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Responsible & Profitable: Teaching to Create a More Ethical Corporate World

Dr. Irene Goll

To what extent does business have an obligation to behave in a socially responible way? How does corporate social responsiblity affect the bottom line?

These questions have received a great deal of attention in the academic and popular press. Irene Goll, Ph.D., associate professor in the Kania School of Management and current William and Elizabeth Burkavage Fellow in Business Ethics and Social Responsibility, has had a long-term interest in studying corporate social responsibility and in examining this issue in the courses she teaches.
Increasingly, companies are being held accountable by their stakeholders to behave in a way that benefits society. Stakeholders include employees, customers, suppliers, shareholders, and others. Social responsibility refers to “the adoption by a business of a strategic focus for fulfilling the economic, legal, ethical, and philanthropic responsibilities expected of it by its stakeholders.”1 It is widely acknowledged that businesses have economic responsibilities in which they provide a return on investment, create jobs, and sell goods and services. Corporations must abide by laws and regulations when conducting business. They also have ethical responsibilities; “companies must decide what they consider to be just, fair, and right.”2 Finally, businesses have philanthropic responsibilities by which they contribute to improve community and society.

Examining the Issues

Dr. Goll teaches Management 473: Organizational Social Responsibility, which focuses on the dynamic relationship between business and society. This course adopts the Stakeholder Approach and examines the many dimensions of the interactions between business and society. Some of the issues the course emphasizes include: corporate governance; the legal environment of business; ethics; relations with employees, consumers, and community; technology; sustainability; and social responsibility in the international environment. There are many exciting cases in the news, and students are encouraged to be informed of current business practices and cases. Some corporations, such as Starbucks, have a positive reputation for their sense of responsibility to society. The class also examines business cases such as Enron, the BP oil spill, and prominent examples of financial fraud and the recent economic meltdown. They are also interested in the debate on hydraulic fracking, which is currently receiving attention in the press in our home state.

Applying Practice to Performance

The question of how corporate social responsibility affects a company’s performance is the subject of considerable debate. Generally, studies have shown that it contributes to a firm’s reputation as well as its financial performance. A study by Dr. Goll and Dr. Abdul Rasheed (University of Texas – Arlington) examined the relationship between discretionary social responsibility and firm performance in a sample of large U.S. companies.3 This study found that the effects of discretionary social responsibility on firm performance depend on the industry’s environment. This study lends support to Stakeholder Theory in which firms that respond to their stakeholders have better financial performance.

Dr. Goll teaches two other courses emphasizing corporate social responsibility: Management 460: Organizational Theory and Management and 455: Business Policy and Strategy. Organizational Theory helps students understand some of the challenges that firms face such as growing competition, globalization, technology, and a changing environment. There is growing pressure on companies in the U.S. and in the international environment to respond to the ethical and social responsibility concerns of today’s stakeholders. The class also discusses the importance of leadership and corporate culture when examining some of the business practices in contemporary society. Ethics and social responsibility are also emphasized in Business Policy and Strategy. This course adopts the Upper Echelon Perspective which emphasizes the important role of the Chief Executive Officer and top executives in making key strategic decisions for the company. When formulating strategy, leaders who believe in and have a sense of responsibility to society and ethics can guide their companies to behave in a more socially responsible manner.

Toward a Corporate Responsible Future

Dr. Goll’s most current research focuses on sustainability and social entrepreneurship. Dr. Goll and Abhijit Roy, Ph.D., are working on a study that examines the role of cultural and economic factors that affect sustainability. The United Nations defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”4 The underlying premise is that countries can further their economic development while still protecting the natural environment and contributing to social development. This is referred to as the triple bottom line. Corporate sustainability also has three dimensions, economic, environment and social and refers to meeting the needs of today’s stakeholders while considering the needs of future stakeholders. Corporations can clearly contribute to a more sustainable future. Many large corporations operate across the world and may have the resources and motivation to contribute to sustainable environmental practices. The study by Dr. Roy and Dr. Goll examines the influence of a nation’s culture and economic factors on a country’s level of sustainability. The study includes 57 countries. The results show that culture influences sustainability at the country level. The study also examines the relationships between economic factors, human development, corruption, and sustainability. Culture influences human development and the level of corruption in a country. The results of this study support the contention that culture influences the behaviors of nations. The greater the performance based culture and the more a culture emphasizes gender equality, the greater the country’s sustainability index.

Social Entrepreneurship

Another area of research interest is social entrepreneurship. Dr. Roy, Alan Brumagim, Ph.D., and Dr. Goll examined the factors that contribute to the success of social entrepreneurship in a cross-national study.5 While social entrepreneurship has existed for a very long time, more recently it has attracted the interest of scholars in the field of business. What is social entrepreneurship? It refers to social ventures whose major purpose is a social mission. While social ventures can also pursue economic interests, social entrepreneurs emphasize social values over economic values. One of the more prominent examples of social entrepreneurship in action is Grameen Bank which extends microloans to the very poor. The study by Drs. Roy, Brumagim, and Goll included 65 countries and found that the more a country emphasizes entrepreneurship, the greater the social entrepreneurship.

Corporate social responsibility is a dynamic concept with the potential to make a major impact on society. It is a very interesting and exciting area for students and faculty to explore in the U.S. as well as globally. Corporate social responsibility has many positive effects on the company, such as contributing to a better reputation and to greater financial performance and has benefits to the external community. Yes – companies can be socially responsible and be profitable!

REFERENCES

1 Thorne, Ferrell, and Ferrell. 2011. Business & Society. U.S.: South-Western Cengage Learning.

2 Thorne, Ferrell, and Ferrell. 2011. Business & Society. U.S.: South-Western Cengage Learning.

3 Goll and Rasheed. 2004. The moderating effect of environmental munificence and dynamism on the relationship between discretionary social responsibility and firm performance. Journal of Business Ethics, 49, pp. 41-54.

4 United Nations. 1987. Brundtland Report.

5 Roy, Brumagim, and Goll. Forthcoming. Predictors of social entrepreneurship success: A cross-national analysis of antecedent factors. Journal of Social Entrepreneurship.

Author

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Dr. Irene Goll, Ph.D.
Management and Marketing Department
irene.goll@scranton.edu
570.941.4044