BA 385 Business Environment

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BA 385Business Environment

• Week 1 (part 2)
• Social Responsibility Framework

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For what is business responsible?
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95 of Respondents Agree

• U.S. corporations should
• Have more than one purpose
• Provide for their workers and the communities in
  which they operate
• Sometimes sacrifice some profit for the sake of
  making things better for their workers and
  communities. Source "How Business Rates By
  the Numbers, Business Week, Sept. 11, 2000, pp.
  148-149.

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Social Responsibility Defined

• Economic
• Provides a return on investment for owners.
• Legal
• Obeys the law.
• Ethical
• Acts in a just, fair, and correct manner.
• Philanthropic
• Promotes human welfare and good will.

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Assumes a Strategic Focus

• Requires a formal commitment from the top
• Requires action and measureable results.
• Depends on collaboration and coordination across
  the business.
• Large companies often create specific positions
  and departments to support programs.

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Stakeholder Orientation

• Those constituents who have a stake in or claim
  on some aspect of a companys products,
  operations, markets, industry and/or outcomes.
• All stakeholders are important to companies that
  operate with a stakeholder orientation.

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Who are the key stakeholders of the organization?

• Customers
• Employees
• Investors
• Stockholders
• Suppliers
• Government
• Communities

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Quote

• "The truth is, we can't afford not to become
  involved in social problems. It has got to be a
  cost of doing business -- and it will be costly
  -- so that your community will be worth doing
  business in and living in."
• -- Elisha Gray II (former head of Whirlpool Corp.)

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Evolution of Social Responsibility

• 1940s
• Economic dominance of corporations
• Total autonomy of top management
• 1950s 60s
• Management less restrained internally
• Organizational charitable giving expanded
• Laws are passed that require protection of the
  natural environment, safer products, promotion of
  equity, and supporting workplace diversity.
• 1970s
• World competition, bankruptcies, mergers and
  acquisitions

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Evolution of Social Responsibility

• 1980s
• Flatter organizations (downsizing)
• More business scandals
• Empowerment of lower-level employees
• Focus on profitability and economies of scale
• 1990s
• Less employee loyalty
• Increased job hopping use of temps
• Greater interest in ethics and social
  responsibility
• 2000s
• Calls for a stronger balance between the global
  market economy and social responsibility

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Global Natureof Social Responsibility

• By whose standards?
• Host country?
• Home country?
• Outside organizations?
• The U.S.?

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Fig. 1.6 Social Responsibility Improved
Performance
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Social Responsibility Builds Trust

• Trust is the glue that holds organizational
  relationships together.
• Most workers feel they can be trusted more than
  they can trust others.
• An Ethics Resource Center study shows that 93 of
  employees who say trust is frequently evident in
  their organization report satisfaction with their
  employer.

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Social Responsibility Strengthens Employee
Commitment

• A Companys dedication to employees ensures they
  will take care of the organization.
• Employees perceptions are affected by
• Safe working conditions, competitive salaries,
  and contractual fulfillment.
• Social programs, including work-family
  relationships, stock ownership, community service.

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Social Responsibility Improves Customer
Satisfaction

• Focus on customer satisfaction strengthens trust.
  This is especially key in service organizations.
• 70 of consumers in a Cone/Roper poll indicated
  they would switch to brands associated with a
  good cause if price and quality were equal.

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Otherwise

• 75 of consumers say they would avoid or refuse
  to buy from certain businesses.
• Consumers may avoid products from companies that
  treat their employees unfairly.

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Social Responsibility Contributes to Investor
Loyalty

• Investor relationships require dependability,
  trust, and commitment.
• Shareholders are concerned about ethics, social
  responsibility, and corporate reputation.
• Half of investors sell their stock within one
  year.

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Social Responsibility Enhances Economic
Performance

• Economic well-being is promoted by
• Trust and a sense of community.
• Rigor in the ethical system.
• The exercise of authority within the society.
• Positive attitudes about work, innovation,
  savings, and profits.

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Fig. 1.7 Social Responsibility Model
Source Adapted from Charles J. Fobrun, "Three
Pillars of Corporate Citizenship," in Corporate
Global Citizenship, ed. Noel M. Tichy, Andrew R.
McGill, and Lynda St. Calir (San Francisco New
Lexington Press, 1997) pp. 27-42.
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Which of these companies is the most socially
responsible?

• Procter Gamble
• Microsoft
• Starbucks
• Home Depot
• Pfizer

• Avon
• Smuckers
• McDonalds
• Coca Cola
• Wal-Mart