Chart of Accounts
General Journal
Ledger Accounts
Trial Balance
Income Statement
Statement of Stockholder Equity
Balance Sheet
Closing Entries
image1.png
image2.png
ACC 201 Accounting Data Appendix
The following events occurred in March:
· March 1: Owner borrowed $125,000 to fund/start the business. The loan term is 5 years.
· March 1 : Owner paid $250 to the county for a business license.
· March 2: Owner signed lease on office space; paying first (March 20XX) and last month’s rent of $950 per month.
· March 5: Owner contributed office furniture valued at $2,750 and cash in the amount of $15,000 to the business.
· March 6 : Owner performed service for client in the amount of $650. Customer paid in cash.
· March 8: Owner purchased advertising services on account in the amount of $500.
· March 10: Owner provided services to client on account, in the amount of $1,725.
· March 15: Owner paid business insurance in the amount of $750.
· March 20: The owner received first utility bill in the amount of $135, due in April.
· March 20 : Office copier required maintenance; owner paid $95.00 for copier servicing.
· March 22: Owner withdrew $500 cash for personal use.
· March 25: Owner paid $215 for office supplies.
· March 25: Owner provided service to client in the amount of $350. Client paid at time of service.
· March 30: Owner paid balance due for advertising expense purchase on March 8.
· March 30 : Received payment from customer for March 10 invoice in the amount of $1,725.
· March 31: Last day of pay period; owner owes part-time worker $275 for the March 16 through March 31 pay period. This will be paid on April 5.
· March 31: Provided service for client on account in the amount of $3,500.
· March 31: Record depreciation of the office furniture at $45.83.
image1.png
The Social Responsibility of Business is to Increase its Profits
Milton Friedman
The New York Times Magazine
September 13, 1970
When I hear businessmen speak eloquently about the "social responsibilities of business in a free-enterprise system," I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are--or would be if they or anyone else took them seriously--preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.
The discussions of the "social responsibilities of business" are notable for their analytical looseness and lack o.
ICT Role in 21st Century Education & its Challenges.pptx
Chart of AccountsThis chart of accounts should help you identify the a.docx
1. Chart of Accounts
This chart of accounts should help you identify the
appropriate accounts to record to as you are
analyzing and journaling transactions for this
workbook. There is nothing to complete on this
page; this is simply a resource for you.
Asset Accounts
Liability
Accounts
Equity
Accounts
Acct
#
Acct
#
Acct
#
Cash 101
Notes
Payable
201
Owner's
Capital
301
Accounts Receivable 102
Accounts
Payable
202 Owner Draws 302
Prepaid Rent 103
Wages
Payable
203
Office Furniture 104
Office Supplies 105
Accumulated Depreciation (contra asset) 106
Revenue
Accounts
Acct
#
Service
Revenue
401
Expense
Accounts
Acct
#
Rent expense 501
Business
License
Expense
502
Insurance
Expense
503
Repairs and
Maintenance
504
Advertising
Expense
506
3. A Company
General
Journal
Entries
Journal Entry Tips
The debited account is recorded first,
credited account recorded second.
Debits and credits must always equal!
Date Accounts Debit Credit
There can be compound entries in
which two accounts receive a debt to
an equivalent credited amount to one
account.
Be sure to use your chart of accounts
(the first page of this workbook).
Each account you will record to is
already listed and organized by
classification of the account.
Total - 0 - 0
If Red, this means your
debits and credits do not
equal. Be sure to review
for errors.
Ledger Accounts
Asse
ts
Liabiliti
es
Equity
Reven
ue
Expens
es
Cash
Notes
Payab
le
Owne
r's
Capita
l
Servic
e
Reven
ue
Rent
Expense
$ - 0 $ $ - 0 $ $ - 0 $ $ - 0 $ $ - 0 $
4. -
0
-
0
-
0
-
0
-
0
$ - 0
$
-
0
$
-
0
$
-
0
$ - 0
Accounts
Rec.
Accoun
ts
Payable
Owne
r
Draws
Busine
ss
Licens
e
Expens
e
$ - 0
$
-
0
$ - 0
$
-
0
$ - 0
$
-
0
$ - 0
$
-
0
$ - 0
$
-
0
$ - 0 $ - 0
Prepaid
Rent
Wage
s
Payab
le
Insurance
Expense
Posting
to the
ledger/t
account
s
Don't
overthi
nk it!
You
are just
posting
each
debit
and
8. As of 03/31/20XX
Unadjusted trial
balance
Account Debit Credit Trial Balance
Cash - 0
Balances from the t accounts will autofill your
trial balance.
Accounts Receivable - 0
If total debits do not equal total credits in the
trial balance, you know you have an error.
Prepaid Rent - 0
These are the balances that will be used to
prepare the financial statements.
Office Furniture - 0
Be sure to implement feedback provided by
your instructor for this Milestone One
submission!
Office Supplies - 0
Accumulated
Depreciation
- 0
Notes Payable - 0
Accounts Payable - 0
Wages Payable - 0
Owner's Capital - 0
Owner Draws - 0
Service Revenue - 0
Rent Expense - 0
Business License
Expense
- 0
Depreciation Expense - 0
Insurance Expense - 0
Repairs and
Maintenance Expense
- 0
Advertising Expense - 0
Wages Expense - 0
Utilities Expense - 0
Retained Earnings
Total: - 0 - 0
Debits should
equal credits
`
Income Statement
9. A Company
Income Statement
For Month ending
3/31/20XX
Revenues
Total Revenues $ - 0
Operating Expenses:
Total Operating Expenses: - 0
Net Income - 0
Statement of Stockholder Equity
Company Name
Statement of Owner's Equity
Period Ending 03/31/20XX
Beginning Capital on 3/01/20XX $ - 0
Increases to capital
Net income/loss:
Owner Contributions
Subtotal: $ - 0
Decreases to capital
Owner Draws
Ending Equity as of 03/31/20XX $ - 0
Balance Sheet
A Company
Balance Sheet
As of March
31, 20XX
Assets
Liabilities and
Owners' Equity
Current Assets:
Current
Liabilities:
Total Current -
10. Liabilities 0
Long Term
Liabilities:
Total Current
Assets
-
0
Total Long Term
Liabilities:
-
0
Total Liabilities:
-
0
Owner's Equity
Non-Current
Assets:
Total Equity
-
0
Total Non
Current/Fixed
Assets
-
0
Total Assets:
-
0
Total Liabilities
& Equity
-
0
<== Total Assets on the left should
equal Liabilities + Owner's Equity
on the right.
Closing Entries
A Company
Closing Entries
Month ending
03/31/20XX
Date Accounts Debit Credit
31-Mar
Close revenues
31-Mar
Close Expenses
31-Mar
Close Income Summary
31-Mar
Close Owner Draws
11. - 0 - 0
image1.png
image2.png
ACC 201 Accounting Data Appendix
The following events occurred in March:
· March 1: Owner borrowed $125,000 to fund/start the business. The loan term is 5 years.
· March 1 : Owner paid $250 to the county for a business license.
· March 2: Owner signed lease on office space; paying first (March 20XX) and last
month’s rent of $950 per month.
· March 5: Owner contributed office furniture valued at $2,750 and cash in the amount of
$15,000 to the business.
· March 6 : Owner performed service for client in the amount of $650. Customer paid in cash.
· March 8: Owner purchased advertising services on account in the amount of $500.
· March 10: Owner provided services to client on account, in the amount of $1,725.
· March 15: Owner paid business insurance in the amount of $750.
· March 20: The owner received first utility bill in the amount of $135, due in April.
· March 20 : Office copier required maintenance; owner paid $95.00 for copier servicing.
· March 22: Owner withdrew $500 cash for personal use.
· March 25: Owner paid $215 for office supplies.
· March 25: Owner provided service to client in the amount of $350. Client paid at time of
service.
· March 30: Owner paid balance due for advertising expense purchase on March 8.
12. · March 30 : Received payment from customer for March 10 invoice in the amount of $1,725.
· March 31: Last day of pay period; owner owes part-time worker $275 for the March 16
through March 31 pay period. This will be paid on April 5.
· March 31: Provided service for client on account in the amount of $3,500.
· March 31: Record depreciation of the office furniture at $45.83.
image1.png
The Social Responsibility of Business is to Increase its Profits
Milton Friedman
The New York Times Magazine
September 13, 1970
When I hear businessmen speak eloquently about the "social responsibilities of business in a
free-enterprise system," I am reminded of the wonderful line about the Frenchman who
discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe
that they are defending free enterprise when they declaim that business is not concerned
"merely" with profit but also with promoting desirable "social" ends; that business has a "social
conscience" and takes seriously its responsibilities for providing employment, eliminating
discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary
crop of reformers. In fact they are--or would be if they or anyone else took them seriously--
preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting
puppets of the intellectual forces that have been undermining the basis of a free society these past
decades.
The discussions of the "social responsibilities of business" are notable for their analytical
looseness and lack of rigor. What does it mean to say that "business" has responsibilities? Only
people have responsibilities. A corporation is an artificial person and in this sense may have
artificial responsibilities, but "business" as a whole cannot be said to have responsibilities, even
in this vague sense. The first step toward clarity in examining the doctrine of the social
responsibility of business is to ask precisely what it implies for whom.
Presumably, the individuals who are to be responsible are businessmen, which means individual
proprietors or corporate executives. Most of the discussion of social responsibility is directed at
corporations, so in what follows I shall mostly neglect the individual proprietors and speak of
corporate executives.
In a free-enterprise, private-property system, a corporate executive is an employee of the owners
of the business. He has direct responsibility to his employers. That responsibility is to conduct
the business in accordance with their desires, which generally will be to make as much money as
13. possible while conforming to their basic rules of the society, both those embodied in law and
those embodied in ethical custom. Of course, in some cases his employers may have a different
objective. A group of persons might establish a corporation for an eleemosynary purpose--for
example, a hospital or a school. The manager of such a corporation will not have money profit as
his objectives but the rendering of certain services.
In either case, the key point is that, in his capacity as a corporate executive, the manager is the
agent of the individuals who own the corporation or establish the eleemosynary institution, and
his primary responsibility is to them.
Needless to say, this does not mean that it is easy to judge how well he is performing his task.
But at least the criterion of performance is straight-forward, and the persons among whom a
voluntary contractual arrangement exists are clearly defined.
Of course, the corporate executive is also a person in his own right. As a person, he may have
many other responsibilities that he recognizes or assumes voluntarily--to his family, his
conscience, his feelings of charity, his church, his clubs, his city, his country. He may feel
impelled by these responsibilities to devote part of his income to causes he regards as worthy, to
refuse to work for particular corporations, even to leave his job, for example, to join his country's
armed forces. If we wish, we may refer to some of these responsibilities as "social
responsibilities." But in these respects he is acting as a principal, not an agent; he is spending his
own money or time or energy, not the money of his employers or the time or energy he has
contracted to devote to their purposes. If these are "social responsibilities," they are the social
responsibilities of individuals, not business.
What does it mean to say that the corporate executive has a "social responsibility" in his capacity
as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way
that is not in the interest of his employers. For example, that he is to refrain from increasing the
price of the product in order to contribute to the social objective of preventing inflation, even
though a price increase would be in the best interests of the corporation. Or that he is to make
expenditures on reducing pollution beyond the amount that is in the best interests of the
corporation or that is required by law in order to contribute to the social objective of improving
the environment. Or that, at the expense of corporate profits, he is to hire "hardcore" unemployed
instead of better qualified available workmen to contribute to the social objective of reducing
poverty.
In each of these cases, the corporate executive would be spending someone else's money for a
general social interest. Insofar as his actions in accord with his "social responsibility" reduce
returns to stockholders, he is spending their money. Insofar as his actions raise the price to
customers, he is spending the customers' money. Insofar as his actions lower the wages of some
employees, he is spending their money.
The stockholders or the customers or the employees could separately spend their own money on
the particular action if they wished to do so. The executive is exercising a distinct "social
responsibility," rather than serving as an agent of the stockholders or the customers or the
employees, only if he spends the money in a different way than they would have spent it.
14. But if he does this, he is in effect imposing taxes, on the one hand, and deciding how the tax
proceeds shall be spent, on the other.
This process raises political questions on two levels: principle and consequences. On the level of
political principle, the imposition of taxes and the expenditure of tax proceeds are governmental
functions. We have established elaborate constitutional, parliamentary and judicial provisions to
control these functions, to assure that taxes are imposed so far as possible in accordance with the
preferences and desires of the public--after all, "taxation
2
without representation" was one of the battle cries of the American Revolution. We have a
system of checks and balances to separate the legislative function of imposing taxes and enacting
expenditures from the executive function of collecting taxes and administering expenditure
programs and from the judicial function of mediating disputes and interpreting the law.
Here the businessman--self-selected or appointed directly or indirectly by stockholders--is to be
simultaneously legislator, executive and jurist. He is to decide whom to tax by how much and for
what purpose, and he is to spend the proceeds--all this guided only by general exhortations from
on high to restrain inflation, improve the environment, fight poverty and so on and on.
The whole justification for permitting the corporate executive to be selected by the stockholders
is that the executive is an agent serving the interests of his principal. This justification disappears
when the corporate executive imposes taxes and spends the proceeds for "social" purposes. He
becomes in effect a public employee, a civil servant, even though he remains in name an
employee of a private enterprise. On grounds of political principle, it is intolerable that such civil
servants--insofar as their actions in the name of social responsibility are real and not just
window-dressing--should be selected as they are now. If they are to be civil servants, then they
must be elected through a political process. If they are to impose taxes and make expenditures to
foster "social" objectives, then political machinery must be set up to make the assessment of
taxes and to determine through a political process the objectives to be served.
This is the basic reason why the doctrine of "social responsibility" involves the acceptance of the
socialist view that political mechanisms, not market mechanisms, are the appropriate way to
determine the allocation of scarce resources to alternative uses.
On the grounds of consequences, can the corporate executive in fact discharge his alleged "social
responsibilities"? On the one hand, suppose he could get away with spending the stockholders' or
customers' or employees' money. How is he to know how to spend it? He is told that he must
contribute to fighting inflation. How is he to know what action of his will contribute to that end?
He is presumably an expert in running his company--in producing a product or selling it or
financing it. But nothing about his selection makes him an expert on inflation. Will his holding
down the price of his product reduce inflationary pressure? Or, by leaving more spending power
in the hands of his customers, simply divert it elsewhere? Or, by forcing him to produce less
because of the lower price, will it simply contribute to shortages? Even if he could answer these
questions, how much cost is he justified in imposing on his stockholders, customers and
15. employees for this social purpose? What is his appropriate share and what is the appropriate
share of others?
And, whether he wants to or not, can he get away with spending his stockholders', customers' or
employees money? Will not the stockholders fire him? (Either the present ones or those who take
over when his actions in the name of social responsibility have reduced the corporation's profits
and the price of its stock.) His customers and his employees can desert
3
him for other producers and employers less scrupulous in exercising their social responsibilities.
This facet of "social responsibility" doctrine is brought into sharp relief when the doctrine is used
to justify wage restraint by trade unions. The conflict of interest is naked and clear when union
officials are asked to subordinate the interest of their members to some more general purpose. If
the union officials try to enforce wage restraint, the consequence is likely to be wildcat strikes,
rank-and-file revolts and the emergence of strong competitors for their jobs. We thus have the
ironic phenomenon that union leaders--at least in the U.S.--have objected to Government
interference with the market far more consistently and courageously than have business leaders.
The difficulty of exercising "social responsibility" illustrates, of course, the great virtue of
private competitive enterprise--it forces people to be responsible for their own actions and makes
it difficult for them to "exploit" other people for either selfish or unselfish purposes. They can do
good--but only at their own expense.
Many a reader who has followed the argument this far may be tempted to remonstrate that it is
all well and good to speak of Government's having the responsibility to impose taxes and
determine expenditures for such "social" purposes as controlling pollution or training the hard-
core unemployed, but that the problems are too urgent to wait on the slow course of political
processes, that the exercise of social responsibility by businessmen is a quicker and surer way to
solve pressing current problems.
Aside from the question of fact--I share Adam Smith's skepticism about the benefits that can be
expected from "those who affected to trade for the public good"--this argument must be rejected
on the grounds of principle. What it amounts to is an assertion that those who favor the taxes and
expenditures in question have failed to persuade a majority of their fellow citizens to be of like
mind and that they are seeking to attain by undemocratic procedures what they cannot attain by
democratic procedures. In a free society, it is hard for "evil" people to do "evil," especially since
one man's good is another's evil.
I have, for simplicity, concentrated on the special case of the corporate executive, except only for
the brief digression on trade unions. But precisely the same argument applies to the newer
phenomenon of calling upon stockholders to require corporations to exercise social responsibility
(the recent G.M. crusade, for example). In most of these cases, what is in effect involved is some
stockholders trying to get other stockholders (or customers or employees) to contribute against
16. their will to "social" causes favored by activists. Insofar as they succeed, they are again imposing
taxes and spending the proceeds.
The situation of the individual proprietor is somewhat different. If he acts to reduce the returns of
his enterprise in order to exercise his "social responsibility," he is spending his own money, not
someone else's. If he wishes to spend his money on such purposes, that is his right and I cannot
see that there is any objection to his doing so. In the process, he, too, may impose
4
costs on employees and customers. However, because he is far less likely than a large
corporation or union to have monopolistic power, any such side effects will tend to be minor.
Of course, in practice the doctrine of social responsibility is frequently a cloak for actions that
are justified on other grounds rather than a reason for those actions.
To illustrate, it may well be in the long-run interest of a corporation that is a major employer in a
small community to devote resources to providing amenities to that community or to improving
its government. That may make it easier to attract desirable employees, it may reduce the wage
bill or lessen losses from pilferage and sabotage or have other worthwhile effects. Or it may be
that, given the laws about the deductibility of corporate charitable contributions, the stockholders
can contribute more to charities they favor by having the corporation make the gift than by doing
it themselves, since they can in that way contribute an amount that would otherwise have been
paid as corporate taxes.
In each of these--and many similar--cases, there is a strong temptation to rationalize these actions
as an exercise of "social responsibility." In the present climate of opinion, with its widespread
aversion to "capitalism," "profits," the "soulless corporation" and so on, this is one way for a
corporation to generate goodwill as a by-product of expenditures that are entirely justified on its
own self-interest.
It would be inconsistent of me to call on corporate executives to refrain from this hypocritical
window-dressing because it harms the foundation of a free society. That would be to call on
them to exercise a "social responsibility"! If our institutions, and the attitudes of the public make
it in their self-interest to cloak their actions in this way, I cannot summon much indignation to
denounce them. At the same time, I can express admiration for those individual proprietors or
owners of closely held corporations or stockholders of more broadly held corporations who
disdain such tactics as approaching fraud.
Whether blameworthy or not, the use of the cloak of social responsibility, and the nonsense
spoken in its name by influential and prestigious businessmen, does clearly harm the foundations
of a free society. I have been impressed time and again by the schizophrenic character of many
businessmen. They are capable of being extremely far-sighted and clear- headed in matters that
are internal to their businesses. They are incredibly short-sighted and muddle-headed in matters
that are outside their businesses but affect the possible survival of business in general. This short-
sightedness is strikingly exemplified in the calls from many businessmen for wage and price
17. guidelines or controls or income policies. There is nothing that could do more in a brief period to
destroy a market system and replace it by a centrally controlled system than effective
governmental control of prices and wages.
The short-sightedness is also exemplified in speeches by businessmen on social responsibility.
This may gain them kudos in the short run. But it helps to strengthen the already too prevalent
view that the pursuit of profits is wicked and immoral and must be curbed and controlled by
external forces. Once this view is adopted, the external forces that curb the market will not be the
social consciences, however highly developed, of the pontificating executives; it will be
5
the iron fist of Government bureaucrats. Here, as with price and wage controls, businessmen
seem to me to reveal a suicidal impulse.
The political principle that underlies the market mechanism is unanimity. In an ideal free market
resting on private property, no individual can coerce any other, all cooperation is voluntary, all
parties to such cooperation benefit or they need not participate. There are not values, no "social"
responsibilities in any sense other than the shared values and responsibilities of individuals.
Society is a collection of individuals and of the various groups they voluntarily form.
The political principle that underlies the political mechanism is conformity. The individual must
serve a more general social interest--whether that be determined by a church or a dictator or a
majority. The individual may have a vote and say in what is to be done, but if he is overruled, he
must conform. It is appropriate for some to require others to contribute to a general social
purpose whether they wish to or not.
Unfortunately, unanimity is not always feasible. There are some respects in which conformity
appears unavoidable, so I do not see how one can avoid the use of the political mechanism
altogether.
But the doctrine of "social responsibility" taken seriously would extend the scope of the political
mechanism to every human activity. It does not differ in philosophy from the most explicitly
collective doctrine. It differs only by professing to believe that collectivist ends can be attained
without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a
"fundamentally subversive doctrine" in a free society, and have said that in such a society, "there
is one and only one social responsibility of business--to use its resources and engage in activities
designed to increase its profits so long as it stays within the rules of the game, which is to say,
engages in open and free competition without deception or fraud."
6
/academy of Management Review 1979, Vol. 4, No. 4. 497-505
A Three-Dimensional Conceptual Model of
18. Corporate Performance ARCHIE B. CARROLL University of Georgia
Offered here is a conceptual model that comprehensively describes es- sential aspects of
corporate social performance. The three aspects of the model address major questions of concern
to academics and managers alike: (1) What Is included in corporate social responsibility? (2)
What are the social issues the organization must address? and (3) What is the organization's
philosophy or mode of social responsiveness?
Concepts of corporate social responsibility have been evolving for decades. As early as the
1930s, for example, Wendell Wilkie "helped educate the businessman to a new sense of social
responsibili- ty" [Cheit, 1964, p. 157, citing historian William Leuchtenburgj. The modern era of
social responsi- bility, however, may be marked by Howard R. Bowen's 1953 publication of
Social Responsibili- ties of the Businessman, considered by many to be the first definitive book
on the subject. Following Bowen's book, a number of works played a role in developing the
social responsibility concept [Berle & Means, 1932; Cheit, 1964; Davis & Blomstrom, 1966;
Greenwood, 1964; Mason, 1960; McGuire, 1963]. By the mid-1950s, discussions of the social
responsibilities of businesses had become so widespread that Peter Drucker chided business-
men: "You might wonder, if you were a conscien- tious newspaper reader, when the managers of
American business had any time for business" [1954].
One of the factors contributing to the ambiguity that frequently shrouded discussions about
social responsibility was the lack of a consensus on what the concept really meant. In 1960,
Keith Davis sug- gested that social responsibility refers to "busi- nessmen's decisions and actions
taken for reasons
at least partially beyond the firm's direct economic or technical interest" [p. 70]. Eells and
Walton, in 1961, argued as follows:
When people talk about corporate social responsi- bilities they are thinking in terms of the
problems that arise when corporate enterprise casts its shadow on the social scene, and of the
ethical principles that ought to govern the relationships between the corporation and society [pp.
457-458).
The real debate got underway in 1962 when Mil- ton Friedman argued forcefully that the
doctrine of _ social responsibility is "fundamentally subversive." He asserted: "Few trends could
so thoroughly un- dermine the very foundations of our free society as the acceptance by
corporate officials of a social responsibility other than to make as much money for their
stockholders as possible" [p. 133].
Joseph McGuire, in 1963, acknowledged the primacy of economic concerns, but also accommo-
dated a broader view of the firm's social responsi- bilities. He posited that:
The idea of social responsibilities supposes that the corporation has not only economic and legal
obli- gations, but also certain responsibilities to society which extend beyond these obligations
[p. 144].
20. holding that "the connotation of're- sponsibility' is that of the process of assuming an obligation.
It places an emphasis on motivation rather than performance." They elaborate: "Re- sponding to
social demands is much more than deciding what to do. There remains the manage- ment task of
doing what one has decided to do, and this task is far from trivial." They go on to argue that
"social responsiveness" is a preferable orientation [1976, p. 6].
S. Prakash Sethi takes a slightly different, but related, path in getting from social responsibility to
social responsiveness. He sets forth a three-state schema for classifying the adaptation of
corporate behavior to social needs: (1) social obligation, (2) social responsibility, and (3) social
responsiveness [1975, pp. 58-64]. Social obligation involves cor- porate behavior in response to
market forces or legal constraints. Social responsibility "implies bringing corporate behavior up
to a level where it is congruent with the prevailing social norms, values, and expectations."
Social responsiveness, the third state in his schema, suggests that what is important is "not how
corporations should respond to social pressures, but what should be their long-run role in a
dynamic social system." Business, therefore, must be "anticipatory" and "preventive" [pp. 58-
64].
In sum, social responsibility has been defined or conceptualized in a number of different ways,
by writers of stature in business, and in its various definitions the term has encompassed a wide
range of economic, legal, and voluntary activities. Indeed, it has been suggested that the term
should give way
498
to a new orientation referred to as social respon- siveness. Below is a summary listing of some of
these various views as to what social responsibility means:
1. Profit making only (Friedman) 2. Going beyond profit making (Davis, Back-
man) 3. Going beyond economic and legal require-
ments (McGuire) 4. Voluntary activities (Manne) 5. Economic, legal, voluntary activities
(Steiner) 6. Concentric circles, ever widening (CED,,
Davis and Blomstrom) 7. Concern for the broader social system (Eells
and Walton) 8. Responsibility in a number of social problem
areas (Hay, Gray, and Gates) 9. Giving way to social responsiveness (Acker-
man and Bauer, Sethi)
The Social Performance Model
Implicit in the various views of social responsibil- ity are a number of different issues. Some
defini- tions, for example, face the issue of what range of eoonomic, legal, or voluntary matters
21. fall under the purview of a firm's social responsibilities. Other def- initions address the social
issues (e.g., discrimina- tion, product safety, and environment) for which business has a
responsibility. A third group of defi- nitions, suggesting social responsiveness, is more
concerned with the manner or philosophy of re- sponse (e.g., reaction versus proaction) than with
the kinds of issues that ought to be addressed.
Because all three of these views are important, I suggest the following three distinct aspects of
cor- porate social performance that must somehow be articulated and interrelated:
1. A basic definition of social responsibility (i.e.. Does our responsibility, go beyond economic
and legal concerns?)
2. An enumeration of the issues for which a so- cial responsibility exists (i.e.. What are the social
areas — environment, product safety, discrimination, etc. — in which we have a
responsibility?)
3. A specification of the philosophy of response (i.e.. Do we react to the issues or proact?)
Each of these needs elaboration.
Definition of Social Responsibility
For a definition of social responsibility to fully address the entire range of obligations business
has to society, it must embody the economic, legal, ethical, and discretionary categories of
business performance. These four basic expectations reflect a view of social responsibility that is
related to some of the definitions offered earlier but that categorizes the social responsibilities of
businesses in a more exhaustive manner. Figure 1 shows how the social responsibilities can be
categorized into the four groups. (The proportions simply suggest the rela- tive magnitude of
each responsibility.)
Discretionary Responsibilities
Ethical Responsibilities
TOTAL
SOCIAL
RESPONSIBILITIES
Legal Responsibilities
Economic Responsibilities
Figure 1 Social Responsibility Categories
22. These four categories are not mutually exclusive, nor are they intended to portray a continuum
with economic concerns on one end and social con- cerns on the other. That is, they are neither
cumula- tive nor additive. Rather, they are ordered in the
499
Figure only to suggest what might be termed their fundamental role in the evolution of
importance. Though all of these kinds of responsibilities have always simultaneously existed for
business organi- zations, the history of business suggests an early emphasis on the economic and
then legal aspects and a later concern for the ethical and discretionary aspects. Furthermore, any
given responsibility or action of business could have economic, legal, ethical, or discretionary
motives embodied in it. The four classes are simply to remind us that motives or actions can be
categorized as primarily one or an- other of these four kinds.
Economic responsibilities The first and fore- most social responsibility of business is economic
in nature. Before anything else, the business institu- tion is the basic economic unit in our
society. As such it has a responsibility to produce goods and services that society wants and to
sell them at a profit. All other business roles are predicated on this fundamental assumption.
Legal responsibilities Just as society has sanctioned the economic system by permitting bus-
iness to assume the productive role, as a partial fulfillment of the "social contract," it has also
laid down the ground rules — the laws and regulations — under which business is expected to
operate. Society expects business to fulfill its economic mis- sion within the framework of legal
requirements. The dotted lines in Figure 1 suggest that, although we have four kinds of
responsibilities, they must be met simultaneously, as in the case of economic and legal
responsibilities.
Ethical responsibilities Although the first two categories embody ethical norms, there are addi-
tional behaviors and activities that are not neces- sarily codified into law but nevertheless are
expected of business by society's members. Ethical responsibilities are ill defined and
consequently are among the most difficult for business to deal with. In recent years, however,
ethical responsibilities have clearly been stressed — though debate continues as to what is and
is not ethical. Suffice it to say that society has expectations of business over and above legal
requirements.
Discretionary responsibiiities Discretionary (or volitional) responsibilities are those about which
society has no clear-cut message for business — even less so than in the case of ethical
responsibili-
ties. They are left to individual judgment and choice. Perhaps it is inaccurate to call these
expectations responsibilities because they are at business's dis- cretion; however, societal
expectations do exist for businesses to assume social roles over and above those described thus
far. These roles are purely voluntary, and the decision to assume them is guid- ed only by a
business's desire to engage in social roles not mandated, not required by law, and not even
generally expected of businesses in an ethical sense. Examples of voluntary activities might be
making philanthropic contributions, conducting in- house programs for drug abusers, training the
23. hardcore unemployed, or providing day-care cen- ters for working mothers. The essence of these
activities is that if a business does not participate in them it is not considered unethical per se.
These discretionary activities are analogous to Steiner's "voluntary" category and the CED's third
circle (helping society).
This four-part framework provides us with cate- gories for the various responsibilities that
society expects businesses to assume. Each responsibility is but one part of the total social
responsibility of business, giving us a definition that more complete- ly describes what it is that
society expects of busi- ness. This definition can therefore be stated:
The social responsibility of business encompasses the economic, legal, ethical, and discretionary
ex- pectations that society has of organizations at a given point in time.
This definition is designed to bring into the fold those who have argued against social
responsibility by presuming an economic emphasis to be separ- ate and apart from a social
emphasis, it requires a recognition of the possibility of movement from one category to the next,
such as an ethicai expectation (business should manufacture safe products) be- coming a legal
expectation (the requirements of the Consumer Product Safety Commission). Neil Churchhill has
referred to this characteristic in as- serting that "social responsibility is a moving target" [1974, p.
266]. The definition does not "nail down" the degree of specific responsibility in each cate- gory,
but it was not meant to. it purports only to provide a classification scheme for the kinds of social
responsibilities business has.
The reader should note, too, that a given busi- ness action may simultaneously invoive several of
500
these kinds of social responsibilities. For example, if a manufacturer of toys decided it shouid
make toys that are safe, it would be (at the same time) economically, legally, and ethically
responsible, given today's iaws and expectations. The four-part framework can thus be used to
help identify the reasons for business actions as weil as to call atten- tion to the ethical and
discretionary considerations that are sometimes forgotten by managers.
The Social Issues Involved
In developing a conceptual framework for cor- porate social performance, we not only have to
specify the nature (economic, legal, ethical, discre- tionary) of social responsibility but we also
have to identify the social issues or topical areas to which these responsibilities are tied.
No effort will be made here to exhaustively iden- tify the social issues that business must
address. The major problem is that the issues change and they differ for different industries, it is
partly for this reason that the "issues" approach to examining business and society relationships
gave way to managerial approaches that are more concerned with developing or specifying
generalized modes of response to all sociai issues that become significant to a firm.
24. One need not ponder the social issues that have evolved under the rubric of social responsibility
to recognize how they have changed over time. For example, product safety, occupational safety
and health, and business ethics were not of major inter- est as recently as a decade ago; similarly,
preoccu- pation with the environment, consumerism, and employment discrimination was not as
intense. The issues, and especiaiiy the degree of organizational interest in the issues, are aiways
in a state of flux. As the times change, so does emphasis on the range of social issues business
must address.
Also of interest is the fact that particular social issues are of varying concern to businesses, de-
pending on the industry in which they exist as well as other factors. A bank, for example, is not
as pressed on environmental issues as a manufac- turer. Likewise, a manufacturer is considerably
more absorbed with the issue of recycling than is an insurance company.
Many factors come into play as a manager at- tempts to get a fix on what social issues should be
of
most interest to the organization. A recent survey by Sandra Holmes illustrates this point quite
well. In her survey of managers of large firms, she asked what factors are prominent in selecting
areas of social involvement by their firms [1976, p. 87]. The top five factors were:
1. Matching a social need to corporate need or ability to help.
2. Seriousness of social need 3. interest of top executives 4. Public reiations value of social
action 5. Government pressure
That these disparate factors should show up in a response to a question of this kind suggests
clearly that business executives do not have a consensus on what social issues should be
addressed.
Thus, we are left with a recognition that social issues must be identified as an important aspect of
corporate social performance, but there is by no means agreement as to what these issues should
be.
Philosophy of Responsiveness
To complete our conceptual model it is necessary that a third component be identified and
discussed. The third aspect of the modei addresses the phil- osophy, mode, or strategy behind
business (man- agerial) response to social responsibility and social issues. The term generally
used to describe this aspect is "social responsiveness."
Social responsiveness can range on a continuum from no response (do nothing) to a proactive re-
sponse (do much). The assumption is made here that business does have a social responsibility
and that the prime focus is not on management accept- ing a moral obligation but on the degree
and kind of manageriai action. In this connection, William Frederick has articulated the
responsiveness view, which he terms CSRg:
25. Corporate social responsiveness refers to the ca- pacity of a corporation to respond to social pres-
sures. The literal act of responding, or of achieving a generally responsive posture, to society is
the focus. . . . One searches the organization for me- chanisms, procedures, arrangements, and
beha- vioral patterns that, taken collectively, would mark the organization as more or less
capable of re- sponding to social pressures [1978, p. 6].
501
lan Wilson
Terry McAdam
Davis & Blomstrom
DO * NOTHING
Reaction
Fight all the way
Withdrawal
Defense
Do only what Is required
Public Relations Approach
Accommodation
Be Progressive
Legal Approach Bargaining
Figure 2 Social Responsiveness Categories
Proaction
Lead the Industry
Problem Solving
DO * MUCH
Several writers have provided conceptual schemes that describe the responsiveness continu- um
well, lan Wilson, for example, asserts that there are four possible business strategies — reaction,
26. defense, accommodation, and proaction [1974], Terry McAdam has, likewise, described four
social responsibility philosophies that mesh well with Wil- son's strategies and, indeed, describe
the mana- gerial approach that would characterize the range of responsiveness. His philosophies
are (1) "Fight all the way," (2) "Do only what is required," (3) "Be progressive," and (4) "Lead
the industry" [1973]. Davis and Blomstrom, too, describe alternative re- sponses to societal
pressures as follows: (a) with- drawal, (b) public relations approach, (c) legal approach, (d)
bargaining, and (e) problem solving [1975]. These correspond, essentially, with the above
schemas. Figure 2 plots these responses on a continuum:
Corporate social responsiveness, which has been discussed by some as an alternate to social
responsibility is, rather, the action phase of man- agement responding in the social sphere. In a
sense, being responsive enables organizations to act on their social responsibilities without
getting 3ogged down in the quagmire of definitional prob- ems that can so easily occur if
organizations try to 3et a precise fix on what their true responsibilities are before acting.
The responsiveness continuum presented here epresents an aspect of management's social per-
ormance that is distinctly different from the concern
for social responsibility, CSR^ (corporate social re- sponsibility), as Frederick [1978] terms it
— our first aspect of the conceptual model — has ethical or moral threads running through it
and, hence, is problematical. In contrast, CSRg (corporate social responsiveness) — our third
aspect — has no moral or ethical connotations but is concerned only with the managerial
processes of response. These processes would include planning and social fore- casting
[Newgren, 1977], organizing for social re- sponse [McAdam, 1973], controlling social activi-
ties [Carroll & Beiler, 1975], social decision making, and corporate social policy [Bowman &
Haire, 1975; Carroll, 1977; Fitch, 1976; Post & Mellis, 1978; Preston & Post, 1975; Steiner,
1972; Sturdivant & Ginter, 1977], Figure 3 puts the three aspects to- gether into a conceptual
social performance model.
The social issues identified in Figure 3 are illus- trative only. Each organization should carefully
as- sess which social issues it must address as it plans for corporate social performance.
Uses of the Model This corporate social performance conceptual
model is intended to be useful for both academics and managers. For academics, the model is
pri- marily an aid to perceiving the distinction among definitions of social responsibility that
have ap- peared in the literature. What heretofore have been regarded as separate definitions of
social responsi- bility are treated here as three separate issues per- taining to corporate social
performance.
502
I
PHILOSOPHY OF
27. SOCIAL RESPONSIVENESS
Discretionary Responsibilities
Ettiical Responsibitrties
SOCIAL
RESPONSIBILITY
CATEGORIES
Legat Responsibitities
Economic Responsibilities
Proaction Accommo- ^^^^ dation _ ^ ^ ^
. Defense
Consum- erism
Environ- ment
piscrifTi- ination
Product Safety
Occupa- tionai Safety
Stiare- hotdars
SOCIAL ISSUES .JNVOLVED
Figure 3 The Corporate Social Performance Model
One aspect pertains to all that is included in our definition of social responsibility — the
economic, legal, ethical, and discretionary components. The second aspect concerns the range of
social issues (e,g,, consumerism, environment, and discrimina- tion) management must address.
Finally, there is a social responsiveness continuum. Although some writers have suggested that
this is the preferable focus when one considers social responsibility, the model suggests that
responsiveness is but one ad- ditional aspect to be addressed if corporate social performance is to
be acceptable. The three aspects of the model thus force us to think through the dominant
questions that must be faced in analyzing social performance. The major use to the aca- demic,
therefore, is in helping to systematize the important issues that must be taught and under- stood
28. in an effort to clarify the social responsibility concept. The model is not the ultimate conceptuali-
zation; it is, rather, a modest but necessary step
toward understanding the major facets of social performance.
The conceptual model can assist managers in understanding that social responsibility is not sepa-
rate and distinct from economic performance but rather is just one part of the total social
responsibili- ties of business. The model integrates economic concerns into a social performance
framework. In addition, it places ethical and discretionary expec- tations into a rational economic
and legal framework.
The model can help the manager systematically think through major social issues being faced.
Though it does not provide the answer to how far the organization should go, it does provide a
con- ceptualization that could lead to a better-managed social performance program. Moreover, it
could be used as a planning tool and as a diagnostic prob- lem-solving tool. The model can assist
the manager by identifying categories within which the organiza-
503
tion can be situated. An illustration will perhaps be helpful for an or-
ganization attempting to categorize what it has done according to the cubic space in Figure 3.
Recently, Anheuser-Busch test-marketed a new adult beverage called "Chelsea." Because the
beverage contained more alcohol than the average soft drink, consumer groups protested by
calling the beverage "kiddie beer" and claiming that the com- pany was being socially
irresponsible by making such a drink available to youth, Anheuser-Busch's first reaction was
defensive — attempting to claim that it was not dangerous and would not lead youngsters to
stronger drink. The company's later response was to withdraw the beverage from the marketplace
and reformulate it so that it would be viewed as safe. The company concluded this was the
socially responsible action to take, given the criticism.
According to the social performance model in Figure 3, the company found itself in the
consumer- ism segment of the model. The social responsibility category of the issue was ethical
(the product being introduced was strictly legal because it conformed to the maximum alcoholic
content standard). As it became clear that so much protest might be turning an ethical issue into
an economic one (as threats of product boycotts surfaced), the company moved along the
responsiveness dimension in the model from reaction and defense to accommodation.
This example shows how a business's response can be positioned in the social performance
model. The average business firm faces many such con- troversial issues and might use the
conceptual
model to analyze its stance on these issues and perhaps help determine its motivations, actions,
and response strategies. Managers would have a systematic framework for thinking through not
only the social issues faced but also the managerial response patterns contemplated. The model
could serve as a guide in formulating criteria to assist the organization in developing its posture
29. on various social issues. The net result could be more syste- matic attention being given to the
whole realm of corporate social performance.
Summary
Corporate social performance requires that (1) a firm's social responsibilities be assessed, (2) the
social issues it must address be identified, and (3) a response philosophy be chosen. The model
pre- sented attempts to articulate these key aspects in a conceptual framework that will be useful
to aca- demics and managers alike. The conceptual model is intended to heip clarify and
integrate various defi- nitional strands that have appeared in the literature. Also, it presents the
notions of ethical and discre- tionary responsibilities in a context that is perhaps more palatable
to those who think economic con- siderations have disappeared in discussions of so- cial
responsibility. The model can be used to help managers conceptualize the key issues in social
performance, to systematize thinking about social issues, and to improve planning and diagnosis
in the social performance realm. To whatever extent the model helps accomplish these
objectives, it re- f- mains but a modest step toward the refinement of the corporate social
performance concept.
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Received 9/25/78
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