Managing Social Responsibility & Ethics Ch 4

Principles of Management Second Edition
© Oxford Fajar Sdn. Bhd. (008974-T) 2014
CHAPTER 4
MANAGING SOCIAL
RESPONSIBILITY
AND ETHICS

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After studying this chapter you should be able to:
❑ Explain the major perspectives of corporate social
responsibility, and identify the major stakeholder groups
frequently associated with social responsibility.
❑ Describe organizational social responsiveness.
❑ Understand how the nature of a management job creates
the possibility for ethical abuses.
❑ Contrast the three major types of managerial ethics.
LEARNING OUTCOMES

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❑ Outline ethical guidelines for managers, and explain the
actions managers can take to handle ethical situations
and avoid ethical conflicts.
❑ Explain key considerations in managing an ethical
organization.
LEARNING OBJECTIVES

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Social responsibility refers to a business’s obligation to
pursue policies, make decisions and take actions that
benefit society. Basically, organizations are socially
responsible to:
❖ Shareholders
– Organization managers must satisfy the owners
– Social responsibility is maximizing shareholders’ wealth
❖ Stakeholders
– Individuals who have a legitimate interest in an organization
– Social responsibility is satisfying the interests of multiple
stakeholders
4.1 INTRODUCTION

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4.2 ORGANIZATIONAL SOCIAL
RESPONSIBILITY
❖ Economic Responsibilities
❖ Legal Responsibilities
❖ Ethical Responsibilities
❖ Discretionary Responsibilities
Source: Adapted from A Three Dimensional Conceptual Model of
Corporate Performance, 1979.
Social responsibilities of management include:

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Organizations and their managers are socially
responsible to six major overlapping groups:
❖ shareholders
❖ employees
❖ consumers
❖ the local community
❖ the general society (regional and national)
❖ the international community
4.2.1 Social Stakeholders

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Strategies for Managing
Stakeholders
❖ The foundations of support for any business process lie
in understanding the needs of people, the stakeholders
in business processes and support systems.
“Stakeholder management is critical to the success of
every project in every organization I have ever worked
with. By engaging the right people in the right way in
your project, you can make a big difference to its
success ... and to your career.”
― Rachel Thompson, experienced Project Manager

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Strategies for Managing
Stakeholders (cont.)
❖ Stakeholder management is an important discipline that
successful organizations use to win support from others.
❖ It helps them to ensure that their projects succeed where
others fail.

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Step 2:
Prioritize your
stakeholders
Step 3:
Understand your
key stakeholders
Step 1:
Identify your
stakeholders
A stakeholder analysis is a technique used by
organizations to identify key people who have to
be won over.
Stakeholder Analysis

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❖ Brainstorm who your stakeholders are:
– all the people who are affected by your work
– who have influence or power over your work
– who have an interest in its successful or unsuccessful
conclusion
Step 1: Identify your stakeholders

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Mapping out your stakeholders on a Power/Interest Grid
helps to classify them according to their power over your
work and by their interest in your work.
Step 2: Prioritize your stakeholders

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❖ High power, interested people
– These are the people you must fully engage and
make the greatest efforts to satisfy.
❖ High power, less interested people
– Put in enough work with these people to keep them
satisfied, but not so much that they become bored
with your message.
(cont.)

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❖ Low power, interested people
– Keep these people adequately informed; talk to them
to ensure that no major issues arise. They can oft en
be very helpful with the details of your project.
❖ Low power, less interested people
– Again monitor these people but do not bore them with
excessive communication.
(cont.)

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Key questions to help you understand your stakeholders are:
❖ What motivates them most of all?
❖ What information do they want from you?
❖ What is their current opinion of your work? Is it based
on good information?
Step 3: Understand your key
stakeholders

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❖ Who influences their opinions in general, and who
influences their opinion of you? Do some of these
influencers thus become important stakeholders in
their own right?
❖ If they are not likely to be positive, what will win
them around to support your project?
❖ If you do not think you will be able to win them
around, how will you manage their opposition?
Step 3: Understand your key
stakeholders (cont.)

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❖ The primary role of management in publicly held
organizations is to earn profits and dividends for
shareholders
❖ Managers tend to view themselves as also being
responsible for the survival of the organization
– perpetuating the organization through development and
expansion
– balancing the demands of all stakeholders, so that
multiple demands do not jeopardize the achievement of
organizational objectives
4.2.2 Shareholders

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❖ Shareholders sometimes use their position to
pressure for change in the social stance of
management
– concerned that many CEOs are being paid a staggering
amount of money yearly, even though the
organization’s performance has been less than stellar
– top managers are often reluctant to disclose the full
extent of their compensation
4.2.2 Shareholders (cont.)

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❖ Studying this issue is problematic because it is difficult
to accurately measure the social responsibility of an
organization against that of another.
❖ While this makes a definitive answer impossible,
cumulative research indicates that no clear
relationship exists between an organization’s degree
of social responsibility and its financial success —
at least, not in the short run.
Does Social Responsibility Pay?

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❖ Refers to the development of organizational decision
processes, whereby managers anticipate, respond to and
manage areas of social responsibility
❖ Often called corporate social responsiveness
– Monitoring Social Demands and Expectations
– Social Forecasting
– Opinion Surveys
– Social Audits
– Issues Management
– Social Scanning
– Internal Social Response Mechanisms
4.3 ORGANIZATIONAL SOCIAL
RESPONSIVENESS

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❖ Major means of assessing social demands and
expectations relative to organizations include:
– Social forecasting
– Opinion surveys
– Social audits
– Issues management
– Social scanning
4.3.1 Monitoring Social
Demands and Expectations

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Common means used by organizations to facilitate
effective social responses include:
❖ Individual executives
❖ Temporary task forces
❖ Permanent committees
❖ Permanent departments
❖ Combination approaches
4.3.2 Internal Social Response
Mechanisms

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❖ Workplace deviance—refers to unethical behaviour
that violates organizational norms concerning right
and wrong
❖ Types of workplace deviance
– Production deviance
– Property deviance
– Political deviance
– Personal aggression
4.3.3 Ethical Challenges at
Workplaces

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❖ Obey the law
❖ Tell the truth
❖ Respect people
❖ Stick to the Golden Rule
❖ Above all, do no harm
❖ Practice participation, not paternalism
❖ Always act when you have responsibility
4.4 ETHICAL MANAGERS

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❖ A number of different ethical principles can be used
to make business decisions:
– Principle of long-term self-interest
– Principle of personal virtue
– Principle of religious injunctions
– Principle of government requirements
– Principle of utilitarian benefits
– Principle of individual rights
– Principle of distributive justice
Principles of Ethical Decision-
making

Managing Social Responsibility & Ethics Ch 4

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