Principles of Management

1. Principles of Management CorporateSocialResponsibility

2. A New SkillforManagers • Discussions of the responsibilitiesof business and its role in societyhave been motivated by the growing awarenessof unfair or discriminatory business behaviorand anincreasing number of social and environmentalscandals • Businesses are now expected to behave in responsible ways. Thisentails: • A managerialobligation to take actionthat protects and improves both the welfare of society as a whole and the interests of the organization.

3. The Davis Model of Corporate Social Responsibility • A generally accepted model of corporate social responsibility was developed by Keith Davis. • Davis’s model is a list of five propositions that describe why and how businessshould adhere to the obligation to take action that protects and improves the welfare of society aswell as that of the organization: • Social responsibility arises from social power • Business shall operate as a two-way open system, with openreceipt of inputs from society and opendisclosure of its operations to thepublic • The social costs and benefits of an activity, product, or serviceshall be thoroughly calculated and considered in deciding whether to proceedwith it • The social costs related to each activity, product, or serviceshall be passed on to the consumer • Business institutions, as citizens, have the responsibility tobecome involved in certain social problems that are outside their normal areas ofoperation

4. Social responsibility arises from social power • Businesshas a significant amount of influence on, or powerover, such critical social issues as minority employment and environmental pollution. • Society’slegal system does not expect more of business than it does ofeach individual citizen exercising personal power.

5. Business shall operate as a two-way open system, with openreceipt of inputs from society and opendisclosure of its operations to thepublic • Businessmust be willing to listen to what must bedone to sustain or improve societal welfare. • Societymust be willing to listen tobusiness reports on what it is doing to meet its social responsibilities. • There must be ongoing, honest, and opencommunications between business and society’srepresentatives if the overall welfare of society is to be maintained or improved.

6. The social costs and benefits of an activity, product, or serviceshall be thoroughly calculated and considered in deciding whether to proceedwith it • Technicalfeasibility and economic profitability arenot the only factors that should influence businessdecision making. • Business should alsoconsider both the long- and short-term societal consequences of all business activities beforeundertaking them.

7. The social costs related to each activity, product, or serviceshall be passed on to the consumer • Businesscannot beexpected to completely finance activities that may be socially advantageous but economicallydisadvantageous. • The cost of maintaining socially desirable activities within businessshould be passed on to consumers through higher prices for the goods or services related tothese activities.

8. Business institutions, as citizens, have the responsibility tobecome involved in certain social problems that are outside their normal areas ofoperation • Businesspossesses the expertise to solve asocial problem with which it may not be directly associated, it should be held responsible forhelping society solve that problem. • Becausebusiness eventually will reap anincreased profit from a generally improved society, business should share in the responsibility ofall citizenry to generally improve society

9. Issuesrelatedto CSR • Employmentconditions • Environmentalsustainability • Consumer affairs • Socialproblems/wellfare • Quality of life

10. Someexamples • Coca-Cola Company is exploring ways to maintain its bottling operation inIndia without using underground water • The Mohawk Home Company is developing a new line ofbathroom rugs with all natural fibers • Kellogg’s is developing environmentally sensitive products,such as its organic Rice Krispies. • Nike, the world-famous athletic-gear manufacturer, recently felt so strongly that its corporatephilosophy on social responsibility issues should be clearly formulated and communicated thatthe company created a new position, vice president of corporate and social responsibility

11. Determining Whether a Social Responsibility Exists • One challenge facing managers who are attempting to be socially responsive is to determinewhich specific social obligations are implied by their business situation. • Managers in the tobaccoindustry, for example, are probably socially obligated to contribute to public health by pushingfor the development of innovative tobacco products that do less harm to people’s health

12. What can themanagers do? • Determining exactly whichsocial responsibilities an organization should pursue and then deciding how to pursue themare the two most critical decisions for maintaining a high level of social responsiveness withinan organization. • Incorporates social goals into the annual planning process. • Seeks comparative industry norms for social programs. • Presents reports to organization members, the board of directors, and stockholders on socialresponsibility progress. • Experiments with different approaches for measuring social performance. • Attempts to measure the cost of social programs as well as the return on social programinvestments.

13. What can themanagers do? • Managers have known for some time that to achieve desirable results inthese areas, they must be effective in planning, organizing, influencing, andcontrolling. • Achievingsocial responsibility results is no different.

14. PlanningorganizingSocial Responsibility Activities • Socialtrends forecasts should be performed within the organizationalenvironment along with the more typically performed economic, political, andtechnologicaltrends forecasts. • Examples of social trends that organizations can forecast are societal attitudestoward water pollution, safe working conditions, and the national education system.

15. Influencing Individuals Performing SocialResponsibility Activities • Influencingis the process of guiding the activities of organization membersto help attain the organization’s social responsibility objectives. • To influenceappropriately in this area, managers must lead, communicate, motivate, and work with groupsin ways that result in the attainment of the organization’s social responsibility objectives.

16. Controlling Social Responsibility Activities • Controlling, as discussed lastweek, is making things happen as they were planned to happen. • To control, managers assess or measure what is occurring in the organization and, if necessary,change these occurrences in some way to make them conform to plans. • Controlling inthe area of social responsibility entails the same two major tasks.

17. Areas of Measurement • The economic function area—A measurement should be made of whether theorganization is performing such activities as producing goods and services that people need,creating jobs for society, paying fair wages, and ensuring worker safety. • This measurementgives some indication of the economic contribution the organization is making to society.

18. The quality-of-life area • The measurement of quality of life should focus on whetherthe organization is improving or degrading the general quality of life in society. • Producinghigh-quality goods, dealing fairly with employees and customers, and making an effort topreserve the natural environment are all indicators that the organization is upholding orimproving the general quality of life. • As an example of degrading the quality of life, somepeople believe that cigarette companies, because they produce goods that can harm thehealth of society overall, are socially irresponsible.

19. The social investment area • The measurement of social investment deals with the degreeto which the organization is investing both money and human resources to solve communitysocial problems. • The organization could be involved in assisting community organizationsdedicated to education, charities, and the arts.

20. The problem-solving area • The measurement of problem solving should focus on thedegree to which the organization deals with social problems, such as participating in longrangecommunity planning and conducting studies to pinpoint social problems.

21. The Social Audit: A Progress Report • A social audit is the process of measuringthe present social responsibility activities of an organization to assess its performance in thisarea. • The basic steps in conducting a social audit are monitoring, measuring, and appraising allaspects of an organization’s social responsibility performance.

22. Discussion on CSR • Argumentsfor CSR: • Business, as a whole, is a subsetof society, one that exerts a significant impact on the way society exists. • Because business is such aninfluential member of societyit has the responsibility to help maintain andimprove the overall welfare of society. • If society already puts this responsibility on its individualmembers, then why should its corporate members be exempt?

23. Argumentsfor CSR • Businessshould perform social responsibility activitiesbecause profitability and growth go hand-in-handwith responsible treatment of employees, customers,and the community. • Performingsocial responsibilityactivities is a means of earning greater organizational profit.

24. Arguments Against Business Performing Social ResponsibilityActivities • “the basic missionof business [is] thus to produce goods and services at a profit, and in doing this, business[is] making its maximum contribution to society and, in fact, being socially responsible.”MiltonFriedman • Friedman argues that making business managers simultaneously responsible tobusiness owners for reaching profit objectives and to society for enhancing societal welfaresets up a conflict of interest that could potentially cause the demise of business as it is knowntoday.