Social Responsibility & Managerial Ethics
What is corporate social responsibility (CSR)?
It is a management’s obligation to make choices and take actions that will contribute to the
welfare and interests of society as well as the organization.
CSR can be difficult 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.
Evaluating Corporate Social Responsibility
Four criteria of corporate social responsibility
1. Economic Responsibility- the business institution being the basic economic unit of society has
the responsibility to produce the goods and services that society wants and to maximize profits
for its owners and shareholders. This is called “profit-maximizing view” advocated by Nobel
economist Milton Friedman. This view argues that the corporation should be operated on a
profit-oriented basis, with its sole mission to increase its profits as long as it stays within the
rules of the game.
2. Legal Responsibility- defines what society deems as important with respect to appropriate
corporate behavior. That is, businesses are expected to fulfil their economic goals within the
framework of legal requirements imposed by the local and national government agencies.
3. Ethical Responsibility- includes behaviors that are not necessarily codified into law and may not
serve the corporation’s direct economic interests. To be ethical, organization decision makers
should act with equity, fairness and impartiality, respect the rights of individuals, and provide
different treatment of individuals only when relevant to the organization’s goals and tasks.
4. Discretionary Responsibility- is purely voluntary and is guided by a company’s desire to make
social contributions not mandated by economics, law, or ethics. Discretionary activities include
generous philanthropic contributions that offer no payback to the company and are not
expected. Discretionary responsibility is the highest criterion of social responsibility because it
goes beyond social expectations to contribute to the community’s welfare.
, Criteria of Corporate Social Performance
Discretionary
Responsibility
Contribute to
The community;
Be a good
Corporate citizen
Ethical Responsibility
Be ethical. Do what is right. Avoid
Harm.
Legal Responsibility
Obey the law.
Economic Responsibility
Be profitable.
Managing Company Ethics & Social Responsibility
Managers must practice ethical leadership.
Ethical leadership means that managers are honest and trustworthy, fair in their dealings with
employees and customers, and behave ethically in both their personal and professional lives.
Managers and first-line supervisors are important role models for ethical behavior, and they
strongly influence the ethical climate in the organization by adhering to high ethical standards in
their own behavior and decisions. Moreover, managers are proactive in influencing employees
to embody and reflect ethical values.
The Ethical Organization
Ethical Leadership
Codes of Ethics
Ethics Committee
Chief Ethics Officer
Ethics Hotline
Ethics Training
Support for Whistle Blowers
What is corporate social responsibility (CSR)?
It is a management’s obligation to make choices and take actions that will contribute to the
welfare and interests of society as well as the organization.
CSR can be difficult 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.
Evaluating Corporate Social Responsibility
Four criteria of corporate social responsibility
1. Economic Responsibility- the business institution being the basic economic unit of society has
the responsibility to produce the goods and services that society wants and to maximize profits
for its owners and shareholders. This is called “profit-maximizing view” advocated by Nobel
economist Milton Friedman. This view argues that the corporation should be operated on a
profit-oriented basis, with its sole mission to increase its profits as long as it stays within the
rules of the game.
2. Legal Responsibility- defines what society deems as important with respect to appropriate
corporate behavior. That is, businesses are expected to fulfil their economic goals within the
framework of legal requirements imposed by the local and national government agencies.
3. Ethical Responsibility- includes behaviors that are not necessarily codified into law and may not
serve the corporation’s direct economic interests. To be ethical, organization decision makers
should act with equity, fairness and impartiality, respect the rights of individuals, and provide
different treatment of individuals only when relevant to the organization’s goals and tasks.
4. Discretionary Responsibility- is purely voluntary and is guided by a company’s desire to make
social contributions not mandated by economics, law, or ethics. Discretionary activities include
generous philanthropic contributions that offer no payback to the company and are not
expected. Discretionary responsibility is the highest criterion of social responsibility because it
goes beyond social expectations to contribute to the community’s welfare.
, Criteria of Corporate Social Performance
Discretionary
Responsibility
Contribute to
The community;
Be a good
Corporate citizen
Ethical Responsibility
Be ethical. Do what is right. Avoid
Harm.
Legal Responsibility
Obey the law.
Economic Responsibility
Be profitable.
Managing Company Ethics & Social Responsibility
Managers must practice ethical leadership.
Ethical leadership means that managers are honest and trustworthy, fair in their dealings with
employees and customers, and behave ethically in both their personal and professional lives.
Managers and first-line supervisors are important role models for ethical behavior, and they
strongly influence the ethical climate in the organization by adhering to high ethical standards in
their own behavior and decisions. Moreover, managers are proactive in influencing employees
to embody and reflect ethical values.
The Ethical Organization
Ethical Leadership
Codes of Ethics
Ethics Committee
Chief Ethics Officer
Ethics Hotline
Ethics Training
Support for Whistle Blowers
