Impacting a Manager\'s Role: Social

¶ … Impacting a Manager's Role: Social Contract and Corporate Social Responsibility

In today's increasingly competitive and globalized world, managers face an increasing number of challenges. One of the contemporary challenges impacting a manager's role is the need to uphold a social contract, through the implementation of corporate social responsibility. Today's public trust in the corporate world has significantly faltered over the last generation.

And, as such, corporate loyalty has faltered with many customers as well as investors. The future manager's challenge will be to rebuild societal faith in their organization specifically and the corporate world in general.

The Social Contract and the Breakdown of Societal Trust:

An organization's social contract can be described as the obligations and expectations that society and organizations mutually have with one another.

However, over recent years, there has been a breakdown in societal trust, due to the blatant disregard of this contract by so many businesses.

In generations past, hard work and loyalty to an organization equated to job security. When employees were productivity and the company was profitable, employees were rewarded with increased income. An employers good fortune was linked to their employees and vice versa. However, with today's increased globalization and deregulation of so many industries, have broken their half of the social contract with massive blue collar and white collar layoffs, as well as the numerous accounting scandals that have rocked the financial world including: Enron, Worldcom, and Tyco.

Social responsibility is not a new idea for businesses (Scherer & Palazzo, 2007). As Dahlin (2007) notes, business ethics and social responsibility began decades ago as the "Progressive Movement" in the 1920s attempted to provide workers with a "living wage." This would be an income that would provide for sufficient education, health, recreation, and retirement. During this time, managers were directed to ensure price increases and any other practices would not hurt a family's "living wage." It was this management style that many believe was the beginning of corporate social responsibilities.

However, by the late 1970s, corporate social responsibility and ethical behavior had begun to fall by the wayside. It was believed by nearly half of survey respondents in 1977 that business executives tended not to apply ethical laws to their work, but instead were more concerned with financial gain.

Charges of corporate wrongdoing began to emerge, both at home and abroad. The 1980s continued the trend. There was a perceived significant erosion in ethics in all spheres of life, according to Dahlin (2007), especially in business. Financial institutions collapsed, securities markets were manipulated, insider trading was headline news, and there was a general disregard of environmental health and safety standards by corporations. There were plant closings and relocations that sent some geographic areas into an economic tailspin. Yet, during the late 1980s, the Defense Industry Initiative on Business Ethics and Coduct (DII) was developed, outlining principles to help enhance the decline in ethics.

The 1990s saw the beginning of lip service to the long forgotten social contract organizations had with society.

Management tried to bring about solutions to the social issues that ran rampant in business. Corporate codes of conduct were adopted. Ethics training programs were implemented. and, many companies formed senior management or board level ethics committees.

However, social issues still plagued corporations around the globe, from sweatshops to downsizing (Dahlin. 2007).

The beginning of the 21st century saw it all come to a head. Corporate America seemed to completely forget there was ever such a thing as a social contract. Corporate social responsibility went out the window as companies like Enron, WorldCom, Arthur Andersen, Tyco, and Xerox shook consumer and investor faith to the core. Enron's questionable accounting practices not only destroyed their company, but that of auditor Arthur Andersen as well. Another expample, as Dahlin (2007) notes, WorldCom was in the heart of one of the largest accounting scandals in history. Add to this the Wal-Mart effect of business in general, with companies having to compete with Wal-Mart's low costs, made possible partially due to their low wages, failure to pay overtime, nonexistent benefits, and resistance to unionization, and a ripple effect has been cast on the waters, causing other companies to follow suit, in an effort to be competitive.

Changing Society Equals a Changing Demand for Corporate Social Responsibility:

Today's changing society has increased the demand for corporate social responsibility. The decades of ethical abuse, coupled with the recent financial soul shattering scandals, has called for businesses to renew their social contract with society (Basu & Palazzo, 2008). Society now demands that corporations take responsibility for their interactions with the world.

A generation ago, most people didn't think tobacco was a dangerous health threat. Just a few years ago, obesity was seen as a combination of genetics and unhealthy lifestyle choices - certainly not the responsibility of food companies. Today, ageism is rarely seen as a corporate responsibility beyond compliance with the law - but in an era of dramatic demographic shifts, it soon will be (Zadek, 2004, p. 125).

These few changes demonstrate how societal changes are increasing the demands for corporate social responsibility, and will be increasingly important to managers. Everyone from governments, to activists, to the media are now holding organizations accountable for the social consequences of their actions. A plethora of organizations even rank corporations on the performance of their corporate social responsibility (Porter & Kramer, 2006).