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CH Two Social Responsibility

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39 views15 pages

CH Two Social Responsibility

Uploaded by

mzuody
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CHAPTER 2

Social Responsibility in Strategic


Management

Dr. Mohammad Alzuod


Broader Responsibility

•Should strategic decision makers be responsible only to


shareholders, or do they have broader responsibilities?
•The concept of social responsibility proposes that a private
corporation has responsibilities to society that extend beyond
making a profit.
•Strategic decisions often affect more than just the corporation. A
decision to retrench by closing some plants and discontinuing
product lines, for example, affects not only the firm’s workforce
but also the communities where the plants are located and the
customers with no other source for the discontinued product.
•Such situations raise questions about the appropriateness of
certain missions, objectives, and strategies of business
corporations.
•Managers must be able to deal with these conflicting interests in
an ethical manner to formulate a viable strategic plan. 3-2
Milton Friedman
There is one and only one social
responsibility of business—to use its
resources and engage in activities designed
to increase its profits so long as it stays
within the rules of the game, which is to say,
engages in open and free competition
without deception or fraud.
Carroll’s 4 Responsibilities

Archie Carroll proposed that the managers of business


organizations have four responsibilities:
–Economic
–Legal
–Ethical
–Discretionary
Carroll’s 4 Responsibilities
1. Economic responsibilities of a business organization’s management are to produce
goods and services of value to society so that the firm may repay its creditors and
increase the wealth of its shareholders.
2. Legal responsibilities are defined by governments in laws that management is
expected to obey. For example, U.S. business firms are required to hire and promote
people based on their credentials rather than to discriminate on non-job-related
characteristics such as race, gender, or religion.
3. Ethical responsibilities of an organization’s management are to follow the generally
held beliefs about behavior in a society. For example, society generally expects firms to
work with the employees and the community in planning for layoffs, even though no law
may require this. The affected people can get very upset if an organization’s
management fails to act according to generally prevailing ethical values.
4. Discretionary responsibilities are the purely voluntary obligations a corporation
assumes. Examples are philanthropic contributions, training the hard-core unemployed,
and providing day-care centers. The difference between ethical and discretionary
responsibilities is that few people expect an organization to fulfill discretionary.
Carroll’s 4 Responsibilities
Benefits Received From Being Socially
Responsible
■■ Their environmental concerns may enable them to charge premium
prices and gain brand loyalty (for example, Stoneyfield Yogurt, Whole
Foods, and Ben & Jerry’s Ice Cream).
■■ Their trustworthiness may help them generate enduring relationships
with suppliers and distributors without requiring them to spend a lot of
time and money policing contracts.
■■ They can attract outstanding employees who prefer working for a
responsible firm (for example, Procter & Gamble and Starbucks).
■■ They are more likely to be welcomed into a foreign country (for
example, Levi Strauss).
■■ They can utilize the goodwill of public officials for support in difficult
times.
■■ They are more likely to attract capital infusions from investors who view
reputable companies as desirable long-term investments. For example,
mutual funds investing only in socially responsible companies more than
doubled in size from 1995 to 2007 and outperformed the S&P 500 list of
stocks.23
Stakeholders
• The concept that business must be socially responsible
sounds appealing until we ask, “Responsible to whom?”
• A corporation’s task environment includes a large
number of groups with interest in a business
organization’s activities.
• These groups are referred to as stakeholders because
they affect or are affected by the achievement of the
firm’s objectives.
• Should a corporation be responsible only to some of
these groups, or does business have an equal
responsibility to all of them?
Stakeholder Analysis

–Primary stakeholder
The first step in stakeholder analysis is to
identify the primary stakeholders: Those who
have a direct connection with the corporation
and who have sufficient bargaining power to
directly affect corporate activities. Primary
stakeholders include customers, employees,
suppliers, shareholders, and creditors.
Secondary stakeholder
The second step in stakeholder analysis is to identify
the secondary stakeholders. those who have only an
indirect stake in the corporation but who are also
affected by corporate activities. These usually include
nongovernmental organizations (NGOs, such as
Greenpeace), activists, local communities, trade
associations, competitors, and governments. Because
the corporation’s relationship with each of these
stakeholders is usually not covered by any written or
verbal agreement, there is room for misunderstanding.
Stakeholder Input
The third step in stakeholder analysis is to estimate the
effect on each stakeholder group from any particular
strategic decision. Because the primary decision criteria
used by management is generally economic, this is the
point where secondary stakeholders may be ignored or
discounted as unimportant. For a firm to fulfill its ethical
or discretionary responsibilities, it must seriously
consider the needs and wants of its secondary
stakeholders in any strategic decision. For example,
how much will specific stakeholder groups lose or gain?
What other alternatives do they have to replace what
may be lost?
Sustainability
• sustainability includes much more than just ecological concerns
and the natural environment. Crane and Matten point out that the
concept of sustainability should be broadened to include economic
and social as well as environmental concerns.
• They argue that it is sometimes impossible to address the
sustainability of the natural environment without considering the
social and economic aspects of relevant communities and their
activities.
• For example, even though environmentalists may oppose road
building programs because of their effect on wildlife and
conservation efforts, others point to the benefits to local
communities of less traffic congestion and more jobs.
• Dow Jones & Company, a leading provider of global business news
and information, developed a sustainability index that considers not
only environmental, but also economic and social factors.
Thank you

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