Social Responsibility Ethics

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• Social Responsibility /Ethics
• Learning Outcomes
• To define ethics /social responsibility
• To review 'classical' and 'contemporary' view of
• business ethics
• To consider the arguments for and against social
• involvement of business
• To review business scenarios

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• Ethics is the discipline dealing with what is
  good and bad
• and with the moral duty and obligations. Ethical
• behaviour is that which conforms to accepted
  standards
• of conduct. Ethical reasoning involves sorting
  out the
• principles that help determine what is ethical
  when faced
• with an ethical dilemma. An ethical dilemma is a
• situation or problem facing an individual that
  involves
• complex and often conflicting principles of
  ethical
• behaviour.
• Bliosi, Wendy (2005) Management and
  Organisational Behaviour, pp.493
• McGraw Hill

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• Definitions
•  
• Business ethics is the study of how personal
  moral norms apply to the activities and goals of
  commercial enterprise. It is not a separate
  moral standard, but the study of how business
  context poses its own unique problems for the
  moral person who acts as an agent of this
  system.
•  
• Nash, Laura (1993) Good Intentions Aside,
  Harvard Business Scholl Press

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• 'What is the most important is that management
  realise that it
• must consider the impact of every business policy
  and business
• action upon society. It has to consider whether
  the action is
• likely to promote the public good, to advance the
  basic beliefs of
• our society, to contribute to its stability,
  strength and harmony.'
• Peter Drucker, The Practice Of Management 1955,
  p.342
• The success of managementhas greatly changed
• managements meaning. Its success has made
  management the
• general, the pervasive function, and the distinct
  organisation of
• our society of organisations. As such,
  management inevitably
• has become affected with the public interest.
  To work out
• what this means for management theory and
  management
• practice will constitute the management
  problems of the next
• fifty years.'
•  
• Peter Drucker, The Frontiers of Management 1986,
  pp.192-193

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• Major Influences on Business Practices

Source Samuel, Certo Peter (1991) Paul,
Strategic Management,pp.230, McGraw-Hill
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• The Classical View
• The classical view purports that business should
  not assume any
• social responsibility beyond maximising profit
  for the owners of
• the firm. Management are the employees of the
  stockholders, the
• holds, and have obligations only to them. The
  eminent economist
• Milton Friedman, a proponent of this view, argues
  that
• "There is one and only one social responsibility
  of business to
• use its resources and engage in activities
  designed to increase its
• profits so long as it stays within the rules of
  the game, which is to
• say, engages in open and free competition,
  without deception or
• fraudFew trends could so thoroughly undermine
  the very
• foundations of our free society as the acceptance
  by corporate
• officials of a social responsibility other than
  to make as much
• money for their stockholders as possible. This
  is a fundamentally
• subversive doctrine."

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• The Contemporary View
•  
• The contemporary view is that businesses, as
  important
• and influential members of society, are
  accountable in
• the maintenance and improvement of societys
  overall
• welfare. A fervent campaigner of corporate
  social
• responsibility, Keith Davis, has enlarged on this
  view. It
• can be summarised in terms of the following five
• propositions

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• Proposition 1 Social Responsibility arises from
• social power. This proposition is built on the
• premise that business has a significant amount of
  
• influence or power over such critical social
  issues
• as minority employment and environmental
• pollution. In essence, the collective action of
  all
• businesses determines the proportion of
• minorities employed and the prevailing condition
• of the environment. Thus, because business has
  power
• over society, society can and must hold business
• responsible for social conditions affected by the
  use of
• this power.

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• Proposition 2 Business shall operate as a two-
• way open system with open receipt of inputs from
• society and open disclosure of its operations to
  the
• public. Business must be willing to listen to
• societal representatives concerning what must
• be done to improve societal welfare. Davis
• suggests that continuing, honest, and open
• communications between business and societal
• representatives must exist if the overall welfare
  
• of society is to be maintained or improved.

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• Proposition 3 Both the social costs and the
• social benefits of an activity, product, or
  service
• shall be thoroughly calculated and considered in
• order to decide whether or not to proceed with
  it.
• Technical feasibility and economic profitability
• are not the only factors that should influence
• business decision-making. Business should also
• consider both the long and short-term societal
• consequences of all business activities before
• such activities are undertaken.

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• Proposition 4 Social costs related to each
• activity, product, or service shall be passed on
  to
• the consumer. Business cannot be expected to
• finance all activities that are economically
• disadvantageous but socially advantageous. The
• cost of maintaining socially desirable activities
  
• within business should be passed on to
• consumers through higher prices for the goods
• or services that are directly related to those
• socially desirable activities.

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• Proposition 5 As citizens, business institutions
  
• have the responsibility to become involved in
• certain social problems that are outside their
• normal areas of operation. If a business
• possesses the expertise to solve a social problem
  
• with which it may not be directly associated. It
• should be held responsible for helping society
• solve the problem. Business will eventually
• receive increased profits from a generally
  improved
• society, so business should share the
  responsibility of
• all citizens to improve that society.

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Doing well by doing good
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• Four main reasons for considering the ethical
  conduct
• of organisations
• To some extent, inescapable, e.g. legal limits on
  conduct
• Some areas may be important e.g. green issues
• Part of the professionalisation of business, e.g.
  treatment of workers
• Self-interest, e.g. bad publicity as a result of
  incorrect behaviour

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• Three prime considerations in developing
• business ethics
• extent of ethical considerations
• their cost and
• the recipient of the responsibility
• Numerous differences between organisations over
  what should be covered under ethics, reflecting
  fundamentally different approaches to doing
  business.

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• Arguments for and against Social
• Involvement of Business
• Arguments for social involvement of business
•  
• Public needs have changes, leading to changed
  expectations.
• Business, it is suggested, received its charter
  from society and
• consequently has to respond to the needs of
  society.
• 2. The creation of a better social environment
  benefits both
• society and business. Society gains through
  better
• neighbourhoods and employment opportunities
  business
• benefits from a better community, since the
  community is the
• source of its work force and the consumer of its
  products and
• services.

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• 3. Social involvement discourages additional
• government regulation and intervention. The
• result is greater freedom and more flexibility in
  
• decision making for business.
• 4. Business has a great deal of power, which, it
  is
• reasoned, should be accompanied by an equal
  amount
• of responsibility.
• 5. Modern society is an interdependent system,
  and the
• internal activities of the enterprise have an
  impact on
• the external environment.
• 6. Social involvement may be in the interest of
• stockholders.

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• Arguments against social involvement of
• business
• The primary task of business is to maximise
  profit
• by focusing strictly on economic activities.
  Social
• involvement could reduce economic efficiency.
• 2. In the final analysis, society must pay for
  the social
• involvement of business through higher prices.
  Social
• involvement would create excessive costs for
  business,
• which cannot commit its resources to social
  action.

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• 3. Business has enough power, and additional
• social involvement would further increase its
• power and influence.
• 4. Business people lack the social skills to deal
  
• with the problems of society. Their training and
  
• experience is with economical matters and their
• skills may not be pertinent to social problems.
• 5.There is a lack of accountability of business
  to
• society. Unless accountability can be
• established, business should not get involved.

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• Concern for Consumers
•      Are products safe and well designed?
•      Are products fairly priced?
•      Are advertisements clear and not deceptive?
•      Are customers treated fairly by salespeople?
• Are credit terms clear?
•     Is adequate product information available?

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• Concern for Employees
• Are employees paid a fair wage?
• Are employees provided a safe work
  environment?
• Are workers hired, promoted, and treated
  fairly without regard to sex, race, colour or
  creed?
• Are employees given special training and
  educational opportunities?
• Are handicapped people given employment
  opportunities?
• Does the business help rehabilitate
  employees with physical, mental, or emotional
  problems?

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• Concern for the Environment
• Is the environment adequately protected
  from unclean air and water, excessive noise, and
  other types of pollution?
• Are products and packages biodegradable or
  recyclable?
• Are any by-products that pose a safety hazard
  to society (such as nuclear waste or commercial
  solvents) carefully handled and properly treated
  or disposed of?

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• Concern for Society in general
• Does the firm support minority and
  community enterprises by purchasing from them or
  subcontracting to them?
• Are donations made to help develop and
  support education, art, health, and community
  development programs?
• Is the social impact of plant locations or
  relocations considered by the managers who make
  those decisions?
• Is appropriate information concerning
  business operations made public?

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• Social Responsibility
• Kohlbergs Levels
• of
• Moral Development
• Preconventional Level
• Concern for self
• Conventional Level
• Consideration of laws and norms
• Principled Level
• Adherence to internal moral code

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Corporate GovernanceDefinedRefers to the
relationship among the board of directors, top
management, and shareholders in determining the
direction and performance of the corporation.
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Corporate Governance
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Corporate Governance

• Setting corporate strategy, overall direction,
• mission or vision
• Hiring and firing the CEO and top management
• Controlling, monitoring, or supervising
• top management
• Reviewing and approving the use of resources
• Caring for shareholder interests

Board of Directors
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• Corporate Governance
• Corporate Governance relates to two main areas
• Selection and conduct of the senior officers of
  the organisation
• Relationships of the senior officers with owners,
  employees and other stakeholders of the
  organisation
• Importance relates to power given to senior
  officers to run the organisation
• Various checks on such power
• Information relayed to stakeholders
• Appointment of non-executive directors
• Corporate Governance is more a matter of
  principles of conduct than a series of simple
  rules

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• Role of the Board in strategic
• management
• Monitor
• Developments inside and outside the corporation
• Evaluate Influence
• Review proposals, advise, provide suggestions and
  alternatives
• Initiate Determine
• Delineate corporations mission and specify
  strategic options

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Board of Directors Continuum
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• At Xerox, CEO Anne Mulcahy says that corporate
• values helped save Xerox during the worst crisis
  
• in our history, and that living our values has
  
• been one of Xeroxs five performance objectives
• for the past several years. These values which
• include customer satisfaction, quality and
• excellence, premium return on assets, use of
• technology for market leadership, valuing
• employees, and corporate citizenship are far
  from
• words on a piece of paper. They are accompanied
  by
• specific objectives and hard measures, adds Ms.
  Mulcahy.

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Social Responsibility

• Carrolls Four Responsibilities
• Economic
• Legal
• Ethical
• Discretionary

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Responsibilities of Business
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• References
• Bliosi, Wendy (2005) Management and
  Organisational Behaviour, pp.493
• McGraw Hill
• Nash, Laura (1993) Good Intentions Aside,
  Harvard Business Scholl Press
• Peter Drucker, The Practice Of Management 1955,
  p.342
• Peter Drucker, The Frontiers of Management 1986,
  pp.192-193
• Samuel, Certo Peter (1991) Paul, Strategic
  Management,pp.230, McGraw-Hill
• Doing well by doing goodApr 22nd 2000From The
  Economist print edition
• Fliess, Barbara (2001) Better business
  behaviour,The Observer(OECD)October 26
• By KEN BELSON,KEN (2005) WorldCom's Audacious
  Failure and Its Toll on an Industry, January
  18,WWW.NYTIMES.COM
• MORGENSON,GRETCHEN (2005) Ebbers Set to Shed His
  AssetsJuly 1, www.nytimes.com
• Kocurek,Paul, Burger, Christian, and
  Birchard,Bill (Spring 2003) Corporate Governance
  Hard Facts about Soft
• Behaviors, http//www.strategy-business.com/press/
  article/authors 
• Journals
• Long Range Planning Volume 32, Issue 2, Pages
  151-281 (April 1999)
• 1. The importance of leadership in shaping
  business values, Pages 166-172 Joanne B. Ciulla
• 2. Sources of corporate values, Pages 173-178
  Simon Webley
•  3.Gaining the ethical edge procedures for
  delivering values-driven management,Pages 179-189
  Dawn-Marie Driscoll and W.
• Michael Hoffman