Chapter 3
WHAT IS SOCIAL RESPONSIBILITY?
Social responsibility is a business’s obligation to pursue policies, make decisions, and take actions that
benefit society. Because there are disagreements over to whom and for what in society organizations are
responsible, it can be difficult to know what is or will be perceived as socially responsible corporate
behavior. There are two perspectives on to whom organizations are socially responsible: the shareholder
model and the stakeholder model.
The shareholder model expresses the view of social responsibility which holds that an organization's
overriding goal should be profit maximization for the benefit of shareholders. Milton Friedman argues that
it is socially irresponsible for companies to divert their time, money, and attention from maximizing profits
to social causes and charitable organizations. He also argues that time, money, and attention diverted to
social causes undermine market efficiency.
The stakeholder model theory of corporate responsibility holds that management’s most important
responsibility, long-term survival, is achieved by satisfying the interests of multiple corporate stakeholders.
Stakeholders are persons or groups with a “stake” or legitimate interest in a company’s actions. The
organization must satisfy various stakeholder groups to assure long-term survival. Being responsible to
multiple stakeholders raises questions: How does a company identify multiple stakeholders? How does a
company balance the needs of different stakeholders?
Some stakeholders are more important to the firm’s survival than others. Primary stakeholders can be any
group on which an organization relies for its long-term survival. Primary stakeholders (company,
employees, shareholders, customers, suppliers, public stakeholders) are more important than secondary
stakeholders, but no primary stakeholder is more important than any other.
Secondary stakeholders can be any group that can influence or be influenced by the company and can
affect public perceptions about its socially responsible behavior. Secondary stakeholders (media, specialinterest groups) do not engage in regular transactions with the company and are not critical to its long term
survival.
Organizations are socially responsible for fulfilling their economic, legal, ethical, and discretionary
responsibilities. The economic responsibility is the expectation that a company will make a profit by
producing a valued product or service. The legal responsibility is the expectation that a company will obey
society’s laws and regulations. The ethical responsibility is the expectation that a company will not violate
accepted principles of right and wrong when conducting its business. The discretionary responsibility is
the expectation that a company will voluntarily serve a social role beyond its economic, legal, and ethical
responsibilities.
Social responsiveness is the strategy chosen by a company to respond to stakeholders’ economic, legal,
ethical, or discretionary expectations concerning social responsibility. Companies may choose from the
following strategies of social responsiveness.
A.
reactive strategy: a social responsiveness strategy where a company chooses to do less
than society expects and to deny responsibility for problems
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Chapter 3: Ethics and Social Responsibility
B.
defensive strategy: a social responsiveness strategy where a company chooses to admit
responsibility for a problem but do the least required to meet societal expectations
C.
accommodative strategy: a social responsiveness strategy where a company chooses to
accept responsibility for a problem and do all that society expects to solve problems
D.
proactive strategy: a social responsiveness strategy where a company anticipates
responsibility for a problem before it occurs and would do more than society expects to
address the problem
Some companies have found that it does pay to be socially responsible. Other companies, however, have
struggled financially as a result of committing resources to socially responsible causes. Although socially
responsible behavior may be “the right thing to do,” it does not guarantee profitability. If a company
chooses to practice a proactive or accommodative social responsibility strategy, it should do so to improve
society and not to improve its financial performance.
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