Fundamentals of Social Responsibility
The term social responsibility, also referred to in the management literature as corporate social responsibility, means different things to different people. For purposes of this chapter, however, social responsibility is the managerial obligation to take action that protects and improves both the welfare of society as a whole and the interests of the organization. According to the concept of social responsibility, a manager must strive to achieve societal as well as organizational goals.2 This obligation is important for managers worldwide, including those in emerging economies.3
Michael E. Campbell is the top manager at Arch Chemicals.4 Campbell has thoroughly explained how his company focuses on social responsibility through its production of water sanitization products. According to Campbell, water supplies are undergoing extreme swings in developed and underdeveloped countries across the globe due to violent storms and floods. Campbell believes that water shortages are increasing and in the near future will affect more than 450 million people. Also, according to Campbell, even when water is available, it is not unusual to find water sources that are too contaminated for people to drink without the risk of serious illness. Following the spirit of the social responsibility concept, Campbell emphasized that by considering both human need and, someday at least, profits, companies in the chemical industry have now begun developing a wide range of technologies that can help secure safe drinking water for the world’s poor.
The amount of attention given to the area of social responsibility by both management and society has increased in recent years and probably will continue to increase.5 The following sections present the fundamentals of businesses’ social responsibility by discussing these topics:
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Areas of social responsibility
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Varying opinions on social responsibility
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Conclusions about the performance of social responsibility activities by business
Areas of Social Responsibility
The areas in which business can act to protect and improve the welfare of society are numerous and diverse. Perhaps the most publicized of these areas are urban affairs, consumer affairs, community volunteerism, and employment practices. The one area that is arguably receiving the most attention currently is the area of ecology conservation, popularly called “going green.”6 An international effort sponsored by the United Nations is currently under way and growing to get large companies to start thinking seriously about ecosystems and how to maintain them. And companies are responding. For example, the Coca-Cola Company is exploring ways to maintain its bottling operation in India without using underground water; the Mohawk Home Company is developing a new line of bathroom rugs with all-natural fibers;7 and Kellogg’s is developing environmentally sensitive products, such as its organic Rice Krispies.8 Pressure groups are also springing up to persuade companies to “go green.” One such group, The Center for Health, Environment, and Justice, was founded and is led by grassroots leader Lois Gibbs.
Varying Opinions on Social Responsibility
Although numerous businesses are already involved in social responsibility activities, much controversy remains about whether such involvement is necessary or even appropriate. The following two sections present some arguments for and against businesses performing social responsibility activities.9
Arguments for Business Performing Social Responsibility Activities
Probably the best-known argument for the performance of social responsibility activities by business begins with the premise that business, as a whole, is a subset of society, one that exerts a significant impact on the way society exists. Because business is such an influential member of society, the argument continues, it has the responsibility to help maintain and improve the overall welfare of society.10 If society already puts this responsibility on its individual members, why should its corporate members be exempt?
In addition, some people argue that business should perform social responsibility activities because profitability and growth go hand in hand with responsible treatment of employees, customers, and the community. This argument says, essentially, that performing social responsibility activities is a means of earning greater organizational profit.11
Researchers continue to study the relationship between social responsibility and revenue growth.12 However, empirical studies have not yet demonstrated a definitive relationship between social responsibility and profitability. In fact, several companies that have been acknowledged leaders in social commitment—including Control Data Corporation, Atlantic Richfield, Dayton-Hudson, Levi Strauss, and Polaroid—have simultaneously experienced serious financial difficulties.13 No direct relationship between social responsibility activities and these financial difficulties was shown, however.
Arguments against Business Performing Social Responsibility Activities
The best-known argument against business performing social responsibility activities was advanced by Milton Friedman, one of America’s most distinguished economists. Friedman argued that making business managers responsible simultaneously to business owners for reaching profit objectives and to society for enhancing societal welfare sets up a conflict of interest that could potentially cause the demise of business as it is known today. According to Friedman, this demise will almost certainly occur if business is continually forced to perform socially responsible actions that directly conflict with private organizational objectives.14
Friedman also argued that to require business managers to pursue socially responsible objectives may, in fact, be unethical because doing so compels managers to spend money on some individuals that rightfully belongs to other individuals. Following Friedman’s argument, a corporate executive is an employee of a business and is directly responsible to owners of that business. Overall, this responsibility is to conduct business in ways desired by the owners. Usually, owners desire to maximize profit while following the basic rules of society, which reflect both laws and ethical customs. When managers reduce profit, they are spending owners’ money. When managers raise prices of products, they are spending customers’ money.15
An example that Friedman might have used to illustrate his argument is the Control Data Corporation. Former chairman William Norris involved Control Data in many socially responsible programs that cost the company millions of dollars—from building plants in the inner city and employing a minority workforce to researching farming on the Alaskan tundra. When Control Data began to incur net losses of millions of dollars in the mid-1980s, critics blamed Norris’s “do-gooder” mentality. Eventually, a new chairman was installed to restructure the company and return it to profitability.16
Conclusions about the Performance of Social Responsibility Activities by Business
The preceding sections presented several major arguments for and against businesses performing social responsibility activities. Regardless of which argument or combination of arguments particular managers embrace, they generally should make a concerted effort to do the following:
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Perform all legally required social responsibility activities.
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Consider voluntarily performing social responsibility activities beyond those legally required.
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Inform all relevant individuals of the extent to which the organization will become involved in performing social responsibility activities.
Performing Required Social Responsibility Activities
Federal legislation requires that businesses perform certain social responsibility activities. In fact, several government agencies have been established expressly to enforce such business-related legislation (see Table 2.1). The Environmental Protection Agency, for instance, has the authority to require businesses to adhere to certain socially responsible environmental standards. Examples of specific legislation requiring the performance of social responsibility activities are the Equal Pay Act of 1963, the Equal Employment Opportunity Act of 1972, the Highway Safety Act of 1978, and the Clean Air Act Amendments of 1990.17
Table 2.1 Primary Functions of Several Federal Agencies That Enforce Social Responsibility Legislation
| Federal Agency | Primary Agency Functions |
|---|---|
| Equal Employment Opportunity Commission | Investigates and conciliates employment discrimination complaints that are based on race, sex, or creed |
| Office of Federal Contract Compliance Programs | Ensures that employers holding federal contracts grant equal employment opportunity to people regardless of their race or sex |
| Environmental Protection Agency | Formulates and enforces environmental standards in such areas as water, air, and noise pollution |
| Consumer Product Safety Commission | Strives to reduce consumer misunderstanding of manufacturers’ product design, labeling, and so on, by promoting clarity of these messages |
| Occupational Safety and Health Administration | Regulates safety and health conditions in nongovernment workplaces |
| National Highway Traffic Safety Administration | Attempts to reduce traffic accidents through the regulation of transportation-related manufacturers and products |
| Mining Enforcement and Safety Administration | Attempts to improve safety conditions for mine workers by enforcing all mine safety and equipment standards |
Voluntarily Performing Social Responsibility Activities
Adherence to legislated social responsibilities is the minimum standard of social responsibility performance that business managers must achieve. Managers must ask themselves, however, how far beyond the minimum they should go.
Determining how far to go is a simple process to describe; yet, it is difficult and complicated to implement. It entails assessing the positive and negative outcomes of performing social responsibility activities over both the short and the long terms, and then performing only those activities that maximize management system success while making a desirable contribution to the welfare of society.
Events at the Sara Lee Bakery plant in New Hampton, Iowa, illustrate how company management can voluntarily take action to protect employees’ health. Many employees at the plant began to develop carpal tunnel syndrome, a debilitating wrist disorder caused by repeated hand motions. Instead of simply having its employees go through physical therapy—and, as the principal employer in the town, watching the morale of the town drop—Sara Lee thoroughly investigated the problem. Managers took suggestions from factory workers and had their engineers design tools to alleviate the problem. The result was a virtual elimination of carpal tunnel syndrome at the plant within a short time.18
Communicating the Degree of Social Responsibility Involvement
Determining the extent to which a business should perform social responsibility activities beyond legal requirements is a subjective process. Despite this subjectivity, however, managers should have a well-defined position in this vital area and should inform all organization members of that position.19 Taking these steps will ensure that managers and organization members behave consistently to support the position and that societal expectations of what a particular organization can achieve in this area are realistic.
Home Depot employees in the Team Depot program provide disaster relief. This effort not only communicates the company’s concern for the community but also it is well aligned with Home Depot’s business mission of providing supplies to disaster stricken areas.
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Nike, the world-famous athletic gear manufacturer, felt so strongly that its corporate philosophy on social responsibility issues should be clearly formulated and communicated that the company created a new position, vice president of corporate and social responsibility. Maria Eitel, a former public relations executive at Microsoft, was hired to fill that position and is now responsible for clearly communicating Nike’s thoughts on social responsibility both inside and outside the organization.20
Overall, managers are facing increasing pressure from stakeholders to be socially responsible. Since action that is consistent with socially responsible ideals is commendable, managers should support social responsibility activities in their organizations. They must clearly communicate to stakeholders, however, that such activities will not take the place of profit maximization but complement it.21