MODULE 5

SOCIAL RESPONSIBILITY AND GOVERNANCE

• What should we know about organizational environments and social responsibility?

• What are current issues in corporate governance?

“Organizations have ethics, too”

SOCIAL RESPONSIBILITY AND GOVERNANCE

Organizational Environments And Social ResponsibilityMODULE GUIDE 5.1

Organizations operate within conditions set by the general environment.

The specific environment includes an organization’s stakeholders.

Social responsibility is an organization’s obligation to best serve society.

Social performance by organizations can be evaluated in different ways.

Scholars argue cases for and against corporate social responsibility.

Organizations follow different social responsibility strategies.

Failures of ethics and social responsibility prompt calls for stronger governance.

ORGANIZATIONAL ENVIORNMENTS AND SOCIAL RESPONSIBILITY

Organizational Environments

General EnvironmentConsists of cultural, economic, legal, political

and educational conditionsSpecific Environment

Consists of the people and groups with which an organization interacts

StakeholdersPeople and Institutions most directly affected

by an organization’s performance

ORGANIZATIONAL ENVIRONMENTS

General Environment

Economic Health of the economy in terms of inflation, income levels, gross domestic

product, unemployment, and job outlook Sociocultural

Norms, customs, and social values on such matters as human rights, trends in education and related social institutions, as well as demographic patterns in society

Legal-political Prevailing philosophy and objectives of the political party or parties running the

government, as well as laws and government regulations Technological

Development and availability of technology, including scientific advancements Natural

Nature and conditions of the natural environment, including levels of public concern expressed through environmentalism

ORGANIZATIONAL ENVIRONMENTS

Specific Environment

Specific Environment :The people and groups with whom an organization interacts.

ORGANIZATIONAL ENVIRONMENTS

Social Responsibility

Corporate Social ResponsibilityThe obligation of an organization to serve its

own interest and those of its stakeholdersSocial Responsibility Audit

Assesses an organization’s performance in the area of social responsibility

ORGANIZATIONAL ENVIRONMENTS

Social Responsibility

ORGANIZATIONAL ENVIRONMENTS

Social Responsibility

The Case “In Favor Of” Corporate Social Responsibility Responsibility Increases

long-run profits Improves public image Helps avoid government

regulation Businesses have

resources and ethical obligations to act responsibly

The Case “Against” Corporate Social Responsibility Reduces business

profits Creates higher business costs

Dilutes business purpose Gives too much social power to business

ORGANIZATIONAL ENVIRONMENTS

Social Responsibility

Strategies

SOCIAL RESPONSIBILITY AND GOVERNANCE

Corporate Governance

MODULE GUIDE 5.2

Failures of ethics and social responsibility prompt calls for stronger governance.

Weak corporate governance can result in more government regulation.

Moral management builds capacities for self-governance in organizations.

CORPORATE GOVERNANCE

Corporate Governance

Corporate GovernanceThe oversight of top management by a

board of directorsWeak corporate governance leads to

government regulationBoeingWorldComEnron

CORPORATE GOVERNANCE

Corporate Governance

CORPORATE GOVERNANCE

Government Regulations

Government Regulations Sarbanes-Oxley Act – 2002

Goal is to see that top CEO’s oversee the financial conduct of their organizations

Occupational and Safety Act (OSHA) – 1970 Goal is to protect employees from workplace injuries

Equal Opportunity Act (EEO) – 1972 Goal is to protect minorities against discrimination

Consumer Product Safety Act – 1972 Goal is to protect consumers from harmful products

CORPORATE GOVERNANCE

Moral management

Moral ManagementMoral Manager

Considers ethical behavior as a personal goalAmoral Manager

Is unethical but unintentionally Immoral Manager

Chooses to behave unethically

CORPORATE GOVERNANCE

Moral Management

CORPORATE GOVERNANCE

Ethics Mindfulness

Ethics MindfulnessEnriched awareness that leads to consistent

ethical behavior

MANAGEMENT TIPS

A social responsibility audit assesses an organization’s accomplishments in areas of social responsibility. Discretionary Responsibility:

Contribute to Community Ethical Responsibility:

Do What Is Right Legal Responsibility:

Obey the Law Economic Responsibility:

Be Profitable