Social Responsibility

PRINCIPLES OF MANAGEMENT

Chapter 11 – Introduction to Social Responsibility

Social Responsibility – usually defined as those obligations a manager has to society in which his organization operates and over which his organization has some influence.

Historical Background

Three Stages Social Responsibility has gone through:

1. Profit Maximization Stage: (1600 – 1875).

This stage was characterized by the contention that the primary goal and motivating force for business organizations is to maximize profit.

During this period managers emphasized profit and overlooked nefarious activities such as child labor, starvation wages, intolerable working conditions, unsafe products, and misleading advertising.

This was an era of cutthroat competition and unethical business practices.

2. Trusteeship Stage:

This stage emerged in the 1920s and 1930s (the depression) resulted from significant changes in the structure of both business organizations and society.

During this period, the structure of the corporation changed into a complex framework of ownership with large constituencies of non-owners and managers who are not identical with the owners.

These managers become trustees for various contributor groups – stockholders, employees, suppliers, customers, creditors, etc. As such, they became responsible not only for maximizing the stockholders’ wealth but also in reconciling and balancing the competing claims of contributor groups. IN short, management became responsible to all the contributors of the corporation.

3. “Quality of Life” Stage:

In the US this stage started in 1935, although it was in the 1960s and 1970s that managers became really aware responsibility and started responding with positive action.

This concept surfaced in what is called as “affluent societies”. This realization that “economic abundance in the midst of declining social and physical environment does not make sense” was the primary reason for the emergence of this concept.

Today, social consensus demands that managers assume responsibilities beyond the profit realm or merely balancing of the competing claims of contributors and power blocs.

The socially responsible manager, if he is to survive, must assume a much more significant role, one that is deeply involved in t solution of society’s major problems.