What is a company\'s responsibility to society? Proponents of the modern view of

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What is a company's responsibility to society? Proponents of the modern view of stakeholder theory argue that companies have a social obligation to operate in ethically, socially, and environmentally responsible ways. This active approach is referred to as corporate social responsibility (CSR) orcorporate citizenship. The idea of corporate citizenship is that a firm should conduct its business in a manner that meets its economic, legal, ethical, and philanthropic expectations.

The economic responsibilities have the highest priority. A firm must be efficient and survive over the long term in order to be useful to society. It must also execute its business activities in a legal and ethical way. These responsibilities are over and above the ones codified in laws and are in line with societal norms and customs. They are expected by society even though they may be ill-defined. This could include things such as environmental ethics. Philanthropy is the least important priority. The corporate citizenship concept focuses more on engagement with stakeholders to achieve mutual goals.

Some corporations have responded to this trend by including CSR-oriented statements in their corporate goals. These statements recognize that CSR has value in a code of conduct or ethics, a commitment to local communities, an interest in employee health and education, an environmental consciousness, and recognition of social issues (diversity, social fairness, etc.). In October 2006, The Conference Board surveyed large U.S. firms on corporate citizenship issues and 198 firms responded. Figure 1.11 shows the results of the survey when firms were asked about the top three CSR topics receiving attention at the company.

What is the motivation for these companies to fund CSR programs? When asked, 92 percent stated that enhancing corporate reputation was very important. Other popular responses were for recruiting and retention (78 percent) and reducing risk (65 percent).

Requirement: answer question 1,2,3

Explanation / Answer

HE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY

For CSR to be accepted by a conscientious business person, it should be framed in such a way that the entire range of business responsibilities are embraced. It is suggested here that four kinds of social responsibilities constitute total CSR: economic, legal, ethical. and philanthropic. Furthermore. these four categories or components of CSR might be depicted as a pyramid. To be sure. ail of these kinds of responsibilities have always existed to some extent. but it has only been in recent years that ethical and philanthropic functions have taken a significant place. Each of these four categories deserves closer consideration.

Economic Responsibilities

Historically. business organizations were created as economic entities designed to provide goods and services to societal members. The profit motive was established as the primary incentive for entrepreneurship. Before it was anything else, business organization was the basic economic unit in our society. As such, its principal role was to produce goods and services that consumers needed and wanted and to make an acceptable profit in the process. At some point the idea of the profit motive got transformed into a notion of maximum profits, and this has been an enduring value ever since. All other business responsibilities are predicated upon the economic responsibility of the firm, because without it the others become moot considerations. Figure 1 summarizes some important statements characterizing economic responsibilities. Legal responsibilities are also depicted in Figure 1, and we will consider them next.

Legal Responsibilities

Society has not only sanctioned business to operate according to the profit motive; at the same time business is expected to comply with the laws and regulations promulgated by federal, state, and local governments as the ground rules under which business must operate. As a partial fulfillment of the "social contract" between business and society firms are expected to pursue their economic missions within the framework of the law. Legal responsibilities reflect a view of "codified ethics" in the sense that they embody basic notions of fair operations as established by our lawmakers. They are depicted as the next layer on the pyramid to portray their historical development, but they are appropriately seen as coexisting with economic responsibilities as fundamental precepts of the free enterprise system.

Figure 2
Ethical and Philanthropic Components of Corporate Social Responsibility

Ethical Components
(Responsibilities)

Philanthropic Components
(Responsibilities)

Ethical Components
(Responsibilities)

Philanthropic Components
(Responsibilities)

1. It is important to perform in a manner consistent with expectations of societal mores and ethical norms. 1. It is important to perform in a manner consistent with the philanthropic and charitable expectations of society. 2. It is important to recognize and respect new or evolving ethical moral norms adopted by society. 2. It is important to assist the fine and performing arts. 3. It is important to prevent ethical norms from being compromised in order to achieve corporate goals. 3. It is important that managers and employees participate in voluntary and charitable activities within their local communities. 4. It is important that good corporate citizenship be defined as doing what is expected morally or ethically. 4. It is important to provide assistance to private and public educational institutions. 5. It is important to recognize that corporate integrity and ethical behavior go beyond mere compliance with laws and regulations. 5. It is important to assist voluntarily those projects that enhance a community

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