The emergence of management as a distinct and identifiable activity has had an important impact on the society within which it developed. So, too society, with its institutions, customs and value systems, has molded the foundations upon which management has formed its framework of thought. In recent years, the attention of businessmen, philosophers, scientists, and the general public has been directed to issues concerning responsibilities of management, ethical and legal practices of managers, and the entire set of value systems of the business community. We shall consider the cultural setting within which managers make decisions and the moral framework for their philosophies of management. We then point out the fundamental role of objectives in a firm.
Management first evolved as the part of an economic system that allocated the resources of land, labor, and capital in a way to maximize material returns to satisfy the wants of human beings. Its primary orientation is still economic; yet as a result of its increasing importance in society, it has become a social institution. Its decisions and actions now have widespread impact on other social institutions, and therefore, management cannot escape social issues.
The growth of the large corporation, with its professional managers, has changed the nature of society through its effect on competitive forces and the ownership of private property. With its increased power in society, it has been forced to concern itself with the nature of its social responsibilities. Management must make decisions involving moral issues and must adapt itself to the social forces that affect it.
Among the many social institutions that have affected the value systems of management, the following four are particularly important: (1) the family, (2) the educational system, (3) the church, and (4) the government.
Within the patterns of values formed by these institutions, the executive must resolve issues of social responsibility. Consumerism with its emerging spokesmen and new laws, environmentalists with their increased emphasis on pollution and on threats to health and the quality of life, and political disclosure of Watergate, activities of the CIA, and bribery of executives by multinational firms forced increased attention on managers’ social responsibility. Legally, executives are representatives of stockholders or a governmental agency; yet they have responsibilities to employees, consumers, suppliers, and the general public. Conflicts of ethical concepts necessarily develop. Four schools of thought relative to social responsibility offer a framework for managers in viewing social responsibility.
1. Profit maximization as socially desirable.
2. No long-run conflict between corporate and social responsibility.
3. Improvement of one’s own organizational behavioral best leads to social betterment.
4. Management as trustee.