Management and Society:

The External Environment,

Social Responsibility, and
Ethics

Marzia Dulal
Assistant Professor, DoTEM,
Commonwealth PhD Scholar, UK

MD 1
Lesson

After studying this chapter, you should be able to:

• Describe the nature of the pluralistic society and selected environments
• Explain the social responsibility of managers and the arguments for and against the social
involvement of business
• Understand the nature and importance of ethics in managing and ways to institutionalize
ethics and raise ethical standards
• Recognize that some ethical standards vary in different societies
• Realize that trust is the basis for human interaction

MD 2
Organisation and its external environment

All managers, whether they operate in

a business, a government agency, a
Every time managers plan, they take church, a charitable foundation, or a
into account the needs and desires of university, must, in varying degrees,
members of society outside the take into account the elements and
organization, as well as the needs for forces of their external environment.
material and human resources, While they may be able to do little or
technology, and other requirements in nothing to change these forces, they
the external environment. They do have no alternative but to respond to
likewise to some degree with almost them. They must identify, evaluate,
every other kind of managerial activity. and react to the forces outside the
enterprise that may affect its
operation.

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 The impact of the external environment on the organization
1IR: Steam power and Utilitarian theory:
water power
plans and actions
2IR: Electricity, railroad should be
and telegraph networks
evaluation by its
3IR: Use of computer and
consequences
communication
technologies Theory of Rights:
4IR (Industry 4.0): People have basic
automation, cyber physical rights
system, Cloud computing,
AI, IoT, M2M , Metaverse Theory of Justice:
Fairness, equity and
CSR: impact of actions on impartiality.
the society
Whistle-blowing:
Social responsiveness: Let know the
mutually beneficial actions
unethical practices
to the competent
People authority.
Profit
planet (reuse, reduce, recycle)
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OPERATING IN A PLURALISTIC SOCIETY

Pluralistic society: A society where many organized groups represent various interests.

Managers operate in a pluralistic society, in which many organized groups represent

various interests. Each group has an impact on other groups, but no one group exerts
an inordinate amount of power. Many groups exert some power over business. As
explained in Chapter 1, there are many stakeholders or claimants on the organization,
and they have divergent goals. It is the task of the manager to integrate their aims.

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 Working within a pluralistic society has several
implications for business.
• First, various groups, such as environmental groups, keep
the business power in balance.
Pluralistic • Second, business interests can be expressed by joining
groups such as the Chamber of Commerce.
society • Third, business can participate in projects with other
responsible groups for the purpose of bettering society; an
example is working toward the renewal of inner cities.
• Fourth, in a pluralistic society, there can be conflict as well
as agreement among groups.
• Finally, in such a society, one group is quite aware of what
other groups are doing.

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 TECHNOLOGICAL
ENVIRONMENT

• One of the most pervasive factors in the

environment is technology. The term
technology refers to the sum total of the
knowledge we have of ways to do things. It
includes inventions and techniques, and it
includes the vast store of organized knowledge
about everything from aerodynamics to
zoology. But its main influence is on ways of
doing things, on how we design, produce,
distribute, and sell goods and services.

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ECOLOGICAL
ENVIRONMENT
• Ecology The relationship of people and other living
things with their environment.
• Managers must take into account the ecological factors
in their decision-making. By ecology we mean the
relationship of people and other living things with their
environment, such as soil, water, and air. Land, water,
and air pollution is of great concern to all people. Land
may be polluted by industrial waste such as packaging.
Water pollution may be caused, for example, by
hazardous waste and sewage. Air pollution can be
caused by a variety of sources, such as acid rain, vehicle
exhaust fumes, and carcinogens from manufacturing
processes.
• A variety of legislation has been passed dealing with
solid waste, water, and air pollution. Managers must be
keenly aware of these laws and regulations and must
incorporate ecological concerns into their decision-
making.

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SOCIAL RESPONSIBILITY AND
SOCIAL RESPONSIVENESS

• Corporate social responsibility: The serious

consideration of the impact of the company’s
actions on society.
• Social responsiveness: 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
society.
• The main difference between social
responsibility and social responsiveness is that
the latter implies actions and the “how” of
enterprise responses.

MD 9
 • Government Rules and Stability: The stability of the government and its
policies, such as taxes, trade rules, and labor laws, affect businesses. In
stable political environments, businesses can operate more smoothly,
while unstable situations create risks and uncertainty.
• Impact on Business Plans: Companies may have to change their plans if
the government changes rules or policies, like adding new tariffs. For
example, if taxes on imported goods increase, a company might start
buying more local products instead.
• Lobbying and Advocacy: Businesses often try to influence government
decisions to create policies that benefit them. By understanding politics,
companies can help shape laws that support their growth.
• Following the Law: Organizations must follow rules and regulations
POLITICAL AND related to areas like employee rights, consumer protection, and health
and safety. Ignoring these laws can lead to fines, lawsuits, and harm to
the company’s reputation.
LEGAL • Impact on Costs: Legal requirements can raise costs. For example,
ENVIRONMENT health and safety laws may require companies to buy safety equipment
or train staff, which adds to expenses.
• Managing Risks: Legal issues, such as lawsuits or new regulations, create
risks. Many businesses have legal teams to help them stay within the
law and avoid problems.

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 • Economic Cycles: When the economy is doing well,
people spend more, and businesses grow. In tough
economic times, people spend less, so companies
might reduce spending or cut costs.
• Prices and Interest Rates: Inflation makes goods and
services more expensive, which affects pricing and
profits. Interest rates (the cost of borrowing money)
also matter. When rates are low, it’s cheaper for
companies to borrow money for growth; when rates
are high, borrowing is more costly.
ECONOMIC • Exchange Rates and Global Markets: For businesses
ENVIRONMENT that operate internationally, exchange rates (the value
of one currency against another) can impact costs and
profits. A stronger local currency can make exports
more expensive for other countries, while a weaker
currency can make imports more costly.

MD 11
 • To live within an environment and be responsive
to it does not mean that managers should merely
react in the face of stress. Because no enterprise
can be expected to react very quickly to
unforeseen developments, an enterprise must
practice ways of anticipating developments
through forecasts. An alert company, for
Reaction or example, does not wait until its product is
Proaction? obsolete and sales have fallen off before coming
out with a new or improved product. A
government agency should not wait until its
regulations are obsolete and discredited before
looking for another way to achieve its objectives.
No enterprise should wait for problems to
develop before preparing to face them. Proaction
is an essential part of the planning process

MD 12
ETHICS IN MANAGING: AN INTEGRATIVE APPROACH

Ethics: The discipline dealing with Business ethics is concerned with

what is good and bad and with a systemic study of morals, truth,
moral duty and obligation. and justice.

It strives to provide methods to

All persons, whether in business,
distinguish between actions and
government, university, or any
attitudes that are detrimental for
other enterprise, are concerned
business and those that are sound
with ethics.
ethically and inspire businesses.

MD 13
Ethical Theories

In organizations, managers compete for information, influence, and resources. The potential for conflicts in selecting the ends as
well as the means to the ends is easy to understand, and the question of what criteria should guide ethical behavior becomes acute.

Three basic types of moral theories in the field of normative ethics have been developed.

First, the utilitarian theory suggests that plans and actions should be evaluated by their consequences. The underlying idea is that
plans or actions should produce the greatest good for the greatest number of people.

Second, the theory based on rights holds that all people have basic rights. Examples are the rights to freedom of conscience, free
speech, and due process. A number of those rights can be found in the Bill of Rights in the Constitution of the United States.

Third, the theory of justice demands that decision-makers be guided by fairness and equity, as well as impartiality.

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 Another way of encouraging ethical corporate behavior is
through whistle-blowing, which means making known to
outside agencies unethical company practices. Black’s Law
Dictionary defines a whistle-blower as “an employee who
refuses to engage in and/or reports illegal or wrongful
Whistle- activities of his employer or fellow employees.” There is even
a whistle-blower website that discusses whistle-blowing
blowing issues, including legal matters and protection. This whistle-
blowing center is a nonprofit organization that helps enforce
environmental laws and works for the accountability of
business and government organizations. Its primary objective
is to protect and defend persons who disclose actions
harmful to the environment and public health.

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