Lecture 6

Social Responsibility

• Business Commitments To Stakeholders

• Stakeholders Affected:– Groups– Individuals– Organizations

Stakeholders

Evolving Social Consciousness

1930s – 1930s – 1940s1940s

1960s – 1960s – 1970s1970s

1980s – 1980s – 1990s1990s

2000+2000+

John D. RockefellerJohn D. Rockefeller

J. P. MorganJ. P. Morgan

Cornelius VanderbiltCornelius Vanderbilt

Vietnam WarVietnam War

Social ActivismSocial Activism

Laissez-FaireLaissez-Faire

Corporate ScandalsCorporate Scandals

Increased Gov’t Increased Gov’t ControlControl

Tighter StandardsTighter Standards

SocialResponsibility

• Environment

• Customer

• Employees

• Investors

SocialResponsibility - Environment

• Pollution– Air (emission of carbon monoxide)– Water– Land

• Improve quality • Prevention of future contamination

• Toxic Waste• Recycling

Consumer Rights

• Safe Products• Informed About Product• To Be Heard• Choose What To Buy• To Be Educated• Courteous Service

Unfair Pricing• Collusion

–Two firms collaborate on price fixing

• Gouging–Price above the market price

when no other retailer is available

Advertising Ethics

• Food Product Labeling–Light, reduced calorie, diet, low fat

• Misleading Product Claims

• Deceptive

• Morally Objectionable

Employer Commitments To Employee

• Job Skills

• Respect & Compassion– Nondiscrimination– Equal Opportunities– Physically & Socially Safe

Workplace

Whistleblowers

• Employees who detect and tries to put an end to

company’s unethical, illegal, socially irresponsible action

by publicizing them

ResponsibilityTo Investors

• Improper Financial Management

• Check Kiting

• Insider Trading

• Financial Misrepresentation- GAAP

Social Responsibility Approaches/Stances

• Obstructionist– Do as little as possible

– Deny or cover actions

– Little regards to ethics

• Defensive– What is required legally

Social Responsibility Approaches/Stances

• Accommodative– Meets standards but will go further in

certain cases

• Proactive– Actively participates in CSR

Low LevelLow Level High High LevelLevel

ObstructioniObstructionistst

DefensiveDefensive AccommodatiAccommodativeve

ProactiveProactive

Social Responsibility Auditing Success of Program

• Starts At Top

• Requires Management Support– Set %age of profits for social programmes

• Single Manager In Charge

• Conduct Social Audits

– Systematic analysis of the firms success in using

funds to meet its obligation