Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL 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
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
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
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 company’s 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:1940s–1960s • 1940s • Economic dominance of corporations • Total autonomy of top management • 1950s–60s • 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 supportingworkplace diversity.
Evolution of Social Responsibility:1970s–1980s • 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:1990s–2000s • 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.
Transparency Long-term perspective Liquidity Limited use of derivatives Absence of rating triggers Minimal counter-party exposure Diversification Lessons Learned from Economic Crises
Global Nature of Social Responsibility • Who determines social responsibility on a global scale? • Host country • Home country • Outside organizations
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.
Social ResponsibilityImproves 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 ResponsibilityStrengthens Employee Commitment • The greater a company’s 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-familyrelationships, stock ownership, community service
What happens whenemployee loyalty is breached? • Quality is compromised. • Service is compromised. • Efficiency decreases.
StrengtheningEmployee 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 ResponsibilityContributes 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.
Social ResponsibilityEnhances Economic Performance • Does business conduct relate to a nation’s 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 • McDonald’s • 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