Transcript Principles of Management

Corporate Social Responsibility
A New Skill for Managers
 Discussions of the responsibilities of business and its role
in society have been motivated by the growing awareness
of unfair or discriminatory business behavior and an
increasing number of social and environmental scandals
 Businesses are now expected to behave in responsible ways.
This entails:
 A managerial obligation to take action that protects and
improves both the welfare of society as a whole and the
interests of the organization.
The Davis Model of Corporate
Social Responsibility
 A generally accepted model of corporate social responsibility was developed by
Keith Davis.
 Davis’s model is a list of five propositions that describe why and how business
should adhere to the obligation to take action that protects and improves the
welfare of society as well as that of the organization:
 Social responsibility arises from social power
 Business shall operate as a two-way open system, with open receipt of
inputs from society and open disclosure of its operations to the public
 The social costs and benefits of an activity, product, or service shall be
thoroughly calculated and considered in deciding whether to proceed
with it
 The social costs related to each activity, product, or service shall be
passed on to the consumer
 Business institutions, as citizens, have the responsibility to become
involved in certain social problems that are outside their normal areas
of operation
Social responsibility arises from social power
 Business has a significant amount of influence on, or
power over, such critical social issues as minority
employment and environmental pollution.
 Society’s legal system does not expect more of business
than it does of each individual citizen exercising
personal power.
Business shall operate as a two-way open system, with open
receipt of inputs from society and open disclosure of its
operations to the public
 Business must be willing to listen to what must be
done to sustain or improve societal welfare.
 Society must be willing to listen to business reports on
what it is doing to meet its social responsibilities.
 There must be ongoing, honest, and open
communications between business and society’s
representatives if the overall welfare of society is to be
maintained or improved.
The social costs and benefits of an activity, product, or service
shall be thoroughly calculated and considered in deciding whether to proceed
with it
 Technical feasibility and economic profitability are not
the only factors that should influence business
decision making.
 Business should also consider both the long- and
short-term societal consequences of all business
activities before undertaking them.
The social costs related to each activity, product, or
service shall be passed on to the consumer
 Business cannot be expected to completely finance
activities that may be socially advantageous but
economically disadvantageous.
 The cost of maintaining socially desirable activities
within business should be passed on to consumers
through higher prices for the goods or services related
to these activities.
Business institutions, as citizens, have the responsibility to
become involved in certain social problems that are outside their
normal areas of operation
 Business possesses the expertise to solve a social
problem with which it may not be directly associated,
it should be held responsible for helping society solve
that problem.
 Because business eventually will reap an increased
profit from a generally improved society, business
should share in the responsibility of all citizenry to
generally improve society
Issues related to CSR
 Employment conditions
 Environmental sustainability
 Consumer affairs
 Social problems/wellfare
 Quality of life
Some examples
 Coca-Cola Company is exploring ways to maintain its bottling
operation in India without using underground water
 The Mohawk Home Company is developing a new line of
bathroom rugs with all natural fibers
 Kellogg’s is developing environmentally sensitive products, such
as its organic Rice Krispies.
 Nike, the world-famous athletic-gear manufacturer, recently felt
so strongly that its corporate philosophy on social responsibility
issues should be clearly formulated and communicated that the
company created a new position, vice president of corporate and
social responsibility
Determining Whether a Social
Responsibility Exists
 One challenge facing managers who are attempting to
be socially responsive is to determine which specific
social obligations are implied by their business
situation.
 Managers in the tobacco industry, for example, are
probably socially obligated to contribute to public
health by pushing for the development of innovative
tobacco products that do less harm to people’s health
What can the managers do?
 Determining exactly which social responsibilities an
organization should pursue and then deciding how to pursue
them are the two most critical decisions for maintaining a high
level of social responsiveness within an organization.
 Incorporates social goals into the annual planning process.
 Seeks comparative industry norms for social programs.
 Presents reports to organization members, the board of
directors, and stockholders on social responsibility progress.
 Experiments with different approaches for measuring social
performance.
 Attempts to measure the cost of social programs as well as the
return on social program investments.
What can the managers do?
 Managers have known for some time that to achieve
desirable results in these areas, they must be effective
in planning, organizing, influencing, andcontrolling.
 Achieving social responsibility results is no different.
Planning organizing Social
Responsibility Activities
 Social trends forecasts should be performed within the
organizational environment along with the more
typically performed economic, political, and
technological trends forecasts.
 Examples of social trends that organizations can
forecast are societal attitudes toward water pollution,
safe working conditions, and the national education
system.
Influencing Individuals Performing Social
Responsibility Activities
 Influencing is the process of guiding the activities of
organization members to help attain the organization’s
social responsibility objectives.
 To influence appropriately in this area, managers must
lead, communicate, motivate, and work with groups in
ways that result in the attainment of the organization’s
social responsibility objectives.
Controlling Social Responsibility
Activities
 Controlling, as discussed last week, is making things
happen as they were planned to happen.
 To control, managers assess or measure what is
occurring in the organization and, if necessary, change
these occurrences in some way to make them conform
to plans.
 Controlling in the area of social responsibility entails
the same two major tasks.
Areas of Measurement
 The economic function area—A measurement
should be made of whether the organization is
performing such activities as producing goods and
services that people need, creating jobs for society,
paying fair wages, and ensuring worker safety.
 This measurement gives some indication of the
economic contribution the organization is making to
society.
The quality-of-life area
 The measurement of quality of life should focus on
whether the organization is improving or degrading the
general quality of life in society.
 Producing high-quality goods, dealing fairly with
employees and customers, and making an effort to preserve
the natural environment are all indicators that the
organization is upholding or improving the general quality
of life.
 As an example of degrading the quality of life, some people
believe that cigarette companies, because they produce
goods that can harm the health of society overall, are
socially irresponsible.
The social investment area
 The measurement of social investment deals with the
degree to which the organization is investing both
money and human resources to solve community
social problems.
 The organization could be involved in assisting
community organizations dedicated to education,
charities, and the arts.
The problem-solving area
 The measurement of problem solving should focus on
the degree to which the organization deals with social
problems, such as participating in longrange
community planning and conducting studies to
pinpoint social problems.
The Social Audit: A Progress Report
 A social audit is the process of measuring the present
social responsibility activities of an organization to
assess its performance in this area.
 The basic steps in conducting a social audit are
monitoring, measuring, and appraising all aspects of
an organization’s social responsibility performance.
Discussion on CSR
 Arguments for CSR:
 Business, as a whole, is a subset of society, one that
exerts a significant impact on the way society exists.
 Because business is such an influential member of
society it has the responsibility to help maintain and
improve the overall welfare of society.
 If society already puts this responsibility on its
individual members, then why should its corporate
members be exempt?
Arguments for CSR
 Business should perform social responsibility activities
because profitability and growth go hand-in-hand
with responsible treatment of employees, customers,
and the community.
 Performing social responsibility activities is a means of
earning greater organizational profit.
Arguments Against Business Performing Social
Responsibility Activities
 “the basic mission of business [is] thus to produce goods
and services at a profit, and in doing this, business [is]
making its maximum contribution to society and, in fact,
being socially responsible.” Milton Friedman
 Friedman argues that making business managers
simultaneously responsible to business owners for reaching
profit objectives and to society for enhancing societal
welfare sets up a conflict of interest that could potentially
cause the demise of business as it is known today.