Social Responsibility & Ethics-CH-4

8/3/2019 Social Responsibility & Ethics-CH-4

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Social ResponsibilitySocial Responsibility

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EthicsEthics


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Prof. Rajni Patel. GHPIBM 2

What is Social Responsibility?What is Social Responsibility?

Managers responsiveness to public consensus Managers responsiveness to public consensus--AdolphAdolph BerleBerle

Keith Davis SR to two types of Business obligations viz. (a)Keith Davis SR to two types of Business obligations viz. (a)sociosocio--economiceconomic obligation and (b)obligation and (b)sociosocio--humanhuman obligationobligation SocioSocio--economiceconomic obligations to see that the economic consequences of itsobligations to see that the economic consequences of its

action do not adversely affect public welfareaction do not adversely affect public welfare

SocioSocio--humanhuman obligation is to nurture and develop human values (morale,obligation is to nurture and develop human values (morale,cooperation, motivation, and selfcooperation, motivation, and self-- realization in work.)realization in work.)

A business firms obligation, beyond that required by laws andA business firms obligation, beyond that required by laws andeconomics, to pursue long term goals.economics, to pursue long term goals.

Different views on Social Responsibility:Different views on Social Responsibility: Communist viewCommunist view-- Imposition of SR on business through theImposition of SR on business through the

instrumentality of stateinstrumentality of state

Capitalist ViewCapitalist View an uncontrolled right to make money free from allan uncontrolled right to make money free from allsorts of SR.sorts of SR.

Pragmatic ViewPragmatic View-- it acknowledges the importance of profit butit acknowledges the importance of profit butsimultaneously stresses the need pro social responsibility.simultaneously stresses the need pro social responsibility.

Trusteeship ViewTrusteeship View-- enjoy thy wealth by renouncing itenjoy thy wealth by renouncing iti.e. earn youri.e. earn yourcrorescrores by all means but understand that your wealth is not yours.by all means but understand that your wealth is not yours.


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Prof. Rajni Patel. GHPIBM

EvolvingEvolving ViewpointsViewpoints

3

CSR mandates that the corporation has not onlyCSR mandates that the corporation has not only

economic and legal obligations, but also certaineconomic and legal obligations, but also certain

responsibilities to society that extend beyond theseresponsibilities to society that extend beyond these

obligations (McGuire)obligations (McGuire)

CSR relates primarily to achieving outcomes fromCSR relates primarily to achieving outcomes fromorganizational decisions concerning specific issues ororganizational decisions concerning specific issues or

problems, which by some normative standard haveproblems, which by some normative standard have

beneficial rather than adverse effects upon pertinentbeneficial rather than adverse effects upon pertinent

corporate stakeholders. The normative correctness ofcorporate stakeholders. The normative correctness ofthe products of corporate action have been the mainthe products of corporate action have been the main

focus of CSR (Epstein)focus of CSR (Epstein)


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Pyramid of SRPyramid of SR


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FourFour--Part model of Corporate Social ResponsibilityPart model of Corporate Social Responsibility

Type of ResponsibilityType of Responsibility SocietalSocietal

ExpectationExpectation ExamplesExamples

PhilanthropicPhilanthropic

EthicalEthical

LegalLegal

EconomicEconomic

DESIRED ofDESIRED of

business bybusiness by

societysociety

EXPECTED ofEXPECTED of

business bybusiness bysocietysociety

REQUIRED ofREQUIRED of


societysociety

REQUIRED ofREQUIRED of


societysociety

Corporate contributions.Corporate contributions.

Programs supporting community/education.Programs supporting community/education.

Community involvement/improvement; volunteerismCommunity involvement/improvement; volunteerism

Avoid questionable practices.Avoid questionable practices.

Respond to spirit of laws.Respond to spirit of laws.

Assume law is a floorAssume law is a floor behaviorbehavior; operate above minimum; operate above minimumrequired by law.required by law.

Assert ethical leadership.Assert ethical leadership.

Obey all laws; adhere to regulations.Obey all laws; adhere to regulations.

Environmental laws.Environmental laws.

Consumer laws.Consumer laws.

Laws affecting all employees.Laws affecting all employees.

Obey Foreign Corrupt Practices Act.Obey Foreign Corrupt Practices Act.

Fulfil all contractual obligations.Fulfil all contractual obligations.

Be profitable.Be profitable.

Maximise sales revenue.Maximise sales revenue.

Minimize costs (administrative, production, marketingMinimize costs (administrative, production, marketing,,

distributiondistribution).).

Make wise strategic decisions.Make wise strategic decisions.

Be attentive to dividend policyBe attentive to dividend policy

Source: Carroll (1979))Source: Carroll (1979))


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Social Obligation

Social

Responsiveness

Social

Responsibility


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Social responsibility vs. Social ResponsivenessSocial responsibility vs. Social Responsiveness

SocialSocial

ResponsibilityResponsibility

SocialSocial

ResponsivenessResponsiveness

Major ConsiderationMajor Consideration EthicalEthical PragmaticPragmatic

FocusFocus EndsEnds MeansMeans

EmphasisEmphasis ObligationObligation ResponsesResponses

Decision FrameworkDecision Framework Long termLong term Medium &Medium &

Short TermShort Term


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Social Responsibility of BusinessSocial Responsibility of Business

Towards Different Groups (Stakeholders)Towards Different Groups (Stakeholders)

Shareholders

Employees

Consumers

Creditors

Suppliers

Government

Society in General


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Concept of Social ResponsibilityConcept of Social Responsibility

Andrew Carniges published a bookThe

Gospel of wealth.

His view on social responsibility was based ontwo principles:

Charity Principle.

Stewardship Principle.


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Charity PrincipleCharity Principle

Charity principle required the more fortunate

members of society to assist its less fortunate

members including the unemployed, the

handicapped, the sick & elder.

e.g. Helping to victims of natural calamities


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Stewardship PrincipleStewardship Principle

StewardshipStewardship PrinciplePrinciple requiredrequired thatthat

BusinessBusiness && wealthywealthy individualsindividuals toto viewview

themselvesthemselves asas stewards,stewards, oror caretakers,caretakers,holdingholding theirtheir propertyproperty inin trusttrust forfor thethe

benefitbenefit ofof thethe wholewhole societysociety..


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Milton Friedmans ArgumentMilton Friedmans Argument

In the 1970s and 1980s , the convergence of a numberIn the 1970s and 1980s , the convergence of a numbereconomic forces led some scholars to reeconomic forces led some scholars to re--examine the notionexamine the notionof corporate social responsibility.of corporate social responsibility.

oo There is one and only one SR of business : to use itsThere is one and only one SR of business : to use itsresources and energy in activities designed to increase itsresources and energy in activities designed to increase its

profits so long as it stays within the rules of gameprofits so long as it stays within the rules of game[and] engages in open and free competition, with out[and] engages in open and free competition, with outdeception and frauddeception and fraud

oo He also insists that managers who devotes corporateHe also insists that managers who devotes corporateresources to pursue personal and perhaps misguided ,resources to pursue personal and perhaps misguided ,

notion of the social good unfairly tax their ownnotion of the social good unfairly tax their ownshareholders, employees and customers.shareholders, employees and customers.

oo Business should produce goods and services efficientlyBusiness should produce goods and services efficientlyand leave the solution of social problems to concernedand leave the solution of social problems to concernedindividuals and govt. agenciesindividuals and govt. agencies


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Concept of Enlightened Self InterestConcept of Enlightened Self Interest

Keith Davis has Said that there isKeith Davis has Said that there is an iron law ofan iron law of

responsibility which states that in the long runresponsibility which states that in the long run

those who do not use power in a manner thatthose who do not use power in a manner that

society considers responsible will tend to lose it.society considers responsible will tend to lose it.So it may be that it is in the enlightened selfSo it may be that it is in the enlightened self--

interest of organizations to be socially responsibleinterest of organizations to be socially responsible--

or at least responsive to social forces.or at least responsive to social forces.


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Corporate Social ResponsivenessCorporate Social Responsiveness

Robert Ackeran was among the first to suggest responsivenessRobert Ackeran was among the first to suggest responsiveness

not responsibility should be the goal of corporate socialnot responsibility should be the goal of corporate socialendeavorendeavor

How organizations become aware of and then respond toHow organizations become aware of and then respond to

social issuessocial issues--takes two approaches.takes two approaches.

oo On one hand the theory deals with how individual companiesOn one hand the theory deals with how individual companies

respond to social issues, and on other hand it deals with therespond to social issues, and on other hand it deals with the

forces that determine the social issues to which businessesforces that determine the social issues to which businesses

should respond.should respond.

oo These two approaches can be combined to classify the ways inThese two approaches can be combined to classify the ways in

which corporations can and do respond to specific social issueswhich corporations can and do respond to specific social issuesoo Corporate responses to the social issues has life cycle, startingCorporate responses to the social issues has life cycle, starting

with recognition of problem, continuing through study of thewith recognition of problem, continuing through study of the

problem and consideration of ways to deal with it.problem and consideration of ways to deal with it.

oo Implementation often comes late and at some point a companyImplementation often comes late and at some point a company

may lose the initiative as govt. or public opinion forces it to act.may lose the initiative as govt. or public opinion forces it to act.


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Corporate Social PerformanceCorporate Social Performance In 1979, ArchieIn 1979, Archie CarroliCarroli combined the philosophies ideas ofcombined the philosophies ideas of

social responsibility and social responsiveness into a singlesocial responsibility and social responsiveness into a singletheory of corporate social action called corporate socialtheory of corporate social action called corporate socialperformance.performance.

The arena of SR debates is shaped by economic, legal andThe arena of SR debates is shaped by economic, legal andethical principlesethical principles

We support free enterprise (economic principle), the publicsWe support free enterprise (economic principle), the publicsright to a safe work place (a legal principle), and equalright to a safe work place (a legal principle), and equalemployment opportunity (an ethical principle). Together theseemployment opportunity (an ethical principle). Together theseprinciples create a social contract between business andprinciples create a social contract between business andsociety that permits companies to act as moral agencies.society that permits companies to act as moral agencies.

Their decisions and policies can reflect one of four stancesTheir decisions and policies can reflect one of four stances

oo ReactiveReactive-- respond to a social issue only after it has challengedrespond to a social issue only after it has challengedcompanys goals.companys goals.

oo DefensiveDefensive-- acts to ward off a challenge.acts to ward off a challenge.

oo AccommodativeAccommodative-- brings itself into line with govt. requirements andbrings itself into line with govt. requirements andpublic opinion.public opinion.

oo ProactiveProactive-- anticipates demands that have not yet been made.anticipates demands that have not yet been made.


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EthicsEthics

What is Ethics?What is Ethics?

oo It is a study of how our decisions affect otherIt is a study of how our decisions affect other

people.people.

oo It is the study of people's rights and duties, theIt is the study of people's rights and duties, the

moral rules that people apply in makingmoral rules that people apply in making

decisions, and nature of the relationships amongdecisions, and nature of the relationships among

people.people.

oo Pattern of thinking of a person influence by thePattern of thinking of a person influence by the

moral principle instill in him.moral principle instill in him.


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Four Levels of EthicsFour Levels of Ethics

LEVEL 1

Society

LEVEL 2

Stakeholders

LEVEL 3

Internal Policy

LEVEL 4

The Individual


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Levels of Ethical Question in BusinessLevels of Ethical Question in Business

SocietalSocietal

At this level we ask questions about the basic institutions in a societyAt this level we ask questions about the basic institutions in a society

Gross inequalities of wealth, status and powerGross inequalities of wealth, status and power

StakeholderStakeholder

We ask questions about how a company should deal with the externalWe ask questions about how a company should deal with the external

groups affected by its decisions, as well as how the stakeholders shouldgroups affected by its decisions, as well as how the stakeholders shoulddeal with the companydeal with the company

Internal PolicyInternal Policy

Here we ask questions about the nature of a companys relations withHere we ask questions about the nature of a companys relations with

its employees.its employees.

PersonalPersonal Here we ask questions about how people should treat one anotherHere we ask questions about how people should treat one another

within an organization. Should we be honest with one another,within an organization. Should we be honest with one another,

whatever the consequences?whatever the consequences?


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The Tools of EthicsThe Tools of Ethics ValuesValues

Values are relatively permanent desires that seem toValues are relatively permanent desires that seem tobe good in themselves, like peace truth, goodwillbe good in themselves, like peace truth, goodwill

Rights and DutiesRights and Duties

Right is a claim that entitles a person the room inRight is a claim that entitles a person the room inwhich to take actionwhich to take action-- a sphere of autonomya sphere of autonomy

A duty is an obligation to take specific steps and toA duty is an obligation to take specific steps and toobey the law in other respects.obey the law in other respects.

Moral RulesMoral Rules

It guide us through situations where competingIt guide us through situations where competinginterests collide.interests collide.

Human RelationshipsHuman Relationships

Every human being is connected to others in a web ofEvery human being is connected to others in a web ofrelationships. These relationships exist because werelationships. These relationships exist because weneed one another for mutual support and toneed one another for mutual support and to

accomplish our goals.accomplish our goals.


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Common MoralityCommon Morality

Common morality is the body of moral rules governingCommon morality is the body of moral rules governing

ordinary ethical problems. Some basic principles ofordinary ethical problems. Some basic principles ofcommon morality are..common morality are..

Promise KeepingPromise Keeping

doing what you say, acceptdoing what you say, accept

NonNon--malevolencemalevolence

Have good feelings for others.Have good feelings for others.

to avoid violence in settling disputesto avoid violence in settling disputes

Mutual AidMutual Aid

Help each otherHelp each other

Respect for personsRespect for persons Regard other people as ends in themselves, not as means to ourRegard other people as ends in themselves, not as means to our

own endsown ends

Respect for propertyRespect for property

Should get consent of others before using their property.Should get consent of others before using their property.


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Applying EthicsApplying Ethics

Institutionalizing EthicsInstitutionalizing Ethicsoo Establishing rules that do not conflict commonEstablishing rules that do not conflict common

moralitymorality

oo Create code of ethics and adhere to them.Create code of ethics and adhere to them.

oo Ways of instutionalizing ethical policy areWays of instutionalizing ethical policy are Corporate code of conductCorporate code of conduct

Ethics committeesEthics committees

Ombudsman officesOmbudsman offices

Judicial boardsJudicial boards

Ethics training programmes andEthics training programmes and Social auditsSocial audits


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Ethical challengesEthical challenges

The challenges of RelativismThe challenges of Relativism

Moral RelativismMoral Relativism The idea that we can't decide matter of right and wrong,The idea that we can't decide matter of right and wrong,

good & evil in any rational way.good & evil in any rational way.

Nave RelativismNave Relativism The idea that all human being are themselves the standard byThe idea that all human being are themselves the standard by

which their action should be judgedwhich their action should be judged

Cultural RelativismCultural Relativism The idea that morality is relative to particular culture, societyThe idea that morality is relative to particular culture, society

or communityor community..


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Social Responsibility & Ethics-CH-4