, freedom of speech, and safety are maximally considered in all decisions. Management seeks out fair dealings with employees.

By carefully considering the described stakeholder orientations under each of the three

ethical types, a richer appreciation of the moral management approach should be

possible. Our goal here is to gain a fuller understanding of what it means to engage in

moral management and what this implies for interacting with stakeholders. To be sure,

there are other stakeholder groups to which moral management should be directed, but

again, space precludes their discussion here. This might include thinking of managers

and non-managers as distinct categories of employees and would also embrace such

groups as suppliers, competitors, special interest groups, government, and the media.

Though the concept of corporate social responsibility may from time to time be

supplanted by various other focuses such as social responsiveness, social

performance, public policy, ethics, or stakeholder management, an underlying challenge

for all is to define the kinds of responsibilities management and businesses have to the

constituency groups with which they transact and interact most frequently. The pyramid

of corporate social responsibility gives us a framework for understanding the evolving

nature of the firm’s economic, legal, ethical, and philanthropic performance. The

implementation of these responsibilities may vary depending upon the firm’s size,

management's philosophy, corporate strategy, industry characteristics, the state of the

economy, and other such mitigating conditions, but the four component parts provide

management with a skeletal outline of the nature and kinds of their CSR. In frank,

action-oriented terms, business is called upon to: be profitable, obey the law, be ethical,

and be a good corporate citizen.

Figure 6 Three Moral Types and Orientation Toward Stakeholder Groups: Customers and the Local Community Type of Management Orientation Toward Customer Stakeholders

Immoral Management

Customers are viewed as opportunities for personal or organizational gain. Ethical standards in dealing do not prevail; indeed, an active intent to cheat, deceive, and/or mislead is present. In all marketing decisions—advertising, pricing, packaging, distribution—customer is taken advantage of to the fullest extent.

Amoral Management

Management does not think through the ethical consequences of its decisions and actions. It simply makes decisions with profitability within the letter of the law as a guide. Management is not focused on what is fair from perspective of customer. Focus is on management’s rights. No consideration is given to ethical implications of interactions with customers.

Moral Management

Customer is viewed as equal partner in transaction. Customer brings needs/expectations to the exchange transaction and is treated fairly. Managerial focus is on giving customer fair value, full information, fair guarantee, and satisfaction. Customer rights are liberally interpreted and honored.

Type of Management Orientation Toward Local Community Stakeholders

Immoral Management

Exploits community to fullest extent; pollutes the environment. Plant or business closing take fullest advantage of community. Actively disregards community needs. Takes fullest advantage of community resources without giving anything in return. Violates zoning and other ordinances whenever it can for its own advantage.

Amoral Management

Does not take community or its resources into account in management decision making. Community factors are assumed to be irrelevant to business decisions. Community, like employees, is a factor of production. Legal considerations are followed, but nothing more. Deals minimally with community, its people, community activity, local government.

Moral Management

Sees vital community as a goal to be actively pursued. Seeks to be a leading citizen and to motivate others to do likewise. Gets actively involved and helps institutions that need help—schools, recreational groups, philanthropic groups. Leadership position in environment, education, culture/arts, volunteerism, and general community affairs. Firm engages in strategic philanthropy. Management sees community goals and company goals as mutually interdependent.

The stakeholder management perspective provides not only a language and way to

personalize relationships with names and faces, but also some useful conceptual and

analytical concepts for diagnosing, analyzing, and prioritizing an organization's

relationships and strategies. Effective organizations will progress beyond stakeholder

identification and question what opportunities and threats are posed by stakeholders;

what economic, legal, ethical, and philanthropic responsibilities they have; and what

strategies, actions or decisions should be pursued to most effectively address these

responsibilities. The stakeholder/responsibility matrix provides a template management

might use to organize its analysis and decision making.

Throughout the article we have been building toward the notion of an improved ethical

organizational climate as manifested by moral management. Moral management was

defined and described through a contrast with immoral and amoral management.

Because the business landscape is replete with immoral and amoral managers, moral

managers may sometimes be hard to find. Regardless, their characteristics have been

identified and, most important, their perspective or orientation towards the major

stakeholder groups has been profiled. These stakeholder orientation profiles give

managers a conceptual but practical touchstone for sorting out the different categories

or types of ethical (or not-so-ethical) behavior that may be found in business and other

organizations.

It has often been said that leadership by example is the most effective way to improve

business ethics. If that is true, moral management provides a model leadership

perspective or orientation that managers may wish to emulate. One great fear is that

managers may think they are providing ethical leadership just by rejecting immoral

management. However, amoral management, particularly the unintentional variety, may

unconsciously prevail if managers are not aware of what it is and of its dangers. At best,

amorality represents ethical neutrality, and this notion is not tenable in the society of the

1990s. The standard must be set high, and moral management provides the best

exemplar of what that lofty standard might embrace. Further, moral management, to be

fully appreciated, needs to be seen within the context of organization-stakeholder

relationships. It is toward this singular goal that our entire discussion has focused. If the

"good society" is to become a realization, such a high expectation only naturally

becomes the aspiration and preoccupation of management.

References

R. W. Ackerman and R.A. Bauer, Corporate Social Responsiveness (Reston, Va.: Reston Publishing Co, 1976).

A.B. Carroll, . A Three-Dimensional Conceptual Model of Corporate Social Performance,' Academy of Management Review, 4, 4 (1979): 497-505.

A.B. Carroll, "In Search of the Moral Manager," Business Horizons, March-April 1987, pp. 7-15.

Committee for Economic Development, Social Responsibilities of Business Corporations (New York: CED, 1971).

K. Davis, "Can Business Afford to Ignore its Social Responsibilities?" California Management Review. 2. 3 (1960): 70-76.

R. Eells and C. Walton, Conceptual Foundations of Business (Homewood, ill.: Richard D. Irwin. 1961).

"Good Timing, Charlie," Forbes. November 27, 1989. pp. 140-144.

W.C. Frederick, "From CSRI to CSR2: The Maturing of Business and Society Thought," University or Pittsburgh Working Paper No. 279, 1978.

M. Friedman. "The Social Responsibility of Business Is to Increase its Profits." New York Times. September 13 1970, pp. 122-126.

S.P. Sethi, "Dimensions of Corporate Social Responsibility," California Management Review, 17,3 (1975): 58-64.

Archie B. Carroll is Robert W. Scherer Professor of Management and Corporate Public Affairs at the College of Business Administration. University of Georgia. Athens.