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© Farhan Mir© Farhan Mir
20200707 IMSIMS
Management Management Thoughts & PracticesThoughts & Practices
MBA & BBAMBA & BBALecture 5Lecture 5(Corporate Social (Corporate Social Responsibility & Business Responsibility & Business Ethics)Ethics)
By: Farhan MirBy: Farhan Mir
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Business and Society Business and Society RelationshipRelationshipBusiness is the collection of private, profit-oriented organizations.
Society is a broad group of people and other organizations, interest groups, a community, a nation. Business and society interrelate in a macroenvironment as stakeholders.
Business
Community
Consumers
Owners
Government
Employees
© Farhan Mir© Farhan Mir
20200707 IMSIMS
“An ABC News/Washington Post survey indicated 63% of the public felt that regulation of corporations is necessary to protect the public.”
“Seventy-five percent of those surveyed by ABC expressed limited confidence in large corporations.”
Gary Langer (2002) “Confidence in Business: Was Low and Still Is,” Gary Langer (2002) “Confidence in Business: Was Low and Still Is,” www.abcnews.com, Sept. 10.www.abcnews.com, Sept. 10.
Corporate Social Corporate Social Responsibility CrisisResponsibility Crisis
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Corporate Responsibility Corporate Responsibility Crisis...Crisis...
“Opinion polls now place business people in lower esteem than politicians.”-Jennifer Merritt (2002) “For MBAs, Soul Searching 101,”
Business Week, Sept. 16, p. 64.
“A W.S.J./NBC poll found that 57% of general public believed that standards & values of corporate leaders & executives had dropped in the last 20 years.”-Eric Hellweg (2002) www.business2.0.com, Sept. 10
© Farhan Mir© Farhan Mir
20200707 IMSIMS
© Farhan Mir© Farhan Mir
20200707 IMSIMS
The DebateThe Debate
McDonalds has been criticized for making food unhealthy (e.g., “Supersize Me”), not telling people what’s in it. Should McDonalds become SR by:
Making foods healthier (e.g., smaller Making foods healthier (e.g., smaller portions, leaner beef, canola oil )portions, leaner beef, canola oil )
Advertise what’s in foodAdvertise what’s in food
So What is Social So What is Social Responsibility!!!!Responsibility!!!!
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Overview of Corporate Overview of Corporate Social ResponsibilitySocial Responsibility
Formal Definitions““The obligation of organization The obligation of organization management to make decisions and take management to make decisions and take actions that will enhance the welfare and actions that will enhance the welfare and interests of society as well as the interests of society as well as the organization” (Daft & Marcic)organization” (Daft & Marcic)
““The extent to which companies should and The extent to which companies should and do channel resources toward improving the do channel resources toward improving the quality of life of one or more segments of quality of life of one or more segments of society other than the firm’s own society other than the firm’s own stockholders” (Dessler)stockholders” (Dessler)
““The set of obligations an organization has The set of obligations an organization has to protect and enhance the societal context to protect and enhance the societal context in which it functions” (Griffin)in which it functions” (Griffin)
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Corporate Social Corporate Social Responsibility (CSR)Responsibility (CSR)
Preliminary definitions of CSRPreliminary definitions of CSR
The impact of a company’s actions on society
Requires a manager to consider his acts in terms of a whole social system, and holds him responsible for the effects of his acts anywhere in that system
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Overview of Corporate Overview of Corporate Social ResponsibilitySocial ResponsibilityClassical View
Pure capitalismPure capitalism
Milton FriedmanMilton Friedman
Sole responsibility of Sole responsibility of business is to serve business is to serve interests of owners: interests of owners: maximize profitsmaximize profits
Socioeconomic ViewStakeholder theoryStakeholder theory
Businesses have a Businesses have a responsibility to protect responsibility to protect and improve society’s and improve society’s welfarewelfare
Moral MinimumBusinesses free to Businesses free to strive for profits as long strive for profits as long as they do no harmas they do no harm
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Social Responsibility – Social Responsibility – Classical ViewClassical View
Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation).
Expending the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the owners and raises prices to consumers.
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Social Responsibility – Social Responsibility – Socioeconomic ViewSocioeconomic View
Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare.
Corporations are not independent entities responsible only to stockholders.
Firms have a moral responsibility to larger society to become involved in social, legal, and political issues.
© Farhan Mir© Farhan Mir
20200707 IMSIMS
The Domain of Corporate The Domain of Corporate Social ResponsibilitySocial Responsibility
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Corporate Social Corporate Social Responsibility (CSR)Responsibility (CSR)
Carroll’s Four Part DefinitionUnderstanding the Four ComponentsResponsibi
litySocietal
Expectation
Examples
Economic Required Be profitable. Maximize sales, minimize costs, etc.
Legal Required Obey laws and regulations.
Ethical Expected Do what is right, fair and just.
Discretionary
Desired/
Expected
Be a good corporate citizen.Business and Society: Ethics and Stakeholder Management, 5E • Carroll & Buchholtz
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved2-16
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Pyramid of CSRPyramid of CSR
Discretional ResponsibilitiesDiscretional ResponsibilitiesBe a good corporate citizen.
Ethical ResponsibilitiesEthical ResponsibilitiesBe ethical.
Legal ResponsibilitiesLegal ResponsibilitiesObey the law.
Economic ResponsibilitiesEconomic ResponsibilitiesBe profitable.
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Corporate Social Corporate Social Responsibility (CSR)Responsibility (CSR)
CSR in Equation Form Is the Sum of:
Economic Responsibilities (Make a profit)Legal Responsibilities (Obey the law)Ethical Responsibilities (Be ethical)Discretional Responsibilities (Good
corporate citizen)
CSR
© Farhan Mir© Farhan Mir
20200707 IMSIMSSource: Schermerhorn, 2002
Managing Corporate Managing Corporate Social ResponsibilitySocial Responsibility
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Social Responsibility Social Responsibility StrategiesStrategies
Reactive StrategyDenying responsibility while striving to Denying responsibility while striving to maintain the status quo by resisting maintain the status quo by resisting change.change.
Defensive StrategyResisting additional social responsibilities Resisting additional social responsibilities with legal and public relations tactics.with legal and public relations tactics.
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Social Responsibility Social Responsibility Strategies Strategies (cont’d)(cont’d)
Accommodation StrategyAssuming social responsibility only in Assuming social responsibility only in response to pressure from interest response to pressure from interest groups or the government.groups or the government.
Proactive StrategyTaking the initiative in formulating and Taking the initiative in formulating and putting in place new programs that serve putting in place new programs that serve as role models for industry as far as as role models for industry as far as Social responsibility is concerned.Social responsibility is concerned.
© Farhan Mir© Farhan Mir
20200707 IMSIMS
But The Debate Goes On! But The Debate Goes On! Managing Corporate Social Managing Corporate Social ResponsibilityResponsibility Arguments against
social responsibility:Reduced business Reduced business profits for ownersprofits for ownersHigher business Higher business costscostsDilution of Dilution of business purposebusiness purposeToo much social Too much social power for businesspower for businessLack of public Lack of public accountabilityaccountabilityPotential conflicts Potential conflicts of interestof interestLack of expertiseLack of expertise
Arguments in favor of social responsibility:
Business creates Business creates problems and problems and should help solve should help solve themthemAdds long-run Adds long-run profitsprofitsBetter public Better public imageimageAvoids more Avoids more government government regulationregulationBusinesses have Businesses have resources resources Better Better environmentenvironmentPublic wants itPublic wants it
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Views Against CSRViews Against CSR
Business is incompetent to handle social issues
The one responsibility of business is to maximise the profits of its owners or shareholders.CSR is not definable and just another marketing trick
© Farhan Mir© Farhan Mir
20200707 IMSIMS
RANK
COMPANy
2001 Net Inc
($mil)
Total Return
to Stock-holders
Com-munit
y
Minor-
ities &
Wo-men
Employ-ees
Environ-ment
Non-U.S.
Stake-holders
Custom-ers
1General Mills
6650.293 5 3.803 1.063 0.193 0.192 0.301
2 Cummins Inc.-102
0.006 5 0.371 2.301 -1.03 3.513 0.301
3 Intel 1,291
0.007 1.563 1.229 3.539 2.64 0.192 0.301
4Procter & Gamble
2,801-0.029 1.563 2.945 1.063 1.416 3.513 -1.06
5 IBM7,713
0.742 3.312 4.662 -0.174 -1.03 0.192 1.663
6Hewlett-Packard
408-0.742 1.563 2.945 1.063 2.64 0.192 1.663
7 Avon Products
430-0.111 1.563 3.803 -0.174 0.193 3.513 0.301
8
Green Mountain Coffee Roasters
6
0.097 3.312 0.371 1.063 0.193 3.513 0.301
9 John Nuveen115
0.735 5 1.229 1.063 0.193 0.192 0.301
10 St. Paul-1,088
-0.415 5 2.087 1.063 0.193 0.192 0.301
Business Ethics 100 Best Corporate Citizens, 2003 Rankings(scores are standard deviations above or below the mean)
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Corporate Social Responsibility Corporate Social Responsibility and Organizational and Organizational PerformancePerformanceCorporate Social Responsibility Issues
Business for Social Responsibility Website Business for Social Responsibility Website (http://www.bsr.org/CSRResources/IssueBriefsLis(http://www.bsr.org/CSRResources/IssueBriefsList.cfm?area=all)t.cfm?area=all)
Examples of Corporate Social ResponsibilityCummins (#2) built school for 800 Brazilian Cummins (#2) built school for 800 Brazilian childrenchildren
Intel’s (#3) CEO gets an email within 24 hours Intel’s (#3) CEO gets an email within 24 hours of injury to any of company’s 80,000 employeesof injury to any of company’s 80,000 employees
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Corporate Social Corporate Social Responsibility and Responsibility and Organizational PerformanceOrganizational PerformanceStudies provide mixed results
A positive relationship between CSR and performance more common
Bottom line: CSR does not appear to hurt organizational performance, and in many cases may enhance performance
© Farhan Mir© Farhan Mir
20200707 IMSIMS
How Does CSR affect How Does CSR affect Reputation?Reputation?
An image for being socially responsible adds to an image of being honest and trustworthy
Such a reputation is a major driver of customer and employee satisfaction
It is often correlated with sales growth
© Farhan Mir© Farhan Mir
20200707 IMSIMS
CSR in PakistanCSR in PakistanENGRO’S SOCIAL CITIZENSHIPENGRO’S SOCIAL CITIZENSHIP(Some examples)(Some examples)
Education- TCF School – Engro Campus- Teacher Training Centre (TARC)- Sahara School (Employee / Company JV)
Health- Free snake bite treatment- Eye Clinic & Eye Camp- Maternity Home- Hospital support – JPMC, Sukkur hospital
Others- Natural calamities- National Debt Relief- Jinnah Film Project
© Farhan Mir© Farhan Mir
20200707 IMSIMS
The Greening of The Greening of ManagementManagement
The recognition of the close link between an organization’s decision and activities and its impact on the natural environment.
Global environmental problems facing Global environmental problems facing managers:managers:
Air, water, and soil pollution from toxic wastesGlobal warming from greenhouse gas emissionsNatural resource depletion
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Do people care enough about wildlife to give evolution a helping hand?It's tough to be a salmon in California waters today. Water intakes threaten you, power boats bring
anglers to try to catch you, and when you finally reach your home river, there may be a dam blocking your way. The last thing you need is for some predator to eat your fry after you spawn.At Chevron, we care about California's salmon. That's why we're releasing mutation-causing chemicals into San Francisco Bay from our refinery at Point Richmond. As salmon swim through the Bay on their way to their spawning grounds our patented GenenTechroline(TM) alters their
chromosomes, giving their offspring a chance to evolve new defenses against predation. The extra eyes on Oncorhynchus guernica, pictured above, are just one example.
And if we save money through this innovative waste disposal technique, and are able to pass it on to our shareholders, so much the better. As the chairman of our Board of Directors said when we
started this program, "the 'eyes' have it."People Do.
Social Responsibility, Social Responsiveness or a modified Solution Judge Yourself!!!!!!!!!
© Farhan Mir© Farhan Mir
20200707 IMSIMS
The Ethical Dimension The Ethical Dimension of Managementof ManagementEthics
The study of moral obligation involving The study of moral obligation involving the distinction between right and wrong.the distinction between right and wrong.
Business EthicsThe study of the complex business The study of the complex business practices and behaviors that give rise to practices and behaviors that give rise to ethical issues in organizations.ethical issues in organizations.
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Practical Lessons from Business Practical Lessons from Business Ethics Research: Ethical Hot Ethics Research: Ethical Hot SpotsSpotsBalancing work and familyPoor internal communicationsPoor leadershipWork hours, work loadLack of management support
Need to meet sales, budget, or profit goalsLittle or no recognition of achievementsCompany politicsPersonal financial worriesInsufficient resources
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Encouraging Ethical Encouraging Ethical ConductConduct
Ethics TrainingAmoral managers:Amoral managers: managers who are managers who are neither moral or immoral, but ethically lazy.neither moral or immoral, but ethically lazy.
Key features of effective ethics training Key features of effective ethics training programsprograms
Top management support.
Open discussion.
A clear focus on ethical issues.
Integration of ethics into the organization.
A mechanism for anonymously reporting ethical violations.
Reward ethical conduct.
© Farhan Mir© Farhan Mir
20200707 IMSIMS
Encouraging Ethical Encouraging Ethical Conduct Conduct (cont’d)(cont’d)
Code of EthicsPublished statement of moral Published statement of moral expectations for employee conductexpectations for employee conduct
Requirements for an effective ethics codeRequirements for an effective ethics codeMust describe specific practices as unethical (e.g., kickbacks, payoffs, gifts, falsification of records, and misleading product claims).Must be firmly supported and fairly enforced by top management.
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