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MGMT Essay Two

Examine how social demands and social responsibility has affected the way in which a Multi-national organisation operates

The structures and aims of organisations change rapidly through time. Nowadays, profit is no longer the only target concerned by organisations. Ethical issues are becoming more important to large organisations, especially to multinational organisations. CSR which stands for corporate social responsibility is an approach that enterprise organisations use to satisfy stakeholders expectations by combining social, ethical and environment concerns with traditional measures such as revenue, profit and legal obligation together. (Ultimate Business Dictionary, 2003) Corporate social responsibility can be simply defined as distinguishing what is right and what is wrong, (Samson & Daft, 2005) it is not a modern theory; however, modern concepts are different from the very first concept which was mainly focused on shareholders interest. (Multinational corporate social responsibility, ethics, interactions and Third World governments: An agenda for the 1990s, 1993) The Boeing Company is one famous multinational organisation which is founded by William E. Boeing On July 15, 1916, (The Boeing Company, 2008c) it is now the worlds largest aircraft manufacturer by revenue and the second largest aeroplane military contractor. (Army Times Publishing Company, 2008) Boeing operates in seventy countries with an employ number more than 160 thousands, it is also one of largest exporters in U.S.A determined by term of sales. (The Boeing Company, 2008a) This essay will discuss how social demands and social responsibility has affected the way in which the Boeing Company operates. The first body paragraph will introduce the term of stakeholder; the organisations responses to social demands will be discussed from the second to fifth body paragraph, the last four body

paragraphs will discuss the four criteria of corporate social responsibility to evaluate organisations social performance.

Stakeholder is any group within or outside the organisation that has a stake in the organisations performance.(Samson & Daft, 2005, p.165) The range of stakeholders for a single organisation is considerably wide, shareholders, employees, customers, suppliers and governments are all usual stakeholders. Furthermore, large multinational organisations often have a much more complex stakeholder structure than single country based organisations. (Nicholson, 1998) The decision made by organisation could effect the benefits of the stakeholders, each stakeholder could have different responses to organisations decisions as stakeholders have their own and different interest in the organisations activities. (Samson & Daft, 2005; Nicholson, 1998) In addition, the stakeholder environment of a particular organisation changes over time as the interest of stakeholders changes from time to time, which means that stakeholders may enter or exit the environment according to the changes of their interests. As an example of the Boeing Company tries to satisfy their stakeholders, Boeing Companys chairman and chief executive officer Harry Stonecipher was forced to resign from his job for an improper relationship with one of the companys employee, Debra Peabody, who also resigned later. Even Boeing declared Mr. Stonecipher did not violate any company conducts, the former presidents behaviour is still considered as an embarrassment to the Boeing Company, the scandal may even decrease the share price of the company. Boeing did a quick action to this scandal, which is considered to be reasonable to its stakeholders, comparing to past few years, the boards actions are often slow and push the scandal becomes ferment, stakeholders interest and benefits were often dropped. (SmartPros Ltd, 2005) The Boeing Company has a quick response system for the companys performance and reputation in order to look after its stakeholders interest and benefits.

Social demand is part of Corporate Social Responsibility, organisations need to response while a specific social demand occurs. (Samson & Daft, 2005) There are four types of responses and actions that an organisation may take to deal with social demands about the organisations activities. (Samson & Daft, 2005) Firstly, proactive responses are the most effective action that an organisation can take to response to social demands; this action was developed by organisations which take lead in solving social issues. (Samson & Daft, 2005) Organisations anticipate the problem before it occurs and change the way in which problem may happens to a better method. Generally, organisations receive no pressure from stakeholders as their demands are solved before problems arise. Furthermore, there is another proactive response; many organisations make generous donations to universities and charity as a way to improve society. Organisations with proactive response often take a long term view of business performance and integrating their cultural values, strategies and tactics with the needs of all their

stakeholders.(Samson & Daft, 2005, p. 173) The Boeing Company is improving its long term business performance time by time; each president was working towards the goal of becoming a proactive organisation. The former president and chief executive officer Phil Condit made a Point to Point tour around the every sites of the Boeing Company, Condit (2002) says, It gave me an opportunity to listen first-hand to employee viewpoints and ideas. And it allowed me to share my assessment of where we are as a company and how we are transforming ourselves for a better future. The former president also suggested even Boeing had made a great improvement on the working environment, the Boeing Company can still achieve even more than that, improvement is always needed.(Condit, 2002) This shows that the Boeing Company is working to become a proactive company over times, and it has a great success for the improvement.

The second type of response is accommodative response; it means that the organisation accepts social responsibility for its actions, (Samson & Daft, 2005,

p. 172) it takes effective steps to response to social demands, although this action may be caused by external pressure. Organisation responds to stakeholders pressures by meeting the legal, ethical and economic responsibilities. Organisations always beware their public image, and try to improve the image by hiring ethic consultants. (Samson & Daft, 2005) The Boeing Company has some cases which it uses the accommodative responses, one example will be the Harry Stonecipher case. In March, 2005, Boeings president and chief executive Harry Stonecipher was forced to resign for an improper relation ship with a company employee, under the pressure of the Board of Directors, which can be considered as stakeholders. David Gebler, CEO of Working Values which used to be hired by Boeing as business ethic consultant suggested that Boeing has done a well job to response to the scandal and the action helps Boeing from ruining its public image. (SmartPros Ltd, 2005) The Boeing Company has respond to the stakeholders pressure by meeting the ethical responsibility and accepts the social responsibility for its actions.

The third type of response is defensive response. Organisations admit to errors caused by omissions or commissions, but they are not acting obstructively. (Samson & Daft, 2005) Defensive organisations often declared the errors are unavoidable, and these organisations are preferred to work within the letter of the law, (Samson & Daft, 2005, p. 173) as they only respond to legal issues. Since the new Boeing airplane model 787 becomes available to order, the delay of deliveries of the new model has occurred three times, the pressure from Boeings customers is explicit, the launch customer All Nippon Airline even used the word extremely disappointed in its formal statement. (Dodge, 2008; Virgin, 2008) However, the Boeing Company only made defensive responses so far, it declares the delay of work is caused by travelled work and unanticipated rework. (Virgin, 2008) Boeing accepts the delay made by them and responded to the pressure, but they declared the delay is common in the industry.

At last, the fourth type response to social demands is obstructive responses which deny all responsibility caused by the organisations activities, declare that evidence of wrongdoing is misleading and even obstruct investigations. This type of responses often used by those organisations only focused on economic benefits. The action of declaring evidence of wrongdoing is misleading is achieved by eliminating and hiding existence of crime evidence. (Samson & Daft, 2005) The Boeing Company is not only focused on economic benefits, but also makes effort towards social responsibility. (The Boeing Company, 2008b) Therefore, such an obstructive response is unfound in Boeings cases.

Corporate social responsibility can be divided into four categories, economic, legal, ethical and discretionary responsibilities in order to evaluating an organisations performance. (Swanson, 1995) Firstly, economic responsibility is the basic reason why a business exists, company is responsible to produce goods and services which the society needs, and producing profits for the owners. (Samson & Daft, 2005) However, purely economic responsibility is no longer an adequate criterion to evaluating performance in most developed countries, because if an organisation only follows the profit based economic responsibility; there will be a trouble for the organisation. (Samson & Daft, 2005) For instance, the Boeing Companys former chief finance officer Mike Sears had a negation about offering a job for a Pentagon air force officer, it seems to be harmless for any party, but the officer was taking a big role of assigning a one billion worth military contract which Boeing finally got, the action was considered as an unethical conduct.(BBC, 2003) Boeings action was simply profit based, it reflects the basic idea of economic responsibility, but, the action leads Boeing to a trouble. After the secret negotiation was unveiled, the air force has cancelled the contact with Boeing, the share price of the company also dropped, the Boeing Company was facing a profit loss instead of profit gain. (BBC, 2003) Economic

responsibility is one way to evaluate the companys performance but it is not the only way.

The second criterion is legal responsibility, it is the most important responsibility that an organisation has to follow, because organisations can only be existed within the legal framework. Legal responsibility defines what society deems as important with respect to appropriate corporate behaviour. (Szwajkowski, as cited in Samson & Daft, 2005, p. 171) When organisations break the law, a possible fine or even closure could apply to organisations by the government. For example, between 2002 and 2003 Boeing sold 94 commercial jets to overseas which contain chips with military applications, this action has violate the Arms Export Control Act, because the legal license that used in this sale in inappropriate, as a result of the violation the Boeing Company paid a fifteen million dollars fine for its law breaking sale. (Gates, 2006) Organisations activities have to be done within the legal frame, otherwise the organisation will face legal sanctions.

Furthermore, ethical responsibility is also a criterion to evaluate organisations performance, it includes behaviours that is not enforced by law or based on economic interests. (Samson & Daft, 2005) Moreover, Organisations decisions are suppose to be ethical, which means they should act with impartiality and also respect the rights of individuals, in contrast, unethical behaviours mean that the organisation gains profit from the societys expense. (Samson & Daft, 2005) Using misleading advertisings could also be considered as unethical behaviours, the Boeing Company has an advertising in UK claims its the yet to launch model 747-8 produces less than 75 grams CO2 per passenger km, but this statement was challenged by a complaint which received by the Advertising Standards Authority. The complaint said the figures used by the Boeing Company can be varied as many unknown factors like the number of passengers will affect the

CO2 per passenger km figure. (Sweney, 2007) The Boeings misleading advertising is a not serious problem as it only has an unclear statement. However, the advertising may attract the attention of people with environment protection mind, and gain supports from them, which indirectly improves the companys public image and maybe even profits. Nevertheless, the advertising may have an effect of misleading, but it does not generate profits directly from the societys expense, the Boeing Companys activities are mostly ethical behaviours.

In addition, the last criteria for evaluating organisations performance is discretionary responsibility, it is not based on any economic, legal or ethics consideration, but purely motivated by organisations interest to contribute to the society. Activities like charity events or generous donations which expect no paybacks are considered as discretionary behaviours. Furthermore, discretionary responsibility is the highest criterion of social responsibility because it goes beyond societal expectations to contribute to the communitys welfare. (Samson & Daft, 2005) In 2007, the Boeing Company donated ten million dollars to help science education for youth in Chicago area, Chicago's Adler Planetarium and the Museum of Science and Industry will equally share the donation which will be used to create educational exhibitions and programming that will attract young people to careers related to science and technology. (Fincutter, 2007) The Boeing Companys donation is totally based on its own desire and motivated by the mind of philanthropy, this donation reflects the good performance of the Boeing Company contributed to discretionary responsibility.

In conclusion, corporate social responsibility is consisted of both organisations performance and response to society. Organisation have four types of response to respond social demands from high to low, proactive response, accommodative response, defensive response and obstructive response. Economic, legal, ethical and discretionary responsibilities are the four criteria for evaluating an

organisations performance. (Samson & Daft, 2005) The Boeing Company has a proactive response to respond social demand, it anticipated the problems before they rise. Boeing also has a reasonable good performance of social responsibility, even improvements are needed. Corporate social responsibility is becoming more important to modern organisations, as economic profit is no longer the only measure of organisations performance to society, organisations contribution to society also counts toward the overall evaluation, it is like the new standard for organisations.

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