Social Responsibilities

1
Social Responsibilities

• In recent years firms have been held more
  accountable for the impact of their activities on
  society. This has arisen due to pressure from
  consumers, investors, media and employees (i.e.
  the firms stakeholders).
• In the past what the firm made was the priority.
  Now people wish to know how, where and what does
  the firm do for society as a whole.
• As a result managers must consider many issues
• Their impact on the local community
• Their treatment of employees
• Where supplies come from and how they are
  produced
• Their impact on the environment.
• i.e. they are now asked to take into account
  their stakeholders concerns not just their
  shareholders.
• Q What factors determine whether a firm decides
  to accept its social responsibilities?
• Possible Answers
• Wealth of country
• Importance people place on this aspect of
  production
• Is it a USP for the firm?
• Size of firm
• Effects of bad publicity
• Pressure groups
• View of managers
• Issues concerning society See p117-8 External
  Influences (Gillespie).

2
Social Audits

• Definition An independent assessment of the
  impact of a firms activities on society.
• A social audit is not a legal requirement (yet!)
  but it is seen as valuable for firms as it allows
  them to take action before its too late.
• WHY DO IT?
• Genuine concern by owners
• Good PR used by righteous- body shop, and
  sinners- BP, ICI
• Protect firm against legal action
• Attract employees, investors, customers and
  suppliers.
• But it shouldnt just be done as a cosmetic
  exercise (this will create more problems than it
  solves by highlighting an issue without resolving
  it). Therefore action and resources are needed.

3
Ethics

• This concerns decisions about what is right or
  wrong. For example
• Should a firm pay suppliers on time or delay to
  earn interest for owners?
• Should a firm relocate to low wage economies
  overseas or create jobs domestically?
• Should firms pay what they can get away with or
  what it can actually afford?
• Ethical issues are never clear cut, for example
  As a tobacco supplier, you know your product can
  kill, but if you close down, thousands will lose
  their jobs and investors lose their investments.
  You pay taxes, your product is legal. Is it wrong
  to try and sell your product?
• Q Is it right to produce and sell genetically
  modified crops?
• NO NEED FOR ETHICS?
• Some say managers dont need to consider the
  concept of business ethics because in maximising
  profits firms will adopt ethical policies anyway
  as, otherwise, it will lose customers and sales.
• BUT if consumers are happy to benefit from the
  lower prices resulting from non-ethical
  behaviour, this results in the market mechanism
  above failing.

4
Ethics or P.R.?

• Cynics argue firms only change their behaviour
  as a P.R. exercise to win over customers,
  investors and employees.
• Some feel managers genuinely want their firms to
  set an example and be better members of society.
• The decision to change may be influenced by the
  positive impact it will have on the firm but this
  doesnt mean it is purely motivated by a cynical
  desire to avoid bad media attention.
• The sincerity of management can be judged over
  the long run willingness to devote resources.
• CULTURE vs. ETHICS
• Culture varies from firm to firm and even
  department to department. The type of culture
  within a firm can lead to unethical behaviour.
  For example
• Do we tell customers the whole truth or what
  they need to know?
• If the boss keeps saying the end justifies the
  means, the employees will soon believe it
• If the boss insists on increased sales no matter
  what, then employees will react
• Increased expenses claims / sickys- everyone
  else does it!