The Conscience of Companies Today
Organizational or corporate social responsibility refers to the obligation of a business firm to seek actions that protect and improve the welfare of society along with its own interests. Corporate social responsibility often challenges businesses to be accountable for the consequences of their actions affecting the firm’s stakeholders while they pursue traditional economic goals. The general public expects business to be socially responsible, and many companies have responded by making social goals a part of their overall business operations (Hay, 1989). This paper will discuss four companies that have a conscience towards our today’s society, and helped to create a better community for all of us, they are Johnson & Johnson, American Telephone & Telegraph (AT&T), Herman Miller, and Procter & Gamble.
A crisis confronted Johnson & Johnson in the fall of 1982, when seven Chicago area residents died after taking Extra-Strength Tylenol capsules contaminated with cyanide. Not only was $400-million-per-year Tylenol the best-selling U.S. drug, but it was a product that symbolized the Johnson & Johnson reputation for quality, gentleness, and fine health care (Kreitner, 1990).
Despite the pressures of dealing with national media coverage, J&J executive immediately opened their doors to the press and took great pains to keep the public informed about the situation. It soon became apparent that the cyanide had been put into the capsules after they had left J&J’s factories, and the problem seemed to be confined to the Chicago area. Nevertheless, Tylenol sales sank to 20 percent of their previous level, and an opinion poll showed that 61 percent of Tylenol users intended to stop using the product.
A major question that arose was what to do about the 31 million bottles of Extra-Strength Tylenol on drugstore shelves throughout the country. The FBI and Food and Drug Administration advised J&J managers not to take any drastic action. Even so, the managers promptly took the unprecedented step of recalling the unsold bottles, at a cost to the form of $100 million (Fortune, 1987). A few weeks later they decided to reintroduce Tylenol capsules in a triple-sealed, tamper-resistant package. In the months following the tragedy, the company established a consumer hot line and continued extensive cooperation with media. It also made a widely advertised refund offer to consumers for any pre-crisis capsules they still had, and its chairman, James E. Burke, appeared on the Donahue show. In an opinion poll taken 3 months after the tragedy, 93 percent of the public felt that J&J had done a good job of handling its responsibilities.
In considering these events, David R. Claire, J&J’s president, said, “Crisis planning did not see us through this tragedy nearly as much as the sound business management philosophy that is embodied in out Credo.” The Credo’s first opening sentence is: “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services.” (Pearce & David, 1987) .
Unfortunately, the importance of relying on the Credo was soon demonstrated again by another crisis. In early 1986, a 23-year-old woman died after taking a cyanide-laced Tylenol capsule. The company quickly offered to the replace capsules with caplets, tablets in the shape of capsules. The replacement effort cost J&J $150 million. In addition, J&J announced that it would no longer offer Tylenol in capsules-another bold and costly move in keeping with its Credo.
The actions of J&J in the two Tylenol incidents earned the company widespread praise. Among Fortune’s 300 most admired U.S. corporations, J&J was rated number one in 1987 on community and environmental responsibility. J&J’s action in the Tylenol situation were unusually swift, decisive, and costly. In the mid-1990s, Tylenol remains one of the America’s most popular and trusted brand names (Guzzardi, 1990). The product commands nearly one-third of the $3 billion brand name analgesic market. No other brand approaches have even 50 percent of Tylenol’s market share.
American Telephone & Telegraph (AT&T) established goals for reducing air emissions, CFCs, solid waste, and hazardous waste in 1990. Under the direction of David R. Chittick, AT&T’s vice-president of environment and safety, the company has either surpassed its operations, AT&T invested $25 million to develop an array of alternative technologies (Business Week, 1987). One, called how solids spray fluxer, eliminates the need for CFC solvents to clean excess flux from electronic circuit broads. AT&T is now selling this technology to some 25 other companies, among them IBM. AT&T even gives its ideas away at times, to help to create a better and safer environment for all. The company managed to eliminate virtually all its ozone-depleting substances a year and half before company’s goal, and 2 years ahead of the worldwide ban.
Now AT&T does not have to worry about the new U.S. law that requires companies to put warning labels on all goods that contain or are manufactured with ozone-depleting substances. The company figures that the cost of tracking and labeling all the tiny components and switching systems that it once manufactured with CFCs would add up to hundreds of thousands of dollars. The early phase out also will save AT&T $25 million annually.
In addition, AT&T embraces total quality management (TQM) principles to solve the universal office pollution problem of too much paper. First, the company established a corporate paper reduction goal of 15 percent by 1995, then it created a corporate TQM team to figure out how to meet it. The department’s TQM teams suggested simple ways to decrease paper consumption, such as eliminating cover pages and using electronic rather than printed media. The department was consuming 22 percent less paper within a year.
Today, AT&T is one of the companies that has the reputation of saving the world. Company’s ‘goes green’ not only create a better place for communities, but also helping the company to save on a lot of costs.
Herman Miller, Inc., proves that financial success and a constant striving to be a better corporate citizen are complementary, not contradictory, goals (Griffin, 1993). The company has long been as well known for its participative management system as for its innovative office furniture designs (Woodruff, 1991). The company is doing everything it can to lessen its adverse effect on the environment. It recycles leather, vinyl, foam, office paper, telephone books, lubricating oil, and even old office furniture. When it found that recycling 800,000 Styrofoam cups every year was not practical, it banned the cups and handed out 5,000 mugs. Instead of dumping into landfills the 4,000 tons of scrap fabric that it produces each year, it now ships them to a North Carolina firm that shreds them and turns them into insulation for car-roof linings and dashboards.
Since 1982, much of the trash that can not be recycled has fueled Miller’s waste-to-energy plant, which saves $750,000 a year in fuel and landfill costs and paid for itself in ten years, a decade ahead of schedule (Woodruff, 1991). Miller also recently spent $800,000 for two high-tech incinerators to burn the toxic solvents that escape during staining and varnishing. Miller’s environmental consciousness extends beyond local and national products. One of the company’s best-known products, the $2, 277 Earnes chair, was always finished with rosewood until the company’s research manager realized that Herman Miller was contributing to the destruction of tropical rain forests. He consequently banned the use of rosewood and Honduran mahogany.
Another test of Herman Miller’s humane attitude came when some of its employees contracted the AIDS virus. When an AIDS victim in the company’s Georgia plant decided to let the rest of the workers know about his condition, his supervisor took charge, acting as what Herman Miller Chairman Max DePree calls a “roving leader”. The supervisor told two managers, and then the three of them quickly told everyone in the plant, ensuring that rumors did not get started. On the next workday after the announcement, the company’s director of health and wellness flew down from Michigan to show a video on AIDS and answer questions. With a history of such sensitivity to its environment and its workers, it is no surprise that Herman Miller tops lists of most-conscientious and best-managed companies (Nelson-Horchler, 1991).
Procter & Gamble is another company that has a conscience by helping the community. The 23rd Summer Olympic Games will be held in Los Angeles, in July and August. This will be the high point of years of hard work and training by many of America’s young athletes who are eager for an opportunity to make this country shine. But the U.S. Olympic Committee, which is responsible for fielding the U.S. team, depends on the American people to support these talented athletes. The U.S is the only major nation in the world whose Olympic athletes do not receive a continuing government subsidy. U.S competitors are supported solely by private donations.
P&G has initiated several programs to help raise these funds, giving millions of Americans the chance to support this important cause (Cordtz, 1990). Five big separate coupon events, involving over thirty P&G brands, make up the company’s Olympic promotions. They are designed to encourage consumer to purchase P&G brands and thus aid U.S. Olympic athletes. The company also sponsored a sweepstakes that helped to raise more funds. P&G Chairman of Board Owen B. Butler presented a check for $1 million, on behalf of the company to the U.S. Olympic Committee.
P&G’s past experience has taught the company to expect such business success. For the past four years, P&G has sponsored similar promotions benefiting the Special Olympics, and international sporting competition for mentally and physically handicapped children and adults. Business results have been very impressive. P&G helps itself by helping the communities.
Four examples stated above say that corporate social responsibility does not necessarily lower profits but encourage firms to focus on long-run profits rather than short-run profits, and optimum profits rather than maximum profits (Post, Frederick, Lawrence, & Weber, 1996). Because of its obvious importance, organization proactively attempt to manage social responsibility (Van Fleet & Peterson, 1994). Moreover, the iron law of responsibility suggests that socially responsible behavior may have a positive long-run effect on organizational success.
