Now let’s turn to the issue of social responsibility. In one sense, the concept of social re- sponsibility, like ethics, is easy to understand: It means distinguishing right from wrong and doing right. It means being a good corporate citizen. The formal definition of corpo- rate social responsibility is management’s obligation to make choices and take actions that will contribute to the welfare and interests of society as well as the organization.31
As straightforward as this definition seems, social responsibility can be a difficult con- cept to grasp because different people have different beliefs as to which actions improve so- ciety’s welfare.32 To make matters worse, social responsibility covers a range of issues, many of which are ambiguous with respect to right or wrong. If a bank deposits the money from a trust fund into a low-interest account for 90 days, from which it makes a substantial profit, is it being a responsible corporate citizen? How about two companies engaging in intense competition? Is it socially responsible for the stronger corporation to drive the weaker one into bankruptcy or a forced merger?
Or consider companies such as Chiquita, Kmart, and Dana Corporation, all of which declared bankruptcy—which is perfectly legal—to avoid mounting financial obligations to suppliers, labor unions, or competitors. These examples contain moral, legal, and economic considerations that make socially responsible behavior hard to define. A company’s impact on the natural environment also must be taken into consideration.
Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.