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CHAPTER 1
Social Responsibility
Framework
95% of Respondents Agree
U.S. corporations should have more than one
purpose. They also owe something to their
workers and the communities in which they
operate, and they should sometimes sacrifice
some profit for the sake of making things
better for their workers and communities.
Source: "How Business Rates: By the Numbers, Business
Week, Sept. 11, 2000, pp. 148-149.
What do you believe organizations
should be responsible for
accomplishing?
Social Responsibility Defined
Social responsibility
The adoption by a business of a strategic focus
for fulfilling the economic, legal, ethical and
philanthropic responsibilities expected of it by
its stakeholders
Businesses should look beyond their self-
interests and recognize that they belong to
a larger group that expects responsible
participation.
Social Responsibility Defined (cont.)
Applies to all types of businesses
Small businesses
Large businesses
Sole proprietorships
Multinational corporations
Social Responsibility Defined (cont.)
Adopts a strategic focus
Requires a formal commitment from top management
Communicated through mission and vision statements,
annual reports, websites, and public relations
Requires action and results
Depends on collaboration and coordination across business
and among constituencies
Large companies often create specific positions and
departments to support social responsibility programs
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Social Responsibility Defined (cont.)
Fulfills societal expectations
Provides a return on investment for owners
Obeys the law and regulatory agencies
Acts in a just, fair, and correct manner
Promotes human welfare and good will
TOTO Corporate Responsibility Committee
Structure
Pyramid of Social Responsibility Social Responsibility Defined (cont.)
Economic
Maintain profitability
Legal
Abide by legal and regulatory influence
Ethical
Ensure just and fair behavior in the workplace
Philanthropic
Promote human welfare and goodwill
Social Responsibility Continuum
Add Figure 1.5 here
Who are the key
stakeholders of the organization?
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Social Responsibility Defined (cont.)
Requires a stakeholder orientation
Customers
Employees
Investors
Stockholders
Suppliers
Government
Communities
Stakeholders
Those constituents who have a stake in, or
claim on, some aspect of a companys
products, operations, markets, industry, and
outcomes
Companies that operate with a stakeholder
orientation recognize that business and society
are interpenetrating systems, in that each
affects and is affected by the other.
Evolution of Social Responsibility:
1940s1960s
1940s
Economic dominance of corporations
Total autonomy of top management
1950s60s
Few formal governance procedures restraining
management actions
Organizational charitable giving expanded
(charities, arts, culture, and community)
Laws are passed that require protection of the natural
environment, safer products, promotion of equity,
and supporting workplace diversity.
Evolution of Social Responsibility:
1970s1980s
1970s
World competition, bankruptcies, mergers and
acquisitions
1980s
Flatter organizations (downsizing)
More business scandals
Empowerment of lower-level employees
Focus on profitability and economies of scale
Evolution of Social Responsibility:
1990s2000s
1990s
Less employee loyalty and increased job hopping
Growth of temporary employment
Greater interest in ethics and social responsibility
2000s
Special interest groups, companies, human rights activists,
and government strive to balance economic and social goals.
Major scandals damage the global economy.
Lessons Learned from Economic
Crises
Transparency
Long-term perspective
Liquidity
Limited use of derivatives
Absence of rating triggers
Minimal counter-party exposure
Diversification
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Global Nature of Social
Responsibility
Who determines social responsibility
on a global scale?
Host country
Home country
Outside organizations
Managing Social Responsibility
in Home and Host Markets
Benefits of Social Responsibility
Greater trust with stakeholders
Greater customer satisfaction
Stronger employee commitment
Stronger investor loyalty
Greater profitability
Countries with greater trust-based institutions foster a
productivity-enhancing environment.
Competitive processes are more efficient and effective.
Social Responsibility Builds Trust
Trust is the glue that holds organizational
relationships together.
Stephen Covey contends that low trust
results in organizational decay and
relationship deterioration.
Political problems and inefficiency
Most workers feel they can be
trusted more than they can
trust others.
Social Responsibility Builds Trust
(cont.)
All organizational members should share a
sense of trust.
Trust should exist between departments
within a firm.
An Ethics Resource Center study shows that
93% of employees who say trust is
frequently evident in their organization
report satisfaction with their employer.
To Trust or Not to Trust
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Social Responsibility
Improves Customer Satisfaction
Focuses on customer satisfaction and
strengthens trust. This is especially key in
service organizations.
Seventy percent of consumers in a
Cone/Roper poll indicated they would
switch to brands associated with a good
cause if price and quality were equal.
What happens when consumer
organizational trust is breached?
Seventy-five percent of consumers say they
would avoid or refuse to buy from certain
businesses.
Consumers may avoid products from
companies that treat their employees unfairly.
Social Responsibility
Strengthens Employee Commitment
The greater a companys dedication to employees, the greater
the likelihood that employees will take care of the
organization.
Failure to care for employees results in lower loyalty and
commitment.
Employees perceptions are affected by:
Safe working conditions, competitive salaries, and
contractual fulfillment
Social programs, including work-family relationships,
stock ownership, community service
What happens when
employee loyalty is breached?
Quality is compromised.
Service is compromised.
Efficiency decreases.
Strengthening
Employee Commitment
Employee stock ownership plans (ESOPs)
Rewards employees for contributing to and gaining from
organizational success and allows them to gain from it
Employee-centered programs
Health care benefits
Health clubs
Child care and elder care
Cafeteria benefits plans
Social Responsibility
Contributes to Investor Loyalty
Investor relationships require dependability,
trust, and commitment.
Shareholders are concerned about ethics, social
responsibility, and corporate reputation.
Half of investors sell their stock
within one year.
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Social Responsibility
Enhances Economic Performance
Does business conduct relate to a
nations overall economic conduct?
Economic well-being is promoted by:
Trust and a sense of community
Rigor in the legal and ethical systems
Consistent exercise of authority within society
Social institutions that foster access,
productivity, and economic growth
Positive attitudes about work, innovation,
savings, and profits