Social responsibility in business

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Introduction

An increasing number of companies today find that there are real business benefits from being socially responsibly. Social responsibility has become a core issue for a large number of companies. There is but one explanation for this evolving social conscience; i.e. the people have demanded it. Traditionally social responsibility was just about donations and reforestation. Now it's much more than just that; now, the public wants to play an active role. Its hard for companies today to meet society's escalating ethical expectations. Consumers are showing that they will reward companies that prove they are social, not just corporate, leaders and that they will punish those they perceive as bad citizens. (Don Tapscott, Anthony Williams, February 00).

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The World Business Council and Sustainable Development used the following definition; "Social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large." (Lord Holme and Richard Watts, Making Good Business Sense).

Social responsibility has many different definitions. There is evidence of the different perceptions of what this should mean from a number of different societies across the world. Originally in the United States, social responsibility had been defined much more in terms of a philanthropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving. The European model is much more focused on operating the core business in a more socially responsible way, complemented by investment in communities for solid business case reasons. (Mallen Baker, 00, Corporate Social Responsibility What Does it Mean?, www.mallenbaker.net)

There are two opposing views of social responsibility

1. Classical View

. Socioeconomic view

Classical View

This view suggests that management's sole objective of social responsibility is to maximize profits. Milton Friedman argues that a manager's primary responsibility is to conduct the business in the best possible interest of the stockholders (the owners).

Socioeconomic View

This view suggests that management's social responsibility goes way beyond profit maximization to include protecting society's welfare and improving society's standards. One of the strongest points of this view is that corporations are not independent entities responsible solely to stockholders.

Figure1, (A Caroll, 11, The Pyramid of Corporate Social Responsibility, Business Horizons, www.oldredlion.org.uk)

Managers have an ethical and philanthropic responsibility to act beyond their economic and legal responsibilities. Ethical responsibilities include behaviors and activities that are expected of an organization from society's members. Philanthropic responsibilities are those that an organization isn't expected to perform but these do benefit members of society.

Figure, (Mallen Baker, 00, Corporate Social Responsibility - What does it mean?, www.mallenbaker.net)

What are stakeholders?

A stakeholder is a group or an individual that has a "stake" (something to gain or lose") as a result of the activities of a business. There are direst stakeholders who have an obvious interest employees, shareholders, customers and suppliers. But there are also indirect stakeholders, those who may have less obvious interests special interest groups, the media, government, or the general public. (www.grantstream.com, Corporate FAQs, 00). Stakeholders are taking an increasing interest in the activities of an organization. Most look to the outer circle- what the organization has actually done, in terms on its impact on society and the environment.

Informal Organizational Dimensions

1. Organizational Leadership and Culture

Leadership practices can go a long way towards defining the social responsibility stance an organization and its members will adopt. (Paul Davidson, Ricky W Griffin, 00, Management- An Australian Perspective, nd Ed.).

. Whistle Blowing

This occurs when an employee illegal or unethical conduct on the part of others within the organization. An organization's response to whistle blowing is usually indicative of its stance on social responsibility. (Paul Davidson, Ricky W Griffin, 00, Management- An Australian Perspective, nd Ed.).

Formal Organizational Dimensions

1. Legal Compliance

This is the extent to which the organization conforms to all laws including local, state, federal and international laws.

. Ethical Compliance

This is the extent to which an organization follows the basic ethical and legal standards of behavior.

. Philanthropic Giving

This is basically giving of funds and donations to charities and other social programs.

Business ethics

Corporate Social Responsibility is becoming increasingly integrated into business ethics. This standard has been evolving for years and will continue to advance into all business sectors. (Brown, Gordon, Harris, 00, The Future of Corporate Social Responsibility, www.coopscanada.coop.). Managerial ethics are standards of conduct and moral judgment manager's use conducting their business. (Bartol Tein, Mattews Martin, 001, Management, rd ed., www.mhhe.com/au/bartol).

There are four views of business ethics

1. Utilitarian View of Ethics

This view of ethics states that ethical decisions are made based solely on their outcomes.

. Rights View of Ethics

This view states that ethical decisions are concerned with protecting and respecting the basic individual rights. E.g. freedom of speech, privacy rights.

. Theory of Justice View of Ethics

This view states that ethical decisions are made to impose and enforce rules fairly and impartially.

4. Integrated Social Contracts Theory

This view states that ethical decisions should be based on empirical (what is) and normative (what should be) factors.

Arguments for and Against Social Responsibility

The major arguments in favor of social responsibility include

1. Social responsibility in an organization balances its power with its responsibilities.

. Organizations being socially responsible reduce the imposition of government regulations.

. Socially responsible organizations tend to have a long-term success rate as these acts promote goodwill, public favor, and corporate trust.

4. Socially responsible acts help an organization improve its image in the eyes of society.

5. Organizations that perform socially responsible acts help society to deal with its ever changing needs and problems.

6. By performing socially responsible acts, organizations help attend to environmental problems that were created by organizations.

7. Organizations have the power, money and resources to help tackle social and environmental problems.

8. Since organizations are considered as members of society, they have a moral obligation to help society deal with its problems. (K. Davis, 1, The case for and against business assumption of social responsibility, Academy of Management Journal.)

The major arguments against corporate social responsibility include

1. Being socially responsible comes with a price attached to it. Socially responsible acts increase an organization's operating costs and in turn weaken its ability to offer goods and services at the lowest possible competitive costs.

. The costs of being socially responsible may not be borne by the competition; therefore a socially responsible organization may penalize itself.

. The costs of socially responsible acts often result in lower dividends to stockholders, lower wages for employees or higher prices for consumers. Social responsibility sends mixed signals about what an organization's goals might be, to both the organization and society. Employees may have difficulty meeting goals if they are not sure whether to make a profit or to act responsibly. On the other hand society may develop unrealistic expectations that the organizations might not be able to fulfill.

4. By giving organizations the liberty to exercise socially responsible acts, makes them more powerful and many already have too much power over society.

5. Individuals in the corporate and business world are trained in areas such as marketing, finance etc. not in how to deal with society's social problems.

6. When corporations, as opposed to individuals, act to solve social problems, no one can really be held accountable. Responsibility should reside with individuals, not with institutions. (Dunham, Pierce, 18, Management)

As it is evident from above, people have used several arguments for and against corporate social responsibility.

Should managers concern themselves with social responsibility? Why?

Analyzing the arguments for and against social responsibility, it is evident that it is important for an organization to be socially responsible. Businesses have found clear benefits from being socially responsible. Organizations which take these issues seriously not only achieve benefits from society but also enhance their reputation, competitiveness, and their risk management (Carl Courtney, 00, Corporate Social Responsibility- Who cares?, London). There are trends that are making these factors very important in the corporate world. A good reputation is vital to all organizations whether in the brand value of a large multinational or the customer service at a local store. There is evidence that shows a strong track record in social responsibility helps maintain and attract the best resources in the jobs market. There are growing expectations of society that an organization has to live up to. Organizations in today's corporate world have to live up to society's expectations or be left out.

The benefits that are derived from an organization being socially responsible don't just happen; they have to be planned, managed and measured at every step of the way. From the study of few socially responsible organizations such as, The Body Shop and Proctor & Gamble (Richard Littlemore, 001, Companies being socially responsible What's the bottom line?, www.bcbusinessmagazine.com), it is clear that the best results occur when the involvement in social responsibility has natural links with the organization. This suggests that different organizations will adopt completely different types on involvement in social responsibility while still generating real benefits. Therefore, it is essential as well as significant for an organization to be socially responsible in today corporate world.

Conclusion

Social responsibility has become a major part in the wealth creation process. When times get hard and push comes to shove, there is always the incentive to practice social responsibility more and better especially if it is a philanthropic exercise which is peripheral to the main business. But as with any process based on collective activities of society there is no "one size fits all". In different countries across the world, there will be and are different priorities and values to be taken into consideration that will shape how an organization acts.

Bibliography

1. A Caroll, 11, The Pyramid of Corporate Social Responsibility, Business Horizons, www.oldredlion.org.uk

. Bartol Tein, Mattews Martin, 001, Management, rd ed., www.mhhe.com/au/bartol

. Brown, Gordon, Harris, 00, The Future of Corporate Social Responsibility, www.coopscanada.coop

4. Carl Courtney, 00, Corporate Social Responsibility- Who cares?, London

5. Don Tapscott, Anthony Williams, February 00

6. Dunham, Pierce, 18, Management

7. K. Davis, 1, The case for and against business assumption of social responsibility, Academy of Management Journal

8. Lord Holme and Richard Watts, Making Good Business Sense

. Mallen Baker, 00, Corporate Social Responsibility What Does it Mean?, www.mallenbaker.net

10. Paul Davidson, Ricky W Griffin, 00, Management- An Australian Perspective, nd Ed.

11. Richard Littlemore, 001, Companies being socially responsible What's the bottom line?, www.bcbusinessmagazine.com

1. www.grantstream.com, Corporate FAQs, 00

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