Social responsibility is having a sense of duty to society and everything that is a part of it. In other words, “social responsibility” means managers are accountable to society at large, not just their shareholders.
Social responsibility is an important aspect of capitalism at large. Individuals and consumers place trust in businesses to “do the right thing”, and take a leadership role in making the world a better place. A world with more socially-responsible managers also leads to fewer government regulations, since regulations are almost always introduced as a reaction to businesses profiting at the loss of society around them.
What does it involve and who does it involve?
The business itself (through its mission and vision statements), those put in charge of running it (the managers), and the people that produce value for it (the rank-and-file employees) are expected to act socially responsible. This means they have to be virtuous in who they are and what they do; that is, think in the best interests of the public, act on those best interests, being able to face the consequences of those actions (if they ever arise), controlling negative behaviors that could lead to negative outcomes, and most importantly, being fair to yourself and those around you.
Upper managements such as the chief executive officers (CEO), the chief financial officer (CFO), the chief operating officer (COO), the chief technology officer (CTO), the chief marketing officer (CMO), the directors, the presidents, the senior vice presidents, the vice presidents, the sales managers, and many others are charged with being the role models, supporters, the enforcers, the implementers, and the delegators of social responsibility. In other words, social responsibility usually comes from the top, with the highest-level managers encouraging their subordinates to act with social responsibility. This is usually done through the company’s mission and vision statements, implementations of internal controls, and specific goals laid out in the business plan.
Besides the management, there are those who keep such people in line and make sure they’re accountable and responsible for everything that happens: you, me, the media, the government, regulatory agencies, critics, customers, investors, activists, and so forth. “Bad press” and “good press” are the biggest motivators for managers to act with social responsibility. If the public sentiment starts viewing a company negatively, its competitors will be very eager to start stealing business.
Everyone is a stakeholder; including the owners (shareholders), employees, customers, suppliers, and society at large. The internal stakeholders are those inside the company, and the external stakeholders are everyone outside of the company.
How should managers approach social responsibility?
Management should make every effort to appear and become socially responsible in everything they do, and what they represent. This helps keep the company in high esteem with their customers, but also proactively avoids problems caused by new regulations (either by preventing their passage to begin with, or already being prepared for them once they are enacted). Managers can be socially responsible by focusing on four key areas.
Being and becoming socially responsible is about working with people who are able to identify when something is socially responsible or irresponsible. Social responsibility is about listening and learning about the people and the environment from which it will apply. Being constructive means listening to complaints, coming from both inside and outside of the organization, and being willing to act on those complaints.
The past is in the past, pay attention to the here and now, the moment in time where it actually counts. Do not be afraid to try new things or consider different options because things will continue to change. Change is something we all have to deal with as we approach the future.
This means companies need to be willing to listen to new research and new concerns coming from outside the organization, even if those concerns might mean a fundamental change to their products or way of doing business.
Do whatever you can to be socially responsible in all areas of your life and your career. By being more accommodating you will make it harder for critics to question your management ability or implicate you in crimes against social responsibility.
In other words, when valid concerns are raised, socially responsible managers need to actually do something about it. This does not mean changing the entire way an organization does business with every valid complaint, but it does mean managers address complaints coming from outside the organization while mapping the company’s path forward.
Take the necessary steps to make social responsibility happen and not wait around for others to follow through with it. Make sure that the structure of social responsibility is in place, but always follow up just to be sure that everyone is complying with it because even if one person diverges, detraction will soon follow.
Companies get the best press if they are proactive and address social issues before they are forced to do so by government regulation. For example, the Heinz brand became nationally beloved after it became the first major food manufacturer to lobby in favor of the Pure Food and Drug Act, a major social issue that other manufacturers were fighting. Nobody will celebrate a brand if they simply follow the bare minimum responsibility that the law requires, but brands can build a loyal following by being ahead of the curve.
Ultimately, a manager must decide whether to become stiff and stagnant or adapt and change towards social responsibility. If the former is chosen, the manager might be publicly scrutinized, penalized, fined, jailed (if they remain stubborn after government regulation is implemented), or worse, totally unemployable (by becoming a villain in the eyes of the public). By choosing the latter, the manager will live to fight another day, becoming recognized for their valiant efforts for social change, and will be remembered as this great person we all strive to be. Social responsibility should not be a second thought, it should be the first and most important thing to consider when devising successful business strategy.
What ways can those charged with social responsibility carry it out for internal and external stakeholders?
The first step and the best thing management can do is include all stakeholders in their decision-making by making them a part of what the organization stands for (vision, mission, goals) and how they operate. The internal stakeholders are the shareholders (owners) and the employees. Shareholders demand that a business does well, which can be seen when their earnings increase and they are able to receive dividend rewards because of it.
In comparison, employees desire monetary compensation for the work that they do and additional benefits of working on the job (medical, 401k, etc.). Then there are the external stakeholders; the suppliers, the banks, the customers, the government, and society. Suppliers want payment for what you purchased from them, banks want interest from the loans they provide you with, customers want to be happy with the products and services they get from you, the government wants you to follow their laws and pay taxes, and society wants you to pay it all forward for a good cause.
Considering all of that, there are many ways a business and those who are running it can show that they are socially responsible, here are a few of them:
Inviting the public (current, future, and potential customers) to share their thoughts and ideas of how the company can improve their products and services and reaching out to the public to help solve problems. Whenever you take a survey or write a review, all that data is used by the company to make a change.
Environmental Sustainability Initiatives
Creating products and services that are less harmful to the environment by recycling materials, cutting waste in the production process, and using renewable energy. Many people are becoming more aware of global warming and how humans are damaging the earth, by being on the right side of science you can change the world. SC Johnson Company has historically been famous for willing to undermine its own product lines for the sake of environmental sustainability, which has been a huge boost to its public image.
Starting charity foundations, offering academic scholarships, donating resources, being generous, and caring about what is important to others to win over customers, employees, and society. Helping others realize their true potential is what business should be about and when people see that, you will be attracting more customers and keeping the ones you already have.
Confront the Critics
Warren Buffet understands that it takes a long time to build a good reputation, but it takes mere moments to destroy it. Companies must take care to keep a good reputation and what better way than to face the negative publicity, the horrible comments, and disgruntled individuals with undeniably positive solutions that will help bring them to your side. Trying to silence critics or slander bad press usually only makes a bad PR problem worse.
Government Laws and Regulations That Have Resulted From Social Irresponsibility
Laws and regulations are there to protect people and the environment because society and the government will not tolerate any harm or abuses that its citizens experience. However, laws and regulations did not spring up from nowhere: they were a result of multiple offenses and repetitive indiscretions that brought attention to the irresponsible actions that needed to be prevented from happening again. And, if they did happen again, people who thought they could get away with it would face hefty fines or serious jail time. Let’s take a look at some of them here:
Telemarketing and Consumer Fraud and Abuse Prevention Act (1994)
The federal government had to respond to this one because people were getting tricked into buying things over the phone by people pretending to sell them something they needed. In return, people gave these fraudsters their personal and financial information. Investigators reported that each year there were $40 billion of losses because of these indirect phishing schemes and Congress responded. This act makes it illegal for telemarketers to deceive and coerce customers and requires them to disclose their information and only make calls at certain times of the day.
Fair Packaging and Labeling Act (1966)
In the past, people used to make all sorts of crazy claims about what their products could do and how much use it could provide. The government eventually tried to put a halt to deceptive labeling, which makes it impossible for companies to lie about their products. This law requires that the product is identified for what it is, be provided in the stated amount intended, and be traced back to the company who developed it or offered it for public consumption.
Fair Labor Standards Act (1938)
This law has been amended almost 20 times with new additions and changes that reflect every time period where the law and labor standards intersected. This law protects everyone that is working or going to work by limiting work hours to 40 hours a week, establishes a minimum wage, allows for overtime pay that exceeds the rate of minimum wage, and also makes sure that children stay in school and not working in a factory.
Occupational Safety and Health Act (1970)
This law makes it illegal to place any worker in unsafe working conditions, and has so many amendments covering ever-broader workplace hazards. This law even covers workplace discrimination. Anything that is a detriment to the health and well-being of any worker is confronted by this law and it holds employers accountable for it. This lesson is part of the PersonalFinanceLab curriculum library. Schools with a PersonalFinanceLab.com site license can get this lesson, plus our full library of 300 others, along with our budgeting game, stock game, and automatically-graded assessments for their classroom - complete with LMS integration and rostering support!
This lesson is part of the PersonalFinanceLab curriculum library. Schools with a PersonalFinanceLab.com site license can get this lesson, plus our full library of 300 others, along with our budgeting game, stock game, and automatically-graded assessments for their classroom - complete with LMS integration and rostering support!Learn More