Social Responsibility & Ethics

What is Social Responsibility?

Managers responsiveness to public consensus-Adolph Berle consensus Keith Davis SR to two types of Business obligations viz. (a) sociosocioeconomic obligation and (b) socio-human obligation socio Socio-economic obligations to see that the economic consequences of its Socioaction do not adversely affect public welfare Socio-human obligation is to nurture and develop human values (morale, Sociocooperation, motivation, and self- realization in work.) self-

A business firms obligation, beyond that required by laws and economics, to pursue long term goals.

Different views on Social Responsibility:

Communist view- Imposition of SR on business through the viewinstrumentality of state Capitalist View an uncontrolled right to make money free from all sorts of SR. Pragmatic View- it acknowledges the importance of profit but Viewsimultaneously stresses the need pro social responsibility. Trusteeship View- enjoy thy wealth by renouncing it i.e. earn your Viewcrores by all means but understand that your wealth is not yours.
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Evolving Viewpoints
CSR mandates that the corporation has not only economic and legal obligations, but also certain responsibilities to society that extend beyond these obligations (McGuire) CSR relates primarily to achieving outcomes from organizational decisions concerning specific issues or problems, which by some normative standard have beneficial rather than adverse effects upon pertinent corporate stakeholders. The normative correctness of the products of corporate action have been the main focus of CSR (Epstein)

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Pyramid of SR

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FourFour-Part model of Corporate Social Responsibility

Type of Responsibility Societal Expectation Examples
Corporate contributions. Programs supporting community/education. Community involvement/improvement; volunteerism

Philanthropic

DESIRED of business by society EXPECTED of business by society

Avoid questionable practices. Respond to spirit of laws. Assume law is a floor behavior; operate above minimum behavior; required by law. Assert ethical leadership.

Ethical

Obey all laws; adhere to regulations.

Legal

REQUIRED of business by society

Environmental laws. Consumer laws. Laws affecting all employees. Obey Foreign Corrupt Practices Act. Fulfil all contractual obligations.

Economic
Source: Carroll (1979))

REQUIRED of business by society

Be profitable. Maximise sales revenue. Minimize costs (administrative, production, marketing, marketing, distribution). distribution). Make wise strategic decisions. Be attentive to dividend policy

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Social Responsibility

Social Responsiveness

Social Obligation

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Social responsibility vs. Social Responsiveness

Social Responsibility Major Consideration Ethical Social Responsiveness Pragmatic

Focus Emphasis Decision Framework

Ends Obligation Long term

Means Responses Medium & Short Term

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Social Responsibility of Business Towards Different Groups (Stakeholders)

       Shareholders Employees Consumers Creditors Suppliers Government Society in General

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Concept of Social Responsibility

Andrew Carniges published a book The Gospel of wealth. His view on social responsibility was based on two principles:  Charity Principle.  Stewardship Principle.

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Charity Principle
Charity principle required the more fortunate members of society to assist its less fortunate members including the unemployed, the handicapped, the sick & elder. e.g. Helping to victims of natural calamities

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Stewardship Principle
Stewardship Principle required that Business & wealthy individuals to view themselves as stewards, or caretakers, holding their property in trust for the benefit of the whole society. society.

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Milton Friedmans Argument

In the 1970s and 1980s , the convergence of a number economic forces led some scholars to re-examine the notion reof corporate social responsibility. o There is one and only one SR of business : to use its resources and energy in activities designed to increase its profits so long as it stays within the rules of game [and] engages in open and free competition, with out deception and fraud o He also insists that managers who devotes corporate resources to pursue personal and perhaps misguided , notion of the social good unfairly tax their own shareholders, employees and customers. o Business should produce goods and services efficiently and leave the solution of social problems to concerned individuals and govt. agencies
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Concept of Enlightened Self Interest

Keith Davis has Said that there is an iron law of responsibility which states that in the long run those who do not use power in a manner that society considers responsible will tend to lose it. So it may be that it is in the enlightened selfselfinterest of organizations to be socially responsibleresponsibleor at least responsive to social forces.

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Corporate Social Responsiveness

Robert Ackeran was among the first to suggest responsiveness not responsibility should be the goal of corporate social endeavor How organizations become aware of and then respond to social issues-takes two approaches. issueso On one hand the theory deals with how individual companies respond to social issues, and on other hand it deals with the forces that determine the social issues to which businesses should respond. o These two approaches can be combined to classify the ways in which corporations can and do respond to specific social issues o Corporate responses to the social issues has life cycle, starting with recognition of problem, continuing through study of the problem and consideration of ways to deal with it. o Implementation often comes late and at some point a company may lose the initiative as govt. or public opinion forces it to act. Prof. Rajni Patel. GHPIBM

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Corporate Social Performance

In 1979, Archie Carroli combined the philosophies ideas of social responsibility and social responsiveness into a single theory of corporate social action called corporate social performance. The arena of SR debates is shaped by economic, legal and ethical principles We support free enterprise (economic principle), the publics right to a safe work place (a legal principle), and equal employment opportunity (an ethical principle). Together these principles create a social contract between business and society that permits companies to act as moral agencies. Their decisions and policies can reflect one of four stances
o Reactive- respond to a social issue only after it has challenged Reactivecompanys goals. o Defensive- acts to ward off a challenge. Defensiveo Accommodative- brings itself into line with govt. requirements and Accommodativepublic opinion. o Proactive- anticipates demands that have not yet been made. ProactiveProf. Rajni Patel. GHPIBM 15

Ethics
 What is Ethics?
o It is a study of how our decisions affect other people. o It is the study of people's rights and duties, the moral rules that people apply in making decisions, and nature of the relationships among people. o Pattern of thinking of a person influence by the moral principle instill in him.

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Four Levels of Ethics

LEVEL 4 The Individual LEVEL 3 Internal Policy LEVEL 2 Stakeholders LEVEL 1 Society
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Levels of Ethical Question in Business

 Societal
 At this level we ask questions about the basic institutions in a society
 Gross inequalities of wealth, status and power

 Stakeholder
 We ask questions about how a company should deal with the external groups affected by its decisions, as well as how the stakeholders should deal with the company

 Internal Policy
 Here we ask questions about the nature of a companys relations with its employees.

 Personal
 Here we ask questions about how people should treat one another within an organization. Should we be honest with one another, whatever the consequences?

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The Tools of Ethics

 Values  Values are relatively permanent desires that seem to be good in themselves, like peace truth, goodwill  Rights and Duties  Right is a claim that entitles a person the room in which to take action- a sphere of autonomy action A duty is an obligation to take specific steps and to obey the law in other respects.  Moral Rules  It guide us through situations where competing interests collide.  Human Relationships  Every human being is connected to others in a web of relationships. These relationships exist because we need one another for mutual support and to accomplish our goals.
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Common Morality
Common morality is the body of moral rules governing ordinary ethical problems. Some basic principles of common morality are..  Promise Keeping
 doing what you say, accept

 Non-malevolence Non Have good feelings for others.  to avoid violence in settling disputes

 Mutual Aid
 Help each other

 Respect for persons

 Regard other people as ends in themselves, not as means to our own ends

 Respect for property

 Should get consent of others before using their property.
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Applying Ethics
Institutionalizing Ethics
o Establishing rules that do not conflict common morality o Create code of ethics and adhere to them. o Ways of instutionalizing ethical policy are
Corporate code of conduct Ethics committees Ombudsman offices Judicial boards Ethics training programmes and Social audits

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Ethical challenges
The challenges of Relativism
 Moral Relativism
 The idea that we can't decide matter of right and wrong, good & evil in any rational way.

 Nave Relativism
 The idea that all human being are themselves the standard by which their action should be judged

 Cultural Relativism
 The idea that morality is relative to particular culture, society or community.

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THANKS

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