Now let’s turn to the issues of social responsibility. In one sense the concept of corporate social responsibility like ethics is easy to understand: It means distinguishing right from wrong and doing right. It means being a good corporate citizen.
The obligation of organization management to make decisions and take actions that will enhance the welfare and interests of society as well as the organizations.
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 bank deposits the money from a trust fund into a low interest account for 90 days from which it makes a substantial profit, is it being a responsible corporate citizen? How about two companies engaging in intense competition? 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 of Global Crossing all of which declared bankruptcy – which is perfectly legal to – avoid mounting financial obligations to suppliers, labor unions, or competitors These example contain moral, legal, and economic considerations that makes socially responsible behavior hard to define. A company’s environmental impact must also be taken into consideration.
Stake holder: Any group within or outside the organization that has a stake in the organization’s performance.
One reason or the difficulty in understanding social responsibility is that managers must confront the question. Responsibility to whom? Recall from that the organization’s environment consists of several sectors in both the task and general environment. From a social responsibility perspective, enlightened organizations view the internal and external environment as a variety of stake holders.
A stake holder is any group within or outside the organization that has a stake in the organization’s performance. Each stakeholder has a different criterion of responsiveness because each has a different interest in the organization. For example Wal-Mart uses aggressive bargaining tactics with suppliers so that it is able to provide low pores for customers. Some stakeholders see this as responsible corporate behavior because it benefits customers and forces suppliers to be more efficient. Others however, argue that the aggressive tactics, are unethical and socially irresponsible because they force US manufacturers to lay off workers, close factories, and outsource from low wage countries. For instance Wal-Mart now purchases nearly 10 percent of all Chinese imports to the United states. One supplier said clothing is being sold so cheaply at Wal-Mart that many US companies could not compete even if they paid their employees.
The organization’s performance facts stakeholders but stakeholder can also have a tremendous effect on the organization’s performance and success. Consider the case of Monsanto a leading competitor in the life sciences industry.
Most organizations are similarly influenced by a variety of stakeholders groups. Investors and shareholders, employees, customers, and suppliers are considered primary stakeholders, without whom the organizations cannot survive. Investors, shareholders and suppliers interests are served by managerial efficiency — that is, use of resources to achieve profits. Employees expect work satisfaction, pay and good supervision. Customers are concerned with decisions about the quality, safety and availability of goods and services. When any primary stakeholder group becomes seriously dissatisfied the organization’s viability is threatened.
Source: New Era Management