Social responsibility, in short, is the proactive approach a company takes to make decisions that best serves the society and the company. Social responsibility can easily be defined, but the concept of social responsibility needs to be explained in detail. Businesses do not operate just to please the stockholders. There is a certain amount of responsibility to society when a business is formed; a building's impacting on the surrounding area. Those responsibilities include, but are not limited to increased traffic from parking lots, pollutants, garbage accumulations, and other activities which may impact the community. There are many issues that must be considered. According to Pearce and Robinson (2009) “corporate responsibility is the idea that a business has a duty to serve society in general as well as the financial interest of its stockholders" (p.55).
Social responsibilities can be segmented into four categories of social commitment. The categories are economic, legal, ethical, and discretionary social responsibilities (Pearce & Robinson, 2009, p.56). Each category must appropriately be strategically planned and implemented by management to ensure a company is socially responsible.
Economic responsibility is also considered the obligation to be profitable to the stakeholders, stockholders, employees, and customers. Economic responsibilities have four basic areas which are profitability, transparency, nondiscrimination, and sustainability (Pnet, 2008, p.1). A company must be profitable to satisfy the stockholders, and provide incentives for the employee to continue to support the company. A company must be transparent in their actions so everyone is aware of the end result. Nondiscrimination is the act of consistency to the financial criteria of a company’s employees, customers, and suppliers (Pnet, 2008, p.1). A company must be sustainable and have long-term plans in place. A company must continue to improve their processes to adapt to the customer to ensure sustainability.
The legal responsibility is the responsibility of a company to obey laws and regulations. The laws range from federal, state, local, and government laws. Another definition of legal responsibilities by Carroll (1991) is “legal responsibilities reflect a view of "codified ethics" in the sense that they embody basic notions of fair operations as established by our lawmakers” (p.1).
Ethical responsibilities may not be covered by the law. In fact, a company can sell a legal product, but the product may be considered unethical to society. Carroll (1991) states “ethical responsibilities embody those standards, norms, or expectations that reflect 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” (p.1). Ethical responsibilities address a company’s ability to do what is right and to reflect proper business behavior (Pearce & Robinson, 2009, p.58).
Discretionary responsibility is the responsibility of a company to be involved in public relations, and to be involved with the community on a voluntary basis. Many companies today participate in a wide variety of social events and some even host the events as well. Companies today understand the basic foundation of community involvement, its impact on the company as well as the community by creating a strategic partnership.
One type of company that comes to mind as possibly being a market segment that is legal but not ethical are the payday loan companies (predatory lending). Yes we live in a free market society, and if a customer is willing to apply for a loan with an outrageous annual percentage rate, then there is nothing illegal about it within the established laws. According to Churchman and Korb (2006) “payday lenders offer high cost, short-term loans that often result in annual percentage rates of more than 400%” (p.1). When you look at it from this perspective, is there anything unethical about this? The issue is that they sometimes target military members and low income families struggling to just make ends meet. Sometimes the family has no option but to apply for the loan and accept the terms. Personally, predatory lenders are feeding off of our weak and poor. We enable this behavior by many times blaming the users of the loans. They do have a stake in it, but if you have a family you must take care of, you will do anything you can to take care of them. If payday loans were socially responsible and made decisions that were in the best interest of society, then their annual percentage rate would not be 400%. Their rates would be competitive with financial institutions, and they could position themselves as an alternative to financial institutions. Because the law allows predatory lenders to charge the outrageous annual percentage rates they do just that, while feeding off of the less fortunate in our society. When the military was my full-time career I saw a lot of good people turn to these lending institutions as their last hope. These soldiers were doing everything right, but could not sustain their family with the salary the military offered at the time. It was sad watching these companies take advantage of my brothers-at-arms.
Carroll, A. (1991). The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders - balancing economic, legal, and social responsibilities. Businesses Services Industries. Retrieved July, 17, 2009, from http://findarticles.com/p/articles/mi_m1038/is_n4_v34/ai_11000639/pg_2/
Churchman, J., & Korb, J. L. (2006). Defend all from payday loans. Center of American Progress. Retrieved July 17, 2009, from http://www.americanprogress.org/issues/2006/07/b1859861.html
Pearce, A. J., & Robinson, B. R. (2009). Strategic Management. New York: McGraw-Hill/Irwin
Pnet, (2008). Four basic responsibilities of a business. Spice Mentor. Retrieved July 16, 2009, from http://spicementor.blogspot.com/2008/04/four-basic-economic-responsibilities-of.html
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