Summary Social Responsibility and Ethics in Strategic Management

Social Responsibilities of Strategic Decision Makers 🌍

Social Responsibility
Social responsibility is the idea that a business should have a positive impact on society, not just focus on making profits. It suggests that businesses should also consider their effect on people, communities, and the environment when making decisions. This idea goes beyond simply earning money and encourages companies to make decisions that benefit society as a whole.

Example: A company donating a portion of its profits to environmental causes or working towards reducing its carbon footprint shows social responsibility.

Friedman’s Traditional View of Business Responsibility 💼💸

Friedman’s View
Milton Friedman, an economist, argued against the idea of businesses having social responsibilities. According to him, a company’s only responsibility is to maximize profits for its shareholders, as long as it stays within the boundaries of the law. He believed spending profits on social causes is not a business’s role.

Example: A company focusing solely on increasing profits, without engaging in environmental initiatives or charity work, follows Friedman’s traditional view.

Carroll’s Four Responsibilities of Business 📊

Economic Responsibilities 💰
A business should produce valuable goods or services to meet society’s needs and generate profit. This ensures the company can pay its bills and provide returns to shareholders.

Example: A company manufacturing affordable and useful products like smartphones that people want to buy.
Legal Responsibilities ⚖️
A business must follow laws and regulations set by the government, ensuring it operates within the legal framework.

Example: A company abiding by safety standards when manufacturing products.
Ethical Responsibilities 🤝
A business should act in ways that align with society’s ethical norms, even if not mandated by law. This involves doing what’s morally right.

Example: Treating employees fairly, paying them decent wages, and not exploiting them.
Discretionary Responsibilities 🎁
These are voluntary actions, such as charitable donations or supporting community initiatives. While not mandatory, these actions can enhance the company’s reputation.

Example: A company contributing to local education programs or organizing charity events.

Benefits of Being Socially Responsible 🌟

Premium Prices & Brand Loyalty: Customers may be willing to pay more for a brand that they know is socially responsible.
Example: People often pay more for environmentally friendly products because they value sustainability.
Stronger Relationships: Being socially responsible can help businesses build long-lasting relationships with suppliers and distributors.
Attracting Top Talent: Socially responsible companies often attract employees who value working for ethical and caring businesses.
Entering Foreign Markets: Countries are more likely to welcome companies that show social responsibility, as it aligns with global sustainability trends.
Public Support in Difficult Times: Being known for contributing positively to society can result in support from local communities and governments during tough times.

Characteristics of Sustainability 🌱

Sustainability involves balancing the following three aspects:

Environmental: Ensuring actions do not harm the planet, like reducing waste or using renewable energy.
Economic: Aiming for profitability while also being mindful of long-term financial health.
Social: Contributing to society by ensuring fair treatment and promoting positive change.

Corporate Stakeholders 🤝

Stakeholders are individuals or groups that have an interest in a business and are affected by its decisions.

Example: Customers, employees, shareholders, and suppliers are all stakeholders in a company.

Enterprise Strategy: This refers to how a business communicates its ethical relationship with stakeholders, aiming to satisfy their expectations and needs.

Stakeholder Analysis 🔍

Stakeholder Analysis is the process of identifying and evaluating the impact of business decisions on stakeholders.

Primary Stakeholders: These are individuals or groups with direct interests in the company’s actions, such as customers, employees, and shareholders.
Example: Employees will be directly impacted by changes in company policy, like salary adjustments.
Secondary Stakeholders: These are groups that may be indirectly affected, such as local communities, NGOs, and competitors.
Example: Local communities may be affected by a company’s pollution or charity initiatives.
Estimating Effects: Managers should analyze how decisions affect each stakeholder group and adjust strategies accordingly.

Reasons for Unethical Behavior 🚫

People or organizations may act unethically for several reasons, including:

Lack of awareness: Not realizing that their behavior is unethical.
Lack of standards: No clear guidelines on what’s right or wrong.
Cultural differences: Different cultures have different ethical standards.
Behavior-based governance: A focus on personal relationships or benefits over following rules.

Moral Relativism 🧠

Moral Relativism suggests that morality is subjective and based on personal or cultural perspectives. It argues that there is no universal standard to determine right or wrong.

Naïve Relativism: Belief that morality is entirely personal and subjective.
Role Relativism: Morality is based on social roles and their expectations.
Social Group Relativism: Morality follows the norms of a specific peer group.
Cultural Relativism: Morality is defined by cultural norms and values.

Kohlberg’s Levels of Moral Development 🌱

Preconventional: Decisions are based on personal benefits and avoiding punishment.
Conventional: Decisions are influenced by society’s laws and norms.
Principled: Guided by a personal moral code, independent of others’ views.

Encouraging Ethical Behavior 💡

Code of Ethics: A set of guidelines that clarifies how employees should behave in various situations.
Whistleblowers: Employees who report unethical or illegal activities within their organization.

Views on Ethical Behavior ⚖️

Ethics: Accepted standards of behavior for an occupation or profession.
Morality: Personal rules of behavior based on beliefs.
Law: Formal rules that regulate behavior, which may or may not align with ethics.

Approaches to Ethical Behavior 📚

Utilitarian Approach: Actions are judged by their consequences, aiming to maximize overall happiness.
Individual Rights Approach: Focuses on respecting individual rights and freedoms.
Justice Approach: Ethical decisions should be fair, impartial, and equitable.

Cavanagh’s Questions to Solve Ethical Problems:

Utility: Does the decision benefit stakeholders?
Rights: Does the decision respect individual rights?
Justice: Is the decision fair and just?

In conclusion, ethical decision-making in business involves balancing the needs of various stakeholders, promoting fairness, and being responsible to society. By understanding different ethical perspectives, businesses can make decisions that benefit both their organization and the community at large. 🌍🤝