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Social Responsibility and Ethics :

Social Responsibility and Ethics U.A.H.A. Rathnasiri Year I – Semester II Skills Development

A Stakeholder:

A Stakeholder Any individual, group or institution directly or indirectly affected by the activities of the organization or who has an influence over the organization

Corporate Stakeholders:

Corporate Stakeholders A large number of groups with interest in a business organization’s activities They affect or are affected by the achievement of the firm’s objectives

Slide 4:

Should a firm be responsible equally for all of them or differently?

Social Responsibility:

Social Responsibility Keith Davis (1960) “businessmen’s decisions and actions taken for reasons at least partially beyond the firm's direct economic and or technical interests.” The obligation of a business to maximize its positive impacts and minimize its negative impacts on the society.

Slide 7:

S. Prakash Sethi (1975) takes a slightly different, but related, path in getting from social responsibility to social responsiveness . He sets forth a three state scheme of or classifying the Adaptation of corporate behavior to social needs . Social obligation Social responsibility Social responsiveness

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Social obligation - involves corporate behavior in response to market forces or legal constraints . Social responsibility - bringing corporate behavior up to a level for congruence with the prevailing social norms, values & expectations. Social responsiveness - what is important is not how corporations should respond to social pressures but their long-run role in a dynamic social system . Business , therefore, must be ‘ anticipatory’ and ‘preventive ’.

Corporate Social Responsibility:

Corporate Social Responsibility ‘If business is to be successful in the fullest sense, it must look beyond the bottom line’ ‘The business of business is to maximize profits, to earn a good return on capital employed and to be good return on capital invested and to be good corporate citizen obeying the law – no more, no less’. (Friedman 1970)

Responsibility of the company as a person:

Responsibility of the company as a person Accountability (Responsible person) Rule following (Responsible action) Decision making (Responsible reasoning & trustworthiness) The moral aspect of responsibility is most fully located in the third use of the term – as it is related to decision making. This will involve the intellectual and emotional process of their moral reasoning and includes consideration of the effects of their actions and others.

Economic Responsibility:

Economic Responsibility The first and prime SR of business is economic in nature. Since business institution is the basic economic unit in our society it has a responsibility to produce goods & services for the society and sell at a profit. All other business roles are predicated on this assumption.

Legal Responsibility :

Legal Responsibility Though the society has allowed the economic system, it has laid down the laws and regulations under which the business units expect to operate. Society expects business to fulfill its economic mission within the framework of legal requirements.

Ethical Responsibility:

Ethical Responsibility Although economic & legal responsibilities represent ethical norms there are additional behaviors that are not necessarily codified into law but expected by the society from the business. Ethical Responsibilities are ill defined and consequently are among the most difficult for business to deal with.

Philanthropic / Discretionary Responsibility:

Philanthropic / Discretionary Responsibility Are the responsibilities about which society has no clear-cut message for business. They are left to individual judgment and choice. They are voluntary not mandated or required by law.

Advantages of fulfilling Social Responsibility:

Advantages of fulfilling Social Responsibility Gives publicity Improves image and goodwill of the organization Ensure long term survival Helps to avoid legal problems Increase the demand for the products Ensure higher profits

Model of CSR :

Model of CSR One of the first approaches encompasses the spectrum of economic and non-economic concerns in defining SR was the “Three Concentric Circle” (Committee for Economic Development -1971). It includes inner circle, intermediate circle and outer circle.

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Inner circle : clear–cut basic responsibilities for the efficient execution of economic function – product, job and economic growth Intermediate circle : Encompases responsibility to exercise this economic function with a sensitive awareness of changing social values & priorities. Outer circle : outlines newly emerging responsibilities that business should assume to become more broadly involved in actively improving the social environment. (address major social problems)

Is CSR Genuine?:

Is CSR Genuine? Propaganda Politics New form of exploitation Genuine commitment Sustainability

Ethics :

Ethics Ethics as the study of how our decisions affect other people. It is also study of how people’s rights and duties the moral rules that people apply in making decisions and the nature of the relationships among people. Ethics are written or unwritten rules about right and wrong and bad as perceived by particular society or group of people.

Possible Ethical Stance :

Possible Ethical Stance Short-term shareholder interests Long-term shareholder interests Multiple stakeholder obligations Shaper of society

Four Levels of Ethical Questions:

Four Levels of Ethical Questions Societal 2. Stakeholder 3. Internal Policy 4. Personal

Tools of Ethics:

Tools of Ethics Values Rights and Duties Moral rules Human Relationships

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