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CHAPTER 1

Social Responsibility

Framework

95% of Respondents Agree

U.S. corporations should have more than one

purpose. They also owe something to their

workers and the communities in which they

operate, and they should sometimes sacrifice

some profit for the sake of making things

better for their workers and communities. Source: "How Business Rates: By the Numbers, Business

Week, Sept. 11, 2000, pp. 148-149.

What do you believe organizations

should be responsible for

accomplishing?

Social Responsibility Defined

Social responsibility

The adoption by a business of a strategic focus

for fulfilling the economic, legal, ethical and

philanthropic responsibilities expected of it by

its stakeholders

Businesses should look beyond their self-

interests and recognize that they belong to

a larger group that expects responsible

participation.

Social Responsibility Defined (cont.)

Applies to all types of businesses

Small businesses

Large businesses

Sole proprietorships

Multinational corporations

Social Responsibility Defined (cont.)

Adopts a strategic focus

Requires a formal commitment from top management

Communicated through mission and vision statements,

annual reports, websites, and public relations

Requires action and results

Depends on collaboration and coordination across business

and among constituencies

Large companies often create specific positions and

departments to support social responsibility programs

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Social Responsibility Defined (cont.)

Fulfills societal expectations

Provides a return on investment for owners

Obeys the law and regulatory agencies

Acts in a just, fair, and correct manner

Promotes human welfare and good will

TOTO Corporate Responsibility Committee

Structure

Pyramid of Social Responsibility Social Responsibility Defined (cont.)

Economic

Maintain profitability

Legal

Abide by legal and regulatory influence

Ethical

Ensure just and fair behavior in the workplace

Philanthropic

Promote human welfare and goodwill

Social Responsibility Continuum

Add Figure 1.5 here

Who are the key

stakeholders of the organization?

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Social Responsibility Defined (cont.)

Requires a stakeholder orientation

Customers

Employees

Investors

Stockholders

Suppliers

Government

Communities

Stakeholders

Those constituents who have a stake in, or

claim on, some aspect of a companys

products, operations, markets, industry, and

outcomes

Companies that operate with a stakeholder

orientation recognize that business and society

are interpenetrating systems, in that each

affects and is affected by the other.

Evolution of Social Responsibility: 1940s1960s

1940s

Economic dominance of corporations

Total autonomy of top management

1950s60s

Few formal governance procedures restraining

management actions

Organizational charitable giving expanded

(charities, arts, culture, and community)

Laws are passed that require protection of the natural

environment, safer products, promotion of equity,

and supporting workplace diversity.

Evolution of Social Responsibility: 1970s1980s

1970s

World competition, bankruptcies, mergers and

acquisitions

1980s

Flatter organizations (downsizing)

More business scandals

Empowerment of lower-level employees

Focus on profitability and economies of scale

Evolution of Social Responsibility: 1990s2000s

1990s

Less employee loyalty and increased job hopping

Growth of temporary employment

Greater interest in ethics and social responsibility

2000s

Special interest groups, companies, human rights activists,

and government strive to balance economic and social goals.

Major scandals damage the global economy.

Lessons Learned from Economic

Crises

Transparency

Long-term perspective

Liquidity

Limited use of derivatives

Absence of rating triggers

Minimal counter-party exposure

Diversification

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Global Nature of Social Responsibility

Who determines social responsibility

on a global scale?

Host country

Home country

Outside organizations

Managing Social Responsibility in Home and Host Markets

Benefits of Social Responsibility

Greater trust with stakeholders

Greater customer satisfaction

Stronger employee commitment

Stronger investor loyalty

Greater profitability

Countries with greater trust-based institutions foster a

productivity-enhancing environment.

Competitive processes are more efficient and effective.

Social Responsibility Builds Trust

Trust is the glue that holds organizational

relationships together.

Stephen Covey contends that low trust

results in organizational decay and

relationship deterioration.

Political problems and inefficiency

Most workers feel they can be

trusted more than they can

trust others.

Social Responsibility Builds Trust (cont.)

All organizational members should share a

sense of trust.

Trust should exist between departments

within a firm.

An Ethics Resource Center study shows that

93% of employees who say trust is

frequently evident in their organization

report satisfaction with their employer.

To Trust or Not to Trust

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Social Responsibility Improves Customer Satisfaction

Focuses on customer satisfaction and

strengthens trust. This is especially key in

service organizations.

Seventy percent of consumers in a

Cone/Roper poll indicated they would

switch to brands associated with a good

cause if price and quality were equal.

What happens when consumer organizational trust is breached?

Seventy-five percent of consumers say they

would avoid or refuse to buy from certain

businesses.

Consumers may avoid products from

companies that treat their employees unfairly.

Social Responsibility Strengthens Employee Commitment

The greater a companys dedication to employees, the greater

the likelihood that employees will take care of the

organization.

Failure to care for employees results in lower loyalty and

commitment.

Employees perceptions are affected by:

Safe working conditions, competitive salaries, and

contractual fulfillment

Social programs, including work-family relationships, stock ownership, community service

What happens when employee loyalty is breached?

Quality is compromised.

Service is compromised.

Efficiency decreases.

Strengthening Employee Commitment

Employee stock ownership plans (ESOPs)

Rewards employees for contributing to and gaining from

organizational success and allows them to gain from it

Employee-centered programs

Health care benefits

Health clubs

Child care and elder care

Cafeteria benefits plans

Social Responsibility Contributes to Investor Loyalty

Investor relationships require dependability,

trust, and commitment.

Shareholders are concerned about ethics, social

responsibility, and corporate reputation.

Half of investors sell their stock

within one year.

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Social Responsibility Enhances Economic Performance

Does business conduct relate to a

nations overall economic conduct?

Economic well-being is promoted by:

Trust and a sense of community

Rigor in the legal and ethical systems

Consistent exercise of authority within society

Social institutions that foster access,

productivity, and economic growth

Positive attitudes about work, innovation,

savings, and profits

Are the following companies considered socially responsible? Why or why not?

Procter & Gamble

Washington Mutual

Starbucks

General Motors

Avon

AIG

McDonalds

Coca Cola

Framework for Studying Social Responsibility

Chapter 2

Strategic Management of Stakeholder Relationships

Chapter 3

Corporate Governance

Chapter 4

Legal, Regulatory, and Political Issues

Chapter 5

Business Ethics and Ethical Decision Making

Framework for Studying Social Responsibility (cont.)

Chapter 6

Strategic Approaches to Improving Ethical Behavior

Chapter 7

Employee Relations

Chapter 8

Consumer Relations

Chapter 9

Community Relations and Strategic Philanthropy

Framework for Studying Social Responsibility (cont.)

Chapter 10

Technology Issues

Chapter 11

Sustainability Issues

Chapter 12

Social Responsibility in a Global Environment