2.3 Social responsibility of managers

	The concept of corporate social responsibility means distinguishing right from wrong and doing right. It means being a good corporate citizen.
	The formal definition of social responsibility is management's obligation to make choices and take actions that will contribute to the welfare and interests of society as well as the organization.
	As straightforward as this definition seems, social responsibility can be a difficult concept to grasp, because different people have different beliefs as to which actions improve society's welfare.
	To make matters worse, social responsibility covers a range of issues, many of which are ambiguous with respect to right or wrong.
	For example, if a bank deposits the money from a trust fund into a low-interest account for 90 days, from which it makes a substantial profit, has it been unethical? How about two companies engaging in intense competition, such as that between Microsoft and Netscape? Is it socially responsible for the stronger corporation to drive the weaker one into bankruptcy or a forced merger? Or consider companies such as Chiquita, Kmart, or Global Crossing, all of which declared bankruptcy – which is perfectly legal – to avoid mounting financial obligations to suppliers, labor unions, or competitors.
	These examples contain moral, legal, and economic considerations that make socially responsible behavior hard to define. A company's environmental impact must also be taken in to consideration.

2.3 Social responsibility of managers

The fundamentals of social responsibility: Social responsibility means different things to different people. The amount of attention given to the area of social responsibility by both management and society has increased in recent years and probably will continue to increase. The following sections present the fundamentals of social responsibility of businesses by discussing these topics:

		The Davis model of corporate social responsibility.
		Areas of corporate social responsibility.
		Varying opinions on social responsibility.
		Conclusions about the performance of social responsibility activities by business.

The Davis model of corporate social responsibility:

A general accepted model of corporate social responsibility was developed by Keith Davis. Stated simply, Davis's model is a list of five propositions that describe why and how business should adhere to the obligation to take action that protects and improves the welfare of society as well as of the organization:

			Proposition 1: Social responsibility arises from social power.
			Proposition 2: Business shall operate as a two-way open system, with open receipt of inputs from society and open disclosure of its operations to the public.

2.3 Social responsibility of managers

			Proposition 3: The social costs and benefits of an activity, product or service shall be thoroughly calculated and considered in deciding whether to proceed with it.
			Proposition 4: The social costs related to each activity, product, or service shall be passed on to the consumer.
			Proposition 5: Business institutions, as citizens, have the responsibility to become involved in certain social problems that are outside their normal areas of operation.

Areas of corporate social responsibility: going green

		The areas in which business can act to protect and improve the welfare of society are numerous and diverse. Perhaps the most publicized of these areas are urban affairs, consumer affairs, community volunteerism, and employment practices.
		The one area that is arguably receiving the most recent attention is the area of ecology conservation, popularly called "going green". An international effort sponsored by the United Nations is currently underway and growing to get large companies to start thinking seriously about ecosystems and how to maintain them.
		Companies are responding. For example, the Coca-Cola Company is exploring ways to maintain its bottling operation in India without using underground water.
		And the Foodmaker Kellogg's is developing environmentally sensitive products such as its new organic cereals. Pressure groups are also springing up to persuade companies to go green.

2.3 Social responsibility of managers

Varying opinions on social responsibility:

		Although numerous businesses are already involved in social responsibility activities, much controversy remains about whether such involvement is necessary or even appropriate.
		The following two sections present some arguments for and against businesses performing social responsibility activities.

Arguments for business performing social responsibility activities: This argument begins with the premise that business as a whole is a subset of society, one that exerts a significant impact on the way society exists. Because business is such an influential member of society, the argument continues, it has the responsibility to help maintain and improve the overall welfare of society. If society already puts this responsibility on its individual members, then why should its corporate members be exempt? Some people argue that business should perform social responsibility activities because profitability and growth go hand in hand with responsible treatment of employees, customers, and e community. This argument says, essentially, that performing social responsibility activities is a means of earning greater organizational profit.

2.3 Social responsibility of managers

Arguments against business performing social responsibility activities: The best-known argument against business performing social responsibility activities has been advanced by Milton Friedman, one of the world's most distinguished economists. Friedman argues that making business managers simultaneously responsible to business owners for reaching profit objectives and to society for enhancing societal welfare sets up a conflict of interest that could potentially cause the demise of business as it is known today. According to Friedman, this demise will almost certainly occur if business is continually forced to perform socially responsible actions that directly conflict with private organizational objectives.

Conclusions about the performance of social responsibility activities by business:

The preceding section presented several major arguments for and against businesses performing social responsibility activities. Regardless of which argument or combination of arguments particular managers embrace, they generally should make a concerted effort to do the following:

			Perform all legally required social responsibility activities.
			Consider voluntarily performing social responsibility activities beyond those legally required.
			Inform all relevant individuals of the extent to which the organization will become involved in performing social responsibility activities.

2.3 Social responsibility of managers

Performing required social responsibility activities:

			In some countries, legislation requires that business perform certain social responsibility activities. In the United States, for example, several government agencies have been established expressly to enforce such business-related legislation.
			The Environmental Protection Agency, for instance, has the authority to require businesses to adhere to certain socially responsible environmental standards. See Table 2.3.

2.3 Social responsibility of managers

Table 2-3: Primary functions of several U.S. agencies that enforce social responsibility legislation

2.3 Social responsibility of managers

Voluntarily performing social responsibility activities:

			Voluntarily performing social responsibility activities: Adherence to legislated social responsibilities is the minimum standard of social responsibility performance that business managers must achieve. Managers must ask themselves, however, how far beyond the minimum they should go.
			Determining how far to go is a simple process to describe, yet it is difficult and complicated to implement.
			It entails assessing the positive and negative outcomes of performing social responsibility activities over both the short and the long terms, and then, performing only those activities that maximize management system success while making a desirable contribution to the welfare of society.

Communicating the degree of social responsibility involvement:

			Determining the extent to which a business should perform social responsibility activities beyond legal requirements is a subjective process.
			Despite this subjectivity, however, managers should have a well-defined position in this vital area and should inform all organization members of that position.
			Taking these steps will ensure that managers and organization members behave consistently to support the position and that societal expectations of what a particular organization can achieve in this area are realistic.

2.3 Social responsibility of managers

			Nike, the world famous athletic-gear manufacturer, recently felt so strongly that its corporate philosophy on social responsibility issues should be clearly formulated and communicated that the company created a new position, vice president of corporate and social responsibility.
			Maria Eitelto, a former public-relations executive at Microsoft, was hired to fill that position and is now responsible for clearly communicating Nike's thoughts on social responsibility both inside and outside the organization.