Chapter 2 Principles of Management

Fundamentals of Social Responsibility: Corporate Social Responsibility: The managerial obligation to take action that protects and improves both the welfare of society as a whole and the interests of the organization. Davis Model of Corporate Social Responsibility: Keith Davis: A generally accepted model of corporate social responsibility. List of 5 propositions that describe why and how business should adhere to obligation to take action that protects and improves the welfare of society as well as of the organization.
Davis model: Proposition 1: Social responsibility arises from social power: Business has power over society and can influence minority and environmental pollution issues. Proposition 2: Business should operate a 2 way system: Inputs from society and open disclosure to the public. Proposition 3: Social costs and benefits shall be considered prior to proceeding: Profits are not the only factors involved.
Proposition 4: Social costs shall be passed on to the consumer: Business can bot be expected to foot the bill for social activities; the cost must be passed along to the consumer as well. Proposition 5: Business has a responsibility for some social problems outside their normal area of operation: Business should help solve social problems, if they can. Performance of Social Responsibility Activities by Business: Perform all legally required social responsibility activities. Consider voluntarily performing social responsibility activities beyond those legally required.

Inform all relevant individuals of the extent to which the organization will become involved in performing social responsibility activities. Performing Required Social Responsibility Activities: Federal Legislation requires that business perform certain social responsibility activities. Environmental Protection Agency(EPA): Enforces socially responsible environmental standards. Equal pay act of 1963: Equal pay for equal work. Equal Employment Opportunity Act of 1972: Highway Safety Act of 1978 Clean Air/ Act Amendment of 1990.
Voluntarily Performing Social Responsibility Activities: Assessing the positive and negative outcomes of performing social responsibility activities over both the short and long term, and the performing only those activities that maximize management system success while making a desirable contribution to the welfare of society. Social Responsiveness: The degree of effectiveness and efficiency an organization displays in pursuing its social responsibilities. Determining Whether a Social Responsibility Exists: Determine which specific social obligation are implied by specific business situations.
Ex: tobacco execs need to consider reducing harm to public while increasing revenues. Social Responsiveness and Decision Making: Socially responsible organizations are both effective and efficient in meeting its social responsibilities without wasting organizational resources in the process. Approaches to meeting Social Responsibilities: Two types of proposed approaches: Lipson S. Prakash Sethi Lipson’s Approach: Incorporate social goals into the annual planning process. Seeks comparative industry norms of social programs.
Presents reports to all stakeholders on social responsibility progress. Experiments with different approaches for measuring social performance. Attempts to measure the cost of social programs as well as the return on social program investments. S Prakash Sethi’s Approach: Social obligation approach: Business has economic purpose and social responsibility is covered by legislature. Social responsibility approach: Business has both economic and societal goals. Social responsiveness approach: Business has both economic and societal goals but anticipates future impact of business practices.
Planning Social Responsibility Activities: Determining how the organization will achieve its social responsibility objectives. Converting Organizational Policies on Social Responsibility into Action: Phase 1: Recognition, by top management, that the organization has some social obligation. Phase 2: Technical staff give input to top management for implementation. Phase 3: Complete employee acceptance of strategy and responsibility for implementation. Controlling Social Responsibility Activities:
Managers assess or measure what is occurring in the organization and, if necessary, change these occurrences in some way to make them conform to plans. Areas of Measurement: Economic function area: Measure of economic contribution the organization is making to society such as fair wages, worker, safety, etc.. Quality of life area: Whether the organization is upholding or improving the general quality of life such as producing high quality items, preserving the natural environment, etc.. Social investment area: Assisting community organizations to solve social problemes such as education, charities, etc..
Problem solving area: Dealing with social problems such as long-rang community problems. Social Audit: The process of measuring the present social responsibility activities of an organization to assess its performance in this area. How society can help business meet social obligations: Set rules that are clear and consistent: Keep the rules technically feasible. Make sure the rules are economically feasible. Make the rules prospective, not retro-active. Make the rules goal setting, not procedure prescribing. Definition of Ethics:
The capacity to reflect on values in the corporate decision-making process, to determining how these values and decisions affect various stake holder groups, and to establish how mangers can use these observations in day to day company management.. Why Ethics is a vital part of management practices: Productivity: If employees are treated ethically they will be loyal and productive. Stakeholder Relations: A positive public image is good for business. Government Regulation: If organization behave ethically, there is less pressure on regulation and corporate over-sight.
Code of ethics: A formal statement that acts as a guide for the ethics of how people within a particular organization should act and make decisions. Creating an ethical workplace: The golden rule: Do unto others… The Utilitarian principles: Greatest good for greatest number. Kant’s categorical imperative: Universal rule of behavior; fairness. The professional ethics: Assume you are being judged by peers. The T. V. Test: Would you be comfortable saying it in front of national T. V.? The legal test: Is it legal? The four way test: Is it rightful?
Is it fair? Will it build good will? Will it be beneficial. Sarbanes-Oxley Reform Standards Passed in 2002 to prevent future deception in publically owned companies. Focuses on promoting ethical conduct. Areas covered include maintaining GAAP, evaluating executive compensation, monitoring fundamental business strategies, understanding and mitigating major risk, and ensuring company structure and process that enhance integrity and reputation. Supports whistle-blowing to discourage deceptive management practices. Consequences: Significant fines and jail time.

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