Social Responsibility and Ethics BUS 222 CLASS

DEFINATIONS Social Responsibility of business refers to what the business does, over and above statutory requirement, for the benefit of the society. Corporate Social Responsibility (CSR) refers to the moral responsibility of the business to the society by the virtue of being a part of the society.

TRADITIONAL VIEW OF CSR The prime purpose of the business was profit maximization- Milton Friedman “ the business of business is business.” Friedman argues that the profit earned by business belongs exclusively to the shareholders of the business and these profit cannot be diverted to any other social purpose.- social obligation

CONT. He argued that when management decide to spend the organization’s resources for ‘social good’, they add to the costs if doing business, which have to be passed on to the consumers through higher prices or absorbed by stockholders through smaller dividend.

MORDERN VIEW OF CSR ‘Moral behavior pays…..at least in the long run.’ According to this view business is a social and economic institution which can not live in isolation. The establishment and development of business depends upon the contribution made by the society. This socioeconomic view says that managers'’ social responsibility go beyond making profit to include protecting g and improving society’s welfare.

CONT. Social responsiveness means that a company engages in social actions in response to some popular social need. Social responsibility means a business’s intention, beyond its legal and economic obligation, to for the right things and act in ways that are good for society

The Social Responsibility Debate What does social responsibility mean? Does it mean the corporation’s actions must not harm society? Does it mean a corporation’s actions should benefit society? – or –

Arguments for CSR Public expectations Long-run profits Ethical obligation Public image Better environment Harmonious and healthy relations with the society

CONT. Discouragement of further governmental regulation Balance of responsibility and power Stockholders interests Possession of resources Superiority of prevention over cure

AGAINST CSR Violation of profit maximization Dilution of purpose Costs Too much power Social actions can not be measured Lack of skills Lack of accountability Increase in the prices of the products or services.

Ten Commandments of Social Responsibility Commandment I Thou shall take corrective action before it is required. Commandment II Thou shall work with affected constituents to resolve mutual problems. Commandment III Thou shall work to establish industry-wide standards and self-regulation.

Ten Commandments of Social Responsibility Commandment IV Thou shall publicly admit your mistakes. Commandment V Thou shall get involved in appropriatable social programs. Commandment VI Thou shall help correct environmental problems. Commandment VII Thou shall monitor the changing social environment.

Ten Commandments of Social Responsibility Commandment VIII Thou shall establish and enforce a corporate code of ethics. Commandment IX Thou shall take needed public stands on social issues. Commandment X Thou shall strive to make profits on an ongoing basis.

Ethical Dilemmas Faced by Managers Should I conduct personal business on company time?

Ethical Dilemmas Faced by Managers Should we spend more on pollution control?

Is it O.K. to give a friend a special rate? Ethical Dilemmas Faced by Managers

If I find out that my boss took a bribe, should I tell someone? Ethical Dilemmas Faced by Managers

Managerial Guidelines for Ethical Dilemmas Utility Approach A situation in which decisions are based on an evaluation of the overall amount of good that will result. Human Rights Approach A situation in which decisions are made in light of the moral entitlements of human beings.

Managerial Guidelines for Ethical Dilemmas Justice Approach A situation in which decisions are based on an equitable, fair, and impartial distribution of benefits and costs among individuals and groups.

Fostering Business Ethics Code of Ethics Describes the general value system, ethical principles, and specific ethical rules that a company tries to apply. Ethics Training Programs Training designed to help managers clarify their ethical framework and practice self-discipline when making decisions in difficult circumstances.

Fostering Business Ethics Whistleblowing A whistleblower is someone who exposes organizational misconduct or wrongdoing to the public.

Implications for Leaders: Social Responsibility and Ethics Explore ways in which the organization can be more socially responsive. Recognize the effect of the organization’s actions on its stakeholders. Create an environment in which employees commit to behaving in socially responsive and ethical ways. Make sure that a code of ethics is put in place and followed.

Implications for Leaders: Social Responsibility and Ethics Ensure that whistle blowing and ethical concerns procedures are established for internal problem solving. Involve line and staff employees in the identification of ethical issues to help them gain understanding and resolve issues. Determine the link between departments and issues affecting the company and make them known to employees in the departments

Implications for Leaders: Social Responsibility and Ethics Integrate ethical decision making into the performance appraisal process. Publicize, in employee communications and elsewhere, executive priorities and efforts related to ethical issues.