Introduction to Management

Chapter Summary

To be truly effective, organizations should interact with their external environment. The external environment can be divided into the general or mega environment and the specific task environment. Social responsibility refers to the obligation of a business firm to enhance the condition of society along with its own interests. Business firms are accountable to six major stakeholder groups: shareholders, employees, customers, creditors and suppliers, society and the government.

Social responsiveness refers to the ability of a firm to implement policies and take part in activities that would benefit both society and the firm. The following categories are generally considered when measuring social responsiveness: contributions, fund-raising, volunteerism, recycling, diversity policies, direct corporate investment, quality of work life, attention to consumers and pollution control. The need to measure social responsiveness led to the development of social audits. Social audits are of two types - audits required by the government and voluntary audits. Although social audits are not legally mandatory, many organizations make social involvement disclosures in their annual reports. This shows the growing concern among major firms about their social responsibility.

The ethical conduct of an organization depends on the ethical standards of its managers. Three types of management have been identified, depending on the ethical or moral nature of their decisions. These are moral, amoral and immoral management. Moral management is in the best interests of the organization in the long run. However, most companies follow the principles of amoral management. To conduct business in an ethical manner, managers should be aware of the factors that affect ethical behavior. Through mechanisms such as top management commitment, code of ethics, ethics committees, ethics audits, ethics training and ethics hotlines, managers can inculcate ethical behavior in the employees.

Next Chapter »