Session 3
The Responsibilities of Business
What is the importance of considering
business’s role in society?

What stakeholders must business consider and
how might this affect business policy?

1
WHAT IS BUSINESS & SOCIETY?

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Business: private, commercially oriented
organizations
Society: a community/national or group of people
with common values, traditions, institutions,
activities & interests
Community
Government
Business
Owners
Employees
Consumers
2
THE BUSINESS-SOCIETY RELATIONSHIP
Assuming a relationship between business
and society connects to notions of
‘embeddedness’ and organizations as
‘open systems’
3
SHOULD BUSINESS HAVE ANY
RESPONSIBILITIES TO
SOCIETY? AND IF SO, WHAT
IS THE NATURE OF THOSE
REPSONSIBILITIES?
4
CORPORATE SOCIAL RESPONSIBILITY
The obligation of decision makers to take
actions which protect and improve the
welfare of society as a whole along with
their own interests
(Davis & Blomstrom, 1975).
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Corporate Social Responsibility (CSR)

obligations that involve going beyond:


the production of goods/services at a
profit
the requirement of competition, law
or custom
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Corporate Social Responsibility (CSR)
 To create policies, make decisions &
engage in actions that are desirable in
terms of the values & objectives of
society.
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CORPORATE SOCIAL RESPONSIBILITY
Examples of CSR:
Can you think of examples of companies
that have recently demonstrated CSR?
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THE ROLE OF BUSINESS IN SOCIETY:
CORPORATE SOCIAL RESPONSIBILITY
• The social responsibility of business
encompasses the economic, legal, ethical
and discretionary (philanthropic)
expectations that society has of
organizations at a given point in time
(Carroll, 1979).
• A PYRAMID OF RESPONSIBILITIES!
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THE CSR PYRAMID
Philanthropic Responsibilities
Be a good corporate citizen
Ethical Responsibilites
Be Ethical
Legal Responsibilities
Obey the Law
Economic Responsibilities
Be Profitable
(Adapted from A. Carroll, 1991)
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• Components can be interdependent rather
than mutually exclusive.
e.g., serving ethical responsibilities
does not necessarily mean that profit
(economic responsibilities) will be
sacrificed – or vice
versa.
Can you think of an example where ethics will
help gain more profit?
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THE CSR PYRAMID
• However, there may also be tensions
between the components –
e.g., “profits versus ethics”.
Can you think of business examples of
ethics conflicting with making a profit?
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THE CSR PYRAMID
Philanthropic Responsibilities
Be a good
citizen
discussion
of corporate
this pyramid
• Our
has already
implied that business is responsible to more
than simply its owners or shareholders!
• Rather there exists a network of
STAKEHOLDERS FOR WHICH THESE
REPSONSIBILITIES EXITS
• What or who are the stakeholders of
business?
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STAKEHOLDERS, BUSINESS & SOCIETY
WHAT IS A STAKE?



An Interest or share in an activity
A Right - a legal right e.g. to fair treatment or
a moral right, e.g. to expect satisfactory service
Ownership – a legal title to an asset/ property
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STAKEHOLDERS, BUSINESS & SOCIETY
A stakeholder is any individual or group
who can affect or is affected by the
actions, decisions, policies, practices or
goals of the organization
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STAKEHOLDER VIEW OF THE FIRM:
Primary stakeholders
Suppliers &
Business
Partners
Local
Communities
Employees/managers
FIRM
Shareholders/
owners/investors
Government
& Regulators
Customers/
consumers
Adapted from KCB, 2007
16
STAKEHOLDER VIEW OF THE FIRM:
Primary & Secondary Stakeholders
Suppliers etc
Employees
Soc. Pressure
Groups
Media &
Academics
Local
Communities
FIRM
Competitors
Government
& Regulators
Trade Bodies
Shareholders/ Customers/
owners etc
consumers
Adapted from KCB, 2007
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PRIMARY & SECONDARY STAKEHOLDERS


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Primary stakeholders have a direct stake in
the organization and its success
Secondary stakeholders influential but stake
is more representational – of public or
special interest
Accountability to secondary stakeholders is
less but these groups may be very powerful
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NONSOCIAL STAKEHOLDERS
PRIMARY NONSOCIAL
STAKEHOLDER
SECONDARY NONSOCIAL
STAKEHOLDERS
The natural environment
Environmental pressure
groups
Future generations
Animal welfare groups
Nonhuman species
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KEY QUESTIONS IN STAKEHOLDER
MANAGEMENT

Who are our stakeholders?

What are our stakeholders stakes?



What opportunities and challenges do our stakeholders
present to the firm?
What responsibilities does the firm have to its
stakeholders?
What strategies or actions should the firm take to
manage challenges and maximize opportunities?
20
Should business have any ethical
and philanthropic responsibilities?
Should business have some kind of
moral obligation to society?
Is CSR a desirable goal?
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DEBATING CORPORATE SOCIAL
RESPONSIBILITY
AGAINST CSR
FOR CSR
Sole responsibility of business Business should conform to
is to make a profit
social rules
Business is not equipped to
manage CSR
Business talent, capital &
expertise could ensure CSR
Business has enough power – Could use its power for CSR,
shouldn’t dictate morality
i.e. using its power positively
Costs of CSR would be
CSR provides long term
passed on to consumers &
benefits by enhancing
limit national competitiveness business environment
Adapted from L. Karakowsky, The Nature of Management & Organizations
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“Business should stick to its business. Any
other position will take over power,
authority and decision-making in
areas…reserved to government, individual
or other institutions”
(Peter Drucker)
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“The fundamental business of business is
ethical - the creation of values that enhance
the welfare of communities, societies and the
world…”
Buchholtz, 1989
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Considering stakeholders

THE STRATEGIC APPROACH
 emphasis on owners or shareholders
 focus on economic
interests
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Considering stakeholders

THE PLURALIST APPROACH
 recognize presence of numerous
stakeholders
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OR
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KEY LEARNING POINTS
 CSR is an increasingly
important issue in business
 Establishing CSR is
difficult and complex
 Stakeholder Management is
an increasingly important aspect
of business
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