12

Accountancy Business and

Management (ABM)
BUSINESS ETHICS and SOCIAL
RESPONSIBILITY
Quarter 4 – Week 2 Module 2
Models and Frameworks of Social Responsibilities
in the Practice of Sound Business

i
ABM 12 – BUSINESS ETHICS and SOCIAL RESPONSIBILITY
Alternative Delivery Mode
Quarter 4 – Week 2 Module 2: Models and Frameworks of Social Responsibility
in the Practice of Sound Business
First Edition, 2020

Republic Act 8293, section 176 states that: No copyright shall subsist in any work of the
Government of the Philippines. However, prior approval of the government agency or office
wherein the work is created shall be necessary for exploitation of such work for profit. Such
agency or office may, among other things, impose as a condition the payment of royalties.

Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names, trademarks, etc.)
included in this module are owned by their respective copyright holders. Every effort has been
exerted to locate and seek permission to use these materials from their respective copyright
owners. The publisher and authors do not represent nor claim ownership over them.

Published by the Department of Education - Schools Division Office of Makati City

OIC-Schools Division Superintendent: Carleen S. Sedilla CESE
OIC-Assistant Schools Division Superintendent/OIC-Chief, CID: Jay F. Macasieb, DEM, CESE

Development Team of the Module

Writer: Evangeline S. Abrazaldo

Editor: Venus E. Mariano, PhD

Reviewer: Celedonia T. Teneza EdD

Layout Artist: Mayumi P. Realosa EdD

Management Team:
Neil Vincent C. Sandoval
Education Program Supervisor, LRMS

Celedonia T. Teneza EdD

Education Program Supervisor, EPP/TLE/TVL

Printed in the Philippines by the Schools Division Office of Makati City

Through the Support of the City Government of Makati (Local School Board)

Department of Education – Schools Division Office of Makati City

Office Address: Gov. Noble St., Brgy. Guadalupe Nuevo

City of Makati, Metropolitan Manila, Philippines 1212
Telefax: (632) 8882-5861 / 8882-5862
E-mail Address: makati.city@deped.gov.ph

ii
 What I Need to Know
This module was designed and written with you in mind. It is here to help you: Models
and Frameworks of Social Responsibility in the Practice of Sound Business. The scope
of this module permits it to be used in many different learning situations. The language
used recognizes the diverse vocabulary level of students. The lessons are arranged to
follow the standard sequence of the course. But the order in which you read them can
be changed to correspond with the textbook you are now using.

Content Standard

The learners demonstrate an understanding of models and frameworks of social

responsibility in the practice of sound business.

Most Essential Learning Competencies

After going through this module, you are expected to formulate a morally defensible
position on ethical issues in entrepreneurship like basic fairness, personnel and
customer relations distribution dilemmas, fraud, unfair competition, unfair
communication, nonrespect of agreements, environmental degradation, etc.

What I Know

Q-4
Lesson Models and Frameworks of Social

2
Responsiblity in the Practice of
Sound Business

Stewardship is a theological belief that humans are responsible for the world, and should
take care and look after it. Believers in stewardship are usually people who believe in one
God who created the universe and all that is within it, also believing that they must take
care of creation and look after it.
Creation includes animals and the environment. Many religions and denominations have
various degrees of support for environmental stewardship as a consequence of stewardship.
In Jewish, Christian and Muslim traditions, stewardship refers to the way time, talents,
material possessions, or wealth are used or given for the service of God.
Stewardship can be consciously defined as: "Utilizing and managing all resources God
provides for the glory of God and the betterment of His creation.
Stewardship begins and ends with the understanding of God's ownership of all:
Philosopher Neil Paul Cummins claims that humans have a special stewardship role on the
planet because through their technology humans can save life from otherwise certain
elimination.
This is a modern-day interpretation of Noah’s Ark, the cornerstone of human stewardship
being technological protection and regulation.

1
Activity 1: Write T if the statements is true and F if it is False.

True or False:

_______1. We are responsible for one another.

_______2. Man can live alone all by himself.
_______3. We are accountable for one another.

_______4. Stewardship in business sector means giving quality service to its

customers.
_______5. Paying appropriate tax to the government is one of the social responsibilities
of business sectors.

What’s In
Activity 2: Analyze the illustration below.

GOD

SOCIETY

Social
Responsibility

1. What can you infer based on the illustration?

2. Do you think they are interrelated to one another? How?
3. Why do you think business sectors of the society have social
responsibility to its members?

2
 What’s New?
What Is the Role of Business in Society?
The role of a business is to produce and distribute goods and services to
satisfy a public need or demand. According to Business News Daily corporate social
responsibility (CSR) is “a business practice that involves participating in initiatives
that benefit a society.” Society does not exist without some form of an economy, and
businesses are what make up the economic system of the world.

Corporate Social Responsibility

Corporations can enact CSR as a business practice in multiple ways. Corporate
social responsibility as a business practice involves putting certain funds toward
organizations or people who are in need of aid. Some corporations put part of
their proceeds towards programs that feed the hungry, others towards
organizations that clean up the environment.

Businesses are also expected to maintain a certain level of responsibility in the

way they run their operations. A company can be viewed as ethically irresponsible
if it knowingly brings harm to the environment or if its business tactics cause
employees to be treated unfairly.

What Is It
Four Models of Corporate Social Responsibility
1. Economic Model
A. Profit-Based Social Responsibility aka Economic Model:

Milton Friedman's 1970 New York Times article "The Social Responsibility of Business
Is to Increase Its Profits" is perhaps best known as an argument for this profit-based
social responsibility of business.

Economically a business is an institution that exists to produce goods and services

demanded by society and by doing this business creates jobs and wealth that
benefit society further.
The law created corporations because it was thought that business firms could be more
efficient in raising the capital necessary for producing goods services jobs and wealth
by legally limiting the liability of those individuals engaged in the creation of
corporations.

B. Economic Model of CSR: holds that business' sole duty is simply to fulfill
the economic functions businesses were designed to serve.

On this narrow view the social responsibility of business managers is simply to pursue
profit within the law.

3
Because corporations are created by society and require a stable political and economic
infrastructure in which to conduct business like all other social institutions they are
expected to obey the legal mandates established by the society.

This Economic Model of CSR denies that business has any social responsibilities beyond
the economic and legal ends for which it was created.
Friedman does not ignore ethical responsibility in his analysis; he suggests that
decision-makers are fulfilling their responsibility if they follow their firm's self-interest
in pursuing profit.
This common view of corporate social responsibility has its roots in the utilitarian
tradition and neoclassical economics.
C.Which Stakeholders Deserve Priority? In the legendary Dodge v. Ford case of 1919
stockholders sued Henry Ford for reducing the price of Ford cars so that they would be
affordable to everyone in America.
Ford's decision on his priorities resulted in a reduction in stock price and a refusal to
pay stock dividends.
The Dodge brothers were two of the largest shareholders in the company and believed
Ford's primary objective should be to make profit for its shareholders.
Ford stated that his ambition was to reach out to the larger community by providing
jobs and increasing the benefits of the industrial system to the greatest number
possible. His goal was to do this by "putting the greatest share of our profits back in the
business."
The court was not persuaded to interfere with the reasonable business (and
humanitarian) judgment of the Ford Motor Co. and did not find that the alleged motives
of the directors "menace the interests of the shareholders."

2. Philanthropic Model
In this model, individuals and businesses are free to contribute to social
causes as a matter of philanthropy.
Business has no strict obligation to contribute to social causes but it can be a
good thing when they do so. But just as charity is a good thing and something that we
all want to encourage business should be encouraged to contribute to society in ways
that go beyond the narrow obligations of law and economics.
This approach is especially common in small locally-owned business where the
owners also often play a prominent leadership role within their local community.
There are occasions in which charity work is done because it brings the firm
good public relations, provides a helpful tax deduction, and builds good will and a
good reputation within a community.
1.Peruse the program at a local art gallery museum theater school event and you will
likely see a list of local businesses as donors or sponsors who have contributed to the
event.
2.The social contribution is as much an investment as it is a contribution.

3.But there are also cases in which business contributes to social causes without
seeking any reputational benefits.

Many firms contribute to charities anonymously.

Support for a social cause is done simply because it is the right thing to
do.

4
1.From the perspective of the narrow view of CSR only Philanthropy done for
reputational reasons and financial ends is ethically responsible.

Because business managers are the agents of owners they have no right
to use corporate resources except to earn owners greater returns on their
investment.

From the perspective of others philanthropy done for financial reasons is

not fully ethical and not truly an act of social responsibility.

3. Social Web Model

➢ In this model, business views as a citizen of the society in which it operates

and like all members of a society business must conform to the normal
ethical duties and obligations that we all face.

I. Philosopher Norman Bowie has defended one version of CSR that would
fall within this social web model.

a) Bowie argues that beyond the economic view's duty to obey the law
business has an equally important ethical duty to respect human rights.
Respecting human rights is the "moral minimum" that we expect of
every person whether they are acting as individuals or within
corporate institutions.

b) Bowie identifies his approach as a "Kantian" theory of business ethics. In

simple terms he begins with the distinction between the ethical
imperatives to cause no harm, to prevent harm, and to do goodness.

c) According to Bowie as long as managers comply with the moral minimum

and cause no harm they have a responsibility to maximize profits.

d) Thus Bowie would argue that business has a social responsibility to

respect the rights of its employees even when not specified or required by
law. Such rights might include the right to safe and healthy workplaces
rights to privacy and rights to due process.

e) But the contractual duty that managers have to stockholder-owners over-

rides the responsibility to prevent harm or to do (philanthropic) good.

II. Stakeholder Theory is perhaps the most influential version of CSR that
would fall within the social web model.

a) Stakeholder theory begins with the recognition that every business

decision affects a wide variety of people benefiting some and imposing
costs on others; in other words that every business decision imposes costs
on someone and that those costs must be acknowledged.

b) Any theory of corporate social responsibility must then explain and defend
answers to the questions: for whose benefit and at whose costs should the
business be managed?

c) The stakeholder theory argues on factual legal economic and ethical

grounds that the economic model is an inadequate understanding of
business.

5
 i. As a descriptive account of business the classical model ignores
over a century of legal precedent arising from both case law and
legislative enactments.

ii. As a matter of law it is simply false to claim that management can

ignore duties to everyone but stockholders.

iii. The wide variety of markets failures well-established in economics

show that even when managers pursue profits there are no
guarantees that they will serve the interests of either stockholders
or the public.

d) But perhaps the most important argument in favor of the stakeholder

theory rests in ethical considerations. The economic model appeals to two
fundamental ethical norms for its justification: utilitarian considerations
of social well-being and individual rights. On each of these normative
accounts however due consideration must be given to all affected parties.
Sometimes as the classical model would hold that balancing will require
management to maximize stockholder interests. But sometimes not.

e) The stakeholder theory argues that on the very same grounds that are
used to justify the classical model a wider "stakeholder" theory of
corporate social responsibility is proven ethically superior.

f) Freeman argues that "the stakeholder theory does not give primacy
to one stakeholder group over another though there will be times
when one group will benefit at the expense of others. In general
however management must keep the relationships among stakeholders in
balance."

4. Integrative Model

➢ In this model, social goals bring into the core of their business model
and fully integrate economic and social goals. There is a growing
recognition that some for-profit organizations also have social goals as a
central part of the strategic mission of the organization.

➢ In two areas in particular social entrepreneurship and sustainability we

find for-profit firms that do not assume a tension between profit and social
responsibility.

➢ Firms that make environmental sustainability as central to their mission

such as Interface Corporation are an example of sustainability.

➢ Even defenders of the narrow economic model of CSR such as Milton

Friedman would agree that owners of a firm are free to make the
pursuit of social goals a part of their business model. They would just
disagree that these social goals should be part of every business's mission.

➢ It certainly would be too much to expect every business to adopt the

principles of social entrepreneurs and devote all their activities to service
of social goals. At best social entrepreneurs demonstrate that profit is not

6
 incompatible with doing goodness and that one can do goodness
profitably. But there are some who would argue that the ethical
responsibilities associated with sustainability are relevant to every
business concern.

➢ As a topic within CSR sustainability holds that a firm's financial goals

must be balanced against and perhaps even over-ridden by environmental
considerations.

➢ Defenders of this approach point out that all economic activity exists
within a biosphere that supports all life. They argue that the present model
of economics and especially the macroeconomic goal of economic growth
is already running up against the limits of the biosphere's capacity to
sustain life.

➢ From this perspective the success of a business must be judged not only
against the financial bottom line of profitability but also against the
ecological and social bottoms lines of sustainability.

➢ Importantly a firm that is environmentally unsustainable is also a firm

that is in the long-term financially unsustainable.

Ethics and Social Responsibility

The words responsible and responsibility are used in several different ways. When we
say that a business is responsible we might mean that it is reliable or trustworthy.

For example you might recommend a car dealership to a friend by describing them as
a responsible trustworthy business.

A second meaning of responsible involves attributing something as a cause for an event

or action. For example bad lending practices were responsible for the collapse of many
banks; and the location of the gas tank was responsible for fires in the Ford Pinto.

A third sense involves attributing liability or accountability for some event or action
creating a responsibility to make things right again.

For example that a business is responsible for a polluted river is not only to say that
the business caused the pollution but that the business is at fault for it and should be
held accountable.

Laws regarding product safety and liability involve many of these meanings of being
responsible. When a consumer is injured for example a first question is to ask if the
product was responsible for the injury in the sense of having caused the injury.

It is this last sense of responsibility as accountability that is at the heart of CSR.

Corporate social responsibility refers to those actions for which a business can be
held accountable. We can be expected to act to fulfill our responsibilities and will be
held accountable if we do not.

Social responsibility is what a business should or ought to do for the sake of

society even if this comes with an economic cost.

Three Different Types of Responsibilities

Philosophers often distinguish three different types of responsibilities in this sense
on a scale from more to less demanding or binding.

7
 1. Responsibility not to cause harm to others: the most demanding
responsibility often called duty or obligation to indicate that they oblige us
in the strictest sense. Even when not explicitly prohibited by law ethics
would demand that we not cause avoidable harm.

2. Prevent harm even in those cases where one is not the cause.
Read the Merck Case Study regarding river blindness.

Pharmaceutical firm, Merck, was not responsible for causing river blindness
and therefore, according to the previous standard of CSR discussed, Merck had
no social responsibility in this case. Given the company's core business purpose
and values its managers concluded that they did have a social responsibility to
prevent a disease easily controlled by their patented drug.

3. Responsibilities to do well such as volunteering and charitable work.

Corporate giving programs to support community projects in the arts education
and culture are clear examples. Small business owners in every town across
America can tell stories of how often they are approached to give donations to
support local charitable and cultural activities.

What’s more?
Activity 3: Based on the models discussed in this module, what would you
consider the best model of social responsibility of a sound business? Why?

What I Have Learned

Activity 4. : Check in each statement if the statements shows social

responsibility and (X) if it is not.

1.A business is an institution that exists to produce goods and services demanded
by society and by doing this business creates jobs and wealth that benefit society
further.

2.Putting certain funds toward organizations or people who are in need of aid.
Some corporations put part of their proceeds towards programs that feed the
hungry, others towards organizations that clean up the environment.

3.The role of a business is to produce and distribute quality goods and services to
satisfy a public need or demand.

4.A business practice involves participating in initiatives that benefit a society.

5.Respecting human rights is the "moral minimum" that we expect of every person
whether they are acting as individuals or within corporate institutions.

6.Society does not exist without some form of an economy, and businesses are
what make up the economic system of the world.

8
7.Pursuing profit should be done within the Economically a business is an
institution that exists to produce goods and services demanded by society and by
doing this business creates jobs and wealth that benefit society

8.There are occasions in which charity work is done because it brings the firm
good public relations, provides a helpful tax deduction, and builds good will and a
good reputation within a community.

9.In Philanthropic Model, social goals bring into the core of their business model
and fully integrate economic and social goals.

10.There is a growing recognition that some for-profit organizations also have

social goals as a central part of the strategic mission of the organization.

What I Can Do?

Activity 5: Make a business plan and choose a model or framework of social

responsibility wherein you can apply once you have a sound business.

Assessment

Choose the correct answer by encircling the letter of the correct answer.

1. Which of the following models and frameworks was designed to serve the
society to fulfill its economic functions?
A. Economic Model C. Social Web Model
B. Integrative Model D. Philanthropic Model

2. What model contributes to the social well-being of its clients by doing

charity works?
A. Economic Model C. Social Web Model
B. Integrative Model D. Philanthropic Model

3. In this model, business views as a citizen of the society in which it operates

and like all members of a society business must conform to the normal
ethical duties and obligations that we all face. Which models best
describes the statement?
A. Economic Model C. Social Web Model
B. Integrative Model D. Philanthropic Model

4. Which of these models fully integrates economic and social goals?

A. Economic Model C. Social Web Model
B. Integrative Model D. Philanthropic Model

5. Who among these people argues that beyond the economic views, it is a
duty of business sectors to obey law and pursue profit within the law?
A. Freeman B. Merck C. Milton Friedman D. Norman Bowie

9
 Additional Activities

Explain this verse in the Bible in relation to the lesson discussed in this module.

7 For none of us lives for ourselves alone, and none

of us dies for ourselves alone.

12 So then, each of us will give an account of

ourselves to God.

Romans 14:7&12

References:
https://en.wikipedia.org/wiki/Stewardship_(theology)#:~:text=An%20example%20of%
20stewardship%20is,in%20political%20and%20practical%20affairs.
https://online.tamucc.edu/degrees/business/mba/general/what-is-the-role-of-
business-in-
society/#:~:text=The%20role%20of%20a%20business,a%20public%20need%20or%20
demand

https://www.chegg.com/homework-help/questions-and-answers/4-models-corporate-
social-responsibility--economic-model--profit-based-social-responsibili-q29764937

10