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3 Tutorials that teach Models of Social Responsiblility and Considering the Stakeholder
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Models of Social Responsiblility and Considering the Stakeholder

Models of Social Responsiblility and Considering the Stakeholder

Author: James Howard

This lesson discusses social responsible business practices

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Social Responsibility and Considering the Stakeholder

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Hello, and welcome to this tutorial on social responsibility and considering stakeholders. Now as always with these tutorials, please feel free to fast forward, to pause and rewind as many times as you need, to make the most out of the time that you're going to spend here. So let me ask you a question. What's social responsibility? If you ask a lot of different people-- five or six-- you'll probably get five or six different answers.

Now what we're going to be looking at in this lesson is socially responsible, and considering of the stakeholders. What does that mean? Also, we're going to be comparing ethics or ethical behavior with social responsibility. Now the key terms for this lesson, are going to be social responsibility and stakeholders.

So social responsibility. Well, up until the 1930s, businesses were free to do pretty much anything they wanted. They could claim anything, they could put anything on the billboard.

They could put anything they wanted into the products that they sold you. "Caveat emptor" was the phrase of the day. And that's a Latin phrase for "let the buyer beware."

Now around the time of the Great Depression, there was a lot of horrible economic problems. And the president at the time, Franklin Delano Roosevelt, began a program of improving those social conditions that has continued up until today. So let's take a look. Social responsibility, what is it? Well, it's the responsibility to act in a way that benefits society at large.

In other words, thinking not just of yourself, but society as a whole. Companies have to consider their impact on society. They play a huge role in our everyday lives. The consequences of those decisions and also the benefit or detriment that those decisions are going to have on society as a whole.

Now there are two basic models of social responsibility. There's the economic model where society benefits when companies make profits. Now let's think about and focus on this for a second.

A company makes profits. How does that benefit society? Well, when they make profits, they're able to produce more product, which improves the lives of individuals. They're also able to hire more people, which provides jobs and pay them more so they have a better standard of living.

Now socioeconomic model is slightly different. In this case, businesses have responsibility to the stakeholders and to society. So it's not just those people inside. It's not just focusing on the profits. I'm looking at other stakeholders as well.

So who are stakeholders? Now we're going to take a look at the definition. Stakeholders are simply the people and parties directly affected by an organization. And they can be customers.

Customers deserve and want safe products. They don't want products that are going to injure them in some way. Employees can also be stakeholders, and they are. Employees want a safe work environment and something that's stable.

The investors are definitely a stakeholder. They want safe investments. They want to know that the money they invest with you is going to be well cared for and put to work, not squandered. Also, communities and the environment. We all want clean air, and clean water, and clean land.

So what are some of the advantages of being socially responsible? Well, for one thing, businesses can't ignore social issues. Businesses are social creatures. Remember, they're people too, right?

They have resources that they can use to help solve some of these social issues. Technically, financially, managerially also. By businesses helping, it creates a more stable environment for the rest of us, and it decreases the need for government intervention within the business community and our everyday lives.

Well, what are the disadvantages for the argument of being socially responsible? Well, a manager's primary job and responsibility is to the shareholders, the owners of the business. So anything that I do that distracts from that job takes away from the primary reason that I'm there.

Resources that a business made belong to the business. And they should be used to create profit, to create jobs, and more resources and products for the community at large. And also to increase my employee morale and well being. Social problems come from society. They don't come from business.

And lastly hey, if the government officials are falling down on the job, then they should be the ones held accountable, not necessarily the business. So as we can see, social responsibility isn't just a catch phrase. It's a lot of hard work, and the arguments for and against a company being socially responsible, depending on how you personally define that, are good on both sides.

So let's compare ethics to social responsibility. Now obviously, there's some overlap here. To be ethical and to be socially responsible are very, very close to each other. Ethics focuses on behaviors and actions, those individual things, the small things. Think microeconomics.

And social responsibility, well, that's a bigger picture view. It's how those ethics, those ethical decisions as behaviors and actions, affect the world at large. Think macroeconomics. How do I balance the needs of the business, the profits, with the needs of the other stakeholders that I can affect on an everyday basis?

So let's take a look at an example. In this case, cigarettes and cigarette manufacturer. Is it ethical to make a product that you know is going to hurt somebody? But I'm making a product that people want. I'm fulfilling a need in the market.

I'm paying my workers. I'm providing jobs. But was it socially responsible? Socially responsible, having cigarettes out there and making that income on something that we know is going to harm someone. Well, what does it do?

Well, first of all, it shortens people's lives. It violates their rights to life, for one. It also does not help with that clean water, air, and land aspect. Every time someone smokes a cigarette, they're their own little power plant, producing pollution that affects the rest of us.

So is it ethical or unethical? And is it socially responsible or not? And as you can see, trying to pry the two apart can be kind of difficult. And you can make arguments for both ethical behavior or unethical behavior, and social responsibility.

So let's recap. What did we talk about? We talked about being socially responsible, and considering the stakeholders involved in your business. And we compared ethics and social responsibility. Something that is quite related, but ultimately very, very different.

I want to thank you for spending some time with me today. I hope you had a good time and learned something. I'll see you next time.

Terms to Know
Social Responsibility

The responsibility to act in a way to benefit society at large.


The people and parties directly affected by an organization.