poweroint

The Pyramid of Corporate Social Responsibiiity: Toward the Morai Management of Organizational Stakeholders Archie B. Carroll F or the better part of 30 years now, corpo- rate executives have struggled with the issue of the firm's responsibility to its soci- ety. Early on it was argued by some that the corporation's sole responsibility was to provide a maximum financial return to shareholders. It became quickly apparent to everyone, however, that this pursuit of financial gain had to take place within the laws of the land. Though social activist groups and others throughout the 1960s advocated a broader notion of corporate respon- sibility, it was not until the significant social legis- lation of the early 1970s that this message be- came indelibly clear as a result of the creation of the Environmental Protection Agency (EPA), the Equal Employment Opportunity Commission (EEOC), the Occupational Safety and Health Ad- ministration (OSHA), and the Consumer Product Safety Commission (CPSC).

These new governmental bodies established that national public policy now officially recog- nized the environment, employees, and consum- ers to be significant and legitimate stakeholders of business. Erom that time on, corporate execu- tives have had to wrestle with how they balance their commitments to the corporation's owners with their obligations to an ever-broadening group of stakeholders who claim both legal and ethical rights.

This article will explore the nature of corpo- rate social responsibility (CSR) with an eye to- ward understanding its component parts. The intention will be to characterize the firm's CSR in ways that might be useful to executives who wish to reconcile their obligations to their share- Social responsibility can only become reality if more man- agers become moral instead of amoral or immoral.

holders with those to other competing groups claiming legitimacy.

This discussion will be framed by a pyramid of corporate social respon- sibility. Next, we plan to relate this concept to the idea of stakehold- ers.

Einally, our goal will be to isolate the ethical or moral compo- nent of CSR and relate it to perspectives that reflect three major ethical approaches to manage- ment—immoral, amoral, and moral. The princi- pal goal in this final section will be to flesh out what it means to manage stakeholders in an ethi- cal or moral fashion.

EVOLUTION OF CORPORATE SOCIAL RESPONSIBILITY W hat does it mean for a corporation to be socially responsible? Academics and practitioners have been striving to estab- lish an agreed-upon definition of this concept for 30 years. In I960, Keith Davis suggested that social responsibility refers to businesses' "deci- sions and actions taken for reasons at least par- tially beyond the firm's direct economic or tech- nical interest." At about the same time, Eells and Walton (196I) argued that CSR refers to the "problems that arise when corporate enterprise casts its shadow on the social scene, and the The Pyramid of Corporate Social Responsibility 39 Figure 1 Economic and Legal Components of Corporate Social Responsibility Economic Components (Responsibilities) 1.

It is important to perform in a manner consistent with maximizing earnings per share.

It is important to be committed to being as profitable as possible.

It is important to maintain a strong competitive position.

It is important to maintain a high level of operating efficiency.

It is important that a successful firm be defined as one that is consistently profitable.

Legal Components (Responsibilities) 1.

It is important to perform in a manner consistent with expecta- tions of government and law.

It is important to comply with various federal, state, and local regulations.

It is important to be a law-abiding corporate citizen.

It is important that a successful firm be defined as one that fulfills its legal obligations.

5. It is important to provide goods and services that at least meet minimal legal requirements.

legitimate, had to address the entire spectrum of obligations business has to society, including the most fundamen- tal—economic. It is upon this four-part perspective that our pyramid is based.

In recent years, the term corporate social performance (CSP) has emerged as an inclusive and global concept to embrace corporate social responsibility, responsiveness, and the entire spectrum of socially beneficial activities of busi- nesses. The focus on social performance emphasizes the concern for corporate action and accomplishment in the social sphere. With a performance perspective, it is clear that firms must formulate and implement-social goals and programs as well as integrate ethical sensitivity into all decision making, policies, and ac- tions.

With a results focus, CSP suggests an all-encompassing orientation towards normal criteria by which we assess busi- ness performance to include quantity, quality, effectiveness, and efficiency.

While we recognize the vitality of the performance concept, we have chosen to adhere to the CSR terminology for our present discussion. With just a slight change of focus, however, we could easily be discussing a CSP rather than a CSR pyramid. In any event, our long-term concern is what managers do with these ideas in terms of implementation.

THE PYRAMID OF CORPORATE F ethical principles that ought to govern the rela- tionship between the corporation and society." In 1971 the Committee for Economic Devel- opment used a "three concentric circles" ap- proach to depicting CSR. The inner circle in- cluded basic economic functions—growth, prod- ucts, jobs. The intermediate circle suggested that the economic functions must be exercised with a /SOCIAL RESPONSIBILITY sensitive awareness of changing social values and / priorities. The outer circle outlined newly emerg-/ T~l or CSR to be accepted by a conscientious ing and still amorphous responsibilities that busi- ness should assume to become more actively involved in improving the social environment.

The attention was shifted from social respon- sibility to social responsiveness by several other writers. Their basic argument was that the em- phasis on responsibility focused exclusively on the notion of business obligation and motivation and that action or performance were being over- looked. The social responsiveness movement, therefore, emphasized corporate action, pro- action, and implementation of a social role. This was indeed a necessary reorientation.

The question still remained, however, of reconciling the firm's economic orientation with its social orientation. A step in this direction was taken when a comprehensive definition of CSR was set forth. In this view, a four-part conceptu- alization of CSR included the idea that the corpo- ration has not only economic and legal obliga- tions, but ethical and discretionary (philan- thropic) responsibilities as well (Carroll 1979).

The point here was that CSR, to be accepted as business person, it should be framed in such a way that the entire range of busi- ness responsibilities are embraced. It is suggested here that four kinds of social responsibilities con- stitute total CSR: economic, legal, ethical, and philanthropic. Furthermore, these four categories or components of CSR might be depicted as a pyramid. To be sure, all of these kinds of respon- sibilities 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 mo- tive was established as the primary incentive for entrepreneurship. Before it was anything else, the business organization was the basic economic unit in our society. As such, its principal role was 40 Business Horizons /July-August 1991 to produce goods and services that con- sumers 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 re- sponsibilities are predicated upon the eco- nomic responsibility of the firm, because without it the others become moot consid- erations. Figure 1 summarizes some im- portant statements characterizing economic responsibilities. Legal responsibilities are also depicted in Eigure 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 pro- mulgated by federal, state, and local gov- ernments as the ground ailes under which business must operate. As a partial fulfill- ment of the "social contract" between busi- ness and society, firms are expected to pursue their economic missions within the framework of the law. Legal responsibili- ties reflect a view of "codified ethics" in the sense that they embody basic notions of fair operations as established by our lawmak- ers.

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 pre- cepts of the free enterprise system.

Ethical Responsibilities Although economic and legal responsibilities embody ethical norms about fairness and justice, ethical responsibilities embrace those activities and practices that are expected or prohibited by societal members even though they are not codi- fied into law. Ethical responsibilities embody those standards, norms, or expectations that re- flect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders' moral rights.

In one sense, changing ethics or values pre- cede the establishment of law because they be- come the driving force behind the very creation of laws or regulations. Eor example, the environ- mental, civil rights, and consumer movements reflected basic alterations in societal values and thus may be seen as ethical bellwethers foreshad- owing and resulting in the later legislation. In another sense, ethical responsibilities may be Figure 2 Ethical and Philanthropic Components of Corporate Social Responsibility Ethical Components (Responsibilities) 1.

It is important to perform in a manner consistent with expecta- tions of societal mores and ethical norms.

It is important to recognize and respect new or evolving ethical/ moral norms adopted by society.

It is important to prevent ethical norms from being compromised in order to achieve corporate goals.

It is important that good corporate citizenship be defined as doing what is expected morally or ethically.

It is important to recognize that corporate integrity and ethical behavior go beyond mere compli- ance with laws and regulations.

Philanthropic Components (Responsibilities) It is important to perform in a manner consistent with the philan- thropic and charitable expectations of society.

It is important to assist the fine and performing arts.

It is important that managers and employees participate in voluntary and charitable activities within their local communities.

It is important to provide assis- tance to private and public educa- tional institutions.

It is important to assist voluntarily those projects that enhance a community's "quality of life." seen as embracing newly emerging values and norms society expects business to meet, even though such values and norms may reflect a higher standard of performance than that cur- rently required by law. Ethical responsibilities in this sense are often ill-defined or continually under public debate as to their legitimacy, and thus are frequently difñcult for business to deal with.

Superimposed on these ethical expectations emanating from societal groups are the implied levels of ethical performance suggested by a consideration of the great ethical principles of moral philosophy. This would include such prin- ciples as justice, rights, and utilitarianism.

The business ethics movement of the past decade has firmly established an ethical responsi- bility as a legitimate CSR component. Though it is depicted as the next layer of the CSR pyramid, it must be constantly recognized that it is in dy- namic interplay with the legal responsibility cat- egory. That is, it is constantly pushing the legal responsibility category to broaden or expand while at the same time placing ever higher ex- pectations on businesspersons to operate at lev- els above that required by law. Figure 2 depicts statements that help characterize ethical responsi- bilities. The figure also summarizes philanthropic responsibilities, discussed next.

The Pyramid of Corporate Social Responsibility 41 Figure 3 The Pyramid of Corporate Social Responsibility PHILANTHROPIC Responsibilities Be a good corporate citizen.

Contribute resources to the community; improve quality of life.

ETHICAL Responsibilities Be ethical.

Obligation to do what is right, just, and fair.

Avoid harm.

LEGAL Responsibilities Obey the law.

Law is society's codification of right and wrong.

Play by the rules of the game.

ECONOMIC Responsibilities Be profitable.

The foundation upon which all others rest.

Philanthropic Responsibilities Philanthropy encompasses those corporate ac- tions that are in response to society's expectation that businesses be good corporate citizens. This includes actively engaging in acts or programs to promote human welfare or goodwill. Examples of philanthropy include business contributions of financial resources or executive time, such as contributions to the arts, education, or the com- munity. A loaned-executive program that pro- vides leadership for a community's United Way campaign is one illustration of philanthropy.

The distinguishing feature iDetween philan- thropic and ethical responsibilities is that the former are not expected in an ethical or moral sense. Communities desire firms to contribute their money, facilities, and employee time to humanitarian programs or purposes, but they do not regard the firms as unethical if they do not provide the desired level. Therefore, philan- thropy is more discretionary or voluntary on the part of businesses even though there is always the societal expectation that busi- nesses provide it.

One notable reason for making the dis- tinction between philanthropic and ethical responsibilities is that some firms feel they are being socially responsible if they are just good citizens in the community. This distinction brings home the vital point that CSR includes philanthropic contributions but is not limited to them. In fact, it would be argued here that philanthropy is highly desired and prized but actually less impor- tant than the other three categories of social responsibility. In a sense, philanthropy is icing on the cake—or on the pyramid, us- ing our metaphor.

The pyramid of corporate social respon- sibility is depicted in Figure 3- It portrays the four components of CSR, beginning with the basic building block notion that economic performance undergirds all else.

At the same time, business is expected to obey the law because the law is society's codification of acceptable and unacceptable behavior. Next is business's responsibility to be ethical. At its most fundamental level, this is the obligation to do what is right, just, and fair, and to avoid or minimize harm to stakeholders (employees, consum- ers, the environment, and others). Finally, business is expected to be a good corpo- rate citizen. This is captured in the philan- thropic responsibility, wherein business is expected to contribute financial and human resources to the community and to improve the quality of life.

No metaphor is perfect, and the CSR pyramid is no exception. It is intended to portray that the total CSR of business comprises distinct components that, taken together, constitute the whole. Though the components have been treated as separate concepts for discussion pur- poses, they are not mutually exclusive and are not intended to juxtapose a firm's economic re- sponsibilities with its other responsibilities. At the same time, a consideration of the separate com- ponents helps the manager see that the different types of obligations are in a constant but dy- namic tension with one another. The most critical tensions, of course, would be between economic and legal, economic and ethical, and economic and philanthropic. The traditionalist might see this as a conflict between a firm's "concern for profits" versus its "concern for society," but it is suggested here that this is an oversimplification.

A CSR or stakeholder perspective would recog- nize these tensions as organizational realities, but focus on the total pyramid as a unified whole and how the firm might engage in decisions.

42 Business Horizons / July-August 1991 actions, and programs that simultaneously fulfill all its component parts.

In summary, the total corporate social re- sponsibility of business entails the simultaneous fulfillment of the firm's economic, legal, ethical, and philanthropic responsibilities. Stated in more pragmatic and managerial terms, the CSR firm should strive to make a profit, obey the law, be ethical, and be a good corporate citizen.

Upon first glance, this array of responsibili- ties may seem broad. They seem to be in striking contrast to the classical economic argument that management has one responsibility:

to maximize the profits of its owners or shareholders. Econo- mist Milton Friedman, the most outspoken propo- nent of this view, has argued that social matters are not the concern of business people and that these problems should be resolved by the unfettered workings of the free market system.

Friedman's argument loses some of its punch, however, when you consider his assertion in its totality. Friedman posited that management is "to make as much money as possible while conform- ing to the basic rules of society, both those em- bodied in the law and those embodied in ethical custom" (Friedman 1970). Most people focus on the first part of Friedman's quote but not the second part.

It seems clear from this statement that profits, conformity to the law, and ethical custom embrace three components of the CSR pyramid—economic, legal, and ethical. That only leaves the philanthropic component for Friedman to reject. Although it may be appropriate for an economist to take this view, one would not en- counter many business executives today who exclude philanthropic programs from their firms' range of activities.

It seems the role of corporate citizenship is one that business has no significant problem embracing. Undoubtedly this perspec- tive is rationalized under the rubric of enlight- ened self interest.

We next propose a conceptual framework to assist the manager in integrating the four CSR components with organizational stakeholders.

CSR AND ORGANIZATIONAL STAKEHOLDERS T here is a natural fit between the idea of corporate social responsibility and an organization's stakeholders. The word "social" in CSR has always been vague and lack- ing in specific direction as to whom the corpora- tion is responsible. The concept of stakeholder personalizes social or societal responsibilities by delineating the specific groups or persons busi- ness should consider in its CSR orientation. Thus, the stakeholder nomenclature puts "names and faces" on the societal members who are most urgent to business, and to whom it must be re- sponsive.

By now most executives understand that the term "stakeholder" constitutes a play on the word stockholder and is intended to more appropri- ately describe those groups or persons who have a stake, a claim, or an interest in the operations and decisions of the firm. Sometimes the stake might represent a legal claim, such as that which might be held by an owner, an employee, or a customer who has an explicit or implicit contract.

Other times it might be represented by a moral claim, such as when these groups assert a right to be treated fairly or with due process, or to have their opinions taken into consideration in an important business decision.

Management's challenge is to decide which stakeholders merit and receive consideration in the decision-making process.

In any given in- stance, there may be numerous stakeholder groups (shareholders, consumers, employees, suppliers, community, social activist groups) clamoring for management's attention. How do managers sort out the urgency or importance of the various stakeholder claims? Two vital criteria include the stakeholders' legitimacy and their power. From a CSR perspective their legitimacy may be most important. From a management efficiency perspective, their power might be of central influence. Legitimacy refers to the extent to which a group has a justifiable right to be making its claim. For example, a group of 300 employees about to be laid off by a plant-closing decision has a more legitimate claim on manage- ment's attention than the local chamber of com- merce, which is worried about losing the firm as one of its dues-paying members. The stake- holder's power is another factor Here we may witness significant differences. Thousands of small, individual investors, for example, wield very little power unless they can find a way to get organized. By contrast, institutional investors and large mutual fund groups have significant power over management because of the sheer magnitude of their investments and the fact that they are organized.

With these perspectives in mind, let us think of stakeholder management as a process by which managers reconcile their own objectives with the claims and expectations being made on them by various stakeholder groups. The chal- lenge of stakeholder management is to ensure that the firm's primary stakeholders achieve their objectives while other stakeholders are also satis- fied. Even though this "win-win" outcome is not always possible, it does represent a legitimate and desirable goal for management to pursue to protect its long-term interests.

The important functions of stakeholder man- agement are to describe, understand, analyze, and finally, manage. Thus, five major questions might be posed to capture the essential ingredi- The Pyramid of Corporate Social Responsibility 43 Figure 4 Stakeholder/Responsib Stakeholders Owners Customers Employees Community Competitors Suppliers Social Activist Groups Public at Large Others ility Matrix Economic Types Legal of CSR Ethical Philanthropic ents we need for stakeholder management:

Who are our stakeholders?

What are their stakes?

What opportunities and challenges are presented by our stakeholders?

What corporate social responsibilities (eco- nomic, legal, ethical, and philanthropic) do we have to our stakeholders?

What strategies, actions, or decisions should we take to best deal with these responsi- bilities?

Whereas much could be discussed about each of these questions, let us direct our atten- tion here to question four—what kinds of social responsibilities do we have to our stakeholders?

Our objective here is to present a conceptual approach for examining these issues. This con- ceptual approach or framework is presented as the stakeholder/responsibility matrix in Figure 4.

This matrix is intended to be used as an ana- lytical tool or template to organize a manager's thoughts and ideas about what the firm ought to be doing in an economic, legal, ethical, and phil- anthropic sense with respect to its identified stakeholder groups. By carefully and deliberately moving through the various cells of the matrix, the manager may develop a significant descrip- tive and analytical data base that can then be used for purposes of stakeholder management.

The information resulting from this stakeholder/ responsibility analysis should be useful when developing priorities and making both long-term and short-term decisions involving multiple stakeholder's interests.

To be sure, thinking in stakeholder- responsibility terms increases the com- plexity of decision making and may be extremely time consuming and taxing, especially at first. Despite its complexity, however, this approach is one methodol- ogy management can use to integrate val- ues—^what it stands for—with the tradi- tional economic mission of the organiza- tion. In the final analysis, such an integra- tion could be of significant usefulness to management. This is because the stake- holder/responsibility perspective is most consistent with the pluralistic environment faced by business today. As such, it pro- vides the opportunity for an in-depth cor- porate appraisal of financial as well as social and economic concerns. Thus, the stakeholder/responsibility perspective would be an invaluable foundation for responding to the fifth stakeholder man- agement question about strategies, actions, or decisions that should be pursued to effectively respond to the environment business faces.

MORAL MANAGEMENT AND STAKEHOLDERS A t this juncture we would like to expound upon the link between the firm's ethical responsibilities or perspectives and its major stakeholder groups. Here we are isolating the ethical component of our CSR pyramid and discussing it more thoroughly in the context of stakeholders. One way to do this would be to use major ethical principles such as those of jus- tice, rights, and utilitarianism to identify and de- scribe our ethical responsibilities. We will take another alternative, however, and discuss stake- holders within the context of three major ethical approaches—immoral management, amoral man- agement, and moral management. These three ethical approaches were defined and discussed in an earlier Business Horizons article (Carroll 1987).

We will briefly describe and review these three ethical types and then suggest how they might be oriented toward the major stakeholder groups.

Our goal is to profile the likely orientation of the three ethical types with a special emphasis upon moral management, our preferred ethical ap- proach.

Three Moral Types If we accept that the terms ethics and morality are essentially synonymous in the organizational context, we may speak of immoral, amoral, and moral management as descriptive categories of three different kinds of managers. Immoral man- 44 Business Horizons / July-August 1991 agement is characterized by those managers whose decisions, actions, and behavior suggest an active opposition to what is deemed right or ethical. Decisions by immoral managers are dis- cordant with accepted ethical principles and, indeed, imply an active negation of what is moral. These managers care only about their or their organization's profitability and success. They see legal standards as barriers or impediments management must overcome to accomplish what it wants. Their strategy is to exploit opportunities for personal or corporate gain.

An example might be helpful. Many observ- ers would argue that Charles Keating could be described as an immoral manager. According to the federal government, Keating recklessly and fraudulently ran California's Lincoln Savings into the ground, reaping $34 million for himself and his family. A major accounting firm said about Keating: "Seldom in our experience as accoun- tants have we experienced a more egregious example of the misapplication of generally ac- cepted accounting principles" ("Good Timing, Chadie" 1989).

The second major type of management ethics is amoral management. Amoral managers are neither immoral nor moral but are not sensitive to the fact that their everyday business decisions may have deleterious effects on others. These managers lack ethical perception or awareness.

That is, they go through their organizational lives not thinking that their actions have an ethical dimension. Or they may just be careless or inat- tentive to the implications of their actions on stakeholders. These managers may be well intentioned, but do not see that their business decisions and actions may be hurting those with whom they transact business or interact. Typically their orientation is towards the letter of the law as their ethical guide. We have been describing a sub-category of amorality known as unintentional amoral managers. There is also another group we may call intentional amoral managers. These managers simply think that ethical considerations are for our private lives, not for business. They believe that business activity resides outside the sphere to which moral judgments apply. Though most amoral managers today are unintentional, there may still exist a few who just do not see a role for ethics in business.

Examples of unintentional amorality abound.

When police departments stipulated that appli- cants must be 5'10" and weigh 180 pounds to qualify for positions, they just did not think about the adverse impact their policy would have on women and some ethnic groups who, on aver- age, do not attain that height and weight. The liquor, beer, and cigarette industries provide other examples. They did not anticipate that their products would create serious moral issues: alco- holism, drunk driving deaths, lung cancer, dete- riorating health, and offensive secondary smoke.

Finally, when McDonald's initially decided to use polystyrene containers for food packaging it just did not adequately consider the environmental impact that would be caused. McDonald's surely does not intentionally create a solid waste dis- posal problem, but one major consequence of its business is just that. Fortunately, the company has responded to complaints by replacing the polystyrene packaging with paper products.

Moral management is our third ethical ap- proach, one that should provide a striking con- trast. In moral management, ethical norms that adhere to a high standard of right behavior are employed. Moral managers not only conform to accepted and high levels of professional conduct, they also commonly exemplify leadership on ethical issues. Moral managers want to be profit- able, but only within the confines of sound legal and ethical precepts, such as fairness, justice, and due process. Under this approach, the orientation is toward both the letter and the spirit of the law.

Law is seen as minimal ethical behavior and the preference and goal is to operate well above what the law mandates. Moral managers seek out and use sound ethical principles such as justice, rights, utilitarianism, and the Golden Rule to guide their decisions. When ethical dilemmas arise, moral managers assume a leadership posi- tion for their companies and industries.

There are numerous examples of moral man- agement. When IBM took the lead and devel- oped its Open Door policy to provide a mecha- nism through which employees might pursue their due process rights, this could be considered moral management. Similarly, when IBM initiated its Four Principles of Privacy to protect privacy rights of employees, this was moral management.

When McCullough Corporation withdrew from the Chain Saw Manufacturers Association because the association fought mandatory safety standards for the industry, this was moral management.

McCullough knew its product was potentially dangerous and had used chain brakes on its own saws for years, even though it was not required by law to do so. Another example of moral man- agement was when Maguire Thomas Partners, a Los Angeles commercial developer, helped solve urban problems by saving and refurbishing his- toric sites, putting up structures that matched old ones, limiting building heights to less than the law allowed, and using only two-thirds of the allowable building density so that open spaces could be provided.

Orientation Toward Stakeholders Now that we have a basic understanding of the three ethical types or approaches, we will pro- The Pyramid of Corporate Social Responsibility 45 pose profiles of what the likely stakeholder ori- entation might be toward the major stakeholder groups using each of the three ethical ap- proaches. Our goal is to accentuate the moral management approach by contrasting it with the other two types.

Basically, there are five major stakeholder groups that are recognized as priorities by most firms, across industry lines and in spite of size or location: owners (shareholders), employees, cus- tomers, local communities, and the society-at- large.

Although the general ethical obligation to each of these groups is essentially identical (pro- tect their rights, treat them with respect and fair- ness), specific behaviors and orientations arise because of the differing nature of the groups. In an attempt to flesh out the character and salient features of the three ethical types and their stake- holder orientations. Figures 5 and 6 summarize the orientations these three types might assume with respect to four of the major stakeholder groups. Because of space constraints and the general nature of the society-at-large category, it has been omitted.

Figure 5 Three Moral Types and Orientation Toward Stakeholder Groups: Owners and Employees Type of Management Immoral Management Amoral Management Moral Management Type of Management Immoral Management Amoral Management Moral Management Orientation Toward Owner/Shareholder Stakeholders Shareholders are minimally treated and given short shrift. Focus is on maximizing positions of executive groups—maximizing executive com- pensation, perks, benefits. Golden parachutes are more important than returns to shareholders. Managers maximize their positions without share- holders being made aware. Concealment from shareholders is the operat- ing procedure. Self-interest of management group is the order of the day.

No special thought is given to shareholders; they are there and must be minimally accommodated. Profit focus of the business is their reward.

No thought is given to ethical consequences of decisions for any stakeholder group, including owners. Communication is limited to that required by law.

Shareholders' interest (short- and long-term) is a central factor. The best way to be ethical to shareholders is to treat all stakeholder claimants in a fair and ethical manner. To protect shareholders, an ethics committee of the board is created. Code of ethics is established, promulgated, and made a living document to protect shareholders' and others' interests.

Orientation Toward Employee Stakeholders Employees are viewed as factors of production to be used, exploited, manipulated for gain of individual manager or company. No concern is shown for employees' needs/rights/expectations, short-term focus. Coer- cive, controlling, alienating.

Employees are treated as law requires. Attempts to motivate focus on increasing productivity rather than satisfying employees' growing maturity needs.

Employees still seen as factors of production but remunerative approach used. Organization sees self-interest in treating employees with minimal respect. Organization structure, pay incentives, rewards all geared toward short- and medium-term productivity.

Employees are a human resource that must be treated with dignity and respect. Goal is to use a leadership style such as consultative/participative that will result in mutual confidence and trust. Commitment is a recurring theme. Employees' rights to due process, privacy, freedom of speech, and safety are maximally considered in all decisions. Management seeks out fair dealings with employees.

46 Business Horizons / July-August 1991 By carefully considering the described stake- holder orientations under each of the three ethi- cal types, a richer appreciation of the moral man- agement approach should be possible. Our goal here is to gain a fuller understanding of what it means to engage in moral management and what this implies for interacting with stakeholders. To be sure, there are other stakeholder groups to which moral management should be directed, but again, space precludes their discussion here. This might include thinking of managers and non- managers as distinct categories of employees and would also embrace such groups as suppliers, competitors, special interest groups, government, and the media.

T hough the concept of corporate social responsibility may from time to time be supplanted by various other focuses such as social responsiveness, social performance, public policy, ethics, or stakeholder management, an underlying challenge for all is to define the kinds of responsibilities management and busi- nesses have to the constituency groups with which they transact and interact most frequently.

The pyramid of corporate social responsibility gives us a framework for understanding the evolving nature of the firm's economic, legal, ethical, and philanthropic performance. The implementation of these responsibilities may vary depending upon the firm's size, management's Figure 6 Three Moral Types and Orientation Toward Stakeholder Groups: Customers and Local Community Type of Management Immoral Management Amoral Management Moral Management Type of Management Immoral Management Amoral Management Moral Management Orientation Toward Customer Stakeholders Customers are viewed as opportunities to be exploited for personal or organizational gain. Ethical standards in dealings do not prevail; indeed, an active Intent to cheat, deceive, and/or mislead is present.

In all marketing decisions—advertising, pricing, packaging, distribution—customer is taken advantage of to the fullest extent.

Management does not think through the ethical consequences of its deci- sions and actions.

It simply makes decisions with profitability within the letter of the law as a guide. Management is not focused on what is fair from perspective of customer. Focus is on management's rights. No consid- eration is given to ethical implications of interactions with customers.

Customer is viewed as equal panner in transaction. Customer brings needs/ expectations to the exchange transaction and is treated fairly. Managerial focus is on giving customer fair value, full information, fair guarantee, and satisfaction. Consumer rights are liberally interpreted and honored.

Orientation Toward Local Community Stakeholders Exploits community to fullest extent; pollutes the environment. Plant or business closings take fullest advantage of community. Actively disregards community needs. Takes fullest advantage of community resources without giving anything in return. Violates zoning and other ordinances whenever it can for its own advantage.

Does not take community or its resources into account in management decision making. Community factors are assumed to be irrelevant to busi- ness decisions. Community, like employees, is a factor of production. Legal considerations are followed, but nothing more. Deals minimally with com- munity, its people, community activity, local government.

Sees vital community as a goal to be actively pursued. Seeks to be a lead- ing citizen and to motivate others to do likewise. Gets actively involved and helps institutions that need help—schools, recreational groups, philan- thropic groups. Leadership position in environment, education, culture/arts, volunteerism, and general community affairs. Firm engages in strategic philanthropy. Management sees community goals and company goals as mutually interdependent.

The Pyramid of Corporate Social Responsibility 47 philosophy, corporate strategy, industry charac- teristics, the state of the economy, and other such mitigating conditions, but the four component parts provide management with a skeletal outline of the nature and kinds of their CSR.

In frank, action-oriented terms, business is called upon to:

be profitable, obey the law, be ethical, and be a good corporate citizen.

The stakeholder management perspective provides not only a language and way to person- alize relationships with names and faces, but also some useful conceptual and analytical concepts for diagnosing, analyzing, and prioritizing an organization's relationships and strategies. Fffec- tive organizations will progress beyond stake- holder identification and question what opportu- nities and threats are posed by stakeholders; what economic, legal, ethical, and philanthropic responsibilities they have; and what strategies, actions or decisions should be pursued to most effectively address these responsibilities. The stakeholder/responsibility matrix provides a tem- plate management might use to organize its analysis and decision making.

Throughout the article we have been build- ing toward the notion of an improved ethical organizational climate as manifested by moral management. Moral management was defined and described through a contrast with immoral and amoral management. Because the business landscape is replete with immoral and amoral managers, moral managers may sometimes be hard to find. Regardless, their characteristics have been identified and, most important, their per- spective or orientation towards the major stake- holder groups has been profiled. These stake- holder orientation profiles give managers a con- ceptual but practical touchstone for sorting out the different categories or types of ethical (or not-so-ethical) behavior that may be found in business and other organizations.

It has often been said that leadership by ex- ample is the most effective way to improve busi- ness ethics. If that is true, moral management provides a model leadership perspective or orien- tation that managers may wish to emulate. One great fear is that managers may think they are providing ethical leadership just by rejecting im- moral management. However, amoral manage- ment, particularly the unintentional variety, may unconsciously prevail if managers are not aware of what it is and of its dangers. At best, amorality represents ethical neutrality, and this notion is not tenable in the society of the 1990s. The stan- dard must be set high, and moral management provides the best exemplar of what that lofty standard might embrace. Further, moral manage- ment, to be fully appreciated, needs to be seen within the context of organization-stakeholder relationships. It is toward this singular goal that our entire discussion has focused. If the "good society" is to become a realization, such a high expectation only naturally becomes the aspiration and preoccupation of management. • References R.W. Ackerman and R.A. Bauer, Corporate Social Re- sponsiveness (Reston, Va.: Reston Publishing Co, 1976).

A.B.

Carroll, "A Three-Dimensional Conceptual Model of Corporate Social Performance," Academy of Man- agement Review, 4, 4 (1979): 497-505.

A.B.

Carroll, "In Search of the Moral Manager," Busi- ness Horizons, March-April 1987, pp. 7-15.

Committee for Economic Development, Social Respon- sibilities of Business Corporations (New York: CED, 1971).

K. Davis, "Can Business Afford to Ignore its Social Responsibilities?" California Management Review, 2, 3 (I960):

70-76:

R. Eelis and C. Walton, Conceptual Foundations of Business ()/{omewooà.

111.:

Richard D. Irwin, 196l).

"Good Timing, Charlie," Forbes, November 27, 1989, pp.

140-144.

W.C. Frederick, "From CSR^ to CSR^: The Maturing of Business and Society Thought," University of Pittsburgh Working Paper No. 279, 1978.

M. Friedman, "The Sociai Responsibility of Business Is to Increase its Profits," New York Times, September 13, 1970, pp. 122-126.

S.P. Sethi, "Dimensions of Corporate Sociai Responsi- bility," California Management Review, 17,'5 (1975):

58-64.

Archie B.

Carroll is Robert W, Scherer Professor of Management and Corpo- rate Public Affairs at the College ot Busi- ness Administration, University of Geor- gia, Athens.

Business Horizons / July-August 1991 Xi. -