MGMT Essay Two

“Examine how social demands and social responsibility has affected the

way in which a Multi-national organisation operates”

The structures and aims of organisations change rapidly through time. Nowadays,

profit is no longer the only target concerned by organisations. Ethical issues are

becoming more important to large organisations, especially to multinational

organisations. CSR which stands for corporate social responsibility is an approach

that enterprise organisations use to satisfy stakeholders’ expectations by

combining social, ethical and environment concerns with traditional measures

such as revenue, profit and legal obligation together. (“Ultimate Business

Dictionary”, 2003) Corporate social responsibility can be simply defined as

distinguishing what is right and what is wrong, (Samson & Daft, 2005) it is not a

modern theory; however, modern concepts are different from the very first

concept which was mainly focused on shareholder’s interest. (“Multinational

corporate social responsibility, ethics, interactions and Third World governments:

An agenda for the 1990s”, 1993) The Boeing Company is one famous

multinational organisation which is founded by William E. Boeing On July 15,

1916, (The Boeing Company, 2008c) it is now the world’s largest aircraft

manufacturer by revenue and the second largest aeroplane military contractor.

(Army Times Publishing Company, 2008) Boeing operates in seventy countries

with an employ number more than 160 thousands, it is also one of largest

exporters in U.S.A determined by term of sales. (The Boeing Company, 2008a)

This essay will discuss how social demands and social responsibility has affected

the way in which the Boeing Company operates. The first body paragraph will

introduce the term of stakeholder; the organisation’s responses to social demands

will be discussed from the second to fifth body paragraph, the last four body

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paragraphs will discuss the four criteria of corporate social responsibility to

evaluate organisation’s social performance.

Stakeholder is “any group within or outside the organisation that has a stake in the

organisation’s performance.”(Samson & Daft, 2005, p.165) The range of

stakeholders for a single organisation is considerably wide, shareholders,

employees, customers, suppliers and governments are all usual stakeholders.

Furthermore, large multinational organisations often have a much more complex

stakeholder structure than single country based organisations. (Nicholson, 1998)

The decision made by organisation could effect the benefits of the stakeholders,

each stakeholder could have different responses to organisation’s decisions as

stakeholders have their own and different interest in the organisation’s activities.

(Samson & Daft, 2005; Nicholson, 1998) In addition, the stakeholder environment

of a particular organisation changes over time as the interest of stakeholders

changes from time to time, which means that stakeholders may enter or exit the

environment according to the changes of their interests. As an example of the

Boeing Company tries to satisfy their stakeholders, Boeing Company’s chairman

and chief executive officer Harry Stonecipher was forced to resign from his job

for an improper relationship with one of the company’s employee, Debra

Peabody, who also resigned later. Even Boeing declared Mr. Stonecipher did not

violate any company conducts, the former president’s behaviour is still considered

as an embarrassment to the Boeing Company, the scandal may even decrease the

share price of the company. Boeing did a quick action to this scandal, which is

considered to be reasonable to its stakeholders, comparing to past few years, the

board’s actions are often slow and push the scandal becomes ferment,

stakeholders’ interest and benefits were often dropped. (SmartPros Ltd, 2005) The

Boeing Company has a quick response system for the company’s performance

and reputation in order to look after its stakeholders’ interest and benefits.

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Social demand is part of Corporate Social Responsibility, organisations need to

response while a specific social demand occurs. (Samson & Daft, 2005) There are

four types of responses and actions that an organisation may take to deal with

social demands about the organisation’s activities. (Samson & Daft, 2005) Firstly,

proactive responses are the most effective action that an organisation can take to

response to social demands; this action was developed by organisations which

take lead in solving social issues. (Samson & Daft, 2005) Organisations anticipate

the problem before it occurs and change the way in which problem may happens

to a better method. Generally, organisations receive no pressure from stakeholders

as their demands are solved before problems arise. Furthermore, there is another

proactive response; many organisations make generous donations to universities

and charity as a way to improve society. Organisations with proactive response

often take “a long term view of business performance and integrating their

cultural values, strategies and tactics with the needs of all their

stakeholders.”(Samson & Daft, 2005, p. 173) The Boeing Company is improving

its long term business performance time by time; each president was working

towards the goal of becoming a proactive organisation. The former president and

chief executive officer Phil Condit made a Point to Point tour around the every

sites of the Boeing Company, Condit (2002) says, “It gave me an opportunity to

listen first-hand to employee viewpoints and ideas. And it allowed me to share my

assessment of where we are as a company and how we are transforming ourselves

for a better future.” The former president also suggested even Boeing had made a

great improvement on the working environment, the Boeing Company can still

achieve even more than that, improvement is always needed.(Condit, 2002) This

shows that the Boeing Company is working to become a proactive company over

times, and it has a great success for the improvement.

The second type of response is accommodative response; it means that “the

organisation accepts social responsibility for its actions”, (Samson & Daft, 2005,

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p. 172) it takes effective steps to response to social demands, although this action

may be caused by external pressure. Organisation responds to stakeholders’

pressures by meeting the legal, ethical and economic responsibilities.

Organisations always beware their public image, and try to improve the image by

hiring ethic consultants. (Samson & Daft, 2005) The Boeing Company has some

cases which it uses the accommodative responses, one example will be the Harry

Stonecipher case. In March, 2005, Boeing’s president and chief executive Harry

Stonecipher was forced to resign for an improper relation ship with a company

employee, under the pressure of the Board of Directors, which can be considered

as stakeholders. David Gebler, CEO of Working Values which used to be hired by

Boeing as business ethic consultant suggested that Boeing has done a well job to

response to the scandal and the action helps Boeing from ruining its public image.

(SmartPros Ltd, 2005) The Boeing Company has respond to the stakeholders’

pressure by meeting the ethical responsibility and accepts the social responsibility

for its actions.

The third type of response is defensive response. Organisations admit to errors

caused by omissions or commissions, but they are not acting obstructively.

(Samson & Daft, 2005) Defensive organisations often declared the errors are

unavoidable, and these organisations are preferred to “work within the letter of the

law”, (Samson & Daft, 2005, p. 173) as they only respond to legal issues. Since

the new Boeing airplane model 787 becomes available to order, the delay of

deliveries of the new model has occurred three times, the pressure from Boeing’s

customers is explicit, the launch customer All Nippon Airline even used the word

“extremely disappointed” in its formal statement. (Dodge, 2008; Virgin, 2008)

However, the Boeing Company only made defensive responses so far, it declares

the delay of work is caused by “travelled work and unanticipated rework”.

(Virgin, 2008) Boeing accepts the delay made by them and responded to the

pressure, but they declared the delay is common in the industry.

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At last, the fourth type response to social demands is obstructive responses which

deny all responsibility caused by the organisation’s activities, declare that

evidence of wrongdoing is misleading and even obstruct investigations. This type

of responses often used by those organisations only focused on economic benefits.

The action of declaring evidence of wrongdoing is misleading is achieved by

eliminating and hiding existence of crime evidence. (Samson & Daft, 2005) The

Boeing Company is not only focused on economic benefits, but also makes effort

towards social responsibility. (The Boeing Company, 2008b) Therefore, such an

obstructive response is unfound in Boeing’s cases.

Corporate social responsibility can be divided into four categories, economic,

legal, ethical and discretionary responsibilities in order to evaluating an

organisation’s performance. (Swanson, 1995) Firstly, economic responsibility is

the basic reason why a business exists, company is responsible to produce goods

and services which the society needs, and producing profits for the owners.

(Samson & Daft, 2005) However, purely economic responsibility is no longer an

adequate criterion to evaluating performance in most developed countries,

because if an organisation only follows the profit based economic responsibility;

there will be a trouble for the organisation. (Samson & Daft, 2005) For instance,

the Boeing Company’s former chief finance officer Mike Sears had a negation

about offering a job for a Pentagon air force officer, it seems to be harmless for

any party, but the officer was taking a big role of assigning a one billion worth

military contract which Boeing finally got, the action was considered as an

unethical conduct.(BBC, 2003) Boeing’s action was simply profit based, it reflects

the basic idea of economic responsibility, but, the action leads Boeing to a trouble.

After the secret negotiation was unveiled, the air force has cancelled the contact

with Boeing, the share price of the company also dropped, the Boeing Company

was facing a profit loss instead of profit gain. (BBC, 2003) Economic

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responsibility is one way to evaluate the company’s performance but it is not the

only way.

The second criterion is legal responsibility, it is the most important responsibility

that an organisation has to follow, because organisations can only be existed

within the legal framework. “Legal responsibility defines what society deems as

important with respect to appropriate corporate behaviour.” (Szwajkowski, as

cited in Samson & Daft, 2005, p. 171) When organisations break the law, a

possible fine or even closure could apply to organisations by the government. For

example, between 2002 and 2003 Boeing sold 94 commercial jets to overseas

which contain chips with military applications, this action has violate the Arms

Export Control Act, because the legal license that used in this sale in

inappropriate, as a result of the violation the Boeing Company paid a fifteen

million dollars fine for its law breaking sale. (Gates, 2006) Organisations’

activities have to be done within the legal frame, otherwise the organisation will

face legal sanctions.

Furthermore, ethical responsibility is also a criterion to evaluate organisation’s

performance, it includes behaviours that is not enforced by law or based on

economic interests. (Samson & Daft, 2005) Moreover, Organisation’s decisions

are suppose to be ethical, which means they should act with impartiality and also

respect the rights of individuals, in contrast, unethical behaviours mean that the

organisation gains profit from the society’s expense. (Samson & Daft, 2005)

Using misleading advertisings could also be considered as unethical behaviours,

the Boeing Company has an advertising in UK claims its the yet to launch model

747-8 produces “less than 75 grams CO2 per passenger km”, but this statement

was challenged by a complaint which received by the Advertising Standards

Authority. The complaint said the figures used by the Boeing Company can be

varied as many unknown factors like the number of passengers will affect the

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CO2 per passenger km figure. (Sweney, 2007) The Boeing’s misleading

advertising is a not serious problem as it only has an unclear statement. However,

the advertising may attract the attention of people with environment protection

mind, and gain supports from them, which indirectly improves the company’s

public image and maybe even profits. Nevertheless, the advertising may have an

effect of misleading, but it does not generate profits directly from the society’s

expense, the Boeing Company’s activities are mostly ethical behaviours.

In addition, the last criteria for evaluating organisation’s performance is

discretionary responsibility, it is not based on any economic, legal or ethics

consideration, but purely motivated by organisation’s interest to contribute to the

society. Activities like charity events or generous donations which expect no

paybacks are considered as discretionary behaviours. Furthermore, discretionary

responsibility is the “highest criterion of social responsibility because it goes

beyond societal expectations to contribute to the community’s welfare.” (Samson

& Daft, 2005) In 2007, the Boeing Company donated ten million dollars to help

science education for youth in Chicago area, Chicago's Adler Planetarium and the

Museum of Science and Industry will equally share the donation which will be

used to create educational exhibitions and programming that will attract young

people to careers related to science and technology. (Fincutter, 2007) The Boeing

Company’s donation is totally based on its own desire and motivated by the mind

of philanthropy, this donation reflects the good performance of the Boeing

Company contributed to discretionary responsibility.

In conclusion, corporate social responsibility is consisted of both organisation’s

performance and response to society. Organisation have four types of response to

respond social demands from high to low, proactive response, accommodative

response, defensive response and obstructive response. Economic, legal, ethical

and discretionary responsibilities are the four criteria for evaluating an

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organisation’s performance. (Samson & Daft, 2005) The Boeing Company has a

proactive response to respond social demand, it anticipated the problems before

they rise. Boeing also has a reasonable good performance of social responsibility,

even improvements are needed. Corporate social responsibility is becoming more

important to modern organisations, as economic profit is no longer the only

measure of organisation’s performance to society, organisation’s contribution to

society also counts toward the overall evaluation, it is like the new standard for

organisations.

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