Management

Fifteenth Edition, Global Edition

Chapter 6
Managing Social Responsibility
and Ethics

Copyright © 2021 Pearson Education Ltd.

CSR
The concept of social responsibility has
been described in different ways.
• For instance, it’s been called as;
• “profit making only,”
• “going beyond profit making,”
• “any discretionary corporate activity
intended to further social welfare,” and
• “improving social or environmental
conditions.”
From Obligations to Responsiveness to
Responsibility
• Social obligation: when a firm engages in social actions
because of its obligation to meet certain economic and
legal responsibilities
• Classical view: the view that management’s only social
responsibility is to maximize profits.
• The most outspoken advocate of this approach is
economist and Nobel laureate Milton Friedman.
• He argued that managers’ primary responsibility is to
operate the business in the best interests of the
stockholders, whose primary concerns are financial.
The Socioeconomic View
• Socioeconomic view: Managers’ social
responsibilities go beyond making profits to include
protecting and improving society’s welfare
• This view is based on the belief that corporations are
not independent entities responsible only to
stockholders, but have an obligation to the larger
society.
• Social responsiveness is when a company
engages in social actions in response to some
popular social need. Managers are guided by social
norms and values and make practical, market-
oriented decisions about their actions. For instance,
Ford Motor Company became the first automaker to
endorse a federal ban on sending text messages
The Socioeconomic View
• A socially responsible organization goes beyond what it’s
obligated to do or chooses to do because of some popular
social need and does what it can to help improve society
because it’s the right thing to do.
• Social responsibility: A business’s intention, beyond its
legal and economic obligations, to do the right things and
act in ways that are good for society
• A socially responsible organization does what is right
because it feels it has an ethical responsibility to do so
 Meaning of CSR
• Corporate social responsibility is seriously considering the impact
of the company’s actions on society.
• Social responsibility is the obligation of decision makers to take
actions which protect and improve the welfare of society as a
whole along with their own interests.
• The idea of social responsibility supposes that the corporation has
not only economic and legal obligations, but also certain
responsibilities to society which extend beyond these obligations.
• A concept whereby companies integrate social and environmental
concerns in their business operations and in their interaction with
their stakeholders on a voluntary basis.
• A responsibility among firms to meet the needs of their
stakeholders and a responsibility among stakeholders to hold
firms to account for their actions.
 Carroll's four-part concept of CSR, which
emphasizes the various social
responsibilities businesses have.
The economic, legal, ethical, and
A Four- discretionary (philanthropic)
expectations that society has of
Part businesses at a particular moment are
all included in the concept of business's
Definitio social responsibility.
n of CSR This four-part concept contextualizes
corporate expectations by connecting
them to more socially conscious issues.
These social issues cover ethical
obligations and charitable
(volunteer/discretionary) obligations.
 Free enterprise systems prioritize the
importance of business as an economic
institution.
The goal should be to produce the
goods and services that society needs
and wants and to sell them for fair
prices. These prices should also ensure
that the business makes enough money
to ensure its survival, growth, and the
Economic reward of its investors.
Responsibili The significance of company's
ties economic duties has been highlighted
by today's corporate hyper competition
on a worldwide scale. Economic
sustainability has emerged as a
pressing issue. Economic
responsibilities are necessary, but they
are insufficient.
 Legal Responsibilities
• Insofar as they define fundamental conceptions of ethical behavior
that are created by lawmakers, legal obligations reflect society's
perception of "codified ethics" Compliance with these regulations is
a duty that company has to society.
• Even though legal obligations are significant, they do not fully
encompass the norms and behaviors that society expects of
businesses. Law is insufficient on its own for at least three reasons.
• First off, there are many themes and difficulties that businesses
may encounter that the law just cannot cover.
• Second, the legal framework frequently lags behind more modern
judgments of what constitutes acceptable conduct.
• Third, rather than proper moral grounds, laws are frequently the
product of elected politicians' personal interests and political
objectives.
• Consequently, laws and regulations on their own, are not enough.
 Ethical
responsibilities
Even if they aren't codified in the
law, ethical responsibilities must be
upheld in order to include the
behaviors, norms, and practices
that society expects or forbids.
Ethical responsibilities encompass
the entire range of norms,
standards, beliefs, and
expectations that represent what
customers, workers, shareholders,
and the community consider to be
fair, just, and compatible with
respecting or protecting the moral
rights of stakeholders.
 A higher quality of
Ethical responsibilities
performance than that
previously or now required by
law may be reflected by ethical
obligations, which may be
regarded as embracing and
reflecting newly developing
values and standards that
society wants business to
satisfy.
In this sense, ethical
obligations are always
changing—typically growing
and enlarging.
It is helpful to conceive of
ethical obligations as
comprising those choice and
behavior domains where
society expects a specific
standard of moral or ethical
 Philanthropic
responsibilities
These are seen as responsibilities
because they correspond to the
public's existing expectations of
business.
A firm's willingness to participate in
social activities that are not
legislated, not required by law, and
not commonly expected of
business in an ethical sense drives
the quantity and kind of these
activities, which are optional or
discretionary.
Corporate giving, product and
service contributions, employee
volunteerism, community
development, and any other
voluntary use of the company's
resources and personnel with the
 Philanthropic
responsibilities
Although corporations' involvement in
philanthropy occasionally has an
ethical objective, it is often seen as a
useful technique for the firm to show
that it is a good corporate citizen.
A major distinction between ethical
and philanthropic responsibilities is
that the latter typically are not
expected in a moral or an ethical
sense.
Communities desire and expect
business to contribute its money,
facilities, and employee time to
humanitarian programs or purposes,
but they do not call firms as unethical
if they do not provide these services
at the expected levels.
This category of responsibilities is
often referred to as good “corporate
 In terms of the many priorities that
CSR the stakeholders are affected by,
each of the four components of
Pyramid is responsibility addresses various
stakeholders, and these obligations
a dynamic, may alter over time.
sustainable Owners, shareholders, and
employees are the groups that will
stakeholde be most significantly impacted by
economic obligations (if the firm is
r model not financially sustainable, these
groups would be negatively
impacted).
Legal obligations are
unquestionably important for
owners and shareholders.
 CSR Pyramid is a
dynamic, sustainable
stakeholder model
All stakeholder groups are impacted by
ethical practices, but a closer look at the
contemporary ethical challenges
businesses confront leads one to believe
that these difficulties most commonly
affect customers, employees, and the
environment.
The community is the group that is most
impacted by philanthropic practices, but
it stands to reason that employees are
second since some research suggests
that a company's philanthropic success
has a big impact on employee happiness
and morale.
It should be observed that when
combined, the ethical and philanthropic
categories more often reflect the heart of
what most people mean today when they
talk about the social responsibility of
business.
 Exhibit Arguments For and Against Social Responsibility

• For • Against
 Public expectations  Violation of profit
 Long-run profits maximization
 Ethical obligation  Costs
 Public image
 Better environment

© 2007 Prentice Hall, Inc. All rights reserved.

Environmental issues
• When the Deepwater Horizon/BP oil spill happened in the spring of
2010, the economic system and society experienced yet another
significant setback.
• The cleaning after what has been called the biggest environmental
catastrophe in history took many years, with serious ecological and
business results.
• The spill likely increased support for the sustainability movement,
which was already well established and raised public awareness of the
effects that business may have on the environment.
• The oil spill, which has been called the worst environmental disaster in
American history, caused damage to more than 1,300 miles of the Gulf
of Mexico’s coastline.
Green Management and Sustainability
• Until the late 1960s, few people (and organizations)
paid attention to the environmental consequences
of their decisions and actions.
• However, a number of environmental disasters
brought a new spirit of environmentalism to
individuals, groups, and organizations.
• Increasingly, managers have begun to consider the
impact of their organization on the natural
environment, which we call green management.
• Green management: managers consider the
impact of their organization on the natural
environment
 How Organizations Go Green
• Legal (light green) approach
Managers and organizations can do many things to
protect and preserve the natural environment.
Some do no more than what is required by law;
that is, they fulfill their social obligation.
The first approach, the legal (or light green)
approach, is simply doing what is required legally.
In this approach, which illustrates social obligation,
organizations exhibit little environmental
sensitivity. They obey laws, rules, and regulations
without legal challenge and that’s the extent of
How Organizations Go Green
• Market approach
As an organization becomes more sensitive to
environmental issues, it may adopt the market
approach and respond to environmental
preferences of customers.
Whatever customers demand in terms of
environmentally friendly products will be what the
organization provides.
How Organizations Go Green
• Stakeholder approach
In the stakeholder approach, an organization works
to meet the environmental demands of multiple
stakeholders such as employees, suppliers, or
community
How Organizations Go Green
• Activist (or dark green) approach
Finally, if an organization pursues an activist (or
dark green) approach, it looks for ways to
protect the earth’s natural resources.
The activist approach reflects the highest degree
of environmental sensitivity and illustrates social
responsibility.
 Exhibit Approaches to Being Green

Source: Based on R.E. Freeman. J. Pierce, and R. Dodd. Shades of Green:

© 2007 Prentice Hall, Inc. All rights reserved.
Business Ethics and the Environment (New York: Oxford University Press, 1995).
Managers and Ethical Behavior
• Ethics: principles, values, and beliefs that define
right and wrong behavior.
• Many decisions managers make require them to
consider both the process and who’s affected by
the result.
• To better understand the ethical issues involved in
such decisions, let’s look at the factors that
determine whether a person acts ethically or
unethically.
Because shared values can be powerful influences,
many organizations are using values-based
management
Values-based management: the organization’s
values guide employees in the way they do their
jobs.
A strong culture exerts more influence on employees
than does a weak one. If a culture is strong and
supports high ethical standards, it has a powerful
and positive influence on the decision to act ethically
or unethically.
Codes of Ethics and Decision Rules
• Uncertainty about what is and is not ethical
can be a problem for employees.
• Code of ethics: a formal statement of an
organization’s primary values and the
ethical rules it expects its employees to
follow.
• Research shows that 97 percent of
organizations with more than 10,000
employees have a written code of ethics.