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 firm’s 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).

Social Audits Definition: An independent assessment of the impact of a firm’s 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 it’s 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 shouldn’t 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.

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 don’t 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.

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 doesn’t 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!