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BBA 2010, Introduction to Business 1 Cou rse Learning Outcomes for Unit VII Upon completion of this unit, students should be able to: 6. Discuss the importance of ethics and social responsibility in business. Reading Assignment In order to access the following resource(s), click the link(s) below: Bird, F. (2016). Why the practice of business ethics calls for a due regard of history. Zeitschrift Fuer Wirtschafts -Und Unternehmensethik , 17 (1), 154 -176 . Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/logi n.aspx?direc t=true&db=bth&AN=114760803&site=ehost -live&scope=site Dunlap, N. (2016). People -driven values: Social responsibility counts. Journal of Property Management , 81 (2), 14. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=113542664&site=ehost -live&sco pe=site Korschun, D., Bhattacharya, C., & Swain, S. D. (2016). CSR and the frontline context: How special programs improve customer service. Gfk -Marketing Intelligence Review , 8(1), 24 -29. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=115049467&site=ehost -live&scope=site Smith, N. C. (2016). From corporate philanthropy to creating shared value: Big pharma’s new business models in developing markets. Gfk -Marketing Intelligence Review , 8(1), 30 -35. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=115049466&sit e=ehost -live&scope=site Click here to access an interactive tutorial that covers business ethics and social responsibility. Unit Lesson Understanding the Concept of Social Responsibility Businesses play a critical role in society. In fact, large organizations have the ability to influence governments, resources, the economy, and communities. In recent years, business criticisms and growing environmental co ncerns have increased pressures on large organizations to take greater responsibility for their actions. Rising concerns for environmental protection, diminishing natural resources, and developing social issues have increased the need for greater corporate social responsibility. The concept of corporate social responsibility developed out of concerns for corporations to act in a manner that enhances society and minimizes actions that adversely affect individuals, their c ommunities, and the environment. Thi s concept requires companies to consider their acts in terms of an entire social system. The term society refers to individuals and the social structures created; businesses exist as an integral part of society that participate in exchanges with society me mbers. Hence, both businesses and society are part of an interactive system in which each unit directly or indirectly affects each other. Although the growth of social responsibility has led to increased satisfaction with business practices, it has also le d to increased expectations. Consider the auto industries ’ dilemma of fuel -economy standards ignited by environmental issues such as emission of pollutants and global warming. Reportedly , these issues cause harm to both the environment and UNIT VII STUDY GUIDE Ethics and Corporate Social Responsibility BBA 2010, Introduction to Business 2 UNIT x STUDY GUIDE Title those in affect ed areas. The automobile in dustry has experienced increased pressure for more fuel -efficient and environmental ly friendly vehicles. Rising expectations of consumers and special interest groups drive the innovation of vehicles that appeal to environment al conservationist s. In response to these expectations, automobile manufacturers design ed more environmentally friendly automobiles — including electrical ly powered vehicles such as the Nissan Leaf and other automobiles of its kind. Th is response is an example o f automobile manufacturers behaving in a responsible manner in the design of vehicles in the public’s best interest. Historical Perspective of Corporate Social Responsibility From a historical perspective, the classical view of business stems from the classical economic model . This classical view held that the marketplace satisfies the needs of society through the production of goods and services. The role of business within the marketplace is to respond to the demands of society by providing for the ne eds and wants. As such, the business is rewarded for its ability to provide what society needs and wants. The role of business has been to make a product or provide a service for a profit. Although businesses were successful in providing for societal needs and wants, the business actions in providing for these needs did not always meet ethical standards. Therefore, laws were created to restrain business behavior , and the legal model of business actions prevailed. Gradually, society’s expectati on of business evolved from the classical economic view of performance and merely obeying the law to conducting business within ethical boundaries and demonstrating good corporate citizenship to all stakeholders through philanthropic activities. Who are the Stakeholders? The stakeholder theory of a firm contends that modern corporations should create value for all stakeholders — not simply those who own shares within an organization. Stakeholders are individuals or groups that have various interest s in a bu siness and are impacted (intentionally or unintentionally) by the decisions, actions, pol icies, and practices of the organization. Primary social stakeholders have a direct interest in the organization and are very influential. They are fundamental to the company’s survival. Examples of primary stakeholders include shareholders and investors, employees and managers, customers, local communities, suppliers , and business partners. Secondary social stakeholders are those who may be affected by the actions of the firm, but they are not essential to the organization’s survival or involved with direct transactions. Examples of secondary social stakeholders include the government, civic institutions , social pressure groups, media, commentators, and competitors. The stakeholder model suggests a two -way relationship between the firm and stakeholders. Stakeholders exercise power and pressure to influence organizations to act in accordance with their agendas. At times, stakeholders act independently or create coalitio ns to influence companies to adopt their agendas. Companies may work collaboratively to resolve concerns on behalf of stakeholders or choose to ignore them.

Companies refusing to acknowledge a stakeholder concern may garner lost public trust and attract ne gative media attention. Therefore, skillful managers must ascertain which issues to address, prioritize alternatives, and implement a strategy that will minimize business risk. Why Should Businesses Be Ethical? There are a number of reasons why businesse s should consider the demands of stakeholders and act with the highest level of ethical perform ance and social responsibility.  First, businesses that are ethical attract and retain the best employees, strengthen relationships with suppliers, increase sale s, enhance customer loyalty, and build good will in the community. This behavior helps them improve financia l performance for shareholders.  Second, doing business in an ethical manner is also a legal requirement. For example, the Sarbanes - Oxley Act provide s guidance for companies to exercise high ethical standards in conducting and monitoring business operations. BBA 2010, Introduction to Business 3 UNIT x STUDY GUIDE Title  Third, businesses should act ethically to prevent harm to the corporation’s stake holders and the general public.  Finally, businesses and stakeholders that promote ethics often act in ways that are consistent with their personal values. Providing a supportive ethical climate contributes to greater employee satisfaction because employees have a higher sense of psychological security , and they experience minimal cognitive dissonance. Conflicting Reviews of Social Responsibility As previously noted, the classical economic argument of social responsibility holds that management’s primary responsibility is to maximize profits for shareholders. A dditionally, this view contends that legislative actions should seek to solve social problems , not business problems . Economist Milton Fried man asserts that management should make as much money as possible while conforming to the rules of society within le gal and ethical constraints. Hence, voluntary or philanthropic activities should be at the discretion of the organization. In fact, many business managers view social responsibility initiatives as costly and believe such endeavors only reward so ciety at th e company’s expense. In contrast, those who advocate philanthropic and voluntary activities believe many social problems stem from the actions of businesses that should provide a remed y for such problems. In turn, any cost incurred as a result of socially responsible behavior will be recovered through improved performance and greater societal support. Society at large supports socially responsible behavior and will patronize those businesses that engage in such endeavors. Additional supporting arguments su ggest that businesses have the resources (talent, expertise, and capital) to curtail social problems and should be given the opportunity to do so. In conclusion, businesses of all sizes can engage in corporate social responsibility that not only improves performance, but also enhances stakeholder relationships. From a long -range , self -interest perspective, businesses must take appropriate actions now to secure sustainability in the future. While not all aspects of social responsibility directly benefit the bottom line, such activities have potential to indirectly affect businesses in the long run. Furthermore, the escalating cost of government intervention and regulation of practices is rising. If businesses employ self -disciplined standards and guidelines, future government intervention can be prevented. Suggested Reading Click here to access a video that explains how the NFL is involved in community relations.