OUTCOMES OF SOCIAL RESPONSIBILITY INVOLVEMENT EXPECTED BY EXECUTIVES

POSITIVE OUTCOMES:

1. Enhanced corporate reputation and goodwill.
2. Strengthening of the social system in which the corporation functions.
3. Strengthening of the economic system in which the corporation functions.
4. Greater Job satisfaction among all employees.
5. Avoidance of issues with government regulations.
6. Greater job satisfaction among executives
7. Increased chances for survival of the firm.
8. Ability to attract better managerial talent.
9. Increased long term profitability.
10. Strengthening of the pluralistic nature of American Society.
11. Maintaining or gaining Customers
12. Investor Preference for socially responsible firms
13. Increased short term profitability

NEGATIVE OUTCOMES:

1. Decreased Short term profitability
2. Conflict of economic or financial and social goals.
3. Increaseed prices for consumers
4. Conflict in criteria for assessing managerial performance
5. Disaffection of stock holders.
6. Decreased Productivity
7. Decreased Long term profitability
8. Increased Government Regulation
9. Weakening of the economic system in which the corporation functions.
10. Weakening of the social system in which the corporate functions.

DAVIS'S MODEL OF CORPORATE SOCIAL RESPONSIBILITY

Davis's model is a list of 5 propositions that describe how and why businesses should adhere to the obligation to take action that protects and improves the welfare of society as well as of the organization:

Proposition 1: SOCIAL RESPONSIBILITY  ARISES FROM SOCIAL POWER.

This proposition is derieved from the understanding that a business has significant amount of  influence on and power over various critical issues like Environment, Minority Employment, Neighbourhood Development etc.,

All business in the country primarily determines the various situations like employment,environment and overall atmosphere that the citizens get to live in.

Since business has power and influence over the society, the society can and should hold the businesses responsible for social conditions that result from the exercise of the power.

Proposition 2: BUSINESS SHALL OPERATE AS A 2 WAY OPEN SYSTEM, WITH OPEN RECEIPT OF INPUTS FROM SOCIETY AND OPEN DISCLOSURE OF ITS OPERATIONS TO THE PUBLIC.

Busienss must be willing to listen to what must be done to sustain or improve social welfare. In turn, the society must be willing to listen to business reports on what is is doing to meet its social responsibilities.

DAVIS suggests that there must be ongoing, honest and open communications between business and society's representatives if the overall welfare of society's representatives if the overall welfare of sicety is to be maintained or improved.

Proposition 3: THE SOCIAL COSTS AND BENEFITS OF AN ACTIVITY, PRODUCT or SERVICE, SHALL BE THOROUGHLY CALCULATED AND CONSIDERED IN DECIDING WHETHER TO PROCEED WITH IT.

The technical feasibility and economic profitability and the shot term and long term consequences of all business activities should be considered before undertaking them.

Proposition 4: THE SOCIAL COSTS RELATED TO EACH ACTIVITY, PRODCUT OR SERVICE SHALL BE PASSED ON TO THE CUSTOMER:

The proposition states that business cannot be expectly to completely finance activities that may be socially advantagesous but economically disadvantageous. The costs of maintaining socially desirable activities within business should be passed on to consumers through higher prices for the goods or services related to these activities.

Proposition 5: BUSINESS INSTITUTIONS, AS CITIZENS, HAVE THE RESPONSIBILITY TO BECOME INVOLVED IN CERTAIN SOCIAL PROBLEMS THAT ARE OUTSIDE THEIR NORMAL AREAS OF OPERATION: -

If a business possesses the expertise to solve a social problem with which it may not be directly associated, it should be held responsible for helping society solve that problem.

Since the business eventually will reap an increased profit from a generally improved society, businesses should share in the responsibility of all citizenry to generally improve society.

MANUFACTURERS & VENDORS - Business Ethics - Definitions

How far must manufacturers and their representatives go to make their products and services completely safe?

WHAT Is the relationship between a business and its customers? a contract, or is there more to it than that?

Hos does the fact that companies usually know more about their products than their customers IMPACT their duty to protect customers from injury or harm?

What responsibility do businesses have for customer injuries no one could reasonably have foreseen or prevented?

What about customer's privacy - what obligations do companies have?

MARKET APPROACH TO CONSUMER PROTECTION:

Consumer safely is seen as a good that is most efficiently provided through the mechanism of the free market whereby sellers must respond to consumer demands.

PROBLEMS WITH THE ASSUMPTION OF FULL INFORMATION:

• Many products are too complex for consumers to understand
• Markets cannot provide consumers with product information.

FREE RIDERS:

individuals who enjoy the benefits of a good without paying their share of its costs.

RATIONAL UTILITY MAXIMIZER:

A person who has a well defined and consistent set of preferences, and who knows how personal choices will affect those preferences.

PROBLEMS WITH THE ASSUMPTION OF RATIONAL UTILITY MAXIMIZATION:

• Few people are good at estimating probabilities.
• People are irrational and inconsistent when weighing choices.
• Many consumer markets are monopolies or oligopolies.

CONTRACT VIEW OF THE FIRM'S DUTIES TO ITS CUSTOMERS:

The view that the relationship between a business firm and its customers is relationship, and the firm's moral duties to the customer are those created by this contractual relationships.

RELIABILITY:

The probability that a product will function as the consumer is led to expect that it will function.

SERVICE LIFE:

The period of time during which the product will function as effectively as the consumer is to led to expect it to function.

MAINTAINABILITY:

The ease with which the product can be repaired and kept in operating condition.

PRODUCT SAFETY:

The degree of risk associated with using a product.

MORAL DUTIES TO CONSUMERS UNDER CONTRACTUAL THEORY:

• Duty to comply with express and implied claims of reliability, service life, maintainability, and safety.
• Duty of disclosure
• Duty not to misrepresent
• Duty not to coerce

DUE CARE THEORY OF THE MANUFACTURER'S DUTIES TO CONSUMERS:

The view that because manufacturers are in more advantaged position, they have a duty to take special care to ensure that consumers' interests are not harmed by the products that they offer them.

CAVEAT EMPTOR:

Let the buyer take care.

CAVEAT VENDOR:

Let the seller take care.

AREAS OF PRODUCER RESPONSIBILITY ACCORDING TO DUE CARE THEORY:

• Design
• Production
• Information

SOCIAL COSTS VIEW OF THE MANUFACTURER'S DUTIES TO CONSUMERS:

The view that a manufacturer should pay the costs of any injuries sustained through any defects in the product, even when the manufacturer exercised all due care in the design and manufacture of the product and has taken all reasonable precautions to warn users of every foreseen danger.

• Manufacturer should pay the costs of all injuries caused by defect in a product even if exercised dure care.
• Argues that injuries are external costs that should be internalized.

STRICT LIABILITY:

A legal doctrine that holds that manufacturers must bear the costs of injuries resulting from product defects regardless of fault.

CRITICISMS OF THE SOCIAL COST VIEW:

• Unfair to manufacturers since it forces them to compensate unforseeable injuries.
• Assumption that adherance to the social cost view will prevent accidents is false.
• Leads to successful consumer lawsuits in cases where manufacturers took all due care.

COMMERCIAL ADVERTISING:

Communication between a seller and potential buyers that is publicly addressed to a mass audience and is intended to induce members of this audience to buy the seller's products.

• Public communication aimed at mass audience
• Intended to induce members of its audience to buy the sellers's products
• Succeeds by creating a desire for the seller's product or a belief that a product will satisfy a pre existing desire.

PRODUCTION COSTS:

The costs of the resources consumed in producing or improving a product.

SELLING COSTS:

The additional costs of resources that do not go into changing the product, but are invested instead in getting people to buy the product.

DECEPTIVE ADVERTISING:

• Is a function of the author's intent to make the audience believe what is known to be false.
• OR a function of The media's communication of the false message.
• OR a function of The audience's vulnerability to deception.

RIGHT TO PRIVACY:

The right of persons to determine what, to whom, and how much information about themselves will be disclosed to other parties.

PSYCHOLOGICAL PRIVACY:

Privacy with respect to a person's inner life.

PHYSICAL PRIVACY:

Privacy with respect to a person's physical activities.

IMPORTANCE OF PRIVACY:

• Protects individuals from interference, shame, embarassment, hurting loved ones, self-incrimination
• Enables the development of personal relationships,professional relationships, distinct social roles and self determination.

BUSINESS & ENVIRONMENT

The process of producing goods forces businesses to engage in exchanges and interactions with 2 main environments ie. the customer environment and the natural environment.

It is from the natural environment that business ultimately draws the raw materials that it transforms into it the finished products, which are then promoted and sold to the customers. 

Thus, the natural environment provides the raw material input of business, whereas the consumer environment absorbs it finished output.

POLLUTION:

The undesirable and unintended contamination of the environment by the manufacture or use of commodities.

RESOURCE DEPLETION:

The consumption of finite or scarce resources.

GLOBAL WARMING:

The increase in temperatiures around the globe due to rising levels of greenhouse gases.

GREENHOUSE GASES:

Carbob dioxide, nitrous oxide, methane and chlorofluorocarbons - gases that absorb and hold heat from the sun,preventing it from escaping back into space, much like a greenhouse absorbs and holds the sun's heat.

OZONE DEPLETION:

The gradual breakdown of ozone gas in the stratosphere above us caused by the release of chlorofluorocarbons (CFCs) in to the air.

ACID RAIN:

Acid rain occurs when sulfur oxides and nitrogen oxides are combined with water vapour in clouds to form nitric acid and sulfuric acid.

These acids are then carried down in rainfall.

PHOTOCHEMICAL SMOG:

A complex mixture of gases and particles manufactured by sunlight out of the raw materials- nirogen oxides and hydrocarbons - discharged to the atmosphere chiefly by automobiles.

MAJOR TYPES OF AIR POLLUTION:

• Gobal Warming Gases
• Ozone depleting Gases.
• Acid Rain
• Airbone Toxics
• Air Quality

ORGANIC WASTES:

Largely untreated human wastes,seware,and industrial wastes from processing various food products,from the pulp and paper industry and from animal feedlots. 

ECOLOGICAL SYSTEM:

An interrealted and interdependent set or organisms and environments.

ECOLOGICAL ETHICS:

The view that nonhuman parts of the environemtn deserve to be preserved for their own sake, regardless of whether this benefits human beings.

PRIVATE COST:

The cost an individual or company must pay out of its own pocket to engage in a particular economic acitivity.

SOCIAL COST:

The private internal costs and wider external costs of engaging in a particular economic activity.

KINDS OF ETHICAL APPROACHES TO ENVIRONMENTAL PROTECTION:

• Ecological approach: nonhumans have intrinsic value.
• Environmental Rights Approach: Humans have a right to a livable environment.
• Market Approach: External costs violate utility, rights and justice.

INTERNALIZATION OF THE COSTS OF POLLUTION:

Absorbtion of costs by the producer, who takes them into account when determining the price of goods.

ENVIRONMENTAL INJUSTICE:

The bearing of external costs of pollution largely by those who do not enjoy a net benefit from the activity that produces the pollution.

SOCIAL AUDIT:

A report of the social costs and social benefits of the firm's activities.

CONSERVING:

The saving or rationing of neurtal resourcese for later uses.

Arguments against the Existence of the Rights of Future Generations:

• Future generations do not now exist and may never exist.
• The potential argument that the present must be sacrificed fot he future.
• Our ignorance of the interests of future generations.

CONSERVATION BASED ON JUSTICE:

• Rawls: Leave the world no worse than we found it.
• Care: Leave our children a world no worse than we received.
• Attfield: Leave the world as productive as we found it.

BUSINESS ETHICS, MORALITY, CORPORATE SOCIAL RESPONSIBILITY

Business Ethics:

The principles of conduct governing an individual or a group.

Business Ethics:

Ethics is the study of Morality.

Ethics is not the same as morality, it is a study  of various dimensions of Morality.

Ethics is the discipline that examines one's moral standards or the moral standards of a society.

WHAT IS MORALITY?

The standards that an individual or a group about what is right and wrong or good and evil.

MORAL STANDARDS :

The norms about the  kinds of actions believed to be morally right and wrong as well as the values placed on the kinds of objects believed to be morally good and morally bad.

NON MORAL STANDARDS:

The standards by which we judge what is good or bad and right or wrong in a nonmoral way.

5 Characteristics of Moral Standards:

1. Involved with serious injuries or benefits.
2. Not established by Law or Legislature.
3. Should be preferred to other values including self interest.
4. Based on impartial considerations
5. Associated with special emotions and vocabulary

NORMATIVE STUDY:

An investigation that attempts to reach conclusions about what things are good or bad or about what actions are right or wrong.

DESCRIPTIVE STUDY :

An investigation that attempts to describe or exploan the world without reaching any conclusions about whether the world is as it should be.

BUSINESS ETHICS:

A specialized study of moral right and wrong that concentrates on moral standards as they apply to business institutions, organizations and behaviour.

BUSINESS ETHICS STUDIES:

• Moral Standards
• How moral standards apply to social systems and organizations that produce and distribute goods and services.

KINDS OF ETHICAL ISSUES:

• Systemic - Social Systems or institutions within which business operate.
• Corporate - An Individual Company taken as a whole
• Individual - A Particular individual or individuals within a company and their behaviours and decisions.

ETHICAL RELATIVISM :

A theory that there are no ethical standards that are absolutely true and that apply or should be applied to the companies and people of all societies.

Objections to Theory of Ethical Relativism:

• Some moral standards are found in all societies.
• Moral differences do not logically imply relativism
• Relativism is incoherent
• Relativism privileges the current moral standards of a society.

Kohlberg's Three Levels of Moral Development :

• Preconventional - Punishment and obedience; instrumental and relative.
• Conventional - Interpersonal concordance; law and order
• Postconventional - Social contract, universal principles

MORAL REASONING:

The reasoning process by which human behaviours, institutions or policies are judged to be in accordance with or in violation of moral standards.

Objections to Bringing Ethics into Business:

• In a free market economy,the pursuit of profit will ensure maximum social benefit
• A manager's most important obligation is to the company.
• Business ethichs is limited to obeying the law.

Arguments Supporting Ethics in Business:

• Ethics applies to all human activities
• Business cannot survive without ethics
• Ethics is consistent with profit seeking
• Prisoner's dilemma argument
• Customers and Employees care about Ethics

Elements of Moral Responsibility:

• Individual must cause or fail to prevent an avoidable injury or wrong.
• Individual must know what he is doing
• Individual must act of his own free will.

RECOMMENDED WEBSITES:

www.scu.edu/ethics

www.ethics.acusd.edu

www.web-miner.com/busethics.htm

www.essential.org

www.sec.gov/edgar.shtml

www.betterworldlinks.org/book100.htm

www.corpwatch.org

www.worldwatch.org

www.arq.co.uk/ethicalbusiness

www.bsr.org

www.mallenbaker.net/csr

www.pwblf.org