Chapter 5
Social responsibility and Managerial Ethics
WHAT IS SOCIAL RESPONISBILITY?
Two views of social responsibility
The classical View * The classical View says that management’s only social responsibility is to maximize profits. * Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation). * Expanding the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the owners and raises prices to consumers.
The Socioeconomic View * The Socioeconomic View is the view that management’s only social responsibility goes beyond making profits to include protecting and improving society’s welfare. * Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare * Corporations are not independent entities responsible only to stockholders. * Firms have a moral responsibility to larger society to become involved in social, legal, and political issues. * “To do the right thing”
Comparing the Two Views * A stage 1 manager is following the classical view of social responsibility and obeys all laws and regulations while caring for stockholders’ interests. * At stage 2 managers expand their responsibility to another important stakeholder group – employees. Because they want to attract, keep, and motivate good employees, stage 2 managers improve working conditions, expand employee rights, increase job security, and focus on human resource concerns. * At stage 3 managers expand their responsibilities to other stakeholders in the specific environment, primarily customers and suppliers. Socially responsible actions for these stakeholders might include fair prices, high-quality products and services, safe products, good