The Rise of Socially Responsible

The Rise of Socially Responsible

The rise of socially responsible management

The rise of socially responsible management has been due in large part to the inability of the board of directors to function effectively as an intermediary between the company and society. The board originally was conceived as the guardian of the interests of the stockholders. As the idea developed that corporate management is responsible to society as a whole, the board might have evolved into an agency for mediation between the management system of the corporate organization and the external environment. In this capacity it could have influenced management to operate the company in the public interest. As it is, of course, the board of directors tends in most cases to rubberstamp top management policies and decisions.

The reason for the failure of a more socially oriented line of evolution probably lies in the UK proclivity for coping with problems of social change in an implicit way. For the board of directors to be set up explicitly as the organization to control the company in the public interest would be to publicly acknowledge that a conflict of interests does exist. This would undermine the whole belief system upon which the free enterprise system was founded. We have followed a much less disruptive approach: We have bypassed the board of directors and through the process of structural differentiation evolved a new type of manager whose major function is to prevent such a conflict of interest from developing.

The basic reason for the evolution of the role of the socially responsible manager is the need to make the company an adaptive entity in a highly dynamic society. For society to maintain itself, there must be a minimal level of harmony and unity of its organizations and social institutions. They must all pull in the same general direction and work together relatively smoothly. This is why organizations and social institutions are so highly interdependent. No one can go in an opposite direction from the others without seriously disrupting social equilibrium. If one were to strike out on a drastically different path than the others, the rest of society would not likely change direction and follow it. More likely the organization or institution out of phase with the others would be discarded and its function taken over by another or by a new one that would evolve. If the company were to take a path at odds with the rest of society, it would be eliminated and another economic entity would take over its major functions. This is the kind of long-run competition which Schumpeter had in mind when he talked of the process of creative destruction.

Philip Selznick's analysis of leadership in administration is helpful in understanding the socially responsible manager's function of ensuring the survival of the corporation. Selznick distinguishes between organizations and institutions: An organization "refers to an expendable tool, a rational instrument engineered to do a job," whereas an institution "is more nearly a natural product of social needs and pressures-a responsive, adaptive organism. Institutionalization is a process which over time turns an organization into an institution. When this has occurred, the organization is so identified with broad social values and goals that it is no longer considered expendable. The most institutionalization is "to infuse with value'1eyond the technical requirements of the task at hand."4 Thus a basic function of socially responsible managers collections to facilitate the infusion of social values into corporations so as to transform the corporate form from an organization into an institution and further its survival in a dynamic world. The socially responsible manager, like Selznick's institutional leader, "is primarily an expert in the promotion and protection of value."5

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