Topic 2: Social Responsibility

Concept of Social Responsibility

Arguments on Social Responsibility
Approach on Social Responsibility

The practice of appropriate behavior in a public
setting, regardless of the behavior's legality. In
investing, social responsibility helps inform
the investment decisions of some individuals and
companies.
The action of an organization that are targeted
toward achieving a social benefit over and above
maximizing profits for its shareholders and
meeting all its legal obligations.

Social responsibility is a concept whereby
companies on a voluntary basis integrate
social and environmental concerns in their
business operations and in the interaction
with their stakeholders.

A balanced approach for organizations to
address economic, social and environmental
issues in a way that aims to benefit people,
communities and society.

Howard R. Bowen (1953)
CSR is an obligation that arises from the impact
corporate decisions and actions have on the lives
of people. Companies should conduct their
business in line with the objectives and values of
the societies in which they operate
Davis (1960)
Businessmen should oversee the operation of an
economic system that fulfills the expectations of
the public. This means in turn that the economys
means of production should be employed in such
a way that production and distribution should
enhance total socio-economic welfare.

Edwin M. Epstein (1987)
CSR relates primarily to achieving outcomes
from organizational decisions concerning specific
issues or problems which have beneficial rather
than adverse effects on pertinent corporate
stakeholders. The normative correctness of the
products of corporate action have been the main
focus of CSR
Open and transparent business practices that
are based on ethical values and respect for
employees, communities, and the
environment. It is designed to deliver
sustainable value to society at large, as well
as to shareholders. (Aaronson , 2003 )

The economic, legal, ethical, and
discretionary expectations that society has of
organizations at a given point in time.
(Carroll and Buchholtz, 2003)
Carroll and Buchholtz's four-part definition of CSR
makes explicit the multi-faceted nature of social
responsibility.

The economic responsibilities refer to society's
expectation that organizations will produce good and
services that are needed and desired by customers and
sell them at a reasonable price. Organizations are
expected to be efficient, profitable, and to keep
shareholder interests in mind.

The legal responsibilities relate to the expectation that
organizations will comply with the laws set down by
society to govern competition in the marketplace.
The ethical responsibilities concern societal
expectations that organizations will conduct their
affairs in a fair and just way. This means that
organizations are expected to do more than just comply
with the law, but also make proactive efforts to
anticipate and meet the norms of society even if those
norms are not formally enacted in law.

The discretionary responsibilities of corporations refer
to society's expectation that organizations be good
citizens. This may involve such things as philanthropic
support of programs benefiting a community or the
nation. It may also involve donating employee expertise
and time to worthy causes.

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The shrinking role of government
Shrinking government resources, coupled with a
distrust of regulations, has led to the exploration of
voluntary and non-regulatory initiatives instead
Increased customer interest
The ethical conduct of companies exerts a growing
influence on the purchasing decisions of customers
Growing investor pressure
Investors are changing the way they assess companies'
performance, and are making decisions based on
criteria that include ethical concerns
Competitive labour markets
Employees are increasingly looking beyond benefits,
and seeking out employers whose philosophies and
operating practices match their own principles
In order to hire and retain skilled employees,
companies are being forced to improve working
conditions.
Supplier relation
Many companies are taking steps to ensure that their
partners conduct themselves in a socially responsible
manner
e.g, introducing codes of conduct for their suppliers
Enlightened self-interest - creating a synergy
of ethics, a cohesive society and a sustainable
global economy where markets, labour and
communities are able to function well
together

Social investment - contributing to physical
infrastructure and social capital is
increasingly seen as a necessary part of doing
business.

Transparency and trust - business has low
ratings of trust in public perception. There is
increasing expectation that companies will be
more open, more accountable and be prepared to
report publicly on their performance in social and
environmental arenas

Increased public expectations of business -
globally companies are expected to do more than
merely provide jobs and contribute to the
economy through taxes and employment.
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1) Profit Maximization
2) Resource Fit
3) Fairness domination by business
4) The Iron Law of Responsibility

Argument for social
responsibility

The interest of
business and its
owners to comply
with societal values

Long term interest of
business

Positive effect on reputation
(which company can gain
more customers, employees,
and benefits)
Argument against
social responsibility

Miton Friedman and
others,
Companies are
misusing the resources


Costly

May dilute companies focus
on economic activity and
hence their productive role in
society

Profit Maximization
Argument for social
responsibility
Business have valuable
resources that could be
used to tackle social
problems
Generating
management talent and
innovation
Helping with the
management of operational
performance
Argument against
social responsibility

They lack the specific
knowledge, skills and
experience needed to
deal with societal
problem

Knowledge such as the
particular technical
expertise to
communicate effectively
with clients.
Resource Fit
Argument for social
responsibility
Davis and Blomstrom observe,
combining social activities with
the established economic
activities of business would give
business and excessive
concentration of power
Argument against social
responsibility

If the business does have
this power then the
problem is to control it,
not think it presents a
problem only in the social
policy context.

Fairness domination by
business
Argument for social
responsibility
Davis has propounded
what he called the The
Iron Law of Responsibility
Company will lose their
power if they do not act
responsible
The interests of businesses
to use their power in a way
that satisfies other societal
actors
Argument against
social responsibility

CSR have been seen as
a way to avoid
government regulation

The Iron Law of
Responsibility
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Obstructionist Stance
Do as little as possible
Avoids social responsibilty and reflects mainly economic
priorities and "tries to stop or block what is going on".

Defensive Stance
Do only what is legally required and nothing
more.
Seeks protection by doing the minimum legally required
and"argues that nothing has been done wrong by them
despite possible bad outcomes".

Accommodative Stance
Meet legal and ethical obligations and go beyond
that in selected cases.
Accepts social responsibility and tires to satisfyeconomic,
legal, and ethical criteria and "provides information and
facts anddoesn't try to hide things".

Proactive Stance
Organization views itself as a citizen and
proactively seeks opportunities to contribute to
society.
Meets all the criteria of social responsibility, including
discretionary performance and "actively provides and tries
to figure out how to helpinstead of being reactive
Human resources
can be an aid to recruitment and retention.
help to improve the perception of a company
among its staff.
Risk management
corruption scandal or environmental accidents
Brand differentiation
play a role in building customer loyalty based on
distinctive ethical values.
Choosing to operate on an ethical level that is
higher than what the law requires
Making contribution to civil and charitable
organizations and nonprofit institutions
Providing benefits for employees and
improving the quality of the life in the
workplace beyond economic and legal
requirements
Taking advantage of an economic opportunity
that is judged to be less profitable but more
socially desirable than more alternatives
Using corporate resources to operate a
program that address some major social
problem

Those corporations that develop a reputation
as being socially responsive and ethical enjoy
higher levels of performance. However, the
ultimate motivation for corporations to
practice social responsibility should not be a
financial motivation, but a moral and ethical
one.
Corporations should go beyond their
economic and legal responsibilities and
accept responsibilities related to the
betterment of society.