Four Stages of Social Responsibility for Stakeholders

The classic view of social responsibility in business values maximizing profits as the top priority of management. However, in 1984, R. Edward Freeman pioneered the concept of a socioeconomic view of social responsibility, which considers the welfare of society as a whole. In 1986, W.C. Frederick further elaborated on four stages a business transitions through until the organization values a global perspective. Arguments against social responsibility include that this is not the main function of a company and dilutes the overall purpose of a business.

Robbins and Coulter break down the concept of corporate social responsibility into four stages. Stage 1 states that the company is only responsible to the stakeholders, no matter if there are two or 200,000 individuals. These interested parties are the only ones with a direct financial interest in the company, so the organization does not owe anyone else anything except the stakeholders. This stage holds that if the stakeholders are satisfied, the company has fulfilled its purpose.

As stakeholders move toward Stage 2 and involve employees in social responsibility, employees begin to buy into the bigger picture. The organization involves them in decision making. Management considers team spirit and overall company morale. The company focuses on employee ethics but recognizes that ethical issues may not be hard and fast. For this reason, most companies operate according to specific ethical standards. When management abides by the same standards, communicates expectations clearly and offers training, the company can present a united front in the area of ethics.

Stage 3 states that after the stockholders and employees are happy, the customers and suppliers should be satisfied. Traditionally, restaurants and retail stores have pursued this philosophy with their view that "the customer is always right." Happy customers and suppliers tell others, who then patronize the business. Most businesses recognize the value of excellent customer service.

In Stage 4, the corporation is responsible not only to stakeholders, but also to society as a whole. Firms have an obligation to "do the right thing." This goes beyond the fair and equitable treatment of stockholders, employees and customers. It includes legal, moral and political involvement. Other benefits include government deregulation and overall environmental betterment. The company's public image improves as society sees the value the business provides as a whole.