What is More Effective in Evaluating Social Responsibilities: Traditional Measures or Entine and Jennings?

Since Entine and Jennings researches the soul of a company, they are more interested in the internal decisions and morals of the company. It is this inner concept the company uses to grow and prosper. They strive to be in total compliance of government acts while understanding they have a duty to the betterment and maintenance of the community’s survival. These actions should be have the basis of ethical morals, honesty and confidence to reveal all behaviors to the society, its stockholders, government agencies and stakeholders. Entine and Jennings looks at the entire picture of the company and its structure, while maintaining the ideal that all divisions of the company must do their part and not just the managers. The managers should be willing to give up some of the firm’s own profit in order to keep the environment pure. They do not concern themselves with the business functions of their divisions.

Traditional models understand external factors and actions may and usually do, have an effect on their decisions concerning their social responsibility. These are not concerned with the internal interests of the company. Traditional models want to prevent external issues; evaluate executives’, governing the business, ethics and knowledge in order to make sure their decisions are reputable in the eyes of the community and the profits are at least maintained, but more importantly, increase. These managers must keep in mind that their judgments are used for the betterment and growth of all the individuals the firm come in contact with, while being true to their own selves and allowing their own progression without harm to others. An important basis is, these divisions needs and requests are equally considered when planning the company’s future.

In one aspect it is difficult to compare the two models because they have entirely diverse viewpoints: They are totally on different ends of the spectrum when it comes to social responsibility evaluation.

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Friedman, Freeman and Entine and Jennings Models of Social Responsibilities: Which One Would You Choose?

The differences between Friedman, Freeman and Entine and Jennings models of social responsibility is their foundation of what are the main considerations when deciding upon these conscientious actions and who were to receive the benefits.

Milton Friedman’s Model believes managers are there to satisfy and be loyal to the company’s (owners) and individuals of society’s profit with stakeholders, vendors and employees coming second. The firm’s reputation is also on the line because without a positive outlook from the community, boycotting of its products might arise. When it comes to the secondary considerations, managers seek to satisfy them with company services, rather than increasing pay and bonuses; this way it will not interfere with the proceeds for society and company. Administrators’ actions might negatively affect employees and consumers by “taxing” them through increases in product cost and reducing increment raises and then using that money to help stockholders instead of benefiting all areas of company structure. These actions are considered acceptable as long as they are not deceitful towards secondary recipients. Friedman believes this is a dangerous practice because, sometimes, these procedures lead to fraud, ruthless maneuvers and unethical measures.

Edward Freeman’s Model sees companies as major organizations within the society and managers must oversee the company’s actions with positive priority to stockholders. Freeman is different than most theorists because he believes corporations are legally a “person” because they are viable parts of the society so they are governed by social, ethical responsibilities. Legal aspects include laws that are beginning to protect more of employee rights, They are also developing  guidelines for companies to follow that will increase the benefits and respect towards stakeholders. This model is different in the sense that even though managers’ responsibilities lie within the betterment of the stockholders, it also considers the concept where stakeholders and communities should have a say in the company’s future, and consumers and vendors work with product quality. The main foundation aspect works towards having all groups, of the company, work together while being considered equals with not one above the other.

Entine and Jennings concentrates on and rates a company according to actions towards their respect of the environment. Consumers support companies that take care of the environment, sometimes at the expense of their own profit level. The new “green” actions, products and considerations are their marketing ploys. This model encourages evaluations of the company policy and their goods to make sure they are within the proper guidelines of what is considered environmentally sound and not polluters or attacks on animals. Entine and Jennings encourage companies to have the social responsibility of assisting the environment to stay pure, as well as protecting it.

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Fannie Mae vs. Honesty

Many internal and external incidents continually caused negative effects on the mortgage company, Fannie Mae. Its internal decisions and actions eventually concluded with a necessity for a 200 billion gov’t buy-out in order to stay afloat and to prevent other mortgage lenders from going out of business. (Jennings, 2012).

where was the soul of Fannie Mae during this time? Using Entine and Jennings’ 8 questions of social responsibility, I will evaluate its core.

Does the company comply with the law? Externally speaking, Fannie Mae followed the rules of the business, but with great stretching of the limits. It did increase the profit of the housing market, but once the Community Reinvestment Act (CFA) was initiated, Fannie Mae overly extended itself with high-risk mortgages, especially due to ballooning-rate lending. It was Fannie Mae’s internal behaviors of falsifying books, leaving information out when presenting to investigations and in general, and attaching quotas to bonuses.

Does the company have a sense of propriety? This is a difficult and subjective question. In 2001, 2002 and 2004, Fannie Mae was voted the most ethical company in the United States: diversity, affirmative action, but as the problems began, the next 4 years brought lying, fraud and deceit.  So, it is difficult to decide which one outweighs the other.

Has honestly do product claims match with reality. I find Fannie Mae to be within the guidelines of the CFA but that did not make it ethical.  Underwriters were up and above board with the company by warning it about the number of mortgages were exceeding the needed repayment.   It was the marketing division that worked outside its realm of social responsibility, by enticing applicants to choose Fannie Mae, but did not explain the many hidden or unfair aspects of the contract.

How forthcoming is the company with information? This is almost non-existent. When investigating employee and Controller Division complaints, Fannie Mae did work with lawyers. It sent limited information to the Accounting Division. When presenting contract information to customers, the consequences of ballooning interest rates were not readily available.

How does company treat its employees? Poorly for all but the head executives, CEOs, President and Vice-President, who received bonuses equaling or exceeding base pay. Other employees lost increment raises in order to pay for pay of the executives. Their complaints were not addressed. And Fannie Mae did not consider job security when it came to decision-making.

How does the company handle 3rd party ethics issues? Fannie Mae used 3rd parties to pay for their mistakes. The government made sure all stockholders and investors were paid back, but the general public had to repay fines and notes.

How charitable is the company? Fannie Mae had its own charity foundation that distributed large amounts of money yearly. But, these donations always came with strings attached that benefited the company over the intended. They abused tax-empts status and gave favors to Congress, in order to get special treatment in return if problems arose for Fannie Mae. It went so far as to align company employees with Congress and other company executives.

How does the company react when faced with negative disclosures? Here I must give some credit to Fannie Mae. When publically investigated by the SEC in 2005, Fannie Mae delivered accounting books, even though they knew they were not in compliance and had limited information.

The answers to these questions proved Fannie Mae was unethical in many aspects of their structure and decisions due to the incorporation of greed.

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