© Prentice Hall, Modern Management 9 th edition.

© Prentice Hall,  Objectives An understanding of the term corporate social responsibility An appreciation of the arguments both for and against the assumption of social responsibilities by business Useful strategies for increasing the social responsiveness of an organization Insights into the planning, organizing, influencing, and controlling of social responsibility activities A practical plan for how society can help business meet its social obligations An understanding of the relationship between ethics and management An understanding of how ethics can be incorporated into management practice.

© Prentice Hall, F UNDAMENTALS O F S OCIAL R ESPONSIBILITY The Davis Model of Corporate Social Responsibility Responsibility arises from power Operate business as a two-way open system Calculate and consider costs and benefits Costs passed on to the consumer Responsibility to become involved.

© Prentice Hall, F UNDAMENTALS O F S OCIAL R ESPONSIBILITY Areas of Corporate Social Responsibility Most publicized: Urban affairs Consumer affairs Environmental affairs Employment practices affairs.

© Prentice Hall, F UNDAMENTALS O F S OCIAL R ESPONSIBILITY Varying Opinions on Social Responsibility Arguments For Business Performing Social Responsibility Activities Arguments Against Business Performing Social Responsibility Activities.

© Prentice Hall, F UNDAMENTALS O F S OCIAL R ESPONSIBILITY Conclusions About the Performance of Social Responsibility Activities by Business Performing Required Social Responsibility Activities Voluntarily Performing Social Responsibility Activities Communicating the Degree of Social Responsibility Involvement.

© Prentice Hall, F UNDAMENTALS O F S OCIAL R ESPONSIBILITY Table 3.1 Primary Functions of Several Federal Agencies That Enforce Social Responsibility Legislation Federal Agency Primary Agency FunctionsPrimary Agency Functions Equal Employment Opportunity CommissionInvestigates and conciliates employment discrimination complaints that are based on race, sex, or creed Office of Federal Contract Compliance ProgramsEnsures that employers holding federal contracts grant equal employment opportunity to people regardless of their race or sex Environmental Protection AgencyFormulates and enforces environmental standards in such areas as water, air, and noise pollution Consumer Product Safety CommissionStrives to reduce consumer misunderstanding of manufacturers’ product design, labeling, and so on, by promoting clarity of these messages Occupational Safety and Health AdministrationRegulates safety and health conditions in nongovernment workplaces National Highway Traffic Safety AdministrationAttempts to reduce traffic accidents through the regulation of transportation-related manufacturers and products Mining Enforcement and Safety AdministrationAttempts to improve safety conditions for mine workers by enforcing all mine safety and equipment standards.

© Prentice Hall, F UNDAMENTALS O F S OCIAL R ESPONSIBILITY Table 3.2 Outcomes of Social Responsibility Involvement Expected by Executives and the Percent Who Expected Them Expected OutcomesPercent of Executives Expecting Them Positive Outcomes Enhanced corporate reputation and goodwill97.4 Strengthening of the social system in which the corporation functions89.0 Strengthening of the economic system in which the corporation functions74.3 Greater job satisfaction among all employees72.3 Avoidance of government regulation63.7 Greater job satisfaction among executives62.8 Increased chances for survival of the firm60.7 Ability to attract better managerial talent55.5 Increased long-term profitability52.9 Strengthening of the pluralistic nature of American society40.3 Maintaining or gaining customers38.2 Investor preference for socially responsible firms36.6 Increased short-term profitability15.2 Negative Outcomes Decreased short-term profitability59.7 Conflict of economic or financial and social goals53.9 Increased prices for consumers41.4 Conflict in criteria for assessing managerial performance27.2 Disaffection of stockholders24.1 Decreased productivity18.8 Decreased long-term profitability13.1 Increased government regulation11.0 Weakening of the economic system in which the corporation functions7.9 Weakening of the social system in which the corporation functions3.7.

© Prentice Hall, S OCIAL R ESPONSIVENESS Determining If a Social Responsibility Exists Stakeholders Social Responsiveness and Decision-Making.

© Prentice Hall, S OCIAL R ESPONSIVENESS Table 3.3 Stakeholders of a Typical Modern Organization and Examples of Social Obligations Managers Owe to Them StakeholderSocial Obligations Owed Stockholders/owners of the organizationTo increase the value of the organization Suppliers of materialsTo deal with them fairly Banks and other lendersTo repay debts Government agenciesTo abide by laws Employees and unionsTo provide safe working environment and to negotiate fairly with union representatives ConsumersTo provide safe products CompetitorsTo compete fairly and to refrain from restraints of trade Local communities and society at largeTo avoid business practices that harm the environment.

© Prentice Hall, S OCIAL R ESPONSIVENESS Figure 3.1 Flowchart of social responsibility decision making that generally will enhance the social responsiveness of an organization No action Consider Undertake 1.Does a social responsibility really exist in this case? 2.Does the firm have a right to undertake this action? 3.Does an assessment of all interests indicate that the action is desirable? 4.Do benefits outweigh costs? 4A.Can subcontracting or other means reduce the cost to a net beneficial level? 5.Could this action be better handled by other parties who are willing to undertake the task? 6.Can we bear the cost of this action? 7.Do we possess the managerial competence to do the job? 7A.Can we acquire needed competence through training or recruitment? 7B.Can we subcontract the activity to parties that possess the required competence?.

© Prentice Hall, S OCIAL R ESPONSIVENESS Approaches to Meeting Social Responsibility Lipson’s approach does the following: Incorporates social goals into annual planning process Seeks comparative industry norms for social programs Presents reports on social responsibility progress Experiments with approaches for measuring social performance Attempts to measure the cost and return of social programs S. Prakash Sethi’s management approaches: Social obligation Social responsibility Social responsiveness approach.

© Prentice Hall, S OCIAL R ESPONSIBILITY A CTIVITIES A ND M ANAGEMENT F UNCTIONS Planning Social Responsibility Activities The Overall Planning Process Converting Organizational Policies on Social Responsibility into Action Phase 1: Recognition by top management of social obligation Phase 2: Involves staff personnel as well as top management Phase 3: Obtain commitment and create realistic expectations Organizing Social Responsibility Activities.

© Prentice Hall, S OCIAL R ESPONSIBILITY A CTIVITIES A ND M ANAGEMENT F UNCTIONS Figure 3.2 Integration of social responsibility activities and planning activities ENVIRONMENTAL FORECASTS Social Economic Political Technological Result in Long-Run Plans Result in Short-Run Plans Result in Management Action FEEDBACK.

© Prentice Hall, S OCIAL R ESPONSIBILITY A CTIVITIES A ND M ANAGEMENT F UNCTIONS Figure 3.3 Conversion of social responsibility policy into action Issue: Action: Outcome: CHIEF EXECUTIVES Corporate obligation Write and communicate policy Enriched purpose, increased awareness Obtain knowledge Add staff specialists Obtain organizational commitment Change performance expectations Issue: Action: Outcome: STAFF SPECIALISTS Technical problem Design data sys & interpret environment Tech & info groundwork Provoke response from operating units Apply data sys to performance measure Issue: Action: Outcome: DIVISION MANAGEMENT Management problem Commit resources & modify procedures Increased responsiveness O R G A N I Z A T I O N A L L E V E L.

© Prentice Hall, S OCIAL R ESPONSIBILITY A CTIVITIES A ND M ANAGEMENT F UNCTIONS Figure 3.4 How Standard Oil Company of Indiana includes social responsibility in its organization chart Office of the chairperson Vice president law and public affairs Manager environmental conservation (research department) Standard Oil (Indiana) foundation Director social & environmental affairs Manager urban minority affairs Manager public affairs services Director public affairs operations Manager social environment planning, research Manager national media services Director communications services Manager international public affairs Director shareholder communications Manager public affairs planning, research (Public affairs coordinator for various corporate functions: manager of domestic areas PA services) (Coordinator, representative for PA abroad) (Research analyst, company historian).

© Prentice Hall, S OCIAL R ESPONSIBILITY A CTIVITIES A ND M ANAGEMENT F UNCTIONS Influencing Individuals Performing Social Responsibility Activities Controlling Social Responsibility Activities Areas of Measurement Economic function Quality-of-life Social investment Problem-solving The Social Audit: A Progress Report.

© Prentice Hall, H OW S OCIETY C AN H ELP B USINESS M EET S OCIAL O BLIGATIONS According to Jerry McAfee chairman of the board and CEO of Gulf Oil Corporation society has the following responsibilities to business: Set rules that are clear and consistent Keep the rules technically feasible Make sure the rules are economically feasible Make the rules prospective, not retroactive Make the rules goal-setting, not procedure-prescribing.

© Prentice Hall, B USINESS E THICS A Definition of Ethics Why Ethics Is a Vital Part of Management Practices Productivity Stakeholder Relations Government Regulation.

© Prentice Hall, B USINESS E THICS Figure 3.5 The Johnson & Johnson Credo We believe our first responsibility is to the doctors, nurses, and patients, to mothers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit. We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development, and advancement for those qualified. We must provide competent management, and their actions must be just and ethical. We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens— support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided, and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return..

© Prentice Hall, B USINESS E THICS A Code of Ethics Creating an Ethical Workplace The general public considers actions ethical when consistent with one or more of the following standards: The golden rule The utilitarian principle Kant’s categorical imperative The professional ethic The TV test The legal test The four-way test.

© Prentice Hall, B USINESS E THICS Figure 3.6 Martin Marietta’s corporate ethics statement To ensure continuing attention to matters of ethics and standards on the part of all Martin Marietta employees, the Corporation has established the Corporate Ethics Office. The Director of Corporate Ethics is charged with responsibility for monitoring performance under this Code of Ethics and for resolving concerns presented to the Ethics Office. Martin Marietta calls on every employee to report any violation or apparent violation of the Code. The Corporation strongly encourages employees to work with their supervisors in making such reports, and in addition, provides to employees the right to report violations directly to the Corporate Ethics Office. Prompt reporting of violations is considered to be in the best interest of all. Employee reports will be handled in absolute confidence. No employee will suffer indignity or retaliation because of a report he or she makes to the Ethics Office.... The Chairman of the Corporate Ethics Committee will be the President of the Corporation. The Committee will consist of five other employees of the Corporation, including representatives of the Corporation’s operating elements, each of whom will be appointed by the Chairman of the Committee subject to the approval of the Audit and Ethics Committee of the Corporation’s Board of Directors. The Chairman of the Corporate Ethics Committee reports to the Audit and Ethics Committee of the Martin Marietta Corporation Board of Directors..

© Prentice Hall, Chapter Three Questions