Professional Ethics

Faculty of Business Management

Trimester 1, 2014

Lecturer : Aminath Arusha

TOPIC – 6 SOCIAL RESPONSIBILTY

AND ORGANISATIONS

Learning Outcomes…By the end of this topic, you should be able to:Describe the eras involved in the evolution of

thought about social responsibility;

Explain the areas of social responsibility;

Discuss the arguments for and against social responsibility; and

Explain how government and organisations influence each other.

WHAT IS CORPORATE SOCIAL RESPONSIBILITY?

CSR is the adoption of an organization regardless of private or public, large or small, at a strategic level of its economic, legal, ethical and community responsibilities to meet the stakeholder expectations. It is a set of obligations that an organization has to protect and extend to the society in which it functions. (Ferrell, Thorne, & Ferrell, 2011)

CSR revolves around four main areas

HISTORICAL VIEWS ON SOCIAL RESPONSIBILITY

Entrepreneurial EraThe Captain's of America

From let to right, John D. Rockefeller, Andrew Carnergie, Cornelius Vanderbilt, and JP Morgan.

THE ENTREPRENEURIAL ERA• Started in the United States during the late 1800s.• Captains at that time, including John D. Rockefeller, Cornelius

Vanderbilt, J. P. Morgan and Andrew Carnegie stated building empires in industries such as oil to railroads and banking to steel.

• These men were truly the first executives to control power and wield influence at the national level.

• Unfortunately, in many instances, early entrepreneurs chose to abuse their power through ruthless practices

• Due to these ruthless practices, governments were forced to pass laws in which it acknowledged the relationship among business, government and society.

• These practices also indicated for the first time that business had a role to play in society beyond the pure maximisation of profit.

Practices of Early Entrepreneurs

DEPRESSION ERA• Views towards social responsibility continued throughout the early

part of the 20th century• However, the views changed drastically during the Depression Era of

the 1930s.• By this time, large organisations had come to dominate the American

economic scene, and many people criticised them for irresponsible financial practices that led to the stock market crash of 1929.

• The New Deal program initiated by Franklin Roosevelt brought series of social, economic and governmental reforms in the US economy

• The “Securities and Exchange Commission (SEC)” was also established in 1934 to regulate the sales of securities and curb unfair stock market practices.

• These new government actions insisted that organisations take an active role in promoting the general welfare of the American public.

• Characterised by social responsibility known as the Social Era of the 1960s.

• The civil rights movement and widespread opposition to the war in Vietnam energised the American public to examine the nation’s values, priorities and goals.

• The growing trend towards social responsibility raised these two important questions:

(a) To whom should a business organization be responsible to?

(b) Who is ultimately accountable for the organization's practices?

THE SOCIAL ERA

AREAS OF SOCIAL RESPONSIBILITY

Organisational Constituents• Are those directly affected by an organization’s actions and also those

who have a direct stake in the performance of the organization such as state and federal governments, creditors, customers, suppliers, employees, interest groups, courts and investors.

• Organisations that are socially responsible in their dealings with employees treat workers fairly, make them a part of the team, and respect their dignity and basic human needs.

• To maintain a socially responsible stance toward investors, managers should do the following:

Maintain proper accounting procedures Provide appropriate information to shareholders about the current

and projected financial performance of the firm Manage the organisation in such a way as to protect the

shareholder’s rights and investments

Organisational Natural Environment• Not long ago many organizations regularly and indiscriminately dumped sewage,

waste products from production and trash into streams, rivers, the air and on vacant land.

• Due to these practices many laws have been put in place to regulate the disposal of waste materials and companies who violate such rules face the consequences.

• However companies have seen the consequence of their actions and have become more socially responsible in their handling of pollutants and other damages to the environment.

• To be socially responsible to the environment in which businesses operate, they need to

Develop economically feasible ways to avoid contributing to acid rain, depletion of the ozone layer and global warming

Find alternative methods of handling sewage, hazardous wastes and ordinary trash.

Develop safety policies that reduce accidents that have potentially disastrous environmental results.

• companies may follow these practices in order to comply with their responsibility toward the natural environment:

Contributions to charities, philanthropic organisations, non-profit foundations and associations

Support for museums, symphonies, public radio and television

Taking a role in improving public health and education

Organisational General Social Welfare

• It is argued that apart from treating constituents and the natural environment responsibly, business organisations should also promote the general welfare of society.

• Therefore, they should act to correct or at least not contribute to political inequalities.

ARGUMENTS FOR ARGUMENTS AGAINST

Businesses create problems andshould therefore help to solvethem.

The purpose of business is togenerate profit for owners.

Corporations are citizens in oursociety.

Involvement in social programmesgives businesses too much power.

Businesses often have theresources necessary to solveproblems.

There is a potential for conflict ofinterest.

Social responsibility can enhanceprofits.

Businesses lack the expertise tomanage social programmes.

WHY SOCIAL RESPONSIBILITY??

ORGANISATIONAL APPROACHES TOSOCIAL RESPONSIBILITY

Organizational Approaches

Explanation

Social Obstruction This approach has the lowest degree of social responsibility. Very few companies take this approach and do very little or few to social and economic problems. When they cross the ethical or legal line, usually they tend to deny or cover up their actions.

Social Obligation This approach involves doing everything that is legally required to solve social or environmental problems but doing nothing more. Managers in organisations that take this approach usually insist that their job is to generate profits.

Social Response This approach involves meeting legal and ethical requirements and going beyond those requirements in certain cases. Such firms voluntarily agree to participate in certain limited social programmes, but solicitors must convince the organisation that they are worthy of support.

Social Contribution This approach has the highest degree of social responsibility. This approach goes far beyond minimal requirements and involves proactively seeking opportunities to contribute to society.

THE GOVERNMENT AND SOCIAL RESPONSIBILITY

HOW GOVERNMENTS INFLUENCE ORGANIZATIONS

HOW ORGANIZATIONS INFLUENCE GOVERNMENTS

Organizational Methods

Explanation

Personal contacts Many corporate executives and political leaders are in the samesocial circles. Hence they can be influenced through the personal contacts they have and through various networks.

Lobbying An attempt by individuals or groups to influence legislation. A lobbyist formally represents an organisation before a law-making body such as various NGOs

Political ActionCommittees(PACs)

PACs are special organisations created to solicit and then distributemoney to political candidates, because companies themselves cannot legally make direct donations to political campaigns. Employees of a firm may be encouraged to make donations to a particular PAC as managers know that the PAC supports candidates with political views similar to their own. The PAC, in turn, makes the contribution itself, usually across the board to state and national candidates.

Favours Organisations sometimes rely on favours and other influence tacticsto gain support.

MANAGING SOCIAL RESPONSIBILITY

Formal organizational approaches

Informal organizational approaches

EVALUATING SOCIAL RESPONSIBILITY

Social Audit: Is a process of assessing and reporting business performance of economic, legal, ethical and philanthropic social responsibilities expected by stakeholders as mentioned earlier in the topic.

Social auditing provides tools that companies can use to identify and measure their impact on stakeholders, communicate this information internally and externally, apply this information to make continual improvements in areas that stakeholders see as important.

One of the most recent guidelines for social responsibility is the ‘ISO 26000 Guidance for Social Responsibility’

The social audit encourages corporations to look into the social, environmental and economic bottom lines, namely, the Triple Bottom Line (Elkington, 1997, 1999). Other examples of nonfinancial measurements are Six-Sigma and Balanced Scorecard.

Ideally, the outcome of social audit is a social report. Corporate social reporting is the reporting of corporation’s social performance; the reporting of what a corporation has or has not achieved at the end of a financial year. However, The Global Reporting Initiatives (GRI) introduced one of the most comprehensive social reporting guidelines.

Some of the benefits of social auditing to corporations are as follows: To achieve the best social performance possible

To facilitate organizational improvement an organizational learning

To improve relationships with stakeholders through dialogues

To assist the organisation in identifying potential risks and liabilities

To assist in coordinating programmes throughout the firm

To allow the company to assess its impact on the environment, community and society

Benefits of Social Auditing

An example of CSR

Adapted from: http://www.sony.net/SonyInfo/csr_report/about/

Stakeholders Principal Goals

Customers •Provide products that deliver satisfaction, safety and peace of mind from the customer's perspective

•Provide customer service that further enhances customer satisfaction

•Enhance usability and accessibility

Shareholders •Promote swift and appropriate disclosure

•Achieve continued growth in corporate value

Business partners •Ensure appropriate, transparent and fair procurement practices, in line with the Sony Group Code of Conduct

•Ensure that procurement practices are in harmony with the environment and society (including labor issues, human rights and conflict minerals)

Stakeholders Principal Goals

Employees •Support employees with diverse backgrounds

•Promote diversity in hiring

•Foster global business leaders and engineers who will drive growth in the future

•Support individual career-building efforts)

•Promote dialogue through employee surveys and town hall meetings

Local communities •Promote initiatives that contribute to communities in fields where Sony is best able to do so

•Provide emergency relief

•Work with NGOs and NPOs to help resolve issues facing society

Stakeholders Principal GoalsGlobal environment •Reduce the environmental footprint of Sony's

business activities and products throughout their life cycle to zero

• Reduce CO2 emissions of Sony's business activities and products throughout their life cycle to zero

•Reduce the volume of virgin resources used and maximize the use of recycled resources; conserve water resources; and promote the collection and recycling of end-of-life products

•Prevent pollution by reducing the volume of chemical substances used

•Promote the conservation and restoration of biodiversity and the sustained use of biodiversity-friendly products

NGOs, NPOs and other organizations •Collaborate with NGOs and NPOs to help address social challenges

•Participate in global frameworks

•Participate in CSR-related organizations and projects