1 Organizations and Social Responsibility Dr. Ellen A. Drost

2 What Is Social Responsibility? After reading these sections, you should be able to explain: 6.to whom organizations are socially responsible. 7.for what organizations are socially responsible. 8.how organizations can choose to respond to societal demands for social responsibility. 9.whether social responsibility hurts or helps an organization’s economic performance.

3 What Is Social Responsibility? Social Responsibility A business’s obligation to…  take actions that benefit society  pursue policies  make decisions

4 To Whom Are Organizations Socially Responsible? Stakeholder Model Stakeholder Model Satisfy Interests Multiple Stakeholders Satisfy Interests Multiple Stakeholders Shareholder Model Maximize Profits 5 5

5 Pros Shareholder Model Firm maximizes shareholder wealth and satisfaction The company stock increases in value Cons Organizations cannot act effectively as moral agents for shareholders Time, money, and attention diverted to social causes undermine market efficiency 5 5

6 Stakeholder Model Primary Stakeholders: Shareholders Employees Customers Suppliers Governments Local Communities Primary Stakeholders: Shareholders Employees Customers Suppliers Governments Local Communities Secondary Stakeholders: Media Special Interest Groups Trade Associations Secondary Stakeholders: Media Special Interest Groups Trade Associations 5 5

7 Organization’s Social Responsibilities Abide by principles of right and wrong Obey laws and regulations Ethical Legal Economic Discretionary Be profitable Serve a social role $ ? 6 6

8 Responses to Demands for Social Responsibility Which response fits Wal-Mart? Reactive Defensive Accommo- dative Proactive Fight all the way DO NOTHINGDO MUCH Withdrawal Do only what is required Legal Approach Bargaining Problem Solving Public Relations Approach Be progressive Lead the industry 7 7

9 Social Responsibility and Economic Performance Realities of Social Responsibility Can cost a company Sometimes it does pay Does not guarantee profitability 8 8