2011

CASE STUDY
Questions & Answers
MBA GENERAL SECTION C

QAISER ABBAS

Q1. WHAT SHOULD A CORPORATION LEARN FROM THE EXPERIENCES OF DOW CORNING? WHY WAS SETTING UP AN ETHICS COMMITTEE INSUFFICIENT TO MONITOR SOCIAL RESPONSIBILTY? A. Social responsibility is the obligation of management to take steps to protect and improve two contradicting goals of corporation, welfare of society and profitability. In this era corporations are focusing more on CSR because according to Keith Davis social responsibility arises from social power and all the corporations have direct or indirect impact on society or we can say stakeholders. Stakeholder means employees, consumers, shareholders, suppliers, distributors, creditors, government and at a large community because they are effected positively or may b negatively by the corporation. But in Dow Corning case, they were not doing this properly. Dow Corning was a health-product manufacturer company and was a strategic business unit of Dow Chemical Company. They introduced silicon breast implant products in 1963 and were enjoying $2.2b annual sales till 1990s but due to not taking social responsibility & social audit seriously, they got bankrupted. From different studies we come to know that there is a positive correlation between CSR and long term benefits like goodwill, profitability, productivity etc. So every corporation must have its own separate Social Relation Department to perform all those activities & steps which favor both society welfare and profitability of organization. In short-term, they may face some sort of difficulties and problems but CSR is very fruitful in long-term and thats why CSR is the part of strategic planning of multi-national and successful businesses like IBM, GOOGLE, MICRO-SOFT, TOYOTA and KINGSTON etc.

When corporations spend on education, food, health, woman rights, providing jobs, good working environment, reducing pollution, securing natural environment and endangered species etc legally or voluntarily it increase their repo and goodwill amongst the society which results in positive growth of companys production. Here the chart shows goodwill of highly CSR oriented corporations. CORPORATIONS MICROSOFT APPLE IBM TOTAL ASSETS $ 92.31B 86.74B 107.74B GOODWILL $ 12.52B 12.61B 22.71B

Ethics committee is insufficient for social responsibilities because CSR is a whole topmanagerial process. We can say ethics committee as a sub part of Public Relation Department who is concerned with CSR. Ethics committee just gives proposals but in CSR we observe a social problem, do survey or experiments and come with planning. After that we organize and influence it to get our desired results by controlling the whole process. This is what a manager does in a proper manner to overcome a social or organizational problem.

Q2. HOW MIGHT DOW CORNING ARGUE ITS CASE USING MILTON FRIEDMENS ARGUMENT AGAINST CORPORATIONS ASSUMING SOCIAL RESPONCIBLITY? A. Milton Friedman is one of Americas most famous economists. He is against the performance of social responsibility by a corporation. He is of the view that making business manager responsible to perform both the contradicting goals (social welfare & profitability) at a time may demise or fail the organization. Because by performing social responsibility constantly organization loses focus on private goal that is maximum profit. For social activities and welfare programs business needs huge finance and this will be deducted from revenue that will directly decrease the business income or profit. Like CONTROL DATA CORPORATION was a profitable and successful firm but when they started to spend millions of dollars on social welfare programs, they got down with millions of dollars losses constantly in 1980s era. So using Friedmans argument DOW CORNING was for to maximize shareholders wealth not society at large. If it went for social welfare works then definitely it had to transfer the funds or profit too which was against the main objective of the company. Dow Corning was already paying too much in form of salaries, taxes and other expenses so paying for such activities would be more harmful. Social welfare activities are the part of government not corporations because corporations are already paying huge amount in the form of taxes so at that time it was the duty of Government not Dow Corning.

Q3.HAD DOW CORNING PERFORMED A SOCAIL AUDIT, WHAT WOULD HAVE BEEN ISSUES RAISED BY THE AUDIT AND WHAT WOULD HAVE BEEN THE LIKELY OUTCOMES? A. No, social audit had not been performed by Dow Corning and that was the reason of failure of the corporation. Social audit is the process through which all details of a public scheme are scrutinized by its beneficiaries. A social audit seeks to evaluate how well public resources are being used to meet the real needs of target beneficiaries. If they would perform some sort of social audit then definitely they would find and retrieve all the problems and drawbacks of the corporation like Side-effects of silicon breast implants Hundreds of suits by customers Damages and legal expenses No futuristic approach Poor management Lack of communication with customers Lack of communication with employees Lack of social and business ethics Lack of CSR department

They did not notice even the side -effects of silicon breast implants, the main reason of their demise. They spent billions of dollars on legal expenses and paying damages but did not establish any public relation department for CSR. If they would perform social audit then defiantly they could overcome through these points.

TO RESPECTED AND GREAT SIR ADNAN JAVID BY QAIS ABBAS KHAN MBA GENERAL SECTION C