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Social
Responsibility

Viewpoints 

 

pwd@otherviews.org

 

 

 

CORPORATE SOCIAL RESPONSIBILITY:

 AN OXYMORON?

One of the dominant reasons corporations form is to attribute to the individual owners "limited liability" and "responsibility" for the actions of the corporation.   An individual, a sole proprietorship, is personally responsible to his public for his actions and he assumes, by choice, responsibility for all his actions and the actions of his enterprise.  He forces no one else to accept responsibility for those commitments.  A corporation is responsible to its public for its actions but its stake holders are not. A corporation has no explicit responsibility to society other than to operate within society's legal and economic framework.   Corporations do not go to church, do not hold public office, and do not have children attending school. 

In a sense a corporation is a group of individuals who have banded together for the purpose of increasing their individual and collective wealth but who aren't willing to accept responsibility for the actions of the group to that end.  Society's recognition of this purpose has been to issue statutory as well as implicit expectations like income tax deductions for charitable donations. 
The trend in corporate America is towards a more comprehensive responsibility to the bottom line.  Since society is increasingly a partner in corporate America the resolution of the apparent conflict must come from society and be expressed in it's expectations The question is: whether a business entity should assume responsibilities other than those legally imposed and, if it does, what is its obligation to its shareholders?  From a different perspective, is it fair for society  to expect a corporation to assume external responsibilities and if in the long run is it of real value to society for it to do so?

What does society expect of corporations and why?  Is it intrinsic or specific to some types of businesses and not to others?  Is it myth or substantive?  Are corporations continuing to pay for the misdeeds of their ancestors.  Is the accepted or assumed responsibility driven by guilt or does it come from a sense of community?  What is the difference between the past, present, and the future operating environments of society?  The central issue for determining the future of corporate social responsibility requires the determination of how and to what extent corporations are responsible to society beyond the mandates of Government and the requirements of their owners and employees.
 

DEFINITIONS

Within the context of "big business," what is the definition for "corporate 
responsibility"?  Exactly who is responsible? the chairman of the board? upper level management? The workers on the assembly line? The shareholders? The vendors? wives? husbands?  And, perhaps of more importance, what are they "socially responsible" for?

Responsible: Expected or obliged to account for something to someone;  Morally  accountable for one's actions; Webster's.

Social: Of or having to do with human beings living together as a group in  situation requiring that they have dealings with one another web.

Ethical:... Conforming to the standards of conduct of a given profession. 
Implies conformity with an elaborated, ideal code of moral principles. Ox 

Moral:... Capable of making the distinction between, right and wrong in conduct.  implies conformity with the generally accepted standards of goodness or rightness in conduct or character...Oxford

A very minimal definition of social responsibility" is suggested by Roger B. 
Smith, former chairman, General Motors Corporation: 

"The special challenge for companies like General Motors is to do 
everything possible to minimize the negative effects of our products and 
processes on the environment."  (source)

A more liberal definition of Social Responsibility is offered by Thornton F. 
Brandshaw in the introduction to PARTICIPATION III:  ATLANTIC RICHFIELD AND SOCIETY:

"The basic goal of private enterprise remains what it has always been...to 
produce needed goods and services, earn a fair return on investment, 
and succeed as an economic institution.  But the new dimension that 
must be observed...a new "bottom line" for business, really...is social approval...  A successful business organization must possess a moral sense as well as an economic sense."

One might wonder if General Motors Corporation's idea of social responsibility is anything more than the avoidance of damaging environmental law suits.  Similarly, Atlantic Richfield's adoption of the term "social approval" may be nothing more than marketing hype.  At least the concept of social approval acknowledges that society is monitoring the moral dimension of a corporation's business decisions and strategy.

In contrast, a more proactive commitment to social responsibility as evidenced by explicit action that benefits society is exemplified by Sara Lee, who "says it best" i n their undated report SARA LEE FOUNDATION PROGRAMS AND APPLICATION PROCEDURES:

"Our policy is to donate the equivalent of at least 2 percent of our U.S. 
pretax income to nonprofit organizations.  . . . Financial aid, food and 
clothing, product donations, and, perhaps most importantly, the 
personal involvement of our employees are the tangible results of our 
resolve to make a difference."

Upon closer scrutiny of Sara Lee's stated desire to make a difference, one has to wonder how their actions differ from any other form of corporate charitable contributions.

The definition and consequential role of external social responsibility that a particular organization chooses is voluntary and usually highly visible.  The expression and execution of that role can become a significant part of the image of the organization.  That visibility also engenders a vulnerability or an unquantifiable expectation that prior commitments must be maintained and perhaps even exceeded.  Social responsibility, if considered as a separate mandate, can become a driving force with a focus far more comprehensive than the bottom line.

Part of the confusion is the result of the transitional environment in today's 
business culture.  Contemporary corporate America still suffers from popular perception that it is unresponsive and indifferent.  Whether the perception is true or not, corporations are having to adjust to global competition and the necessity of increasing the efficiency and effectiveness of their overall operations.  All activities within the organization must justify their contribution to the organization.

As corporations become more responsive and effective, the corporate image will change.  As corporate image change occurs, so should the perceived requirements for public relations gestures.  The best representation of a socially responsible corporation will be the one that is respected and trusted by its community.  Future trends in corporate social responsibility will be fostered by the very responses to issues of efficiency, effectiveness, and survival that the organization as a whole will have faced.
 
 

THE WHY AND HOW OF SOCIAL RESPONSIBILITY

 MEASURABILITY

Efficiency and effectiveness can only be defined and  measured by comparison with prior results.  Trial and error is not a methodology for the "center ring" of society.  The subjectivity of social responsibility renders the defining of an appropriate realizable goal an exercise in abstraction; and measuring the outcome of social responsibility is even more absurd.  As difficult as social approval is to quantify, uncertainty about the outcome of actions affecting society must be minimized if the potential benefits are to be maximized in an organization's operations.
 
 

 BUSINESS ISSUES

The image of the corporate environment is in the process of dramatic change.  The perception of an immutable business environment is giving way to one more responsive to the market place and to society's needs.  The consumer is gradually realizing the possibilities of a consumer oriented corporation, and business is realizing its interdependence with the market.  Responsiveness to change and a respected corporate image are now recognized as requisites for economic survival.

Competition has exposed the vulnerabilities of large and cumbersome 
organizations to change and growth.  Within the corporation, all levels of 
management are increasingly aware of the need to care about responding quickly and independently in order to enhance effectiveness of the organization overall. 

Education has increased the upward mobility of the population toward the gradually more accessible upper echelons of management.  As a result, responsibility has been increasingly redistributed across the breadth and width of the organizational structure.  It can no longer be attributed only to the one person who sits at the head of the table.  Authority and "responsibility" are no longer the sole province of the upper levels of management and are increasingly being shouldered by all members of the organization.
 

Responsibility


Who or what imposes the condition of moral or ethical responsibility:  the 
organization that assumes the responsibility or the person or group of persons that accept the benefits?  Is it different for individuals and corporations.  Is it different for different types of business; or sizes of businesses; or locations of businesses?  Does it vary in different parts of the world under different political and cultural conditions?

Responsibility to an individual is a contractual relationship instituted by choice for joint benefit.  Responsibility to society is usually not contractual and rarely is directly reciprocal.

Responsibility to society can be broken down into to types: imposed and voluntary.
Imposed responsibility (usually by governments) is relatively easy to deal with because it is inescapable and universal, it can't be legally ignored only argued with and lobbied against.  Imposed responsibility isn't a consideration with this discussion except to the extent that a corporation's posture of compliance affects its image and ability to operate effectively.
The degree to which the imposed responsibility is rational is always an issue, however the public's perception of fairness must be weighed against the organization's strategy of "Social Responsibility".  Resistance to that imposed responsibility can be perceived as un-social or detrimental to the "public welfare" whereas lack of resistance may mean accepting significant operational penalties and possible loss of investor confidence. 

The overall best interest of a socially responsible individual or organization may not be in its operational best interest.  The organization's definition and strategy of "Social Responsibility" must be substantial and consistent  enough to offset what are often perceived anti-social business practices.

Voluntary responsibility must be challenged as to it's appropriateness and potential advantage for the organization.  It  must be justified to members of the corporation and balanced against potential returns or losses to the corporation.  It is also subject to stockholder challenge and the influence of organized special interest groups.  Voluntary responsibility, to be effective for the corporation's goals and affective for the object, must be carefully defined on all levels and it must be justified on moral and ethical grounds (to what extent is it capitalizing on a bad situation for profit and how much is humanistic, or socially responsible concern? 

Voluntary responsibility is assumed to be based on the integrity and convictions of the individual or organization and has a cost attached to it that is frequently an economic disadvantage in the short term seldom, if ever, realized as an advantage.  Additionally, the presumption of an advantage it is at best difficult and usually impossible to quantify.  Still it must be a considered a significant factor because of the necessity to explain and quantify to the stock holders the value of the activities. 

Volunteerism, to a certain extent, overcomes many of the potential pitfalls of direct financial involvement by organizations.  The efforts depend on individuals, and as a result, a perceived sense of personal commitment and sincerity that aren't usually associated with an effort of a corporation.

The difference between an organization and an individual assuming a social responsibility is that an individual only has to justify his actions to himself and an organization has many groups and many people to answer to and the corporation's primary responsibility to the bottom line and their stockholders.

For many of those stockholders the issue of "Social Responsibility" is personal and their purpose for investing money in a business is to make more money not to find creative ways to give it away.  Is there anything wrong, after all, with earning a living?  Isn't that all that should be expected of a profit motivated organization?  Can a legitimate business even exist for any other reason than profit?

What greater gift can a corporation give to society than increasing employment possibilities and providing a useful and desired product?  Wouldn't the benefits to society as a whole be greater if the organization turned out a better product at a lower price, with less negative impact on its physical and political environment?  The benefits and the responsibilities would then be more evenly distributed across the range of society rather than intensively for small (relatively) groups of people.

With corporations focusing on doing their business and philanthropic effort left to individuals with their individual priorities there would be less confusion about the issues of responsibility and choice.  Society is a nameless sponge soaking up all the residual within its sphere of influence; the more responsibility an organization assumes the more society will come to expect and the less meaningful the concept of a gift.  What then of society's perception of an organization that limits its "social responsibilities" to its operations?  How can the sense of benevolence remain when society's expectations turn voluntary efforts into "responsibility".

"Another issue that deserves consideration is social responsibility.  Should business operate strictly in their stockholders' best interests, or are firms also responsible for the welfare of their employees, customers, and the communities in which they operate?  Certainly firms have an ethical responsibility to provide a safe working environment, to avoid polluting the air or water, and to produce safe products.  However, socially responsible actions have costs, and it is questionable whether many businesses would voluntarily incur these costs.  If some firms do act in a socially responsible manner while others do not then the socially responsible firms will be at a disadvantage in attracting capital.... Thus, any voluntary socially responsible acts that raise costs will be difficult, if not impossible, in industries that are subject to keen competition....

After all, why should the stockholders of one corporation subsidize society to a greater extent than those of other businesses?  For this reason, even highly profitable firms (unless they are closely held rather than publicly owned) are generally constrained against taking unilateral cost increasing social actions.... Does all this mean that firms should not exercise social responsibility?  Not at all, but it does mean that most significant cost increasing actions will have to be put on a mandatory rather than a voluntary basis, at least initially, to ensure that the burden falls uniformly on all businesses.  Thus, such social benefit programs as fair hiring practices, minority training, product safety, pollution abatement, and antitrust actions are most likely to be effective if realistic rules are established initially and then enforced by government agencies... 

In spite of the fact that many socially responsible actions must be mandated by government, in recent years numerous firms have been voluntarily taking actions, especially in the area of environmental protection, because these actions help sales..." Fin Mgmt. 15-16

In the future the need for a clear precise definition of a particular firm's assumed "Social Responsibility" and strategy for its implementation will become increasingly important in addition to an adequate return on investment. 

The selection of a specific cause to champion becomes an identification with that cause.  Unless the administrator of the disbursement is "careful" the organization can become a victim of controversy associated with the cause as easily as with the "goodness" of the cause.  One approach is to create a new cause like Mac Donald's House, another is to subscribe to a separate agency, like United Way, who in turn disburses the proceeds in a socially recognized and accepted way.


IMPORTANT PRINCIPLES FOR THE SELECTION OF APPROPRIATE EXTERNAL ACTIVITIES FOR AN ORGANIZATION TO MEET ITS ASSUMED SOCIAL RESPONSIBILITY:


1. Define Social Responsibility" in the context of the organizations mission and needs as well as societies needs, and establish  objectives for its policies.  The gifts that are the most appreciated   are those that are most consistent with the values and needs of the  giver as well as the receiver.

2. Carefully establish a strategy and schedule for the implementation   of the organizations policy of "social responsibility" that is "comfortable"  both to the organization and its stake holders.

3. Select the target beneficiary for compliance with the organizations requirements first... don't wait to be selected.

4. Maintain a constancy of purpose, consistency, and stability of philosophy in the implementation of external activities.

Factors to consider about the appropriateness of an approach to "Social Responsibility" for a particular type of organization:

1. The political and geographical arena within which an organization operates defines the range of influence of any external, society affecting, efforts. 

2. The degree of consumer exposure of the organization affects the probability of return on any external efforts.

3. The particular external efforts that are selected, based on 1. ? 2. affect the probability of return. 

4. The size of the organization's work force will help determine the scope of the external and internal efforts and the value of those efforts.

5. The degree of physical presence of the organization in the local, regional, or international community will affect the type of external effort and its scope.

6. The degree of dependence of the organization for the satisfaction of its business mission on its local community will affect the type and level of external effort. 

7. The risk of detrimental effects of the organization on the local community and the degree of need for a "Goodwill" account will affect the type and level of external effort.

8. The sensitivity of the organizations stockholders to the need for external efforts and their confidence in the probability of an actual return to the organization will affect the type and level of external activity. 

9. The level of the community's awareness of the organization and the sensitivity of the community to the intrinsic importance of the organization will affect the type and level of external activity.
 

Factors to consider about the selection of a cause to champion:


1. Personal relevance to the organization.
2. General social acceptance (100% is good) and lack of  controversy
3. Risks
4. Sensitivity to support.
5. Relevance to the primary business
6. Correlation to the corporate definition of "social responsibility" and 
 implementation strategy.
7. Payback time frame.
 

Factors to consider about the implementation of contributions (whatever the type):


1. Integrity of the individual or recipient organization.
2. Durability of the effort or expense.
3. Coincidence to the operational demands of the donor  organization.
4. Coincidence to the operational demands of the recipient  organization.
 
 

THE CLEAN SLATE


To provide the greatest benefit to society and exhibit the greatest "Social Responsibility" corporations in the future should focus on is their mandated and contractual obligations.  If a corporation is to assume an active role in society outside its primary mission of providing a return on stockholders investments those activities should be publicly stated as part of the corporate mission and strategy.  By focusing on responsive, responsible, and effective operations corporations will be exhibiting the highest degree of "social responsibility" possible and be doing it with the greatest return for its investors.  They will be affecting the highest percentage of the population and doing so more effectively than any guilt driven or PR driven activity with none of the risk or conflict of interest associated with elitist philanthropic gestures.  This shift towards the individuals responsibility for "social responsibility" issues  is a logical consequence of the process of businesses becoming more competitive by becoming more effective at identifying and responding to their market.
 


pwd@otherviews.org

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