1. Management’s Social and Ethical Responsibilities

2. Chapter Objectives
Define the term corporate social responsibility (CSR) and specify the four levels in Carroll’s global CSR pyramid.
Contrast the classical economic and socioeconomic models of business and summarize the arguments for and against CSR.
Identify and describe the four social responsibility strategies and explain the concept of enlightened self-interest.

3. Chapter Objectives (cont’d)
Distinguish between instrumental and terminal values and explain their relationship to business ethics.
Identify and describe at least four of the ten general ethical principles.
Discuss what management can do to improve business ethics.

4. Corporate Social Responsibility (CSR)
The idea that business has social obligations above and beyond making a profit, to:
constituent groups in society other than stockholders and beyond that prescribed by law (Kreitner, 2007)
What an organization does that affects the society in which it exists (Stoner et. Al., 1995)
Organizations include:
financial, environmental, and social responsibility in their core business strategies.
Establishing a positive company reputation & brand in the public eye
through good work that yields a competitive edge while at the same time contributing to other

5. CSR for Global & Transnational Corporations (Kreitner, 2007, p.125)
AB Carroll defines 4 areas of responsibility:
Economic;
make a profit consistent with expectations for international businesses.
Legal;
Obey the law of host countries as well international law.
Ethics;
take host-country & global standards into consideration.
Philanthropic
Be a good corporate citizen especially as defined by the host country’s expectation.

6. Carroll’s Global CSR Pyramid

7. Business’s Role of in Society? (Kreitner, 2007, p.127)
The Classical Economic Model (Adam Smith)
An “invisible hand” (i.e., the competitors) promoted the public welfare when individuals/orgs tried to maximize short-run profits in pursuit of their own economic self-interests.
The Socioeconomic Model
Business has an obligation to meet the needs of the many groups in society besides stockholders in its pursuit of profit.

8. Arguments For CSR (Kreitner, 2007)
Business is unavoidably involved in social issues:
its either part of the problem or solution; or
shares responsibility for societal problems, eg
unemployment, inflation, pollution etc.
Business has the resources to tackle today’s complex societal problems.
Technical, managerial & financial resources
A better society means a better environment for doing business.
It can enhance long-run profitability by investing in society,
today's problems can turn into tomorrows profits
Corporate social action will prevent government action.

9. Socio-economic; Arguments for:
Companies are licensed by governments, so
companies are not independent entities, responsible only to stockholders;
they also have a responsibility to the larger society that creates and sustains them.
A major flaw in the classicists’ view as seen by socio-economic proponents is:
their time frame;
they contend that managers should be concerned with maximising financial returns over the long term.
to do that they must accept some social obligations and costs that go with them, ie.,
they must protect society’s welfare by not polluting, discriminating, engaging in deceptive advertising and the like.

10. Arguments Against CSR
Profit maximization ensures the efficient use of society’s resources.
by buying G&S, consumers dictate where assets should be deployed.
social expenditures amount to theft of stockholders’ equity
As an economic institution lacks the ability to pursue social goals.
inefficiencies can be expected if mgrs divert their attention from pursuit of economic goals.
Business already has enough power.
More concentration of social power is undesirable
Because business managers are not elected, they are not directly accountable to society.

11. The classical view (Milton Freidman, 1962); Arguments against CSR
He argues that:
Most managers are professional managers, which means they don’t own the businesses they run.
Their primary charge is to conduct the business in the interests of the shareholders;
these are profits (financial return).
spending resources for the social good, undermines the market mechanism.
there are pressures in a competitive market for investment funds to go where they get the highest return

12. The classical view (Milton Freidman, 1962) cont’d.
If:
socially responsible actions reduce profits and dividends,
stockholders lose;
wages and benefits have to be reduced to pay for social action,
employees lose;
prices are raised to pay for social actions,
consumers lose.
higher prices are rejected by the market and sales drop,
the business might not survive,
in which case all the organization constituencies lose.

13. Milton Freidman’s argument against
Best understood in terms of microeconomics:
If socially responsible acts add to the cost of doing business,
those costs either have to be:
passed on to consumers, or
absorbed by stockholders through a smaller profit margin

14. Social Responsibility Strategies
Reactive Strategy
a company responds to a social issue only after it has challenged company goals.
eg. Tobacco industry, intent on preventing any legal liability linkage between smoking and cancer
Defensive Strategy
resisting additional social responsibilities with legal and public relations tactics
eg. Automotive industry’s fight against efforts to regulate greenhouse gas emissions

15. Social Responsibility Strategies (cont’d)
Accommodation Strategy
Assuming social responsibility only in response to pressure from interest groups or the government
Proactive Strategy
Taking the initiative in formulating and putting in place new programs that serve as role models for industry

16. A Continuum of Social Responsibility Strategies

17. Who Benefits from CSR?
Organizations that have the unselfish devotion to the interests of others. Altruism
Research findings show:
there is a positive correlation between industry leadership on a socially responsible issue (ie, pollution control) and profitability.
The researchers concluded, “it pays to be green.”

18. Who Benefits from CSR (cont’d)
Enlightened Self-Interest, the realization that business:
ultimately helps itself by helping to solve societal problems
it is in their own best interest to act in ways that the community considers socially responsible.
it involves balancing short-run costs and long-run benefits.
Research into corporate philanthropy showed:
Corporate giving is a form of profit-motivated advertising

19. The Ethical Dimension of Mgmt
Ethics
the study of moral obligation involving the distinction between right and wrong (Kreitner, 2007)
a code of moral principals and values that guide the actions of people and groups. Boddy (2005, p138)
they set standards as to what is acceptable behaviour, especially when an action or decision may hurt others.
Business Ethics
The study of the complex business practices and behaviors that give rise to ethical issues in organizations

20. Ethical Dilemmas (Boddy, 2005)
Most involve a conflict between the needs:
of the individual and the organization, and/or
the organization and society.
Eg.
should airlines routinely test pilots for alcohol before they go on duty?
Should a company monitor the websites that staff visit to check they are not downloading pornography or paedophilia?
Should food companies design and advertise products in a way that adds to the obesity of children?

21. 4 Principles People Use to Justify a Decision as Ethical. (D
4 Principles People Use to Justify a Decision as Ethical. (D. Boddy, 2005):
Moral principles
In line with accepted principles?
Utilitarianism
Best outcome for the greatest number?
Human rights
Does it maintain individual’s human rights?
Individualism
In an individual’s best long-term interests?

22. 1. Moral principles
Evaluate whether a decision is consistent with an accepted moral principle. Eg.
do not bribe others.
If a decision fits such an accepted principal, it is ethically justified.
This implies that:
manager who accepts a high salary and bonus even if the company has performed badly would be performing….
unethically, as most people would feel it violated accepted ideas of fairness and equity

23. 2. Utilitarianism
Looks at a decision from the perspective of, who gains from it and suggests that:
what is good for the greatest number is right (Honderich, 1995, pp ).
On this view,
making 20% of a company’s workforce redundant during a business downturn can be justified if it
enables the company to survive and save the jobs of 80%.

24. 3. Human rights(Rights view)
The idea that:
people have fundamental rights and liberties and
an ethically correct decision is the one that best maintains the human rights of those affected.
I.e. the rights of consent, privacy, free speech, fair treatment, life, etc.
Decisions violating these rights may be unethical.

25. 4. Individualism The ethics of self-interest,
claims that an act is moral if it protects the individuals best long-term interest.
The assumption is that people will only be able to maximise their personal self-interest, if
they do things others value and are willing to pay for.

26. Dilemmas within each philosophy

27. Ethical relativism Argues that:
morality depends on a particular society;
there is no absolute ethical standard independent of cultural context.
what is right is determined by what members of a culture or society says is right, so
what is right in one place may be wrong in another.
This view allows managers to use different standards depending on the culture or country in which they are conducting business.

28. Personal Values as Ethical Anchors
Abstract ideals that shape one’s thinking and behavior
Instrumental value: Enduring belief that a certain way (mode) of behaving is appropriate in all situations
Honesty is the best policy
Terminal value: Enduring belief that a certain end-state of existence is worth striving for.
Social recognition and admiration
Instrumental values (modes of behavior) help people achieve terminal values ( desired end-states).

29. General Ethical Principals
Self-interests
Never take any action which is not in the long-term interest of yourself and/or of the org to which you belong
Personal virtues
Never take any action that is not honest, open and truthful
Religious injunctions
Never take any action that is not kind & that does not build a sense of community, working for a common goal

30. General Ethical Principals
Govt requirements
Never take any action that violates the law
Utilitarian benefits
Never take any action that does not result in greater good than harm for the society of which you are part
Universal rules
Never take any action that you would not be willing to see others, faced with the same or a closely similar situation, also be free to take
Individual rights
Never take any action that abridges the agreed upon & accepted rights of others

31. General Ethical Principals
Economic efficiency
Always act to maximize profits subject to legal & mkt constraints
Distributive justice
Never take any action in which the least amongst us are harmed
Contributive liberty
Never take any action that will interfere with the rights for self determination

32. Encouraging Ethical Conduct, Kreitner (2007, p.139)
Four specific ways:
Ethics Training
Ethical Advocate
Code of Ethics
Whistle-Blowing
Each can make an important contribution to an integrated ethics program.

33. 1. Ethics Training Key features of effective ethics programs
Support of top management
Open discussion
A clear focus on ethical issues
Integration of ethics into the organization
A mechanism for anonymously reporting ethical violations
Rewarding of ethical conduct.

34. 2. Ethical Advocate
An ethics specialist who plays a role in top management’s decision making.
Acts as the boards social conscience, and
plays the specific role of critical questioner.

36. 3. Code of Ethics
A published statement of moral expectations for employee conduct.
Some codes specify penalties for offenders
Two requirements for an effective code
Describes specific events as unethical
Eg. Xerox Corp. code of conduct, “We’re honest with our customers. No deals, no bribes, no secrets, no fooling around with prices. A kickback in any form kicks anybody out. Anybody.”
Is firmly supported by top management, and
equitably enforced through the reward-and-punishment system.

37. 4. Whistle-Blowing
The reporting of perceived unethical matters to out side authorities.
Eg. News media, government agencies or public interest groups.
Today’s mgmt tries to create a climate in which the need for whistle blowing is reduced.
Mgr’s see whistle blowing :
as eroding their authority and decision-making prerogatives, and as the epitome of disloyalty

38. Steps to either reduce/eliminate whistle blowing
Encourage free expression of controversial & dissenting viewpoints.
Streamline the organization’s grievance procedure.
Find out what staff feel about organization’s social responsibility policies & make appropriate changes.
Let staff know that mgmt respects & is sensitive to their individual consciences.
Recognize that the harsh treatment of a whistle blower will probably lead to adverse public opinion.

39. The End