Strategic Management

Social Responsibility
Social responsibility is the
idea that businesses
should balance profit-
making activities with
activities that benefit
society. It involves
developing businesses
with a positive
relationship to the society
in which they operate.
Corporate Governance
Corporate governance is the system
of rules, practices and processes by
which a firm is directed and
controlled. Corporate
governance essentially involves
balancing the interests of
a company's many stakeholders,
such as shareholders, management,
customers, suppliers, financiers,
government and the community.
 Social Responsibility
• Concerned with treating
the SHs of the firm
ethically or in socially
responsible manner
• In contrast of profit
maximization as it
suggests a set of actions
beneficial for external SH
and may not be good for
shareholders
VERSUS
Corporate Governance
• Concerned with holding
the balance between
economic and social goals
and between individual
and communal goals
• Encourage the efficient
use of resources and
equally to require
accountability for the
stewardship of those
resources
• Focused on profit
maximization
RESPONSIBILITIES OF A
BUSINESS FIRM
 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.”
Archie Carroll: Four Responsibilities of Business

Philanthropic 01

02 Ethical

Legal 03

04 Economic
 Archie Carroll
1. Economic – to produce goods and
services of value to society so that the
firm may repay its creditors
2. Legal – defined by governments in laws
that management is expected to obey
3. Ethical – to follow the generally held
beliefs about behavior in a society
4. Philanthropic – purely voluntary
obligations a corporation assumes
 A business firm must first make a profit to satisfy economic
responsibilities. In continuation, firm must follow the laws to fulfill
its legal responsibilities. After the fulfillment of the two
responsibilities, it must look to fulfill its social ones—the ethical
and philanthropic. Ethical responsibilities can be fulfilled by taking
actions that society tend to value but has not yet put into law.
Philanthropic, then, follows. Discretionary responsibilities of today
may become the ethical responsibilities of tomorrow.

Rationality behind Carroll’s theory

SUSTAINABILITY
Crane and Matten
concept of sustainability should be
broadened to include economic and
social as well as environmental concerns

impossible to address the sustainability

of the natural environment without
considering social and economic aspects
of relevant communities and their
activities
 Corporate Stakeholders
Creditors, directors,
employees, government
and its agencies.
Owners (shareholders),
suppliers, unions, and the
community from which
the business draws its
Stakeholders can affect resources.
or be affected by the
organization’s actions,
objectives and policies.
Stakeholder Analysis
Investigating relationships
between stakeholders

Differentiating between
categorizing
stakeholders

Identifying
stakeholders
Reasons for Unethical Behavior
Setting a Bad Example

Impact of Peer Influence

Fear of Reprisal

Cultural differences
 Rule-based
Normally used by developed
nations
Follows well-organized rules
in business dealings and
reporting
Publicly discloses in-depth
information about the
company—transparent
Has an infrastructure, based
on accounting, auditing, etc.
Relationship
Used by developing countries
Transactions based on personal
and implicit agreements
Inherently nontransparent due
to the local and non-verifiable
nature of its information
Decisions may be affected by
culture than market share data
 THE CAUSE

Organizational Pressure from others

performance required it and everyone does it
74% 26%
 Relativism Types
Moral Relativism
morality is relative to some personal,
social, or cultural standard. Social Group Relativism
decision is considered legitimate if it is common
Native Relativism practice, regardless other considerations
each person should be allowed to interpret situations
and act according to his own moral values Cultural Relativism
Role Relativism people should understand the practices of
a manager in charge of a work unit must put aside his other societies but not judge them.
personal beliefs and do what the role requires.
KOLHBERG’S LEVELS OF MORAL
DEVELOPMENT
Preconventional level
– characterized by a concern for self

Conventional level
– characterized by considerations of
LEVELS society’s laws and norms

Principled level
– characterized by a person’s
adherence to an internal moral code
 CODE OF
ETHICS
Specifies how an organization
expects its employees to
behave while on the job
Clarifies company expectations
of employee conduct in various
situations
Makes clear that the company expects its
people to recognize the ethical
dimensions in decisions and actions
 Views on Ethical Behavior

Ethics
defined as the consensually
accepted standards of Law
behavior for an occupation, a
refers to formal codes
trade, or profession.
that permit or forbid
certain behaviors and
may or may not enforce
ethics or morality
Morality
constitutes one’s rules
of personal behavior
based on religious or
philosophical grounds.
 Basic Approaches to
Ethical Behavior
01
Proposes that actions and plans should
be judged by their consequences

Proposes that human beings have

02
certain fundamental rights that should
be respected in all decisions
Proposes that decision makers be
03 equitable, fair and impartial in the
distribution of costs and benefits to
individuals and groups.
 IMMANUEL KANT’S SOLUTION FOR
ETHICAL DILLEMAS
A person’s action is
ethical only if that A person should never
person is willing for treat another human
that same action to being simply as means
be taken by but always as an end.
everyone who is in a
similar situation.