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What is the role of Business in Society

Allegations About Business …. Little concern for the consumer Cares nothing about the deteriorating social order Has no concept of acceptable ethical behavior Indifferent to the problems of minorities and the environment. What responsibility does business have to society?.

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What is the role of Business in Society

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  1. Allegations About Business … • Little concern for the consumer • Cares nothing about the deteriorating social order • Has no concept of acceptable ethical behavior • Indifferent to the problems of minorities and the environment What responsibility does business have to society? What is the role of Business in Society

  2. Does the firm have a social responsibility? NO!!! Nobel Laureate Economist Milton Friedman argues corporations’ only social responsibility is to make money. Some of his key arguments are: • Social issues are in the realm of public policy i.e. government action. • Managers have no constituency to whom they are responsible • Managers are not trained to make public policy decisions.

  3. Restricts the free market goal of profit maximization Dilutes the primary aim of business Increase business power Limits the firm’s ability to compete in a global marketplace More Arguments Against CSR

  4. Does the firm have a social responsibility? YES!! The social Contract (Rousseau etc.) suggests that corporations as citizenssociety have a responsibility to give back to that society in fair measure to what they receive from that society.

  5. Addresses social issues business may have caused and allows business to be part of the solution Protects business self-interest Limits future government intervention Addresses issues by using business resources and expertise Addresses issues by being proactive More Arguments For CSR

  6. Requires the individual to consider his/her acts in terms of a wholesocial system, and holds him/her responsible for the effects of actsanywhere in that system. The impact of a company’s actions on society is the focus. CorporateSocial Responsibility? Corporate Social Responsibility (CSR)

  7. Factors in the Societal Environment Criticism of Business Increased Concernfor the Social Context A Changed Social Contract Business Assumption ofCorporate Social Responsibility Social Responsiveness, leads to Social Performance, and Corporate Citizenship A More Satisfied Society Fewer Factors Leading toBusiness Criticism Increased ExpectationsLeading to More Criticism Business Criticism/Business Response Cycle

  8. Ethical and Moral Relativism Responsibility according to whom????

  9. Corporate Social… Emphasizes… Responsibility obligation, accountability Responsiveness action, activity Performance outcomes, results Evolution of Concepts

  10. Corporate Social Performance “CSP is the firm's configuration of principles of social responsibility processes of social responsiveness and policies, programs and observable outcomes as they relate to the firm's societal relationships" ( Wood's 1991:691)

  11. Acceptance and Broadening of Meaning • From the 1950’s to the present, the concept of CSP has gained considerable acceptance and the meaning has been broadened to include specific issues, such as: • product safety • honesty in advertising • employee rights • affirmative action • environmental sustainability • ethical behavior • global CSP

  12. Carroll’s Four-Part Definition of CSR(P) • The social responsibility (performance) of business encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time.

  13. Understanding the Four Components Responsibility Societal Expectation Examples Legal Economic Philanthropic Ethical Expected/ Required Required Required Desired/Expected Obey laws and regulations Do what is right, fair, and just Be a good corporate citizen Be profitable. Maximize sales, minimize costs Carroll’s Four-Part Definition of CSR

  14. Philanthropic PerformanceBe a good corporate citizen. Ethical Performance Be ethical. Legal Performance Obey the law. Economic Performance Be profitable. The Pyramid of CSR(P)

  15. Defensive approach Cost-benefit approach Strategic approach Innovation and learning approach Ways Firms Respond to CSR(P) Pressure The Civil Corporation, Simon Zadek

  16. Corporate Social Performance

  17. Perspective 1: CSP Drives the Relationship Good CorporateSocial Performance Good CorporateFinancialPerformance Good CorporateReputation Perspective 2: CFP Drives the Relationship Good CorporateFinancialPerformance Good CorporateSocial Performance Good CorporateReputation Perspective 3: Interactive Relationship Among CSP, CFP, and CR Good CorporateSocial Performance Good CorporateFinancialPerformance Good CorporateReputation Social and Financial Performance

  18. Owner Stakeholders’ “Bottom Line” (Profit and WACC) Consumer Stakeholders’ “Bottom Line” Corporate Social Performance Employee Stakeholders’“Bottom Line” Community Stakeholders’“Bottom Line” Other Stakeholders’ “Bottom Line” A Multiple Bottom-Line Perspective

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