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Social and Ethical responsibilities

 Social Responsibility
According to Keith Davis social responsibilities refer
to "the businessman's decisions and actions taken to
reasons, at least partially, beyond the firm's direct
economic or technical interest.“
 Operational Definition:
“Social responsibility contends that management is
responsible to the organization itself and to all the
interest groups with which it interacts. Other interest
groups such as workers, customers, creditors, suppliers,
government and society in general are placed essentially
equal with shareholders.”
Corporate Social Responsibility in the
Indian IT Sector
• Polaris: 21 lakhs on CSR
– Education to poor children – Ullas Trust
– To encourage meritious students of 9th to 12 std.
– 60% from Polaris and 40% from its associates to the
– Economically backward students – IT literacy through
Bhavishya Jyothi Scholarship.
– Made Internet experience simple for slum childrens
– I-write for physically challenged people
– Program for visually challenged children
• Sify:
– Social service organization Alambana.
– “Alambana Vidhya Scheme” – 3 months full time
Computer course
– Free IT education and jobs
– Much financial and Social support during
earthquake in Gujarat in 2001.
Arguments for Corporate Social Responsibility
1. Since businesses owe their profits to society, they have to respond to
public expectations and to the changing needs of the society.
2. The creation of a better social environment, benefits both the
society and the business. Society benefits through employment
opportunities and hence a better community builds up. Business
derives benefits from a better community as the community is the
source of its work force, and is also the consumer for its products
and services.
3. Governmental regulation and intervention are reduced because of
increased social involvement. As a result of this a business can
benefit through greater freedom and greater flexibility in decision
4. Business possesses a great deal of power, that should be
accompanied by an equal amount of responsibility.
5. Modern society is an interdependent system. The internal activities
of an enterprise make an impact on the external environment.
Arguments against Corporate Social Responsibility
1. The aim of any business activity is profit maximization and this can be
achieved by focusing on economic activities. Economic efficiency of a
business is reduced if it focuses on social responsibilities.
2. A business would incur extra costs because of its involvement in social
activities and a business that plans to increase its economic efficiency
cannot incur such costs.
3. International balance of payments can be weakened because of these
social costs. If a company involves itself in social causes then it has to add
these costs to the price of the product. Thus, a company selling in
international markets would be at a disadvantage when competing with
other countries that do not have these costs attached to the price of the
4. A business is considered to have enough power and additional social
involvement can further increase its power and influence. Such influence
and power may corrupt them.
5. Businesspeople lack the social skills that are required, to deal with the
problems of society. The training they receive is basically aimed at
increasing the economic efficiency of the firm.
 Organizations need to identify the various interest groups which
may affect the functioning of a business organization and may be
affected by its functioning. Business enterprises are primarily
responsible to internal and external stakeholders.
Internal Stakeholders
 Shareholders
 Employees
External stakeholders
 Customers,
 Suppliers, creditors and others
 Society
 Government.
Measuring Social Responsiveness
 According to Keith Davis and William C. Frederick, social
responsiveness is "the ability of a corporation to relate its
operations and policies to the social environment in ways
that are mutually beneficial to the company and to the
• Contributions – social contribution – relief and
rehabilitation centers, Gujarat earth quake
• Fund raising – Collection of money by company and its
• Volunteerism – company and its employees
• Recycling – e.g. reuse sport shoe
• Valuing diversity – equality in employment
• Direct investment for some facilities for locality or
• Quality of work life – employees’ requirement other
than salary
• E.g IBM’s commitment to giving - 9/11 attack
Managerial Ethics
 Types of Management Ethics
• Archie B Carroll identified three types of
management ethics.
• Moral management – Manager follows ethical
considerations and principles
• Amoral management - Manager intentionally
or unintentionally ignores ethical
• Immoral management – Manager ignores and
also opposes ethical behaviour
Factors that influence ethical
• Stage of moral development
• Individual characteristics
• Structural variables
• Organization’s culture
• Issue intensity
Stages of moral development
• The extent to which the manager’s moral
judgment depends on outside influences
decreases with each successive stage.
• Preconventional - -managers decide whether an
act is right or wrong depending on personal
• Conventional level – moral values are perceived
as important for achieving certain benchmarks
and living up to the expectations of others.
• Principled – managers frame ethical principles
without regard to social pressures.
Stages of Moral Development
• Principled
6. Following self chosen ethical principles even if they
violate the law
5. Valuing rights of others and upholding absolute
values and rights regardless of the majority’s opinion.
• Conventional
4. Maintaining conventional order by fulfilling
obligations to which you have agreed
3. Living up to what is expected by people close to you
• Preconventional
2. Following rules only when doing so is in your
immediate interest
1. Sticking to rules to avoid physical punishment
Individual characteristics
• Personality variables influence a person’s
ethical behaviour
– Ego strength
– Locus of control
Structural variables
• Organization structures that create ambiguity
and fail to provide clear guidance to managers
are more likely to encourage unethical
• Structural designs of different organizations
differ in the amount of time, competition, cost
and pressures faced by employees.
Organization’s Culture
• An organization that is characterized by high
risk tolerance, control and conflict tolerance is
most likely to promote high ethical standards.
• Aggressive, innovative and openly challenge
expectations which is unrealistic or personally
Issue Intensity
• Certain issues may be considered ethical or
unethical by manager depending upon certain
• Factors are:
– Greatness of harm
– Everyone agrees that the action is wrong
– Greater chances of the act causing harm
– Consequences of the action may be felt immediately
– Person feels close to victims
– Action has a serious impact on the victims
Ethical Guidelines for Managers
• Obeying the law
• Tell the truth
• Uphold human dignity
• Adhere to the golden rule - "Do unto others as you
would have others do unto you," provides a standard
measure for monitoring the ethical dimensions of
business decisions.
• Do no harm
• Allow room for participation
• Always act when you have responsibility
Mechanisms for Ethical Management
• Creation of ethical climate
• Top management commitment and dedication
to work
• Code of ethics
• Ethics committee
• Ethics audits
• Ethics training
• Ethical hot line – telephone line to bypass the
proper channel for reporting ethical dilemmas
and problems of employees
Tools of Ethics
• Value
– E.g top quality customer service(Dedication to
customers, employees development, respect for
individuals, team work,
• Rights and Duties
• Moral rules – guide us through situations where
competing interests collide
• Human Relationships – pervasive aspect of moral