ETHICS AND SOCIAL RESPONSIBILITIES IN MANAGEMENT

By :- Anup Chauhan & Bhoomika kapoor

Social Responsibility
Definition:- Is an ethical or ideological theory, that an entity whether a govt.
corporation or private organization has a big responsibility to society at large.

MNCs wants to lower the cost by locating in countries where human rights are not a high priority. They justify by saying that they are bringing in jobs and strengthening the local economy. Are tobacco and alcoholic beverages companies socially responsible ? What factors influence the decision of managers in these situations ?

Two Views of Social responsibilities:Social Responsibility

The Classical View

Socio-Economic View

Views of Social Responsibilities

The Classical View:

Believes that managements only social responsibility is to maximize profits. Milton Friedman, the economist and Nobel prize winner strongly advocates this approach. According to this view doing Social good adds to the cost of doing business. This additional cost is compensated by: Increasing the price of the product.  Stockholders reduce their profit margins. Those who believe in this view are also socially responsible but their definition of social responsibility is different i.e. their extent of responsibility is to maximize profits for Stock holders.

Views of Social Responsibilities

The Socio-Economic view:

Social Responsibilities goes beyond making profits to include protecting and improving societys welfare. Corporations are not independent entities responsible only to stock holders. They also have responsibility to larger society that allows their formation through various laws and regulations and supports them by purchasing their products and services. Expectations from the society:- Society also expects from the businesses to become involved in social, political and legal issues. Covers various aspects like Environmental assessment and stakeholders management.

Comparison of the views

The difference between the two perspectives is easy to understand as the Classical view is based on maximizing profits whereas the socio economic view goes beyond making profits to include protecting and improving societys welfare.
Lesser Social Responsibility Greater

Stage 1 Owners and Management

Stage 2 Employees

Stage 3 Constituents in the specific environment (Customer)

Stage 4 Broader Society

Corporate Social Responsibility Pyramid

Carrolls four part definition:Contribute resources to communities; improve quality of life. Obligation to do what is right, just and fair. Avoid harm. Law is societys codification of right and wrong. Play by the rules of the game. The foundation on which all other rest.

Be a good Corporate citizen

Philanthropic Responsibilities Ethical Responsibilities Legal Responsibilities Economic Responsibilities

Be ethical

Obey the law

Be Profitable

Obligations, Responsiveness, Responsibility

Social Obligations.

Engages in social actions because of its obligations to meet economic and legal responsibilities. Engages in social actions in response to some popular social need. Goes beyond social obligations and responsiveness and believes in getting involved in actions which can improve the society as its the right thing to do.

Social Responsiveness.

Social Responsibility.

Example
Infosys:

Indian IT giant with over 1,00,000 employees and presence in 22 countries.

Infosys as a socially responsible company aims at: Conservation of Resources. Prevention of pollution. Adherence to all applicable legislations. Organizing and contributing in welfare programs, especially for under privileged children. The primary purpose of corporate leadership is to create wealth legally and ethically. This translates to bringing a high level of satisfaction to five constituencies - customers, employees, investors, vendors and the societyat-large.
- N.R Narayana Murthy (Chairman of board and Chief mentor)

Arguments For and Against Social Responsibility

For:

Against:

Public Expectations. Long Term Profits. Ethical Obligation. Public Image. Better Environment. Less Govt. Regulations Stakeholders Interest.

Violation if profit maximization. Costs. Lack of necessary skills to address social issues. No direct lines of accountability for social actions.

NATURE OF ETHICS
Ethics The inner-guiding moral principles, values, and beliefs that people use to analyze or interpret a situation and then decide what is the right or appropriate way to behave
Ethical Dilemma quandary people find themselves in when they have to decide if they should act in a way that might help another person even though doing so might go against their own self-interest

Reasons to Behave Ethically

From Internal Customer point of view:

Improves the atmosphere at work and helps motivating the employees. Ethic behavior of management sets a good example to the employees. Evokes a sense of pride for the company and improves its image in the eyes of employees.

From External Customer point of view:

Improves the public image of the company adds to the overall development of ethical behaviour in the society

GENERAL TYPES OF ETHICS

The general types of ethics are as follows: Organizational Societal

ethics

ethics Occupational ethics Individual ethics

FACTORS THAT AFFECT ETHICS

The factors that affect ethics are as follows:
Stage

of moral development Individual characteristics Structural variables Organizations culture Issue intensity

STAGE OF MORAL DEVELOPMENT

There are three levels of moral development PRECONVENTIONAL: Sticking to rules to avoid physical punishment and following rules only when doing so is in your immediate interest. CONVENTIONAL: Living upto what is expected by people close to you and maintaining conventional order by fulfilling obligations to which you have agreed. PRINCIPLED: Valuing rights of others and upholding absolute values and rightsbregardless of the majoritys opinion and following self-chosen ethical principles even if they violate the law.

INDIVIDUAL CHARACTERISTICS
Two personality variables influence an individuals actions. They are : EGO STRENGTH: It is a personality measure of the strength of a persons convictions . People who score high on ego strength are likely to resist impulses to act unethically and instead follow their convictions. That is, individuals high on ego strength are more likely to do what they think is right. LOCUS OF CONTROL: It is a personality attribute that measures the degree to which people believe they control their own fate. People with an internal locus of control believe that they control their own destinies ; hose with an external locus believe that what happens to them is due to luck or chance. Externals are less likely to take personal responsibility for the consequences of their behavior and are more likely to rely on external forces. Internals on the other hand are more likely to take responsibility for consequences and rely on their internal standards of right and wrong to guide their behavior. Employees with an internal locus of control are likely to be more consistent in their moral judgments and actions than external ones.

STRUCTURAL VARIABLES
An organizations structural design influences whether employees behave ethically. Some structures provide strong guidance , whereas others create ambiguity and uncertainty. Structural designs that minimize ambiguity and uncertainty through formal rules and regulations and those that continuously remind employees of what is ethical are more likely to encourage ethical behaviour. Other organizational mechanisms that influence ethics include the use of goals , performance appraisal systems , and reward allocation procedures.

ORGANIZATIONS CULTURE
An organizational culture most likely to encourage high ethical standards is one thats high in risk tolerance, control and conflict tolerance. The employees in such a culture are encouraged to be aggressive and innovative. If the culture is strong and supports high ethical standards, it has a very powerful and positive influence on their decision to act ethically or unethically.

ISSUE INTENSITY
The determinants of issue intensity are : Greatness of harm Consensus of wrong Probability of harm Immediacy of consequences Proximity to victims Concentration of effect The larger the number of people harmed ,the more agreement that the action is wrong , the greater the likelihood that the action will cause harm , the more immediately that the consequences of the action will be felt, the closer the person feels to the victim, and the more concentrated the effect of the action on the victims , the greater the issue intensity. The more intense an ethical issue is, the more the employees would behave ethically.

CODE OF ETHICS
A code of ethics is a formal statement of an organizations primary values and the ethical rules. Code of ethics tend to fall in three major categories: Be a dependable organizational citizen. Dont do anything unlawful or improper that will harm the organization. Be good to customers. To make proper use of the code of ethics , all levels of management should continually reaffirm the importance of the ethics code and the organizations commitment to it. An ethics code should not be created solely by senior employees. It should be properly communicated to all the employees of the company.