Classical Models of Social Responsibility

Classical models of capitalism argue that “business interacted with others only through the marketplace.” (Post, Lawrence and Weber, 2002) Under the classical model, there was no need to teach the concept of Social Responsibility in Business Schools. As Post et al. further note, the classical view of business interaction with society has changed over the past forty years. They state that “Business decisions are shaped by cultural and political forces, as well as economic factors, and business also affects the political life and culture of a society” (2002:6). It has become clear that business cannot operate in a vacuum. A business must consider the entire environment when making decisions. Many companies and managers understand that a healthy environment and community present a better economic environment for their products and services. That realization has led many managers and owners to actively participate in social projects, particularly in their local areas. Virtually all business programs now offer courses, or segments of courses, on corporate social responsibility in their curricula as a result of these changes in thinking and actions on the part of managers. These courses typically include a discussion of different models of corporate social responsibility.

The classic stewardship model, where a company or organization states as a goal the enhancement of its environment, can be exemplified by the Dayton Company (now Target Corporation). The company makes it clear that its primary objective is profits. At the same time, the company also makes it clear that it feels a responsibility to its social environment. As part of its corporate objectives, the company commits a portion of its pre tax profits to charitable activities. However, it constrains much of these contributions to charities that are located near company facilities. The company makes money first, but then uses part of these funds to support charitable activities.

The classic social activist model is trying to solve social problems outside of the corporate sector. When corporations (and others) have failed to act in a socially responsible manner, individuals such as Ralph Nader often arise to pressure for change. Nader’s book, Unsafe at any Speed, (1965) exposed the lack of safety of the American automobile, in the face of the “Big 4" U.S. auto companies and the American consumers’ love affair with power and speed. The book was instrumental in the growing consumer movement of the 1960's, and served both as a cause and a source of income to support his causes. The book provided primary (direct royalties) and secondary (donors in agreement with his views) funding for Public Citizen, the umbrella organization started by Nader. It can be argued, moreover, that Nader is an entrepreneur. While he started as a social activist, he rather quickly developed value added activity in developing the organizations that were designed to meet his activist agenda. He also found ways to fund his organization and causes through reallocation of various resources. This can be argued to be akin to entrepreneurial behavior.

In our society, social entrepreneurship is forced to be either for profit or not for profit. Many organizations are nonprofits simply because all they need to start is a cause, whereas a for-profit organization also needs a market for its products and appropriate business skills.

Hybrid Models of Social Entrepreneurship

Responsibility to society takes many more forms than the “extremes” represented by the classic stewardship and classic social activist models. There are individuals and organizations all along the continuum between these two models. Two intermediate models, differentiated by their legal forms, can be better used to describe these “hybrid” approaches to social responsibility.

The “corporate social entrepreneurship model” involves entrepreneurs who have set up a business wherein a major aspect of their corporate activities is to support social activities more directly than simply making donations to charitable causes. Ben & Jerry’s Homemade, Inc. is such a company. The entrepreneurs created an organization that both made money and embodied the personal values of the founders. This can be seen by their policies to buy local, and to purchase from minority groups in the Center Cities as well as in the Rain Forest. They then created a foundation to fund other social causes. The founders embodied their values within and beyond the company.

The second model involves organizations that are designed as not for profit entities to develop and support social causes. Many are small organizations that are designed to solve local problems. One could call this hybrid model “nonprofit social entrepreneurship.” The founding of Hull House by Jane Addams in 1889 represents an example of this approach. Inspired by a settlement house that she visited in London, Addams saw the concept as a way to alleviate some of the social problems experienced by immigrants to Chicago. Addams brought together a group of young activists to live in Hull House in the midst of an immigrant community, working to improve literacy, education, health and many other local problems, as well as to lobby for social and legislative changes. Many of the concerns expressed by the residents of Hull House and their solutions have become part of modern social welfare legislation.

Both of these models follow many of the traditional concepts and models of entrepreneurial behavior. Their goals involve social actions instead of or in addition to traditional economic objectives, however. While companies such as Target and Ben & Jerry’s support their social actions through market activities, the nonprofit organizations all compete for funds from similar sources. There are courses and materials that address ways to organize, operate, and fund these organizations, however these course are typically not a part of business curricula. Consequently, business school students are not typically exposed to these materials.

Focus on Business Ethics

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