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Richard E. Smith (2011) defines Social responsibility is an ethical or ideological theory that an

entity whether it is a government corporation, organization or has a responsibility to society

(p.2). According to Archie Carroll, corporations should always satisfy four different types of

responsibilities. Those responsibilities are: Economic, legal, ethical and discretionary (Hunger, &

Wheelen, 2012, p. 73). Unlike Milton Friedman who contends that a companys only social

responsibility is to engage in open and free competition without deception and fraud (Hunger,

& Wheelen, 2012, p. 72). Carroll realizes that a business needs to make money while being

ethical. In Carrolls view, a business can survive by putting economics first while other

responsibilities follow. In order of priority, Carroll itemizes these responsibilities into four

categories namely economic, legal, ethical and discretionary. Following Carrolls order of

priority, the following stakeholders fall into one or more of these categories.

Responsibility towards owners and investors:

Owners are the persons who own the business. They contribute capital and bear the business

risks. The primary responsibilities of management is to assure a fair and reasonable rate of return

on capital and fair return on investment can be determined on the basis of difference in the risks

of business in different fields of activity( MIT, 2011). With the growth of business the

shareholders can also expect appreciation in the value of their capital. Investors are those who

provide finance by way of investment in debentures, bonds, deposits etc. Banks, financial

institutions, and investing public are all included in this category.

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Responsibilities towards Employees:

One thing that all companies must keep in mind is that employees are stakeholders in the

business. They have a vested interest in what the company does and how it is run. When the

company is perceived to feel that their employees are a valuable asset and the employees feel

they are being treated and such, productivity increases ( MIT, 2011). By making decisions that

affect its health as seen to those stakeholders that are outside of the business environment.

Responsibility towards the Governments: As a part of their social responsibility, management

must conduct business affair in lawful manner, honestly pay all the taxes and dues, and should

not corrupt public officials for selfish ends. Business activities must also confirm to the

economic and social policies of the government.

Responsibility towards consumers: In a competitive market, serving consumers is supposed to

be a prime concern of management. But in reality perfect competition does not prevail in all

product markets. In the event of shortage of supply there is no automatic correction (the

economist, 2011, p.79-81). Besides consumers are often victims of unfair trade practices and

unethical conduct of business. Consumer interests are thus protected to some extent with laws

and pressure of organized consumer groups. Management should anticipate these developments,

satisfy consumer needs and protect consumer interests. Goods must be of appropriate standard

and quality and be available in adequate quantities at reasonable prices. Management should

avoid resorting to hoarding or creating artificial scarcity as well as false and misleading

advertisements.

Responsibility towards the community and society: The socially responsible role of

management in relation to the community are expected to be revealed by its policies with respect

to the employment of handicapped persons, and weaker sections of the community,

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environmental protection, pollution control, setting up industries in backward areas, and

providing relief to the victims of natural calamities etc.

Relativism with respect to ethics is the position which maintains that moral codes are the relative

standards of a particular culture or society (the economist, 2011, p.79-81). However, there are

some normative issues concerning rights, fairness, and justice that be applicable throughout the

world.

Ethical issues cannot possibly be reduced to questions of statistically interpretable facts or to the

determination of maximally efficient strategies for reaching ethical goals. They concern

questions of rights, fairness, and justice. While culture does permit some behaviors that many

might consider as unethical in other parts of the world, to build a truly great global business,

business leaders need to adopt a global standard of ethical practices ( MIT, 2011). One reason

for this idea is because in many parts of the world, businesses are required to make payments or

bribe an official in order to seek a contract. While this is common practice in these countries, in

America, we consider it as unethical. According to James Harrison, What's significant about

these ethical scandals is the damage they do to great institutions (2012, p.479). Global standards

should take into consideration all areas of morality or ethics that could affect more than one part

of the world. An organization such as The International Standards Organization (ISO) has

determined that there are five standards, act with integrity, always provide a high standard of

service, act in a way that promotes trust in the industry, treat others with respect, and take

responsibility (2011).there are a number of shortcomings. A significant flaw is that the standardattempts to create the same guidance for private and public sector organizations. While these

standards are good, there are still small flaws, Smith (2011) argues that in addition to these

standards, profit is necessary for a corporate social responsibility to flourish (p.6).

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References

Hunger, D., & Wheelen, T. (2012). Strategic management and business policy: Toward global

sustainability. Upper Saddle River, N.J: Pearson Prentice Hall.

Smith, R. (2011).Defining Corporate Social Responsibility: A Systems Approach For Socially

Responsible Capitalism. Retrieved from

repository.upenn.edu/cgi/viewcontent.cgi?article=1009&context=od_theses_mp

Harrison, J. (2012). Stakeholders, social responsibility, and

performance: Empirical evidence and theoretical perspectives. Academy of

Management Journal, 42(5), 479.

International Standards Organization. (2010). ISO 26000 project overview.

Retrieved March 12, 2011 from, http://www.iso.org/iso/iso_26000_project_

overview.pdf.

Let a million flowers bloom. (2011, March 12). The Economist, 398(8724),

79-81.

Massachusetts Institute of Technology. (2011). Sustainability: The

embracers seize the advantage. MIT Sloan Management Review. Retrieved from

http://c0426007.cdn2. cloudfiles.rackspacecloud.com/MIT-SMR-BCGsustainability.