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CHAPTER 2 MORAL AND SOCIAL RESPONSIBILITY

CHAPTER 2

MORAL AND SOCIAL RESPONSIBILITY

INTRODUCTION
The first part of this chapter explores the grounds of moral obligations as detailed in moral theories, and their application to social and business issues. The second part of the chapter outlines ethics in the organisational context, focusing primarily on social responsibilities.

OBJECTIVES
By the end of this chapter, you should be able to: 1. elaborate on how significantly different approaches to morality address the issue of moral liability and accountability for ones decision; and 2. apply these approaches to decision-making in the business context.

2.1

CONDITIONS FOR MORAL ACCOUNTABILITY AND LIABILITY

Once we are satisfied with the grounds for deciding whether an action is morally right or wrong, we need to know when to hold a person morally accountable for his/her actions. Legal liability is not the issue here. A business executive or manager involved in ethical misconduct may or may not be found legally guilty of a crime but that has no bearing on the persons moral responsibility for his/her actions. A finding of not guilty may only mean that the prosecution did not present a convincing case to a jury and that the accused party did not incur any kind of legal liability. A persons moral responsibility, however, may still remain. He/she may still have to make restitution for money stolen, property damaged or destroyed, or physical or psychological harm done to others.

2.1.1

Knowledge and Freedom

To be morally responsible for an action, a person must act intentionally and deliberately. That is to say, he/she must be fully aware of what he/she is doing and must act freely without any physical or psychological coercion. To the extent that a persons knowledge or freedom is diminished or absent, moral accountability and liability are proportionately diminished or even nonexistent.

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2.1.2

Ignorance

Ignorance excuses someone only when it is non-culpable, that is, when the person acting does not understand the nature of what is being done or cannot anticipate all the reasonably foreseeable consequences of the action. The question of ignorance is sometimes subtle in business situations. Case: Suppose that the managers in a particular division of a company were submitting padded expense vouchers to recover personal contributions made to political candidates contributions that would be illegal if made directly by the company. Now, the top executive in a division is ordinarily considered responsible for his/her subordinates actions. In this case, however, there are several layers of supervision between him/her and these managers. He/she cannot be expected to know about the inflated expense accounts unless and until they are uncovered in an audit or reported in some other way. But if that executive has hinted somewhere along the line that he/ she did not expect people to make these contributions out of their own pockets and did not want to know how they are going to get their money back, he/she would certainly be culpably ignorant of their actions and would consequently share in the moral (if not legal) responsibility for what they did.

2.1.3

Coercion

It is probably easier to determine whether ignorance excuses a person in a particular situation than it is to judge to what degree coercion diminishes moral responsibility. A bank teller who hands over the contents of a cash drawer to an armed robber is clearly not morally guilty of misappropriating the banks assets. But what about situations where business people have to cooperate in some apparent moral evil initiated by others? Suppose the higher management of a company asks or orders a subordinate or a contractor to carry out an action that may harm other people or their property or is simply dishonest. For Example: dumping toxic waste where it will pollute a communitys water supply; figuring out ways to fire or demote an employee who is an aggravation to management in some way; ignoring hazardous safety conditions that are very expensive to correct; altering financial reports to hide evidence of mismanagement or fraud; concealing a supervisors personal or profligate spending in padded expense vouchers; hiding political contributions in fake expense accounts; or acquiescing in a customers morally questionable demands to avoid losing a valuable client.

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Question: How much coercion is involved in these examples? Is an employees moral accountability lessened because the boss, higher management or a customer told him/her to do any of these things? Can an employee claim that it is the boss, company or customer who is really acting, and that he/she is just following orders? Study the following three hypothetical cases for further consideration: (a) The Discrimination Case Suppose a large Malaysian multinational corporation wants to establish a potentially highly profitable account with a foreign company whose officials are biased against female business executives and who make it clear that they do not want to deal with them. The Malaysian corporations top managers deliberately exclude their women executives from business or social meetings with these officials, thereby abetting their discriminatory behaviour. Question: Can the management of the Malaysian multinational corporation claim coercion on the grounds that it would likely lose the account if it ignores its customers cultural sensitivities? (b) The Nuclear Plant Case Suppose an individual employed by a company that manufactures nuclear weapons decides that what his company is doing is morally wrong. It is probably unlikely that the company will shut down its operations because of his moral scruples. Question: (i) Is he obliged to stop cooperating in what he considers a moral evil and resign? (ii) What if he cannot not make as much money elsewhere? (iii) Is the threat to his financial security strong enough to justify his staying on the job for a few more years? (c) The Insurance Case An adjuster hired by several auto companies to examine reported losses of electronic equipments says that he is becoming increasingly nervous about being directed to approve claims without first inspecting the vehicles. He is asked to verify the theft of tape decks and car phones but realises after his inspections that the vehicles never had the lost equipments. When he balks at some of the more flagrant requests, Mr. Black begins to lose business. When his whistleblowing becomes known, he is blackballed.

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Question: Can an adjuster in the same situation claim coercion if he goes ahead with the approvals and subsequently argues that he is not morally responsible for the fraudulent claims since he is acting on the request of the insurers? Before we move on to examine how ethical theories may be employed to resolve the above cases, check your understanding of what you have learnt by completing the following exercises.

Exercise 2.1
1. Do you agree that if an action is morally right, then it is also legally right? Explain. 2. If a person commits murder, can he be held morally responsible if he pleads ignorance as an excuse? Why?

2.2

THE NATURAL LAW SOLUTION TO THE CASES

The natural law moralist holds that to the extent an act is involuntary, the person performing it is proportionately less responsible for it. Violence and fear may make an action involuntary; however, in the three cases described above, physical violence is not the issue; grave fear of losing ones livelihood or profit is. Is this fear sufficient to make the cooperation of the people involved in the cases involuntary? The answer depends on whether their cooperation is formal or material . Formal cooperation means that someone becomes a willing partner with another person in performing an intrinsically wrong act, consenting to and approving the evil done. Formal cooperation is never justified, even by grave fear.

Material cooperation, by contrast, means that a person is asked to do something that is morally legitimate in itself, not evil by nature, but ultimately helps another person accomplish an act that is intrinsically wrong.

(a) The Discrimination Case (i) The executives of a corporation are asked to exclude women from participation in an activity which is purely and simply part of ordinary business dealings.

(ii) It is hard to see why this action is not morally wrong since discrimination against someone on the basis of a characteristic (gender, in this case) irrelevant to job performance is a serious affront to the dignity and worth of a human being.

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(iii) On the natural law account, the corporations executives would be guilty of formal cooperation if they excluded women from participation in a business activity. The fear of losing the customers account would not excuse them. (b) The Nuclear Plant Case (i) The employee has come to believe that the production of nuclear or chemical weapons is immoral in itself. How do we judge whether his cooperation is formal or material?

(ii) Assuming that the continued production of these weapons is, in fact, immoral because they are a dire threat to millions of human beings, if they are ever used in a global war, we would then need to ask: what is the employees job in the company? Is he a nuclear scientist whose expertise is nearly irreplaceable or can only be replaced at considerable cost and inconvenience to the company? (iii) If so, it would seem that his work is so immediately tied to the final product that what he does has to be considered formal cooperation in a moral evil. Hence, the fear of losing his job or pension would not justify his staying on with the company. (iv) If he is performing some less sophisticated function which is not absolutely vital to the process, then his fear of losing his livelihood or pension might justify his staying on until he can retire or find a job that will pay as well as the present one. (c) The Insurance Case (i) In the third case, an insurance adjuster claims that he is asked to lie and to commit a direct act of fraud which is morally wrong in itself. (ii) If he inflates the estimates, then he is formally cooperating in the evil intended by the insurance companies. The fear of being blackballed or losing some accounts would not justify his action.

2.3

THE UTILITARIAN SOLUTION TO THE CASES

(a) The Discrimination Case From the utilitarian standpoint, a decision by the top management to come down solely on the side of profit might be criticized as a failure to include all reasonably foreseeable consequences in its calculations. To calculate the negative effects of excluding women from the said business dealings, it would have to ask a number of questions. (i) Would the affront to these women cause them serious psychological damage?

(ii) What would it cost to recruit and train replacements for those women who might resign as a result of gender discrimination?

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(iii) What would happen if this action became public? (iv) Would the corporations reputation be damaged to such an extent that it might lose existing and future customers as well as future investors? (v) Would it be able to continue to attract high-quality employees? (vi) What would potential lawsuits claiming discrimination cost? (vii) What would the effect be on social justice generally, on the effort to promote equal opportunity in the marketplace? The process outlined so far looks like nothing more than what would be required for a sound business decision. But it is important to remember that moral decision is at issue here. That is to say, we have to determine what the morally right action is. It may be argued that, from the utilitarian viewpoint, a right moral decision is likely be a good business decision. But it may well be that what appears to be a good business decision is not necessarily morally right even for utilitarians who must always determine what is good for everyone, what contributes to happiness on the whole. (b) The Nuclear Plant Case The employees dilemma is whether he should continue in his present job which he deems immoral or give up it up, along with the high salary and other employment benefits which he might not earn in some other occupation. First of all, this individual has to decide how far he should project the consequences of his actions, that is, how immediately or directly they actually contribute to the production and use of nuclear weapons. The moral significance of his actions will likely increase the more directly their consequences are tied to the actual production of the weapons. Remember that the intention of using these weapons against civilian populations is not, by itself, morally significant for the utilitarian (It is the natural-law moralist who holds that such an intention is immoral.) All the utilitarian has to do is to decide whether or not the predicted consequences of his/her actions contribute to the good on the whole. (c) The Insurance Case The adjuster is asked by insurance companies to make false claims against a special state-sponsored automobile insurance fund. What consequences should he weigh, on the whole, in deciding whether or not he should entertain the request?

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CHAPTER 2 MORAL AND SOCIAL RESPONSIBILITY Table 2.1: Decision to Make False Claims

What would happen if he agrees to file them?

What happens if he refuses to file false claims and reports the case to government agencies? x If insurance companies blackball him, he would not be able to earn a living in the insurance industry. The general public would probably admire his honesty, but his reputation as a whistle blower would likely work against him in the insurance industry. He would also have to evaluate the psychological and emotional damage he would personally suffer from the whole episode.

Those contributing to the fund might have to increase premiums to offset the amounts paid out in false claims. If the fraud became public, the adjuster and officials of the companies involved might be prosecuted, fined or imprisoned. The adjusters chances of working for other insurance companies would be jeopardised because his reputation would suffer. Filling false claims would save him from economic disaster and would probably increase profits for the companies and their stockholders.

The positive effect of his refusal to commit fraud would be that those insured by the special fund would not have to pay increased premiums to cover unjustified claims. Unscrupulous companies would also be stopped from defrauding present and future customers. The hard part of the utilitarian judgment in this case is how to accurately balance the losses to all the clients insured by the special fund if the adjuster decides to file fraudulent claims against his own losses if he refuses to file them. Again, coercion by itself does not carry any special weight in utilitarian calculation. Have you ever been in a situation where you were compelled to extend formal or material cooperation to your colleagues or peers? Describe the situation and think about how you would handle the situation from the utilitarian standpoint.

2.4

THE CULTURAL RELATIVISTS SOLUTION TO THE CASES

(a) The Discrimination Case We have a conflict of two cultures: the culture of the corporations officials against the culture of the customers representatives. Whose mores should prevail? To be consistent, a cultural relativist would have to observe the mores of the society in which the business and social events are to take place.

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(b) The Nuclear Plant Case The cultural relativist would argue that if the nuclear plant is operating under the direction of a legitimate government, that very fact would be sufficient to indicate that society approves the production of nuclear weapons. Therefore, the engineer may continue with his job without any moral scruples. (c) The Insurance Case As a cultural relativist, the insurance adjuster would have to determine just which societal mores govern this situation. (i) If the law clearly prohibits making false reports of this kind and he regards the law as his societys mores, then he would have to observe it. Otherwise, he would have to know what his culture expects of people faced with this kind of moral decision.

Summary
From the three cases studied above, we can conclude that: For the natural law moralist, the excuse of coercion is only valid in cases where fear destroys a persons freedom to consent to an action. Material cooperation means that the action a person performs is morally good in itself but someone else uses the action for his/her immoral purposes. Formal cooperation means that a person commits a morally wrong action, intends the moral wrong, and joins his/her action with the morally evil act of another. For the natural law moralist, material cooperation is sometimes justified for good reasons, usually in a persons self-interest, but formal cooperation in anothers evil is never permitted. Lets check your understanding by answering the following questions.

Exercise 2.2
1. What is your understanding of the term moral responsibility? 2. Differentiate between material cooperation and formal cooperation.

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2.5

ETHICS IN AN ORGANISATIONAL CONTEXT

Ethics are known as principles of morally accepted conduct of individuals. What do you think organisational ethics refer to?

It is vital to note that ethical or unethical actions by particular managers do not occur in a vacuum. Indeed, they most often occur in an organisational context that is conducive to them. The actions of peers and top managers, as well as the organisations culture, all contribute to the ethical context of the organisation. The starting point in understanding the ethical context of management is the individuals own personal ethical standards. Some people are willing to risk personal embarrassment or lose their job rather than do anything unethical. Other people are easily swayed by unethical behaviour around them and by other situational factors, and they may be willing to commit significant crimes to further their own careers or for financial gain. Organisational practices may strongly influence the ethical standards of employees. Some organisations openly permit, and may even encourage, unethical business practices that are in the best interest of the firm.

2.6

MANAGING ETHICAL BEHAVIOUR

Organisations are also going to greater lengths to formalise their standards for ethical behaviour. Some organisations, including Johnson & Johnson and Hewlett-Packard, have prepared guidelines that detail how employees are to treat suppliers, customers, competitors and other constituents. Some organisations have developed and publicized formal codes of ethics written statements of the values and ethical standards that guide the firms actions.

2.7

SOCIAL RESPONSIBILITY AND ORGANISATIONS

Only individuals have ethics. Organisations themselves do not have ethics, but their relationships to their various environments often pose ethical dilemmas and call for ethical decisions. Social responsibility is the set of obligations that an organisation has to protect and extend to the society in which it functions.

2.8

HISTORICAL VIEWS OF SOCIAL RESPONSIBILITY

Views of social responsibility held by organisations, the government and the public at large have changed dramatically over the last hundred years. In particular, there have been three critical turning points in the evolution of thinking about social responsibility, as outlined in Figure 2.1.

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Figure 2.1: Three critical turning points in the evolution of thinking about social responsibility

2.8.1

The Entrepreneurial Era

The first turning point in the United States occurred during the late 1800s and is generally associated with what many now call the entrepreneurial era. Then, so-called captains of industry, including John D. Rockefeller, Cornelius Vanderbilt, J. P. Morgan and Andrew Carnegie, were amassing fortunes and building empires in industries ranging from oil to railroads, and banking to steel. Prior to their day and age, virtually all businesses were small, so these men were truly the first executives to control power and wield influence at the national level. Unfortunately, in many instances, they chose to abuse their power through such practices as labour lockouts, discriminatory pricing policies, kickbacks, blackmail and tax evasion. Eventually, outcries from public officials and other leaders forced the federal government to step in and pass laws that outlawed some business practices and restricted others. These laws were significant in that they acknowledged the relationship between business, the government and society, and indicated for the first time that business had a role to play in society beyond the pure maximisation of profit.

2.8.2

The Depression Era

Subtle changes in views towards social responsibility continued throughout the early part of the 20th century. But the next turning point did not occur until the Depression era of the 1930s. By this time, large organisations had come to dominate the American economic scene, and many people criticized them for irresponsible financial practices that led to the stock market crash of 1929. As part of Franklin Roosevelts New Deal, the government passed several laws to protect investors and smaller businesses. The Securities and Exchange Commission was also established in 1934 to regulate the sales of securities and curb unfair stock market practices. As an outgrowth of these and other actions, the social responsibility of organisations was more clearly delineated. In particular, the new government actions insisted that organisations take an active role in promoting the general welfare of the American public.

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2.8.3

The Social Era

The third major turning point in views of social responsibility came during the social era of the 1960s. This period of American history was characterised by social unrest. The civil rights movement and widespread opposition to the war in Vietnam energised the American public to examine the nations values, priorities and goals. Students and activists accused big businesses, such as McDonnell Douglas and Du Pont, of trying to promote and extend the Vietnam War in order to increase profits. President John F. Kennedy proclaimed four basic consumer rights: (a) (b) (c) (d) The The The The right to safe products, right to be informed about all relevant aspects of a product, right to be heard in the event of a complaint, and right of consumers to choose what they buy.

The growing trend towards social responsibility raises two important questions: (a) (b) To whom is a business organisation responsible; and Who in an organisation is ultimately accountable for the organisations practices?

We will address these questions shortly. Draw a mind map showing the evolution of thinking about social responsibility and elaborate it in detail.

2.9

AREAS OF SOCIAL RESPONSIBILITY

There are a few key areas of social responsibility. In general, organisations may exercise social responsibility towards the following three areas, as shown in Figure 2.2 below:

Figure 2.2: Organisational social responsibility

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(a) Organisational Constituents Organisational constituents are people and organisations directly affected by the practices of a specific organisation and have a stake in its performance. The major types of organisational constituents are state and federal governments, creditors, customers, suppliers, employees, interest groups, courts and investors. The interests of people who own and invest in an organisation are affected by virtually anything the firm does. If the firms manager is caught committing criminal acts or violating acceptable ethical standards, the resulting bad press and public outcry are likely to hurt the organisations profits, stock prices and so forth. Organisations that are socially responsible in their dealings with employees treat workers fairly, make them a part of the team, and respect their dignity and basic human needs. To maintain a socially responsible stance toward investors, managers should maintain proper accounting procedures, provide appropriate information to shareholders about the current and projected financial performance of the firm, and manage the organisation in such a way as to protect shareholders rights and investments. (b) Organisational Natural Environment A second critical area of social responsibility is the natural environment. Not long ago, many organisations regularly and indiscriminately dumped sewage, waste products from production and trash into streams, rivers, the air, and on vacant land. Now, however, many laws have been put in place to regulate the disposal of waste materials. In many instances, companies have seen the error of their ways and have become more socially responsible in their release of pollutants. Much remains to be done. Companies need to develop economically feasible ways to avoid contributing to acid rain, depletion of the ozone layer, and global warming. They need to find alternative methods of handling sewage, hazardous wastes and ordinary garbage. Companies also need to develop safety policies that cut down on accidents that have potentially disastrous environmental results. For example: Practices include contributions to charities, philanthropic organisations, and not-for-profit foundations and associations; support for museums, symphonies, and public radio and television; and taking a role in improving public health and education. (c) Organisational General Social Welfare Some people feel that in addition to treating constituents and the natural environment responsibly, business organisations should also promote the general welfare of society. Some people also believe that organisations should act to correct or at least not contribute to political inequalities.

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2.10

ARGUMENTS FOR AND AGAINST SOCIAL RESPONSIBILITY

On the surface, there would seem to be little disagreement over the need for organisations to act responsibly, not only towards their constituents but also the natural environment and the wider society in which they operate. Nonetheless, several convincing arguments have been put forth by those who oppose these wider interpretations of social responsibility. Some of the most salient arguments on both sides of this contemporary debate are summarised in Table 2.2.
Table 2.2: Arguments for and against Social Responsibility

Arguments for Social Responsibility 1. Businesses create problems and should therefore help to solve them. 2. Corporations are citizens in our society.

Arguments against Social Responsibility 1. The purpose of business is to generate profit for owners. 2. Involvement in social programmes gives businesses too much power. 3. There is a potential for conflict of interest. 4. Businesses lack the expertise to manage social programmes.

3. Businesses often have the resources necessary to solve problems. 4. Social responsibility can enhance profits.

Although each of the arguments summarised above is a distinct justification for sociallyresponsible behaviour on the part of organisations, another basic reason for social responsibility is profit itself. Organisations that make clear and visible contributions to society can achieve enhanced reputation and garner a greater market share for their products.

2.11

ORGANISATIONAL APPROACHES TO SOCIAL RESPONSIBILITY

Some people advocate an expanded social role for organisations, while others argue that their social role is already too large. Not surprisingly, organisations themselves have a wide range of positions on social responsibility. As shown in Figure 2.3, the four stances that an organisation can take vis--vis social responsibility fall along a continuum, ranging from low to high degrees of socially responsible practices.

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Highest Degree of Social Responsibility

Social Contribution Social Responsibility Social Obligation Social Obstruction Lowest Degree of Social Responsibility
Figure 2.3: Organisational approaches to social responsibility

The elaboration of each Social Responsibility is shown in Table 2.3 below.

Table 2.3: Organisational Approaches to Social Responsibility

Social Obstruction

The few organisations that take the social obstruction approach to social responsibility usually do as little as possible to solve social or environmental problems. When they cross the ethical or legal line that separates acceptable from unacceptable practices, their typical response is to deny or cover up their actions. The social obligation approach to social responsibility involves doing everything that is legally required to solve social or environmental problems but doing nothing more. This approach is most consistent with the arguments against social responsibility described above. Managers in organisations that take this approach usually insist that their job is to generate profits. The social response approach to social responsibility involves meeting legal and ethical requirements and going beyond those requirements in certain cases. Such firms voluntarily agree to participate in certain limited social programmes, but solicitors must convince the organisation that they are worthy of support. The highest degree of social responsibility that a firm can exhibit is the social contribution approach. This approach goes far beyond minimal requirements and involves proactively seeking opportunities to contribute to society. Firms that adopt this approach take to heart the arguments in favour of social responsibility. They view themselves as citizens in a society.

Social Obligation

Social Response

Social Contribution

Remember that these categories are not discrete but merely define stages along a continuum. Organisations do not always fit neatly into one category.

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2.12

THE GOVERNMENT AND SOCIAL RESPONSIBILITY

The relationship between organisations and government is two-way. As shown in Figure 2.4, organisations and the government use several methods in their attempt to influence each other.

Figure 2.4: How organisations and government influence each other

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2.13

HOW GOVERNMENT INFLUENCES ORGANISATIONS

The elaboration of how the government influences organisations is shown Table 2.4.
Table 2.4: How Government Influences Organisations

Direct Regulation

Regulation is the establishment of laws and rules that dictate what organisations can and cannot do under certain circumstances. In terms of social responsibility, most regulatory control of organisations focuses on two areas of social responsibility discussed earlier: organisational constituents and the environment. To implement legislation, the federal/ state government has created special agencies to monitor and control certain aspects of business activities. Other forms of regulation are indirect. The government can indirectly influence how organisations spend their social responsibility dollars by providing greater or less tax incentives. If the government wants organisations to spend more on training the hard-core unemployed, parliament could pass laws to provide tax incentives to companies that open new training facilities.

Indirect Regulation

2.14

HOW ORGANISATIONS INFLUENCE GOVERNMENT

Organisations can influence their environment in many different ways. They have four main methods of addressing government pressures for more social responsibility as shown in Table 2.5 below.
Table 2.5: Four Main Methods of Addressing Government Pressures for More Social Responsibility

Personal Contacts

Many corporate executives and political leaders in the same social circles. Thus, personal contacts and networks offer one method of influence. A business executive may be able to contact a politician directly and present his/her case regarding a piece of legislation being considered. Lobbying is an attempt by individuals or groups to influence legislation. A lobbyist formally represents an organisation before a law-making body. PACs are special organisations created to solicit and then distribute money to political candidates, because companies themselves cannot legally make direct donations to political campaigns. Employees of a firm may be encouraged to make donations to a particular PAC, because managers know that the PAC supports candidates with political views similar to their own. The PAC, in turn, makes the contribution itself, usually to a broad slate of state and national candidates. Organisations sometimes rely on favours and other influence tactics to gain support.

Lobbying

Political Action Committees (PACs)

Favours

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2.15

MANAGING SOCIAL RESPONSIBILITY

As we have seen, there are pitfalls for managers who fail to adhere to high ethical standards and for companies that try to circumvent their legal obligations. Organisations, therefore, need to fashion an approach to social responsibility the way they would develop any other business strategy. They need to view social responsibility as a major challenge that requires careful planning, decision making, consideration and evaluation. They may accomplish this through both formal and informal approaches as outlined below. (a) Formal Organisational Approaches The formal methods that organisations can use to manage social responsibility are: (i) Legal compliance (ii) Ethical compliance (iii) Philanthropic giving The elaboration of each formal methods is shown in Table 2.6 below.
Table 2.6: Formal Organisational Approaches

Legal Compliance

Legal compliance is the extent to which the organisation complies with local, state, federal and international laws. The task of managing legal compliance is generally assigned to the appropriate functional managers. Ethical compliance is the extent to which members of the organisation follow basic ethical (and legal) standards of behaviour. Many organisations also establish formal ethics committees, which may be asked to review proposals for new projects, help evaluate new hiring strategies, or assess a new environmental plan. Philanthropic giving is the awarding of funds or other gifts to charities or other programmes. Unfortunately, in this age of cutbacks, many corporations have limited their charitable gifts over the past several years as they trim their budgets.

Ethical Compliance

Philanthropic Giving

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(b) Informal Organisational Approach In addition to formal approaches for managing social responsibility, there are also informal approaches. Two of the more effective approaches are: (i) Organisation Leadership and Culture (ii) Whistle-blowing Read the elaboration of the two informal approaches in Table 2.7.
Table 2.7: Informal Organisational Approach

Organisation Leadership and Culture

Leadership practices and organisation culture can go a long way towards defining the social responsibility stance that an organisation and its members will adopt. Thus, providing appropriate leadership and culture is vital in managing an organisation informally. Whistle-blowing is the disclosure by an employee of illegal or unethical conduct by others within their organisation. Whistle-blowers may have to proceed through a number of channels to be heard and may even be fired for their effort. Many organisations, however, welcome their contributions.

Whistle Blowing

2.16

EVALUATING SOCIAL RESPONSIBILITY

An organisation that is serious about social responsibility must ensure that its efforts are producing the desired benefits. Essentially, this requires applying the concept of control to social responsibility. Many organisations require current and new employees to read their guidelines or code of ethics and to sign a statement agreeing to abide by them. An organisation should also evaluate how it responds to instances of questionable legal or ethical conduct. Additionally, some organisations occasionally conduct corporate social audits. A corporate social audit is a formal and thorough analysis of the effectiveness of the firms social performance. It requires the organisation to define all its social goals clearly. As well, it analyses the resources devoted to each goal, determine how well the various goals are being achieved, and make recommendations about which areas need additional attention. You have just completed Chapter 2 which overviews the topic of Moral Responsibility. Complete the following exercise to check your understanding.

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Exercise 2.3
1. Summarise the basic historical views of social responsibility. 2. What are the arguments for and against social responsibility? 3. What are the ways through which governments usually influence organisations? How do organisations, in turn, influence governments? 4. What formal organisational approaches can be used to manage social responsibilities?

SUMMARY
Some pertinent points to remember with respect to moral and social responsibilities are:

The natural law moralist allows for coercion only in cases where grave fear destroys a persons freedom to consent to an action. The distinction between material and formal cooperation in someone elses wrongdoing is recognised. The utilitarian moralist would hold the people involved in any case accountable for calculating the net good and bad results of their proposed actions and for performing only that action that will produce the most good. Coercion by itself does not carry any special weight in the calculation. The cultural relativist locates liability and accountability solely in a societys mores. Coercion is excusable only if the societys customary practices acknowledge it as such. Social responsibility is the set of obligations that an organisation has to protect. Views of social responsibility have developed from the entrepreneurial era, through the Depression and social eras, up to the present time. Organisations may be considered responsible to their constituents, the natural environment and the general social welfare. Organisations present strong arguments both for and against social responsibility. The approach that an organisation adopts toward social responsibility falls along a continuum ranging from social obstruction, social obligation and social response, to social contribution. A government influences organisations through the establishment of laws and rules that dictate what businesses can and cannot do in prescribed areas. Organisations, in turn, rely on personal contacts, lobbying, political action committees and political favours to influence the government.

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Organisations use three formal approaches to manage social responsibility: legal compliance, ethical compliance and philanthropic giving. Leadership and allowing for whistle-blowing are informal means of managing social responsibility. Organisations should evaluate the effectiveness of their socially responsible practices as they evaluate any other strategy.

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