Chapter 5 Social Responsibility and Managerial Ethics

Chapter 5 Social Responsibility and Managerial Ethics -...

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Chapter 5 Social Responsibility and Managerial  Ethics ANNOTATED OUTLINE 1. INTRODUCTION This chapter discusses issues involving social responsibility and managerial ethics and their effect on managerial decision making. Both social responsibility and ethics are responses to a changing environment and are influenced by organizational culture. 2. WHAT IS SOCIAL RESPONSIBILITY? Managers regularly face decisions that have dimensions of social responsibility. Examples include employee relations, philanthropy, pricing, resource conservation, product quality, and doing business in countries that violate human rights. A.Two opposing views of social responsibility are presented: 1. The classical view is the view that management’s only social responsibility is to maximize profits. a. Economist and Nobel laureate Milton Friedman is the most outspoken advocate of this view. b. Friedman argues that managers’ primary responsibility is to operate the business in the best interests of the stockholders —the true owners of the organization. 2. The socioeconomic view is the view that management’s social responsibility goes beyond the making of profits to include protecting and improving society’s welfare. a. This view purports that corporations are not independent entities responsible only to stockholders. b. According to the socioeconomic view, modern organizations are no longer solely economic institutions; society now expects businesses to become involved in social, political, and legal issues. 3. Comparing the Two Views. Classicists maintain that the organization’s only legitimate concern is its stockholders. A four-stage model of the progression of an organization’s social responsibility is shown in Exhibit 5-1 and PowerPoint slide 5-9 . Social responsibility may progress from the stance of obeying all laws and regulations while caring for stockholders’ interests (Stage 1) to
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the point of demonstrating responsibility to society as a whole (Stage 4), which characterizes the highest socioeconomic commitment. B. Supporting and opposing arguments can be found in regard to an organization’s social responsibility (see Exhibit 5-2 ). C. From Obligations to Responsiveness to Responsibility. Social obligation occurs when a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities. Social responsiveness is seen when a firm engages in social actions in response to some popular social need. Social responsibility is a business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. 3. SOCIAL RESPONSIBILITY AND ECONOMIC PERFORMANCE How do socially responsible activities affect a company’s economic performance?
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