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SOCIAL RESPONSIBILITY OF BUSINESS

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SOCIAL RESPONSIBILITY OF BUSINESS

  1. 1. SOCIAL RESPONSIBILITY OF BUSINESS GROUP : 3
  2. 2.  Social responsibility is an ethical or ideological theory that an entity whether it is a government, corporation, organization or individual has a responsibility to society.  While primarily associated with business and governmental practices, activist groups and local communities can also be associated with social responsibility, not only business or governmental entities.  Corporate social responsibility (CSR, also called corporate responsibility, corporate citizenship, and responsible business) is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment.  This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.
  3. 3.  Social responsibility is voluntary; it is about going above and beyond what is called for by the law (legal responsibility).  Social responsibility means eliminating corrupt, irresponsible or unethical behavior that might bring harm to the community, its people, or the environment before the behavior happens.  The shareholders, suppliers of resources, the consumers, the local community and society at large are affected by the way an enterprise functions. Thus a business enterprise should be able to strike a balance between these divergent groups.  There has been greater consensus around the fact that the business enterprise which makes use of the resources of society and depends on society for its functioning, should discharge its duties by enhancing the overall welfare of society. The nature of social responsibility can be classified into:  Manner in which a business carries out its own activity.  Welfare activity that it takes upon itself as an additional function.
  4. 4. Businesses can use ethical decision making to strengthen their businesses in three main ways  To use their ethical decision making to increase productivity. This can be done through programs that employees feel directly enhance their benefits given by the corporation, like better health care or a better pension program. One thing that all companies must keep in mind is that employees are stakeholders in the business. They have a vested interest in what the company does and how it is run. When the company is perceived to feel that their employees are a valuable asset and the employees feel they are being treated and such, productivity increases.
  5. 5. CLASSICAL AND CONTEMPORARY VIEWS
  6. 6. Classical view • The classical view is best expressed in terms of the work of the economist Milton Friedman who believed it was wrong for corporate officials to extend their social responsibilities beyond serving the interests of their shareholders. • Friedman said: “There is one and only one social responsibility of business – to use its resources and to engage in activities designed to increase its profit so long as it stays within the rule of the game, which is to say, engages in open and free competition without deception and fraud.”
  7. 7. Contemporary view • Business is an ecological one according to which business is an integral part of a society to serve social purposes. • Business is a social institution performing social mission • It have a broad influence on the way people behave and work
  8. 8. According to Steiner and Steiner • Each business must take into account the situation which it finds itself in meeting stakeholder expectations. • Business is an economic entity and cannot jeopardize its profitability meeting social needs. • Business should recognize that social good benefit to all.
  9. 9. • Directly related to social power to influence outcomes. • Related to size of company and to thee industry • Should tackle only social problems in which it has competence. • Business must assume its share of the social burden and be willing to absorb reasonable social costs.
  10. 10. SOCIAL ORIENTATION OF BUSINESS
  11. 11. SOCIAL RESPONSIBILITY MODLES • There are mainly three models which describe evolution and extent of social orientation of companies. • Carroll’s model • Halal’s model • Ackerman’s model
  12. 12. Carroll’s Model • Corporate social responsibility is the entire range of obligations business has to society • A firm has the following four categories of obligations of corporate performance • Economic • Legal • Ethical • Discretionary
  13. 13. William E Halal’s model • A firm can only attempt to unite the diverse interest of various social groups to form a workable coalition engaged in creating value for distribution among members of the coalition. Beyond a certain level of economic activity ,the social issues at stake may become conflicting.
  14. 14. Ackerman’s Model • There are three phases in development of the social responsiveness of a company • First phase: top management recognizes the existence of a social problem which deserves the company’s attention and acknowledges the company’s policy towards it by making an oral or written statement
  15. 15. • Second phase: company appointing staff specialists or external consultants to study the problem and suggest way of dealing with it • Third phase: Implementation of social responsibility programmes
  16. 16. EXTENT OF SOCIAL ORIENTATION AND INVOLVEMENT • Extent of social orientation and involvement of companies is classified into following categories • Anti-social • Indifferent • Peripheral • Socially oriented • Committed and very active
  17. 17. FACTORS AFFECTING SOCIAL ORIENTATION 1.Promoters and Top Management 2.Board of Directors 3.Stake Holders and Internal Power Relationship 4.Societal Factors 5.Industry and Trade Association 6.Government and Laws 7.Political Influences 8.Competitors 9Resources 10.Ethical Influences
  18. 18. 1.promoters and Top Management: • The value and vision of Top management and promoters is one of the very important factors that influence the corporate social responsibility 2.Board of directors: • Board of directors decides major policies and resource allocation of a company
  19. 19. 3.Stakeholders and internal power relationship: • A firm can only attempt to unite the diverse interest of various social groups to form a workable coalition 4.Societal factors: • It is influenced by a certain characteristics of the society and general attitude and expectation of the society regarding social responsibility of business
  20. 20. 5. Industry and trade associations: • It influence the behaviour of the firm by establishing professional and ethical codes and norms education and collective decisions 6.Government and laws: • Laws are society’s codification of right and wrong .business shall play the rules of the game .
  21. 21. 7.Political influences: • Pressure exerted by special interest groups in society and media to control business practices .eg, Ngo’s like environmentalist, consumer interest groups etc… 8.competitors: • Social orientation of companies influence by the competitive forces . some companies do good to the society and some are encourage to do some thing.
  22. 22. 9.Resources: • Social involvement of companies is also effected by the financial position and the other resources of the company. 10.Ethical influences: • Another factor influencing the social orientation is ethical decision making and self-regulation of business conduct.
  23. 23. RESPONSIBILITIES TO DIFFERENT SECTIONS
  24. 24. Social responsibilities of business Share holders Employees Government Society Consumers Local community
  25. 25. RESPONSIBILITY TO SHARE HOLDERS I. SHARE HOLDERS ARE THE REAL OWNERS OF THE COMPANY II. PROFIT MAXIMIZATION AND WEALTH MAXIMIZATION III. MAKING PROFIT AND DISTRIBUTE DIVIDENTS TO SHARE HOLDERS IV. FINANCIAL INDIPENDANCE V. INCREASING THE VALUE OF SHARES BY IMOROOVING IMAGE AND MARKET OF TH ECOMPANY
  26. 26. RESPONSIBILITIES TO EMPLOYEES I. PAYMENT OF FAIR WAGES II. OFFERING BEST POSSIBLE WORKING ENVIORNMENT III. ESTABLISHMENT OF WORKING STANDARDS AND NORMS IV. PROVIDE SUFFICIENT LABOUR WELFARE AND RECREATIONAL PROVISIONS V. PROPER TRAINING AND EDUCATION TO THE WORKERS VI. OPPORTUNITIES FOR ACCOMPLISHMENT AND PROMOTIONS VII. BENEFITS IN TERMS OF MONEY AND OTHERS VIII. EFFICIENT GRIEVANCE HANDLING SYSTEM IX. OPPORTUNITIES IN MANAGERIAL DECISION MAKING AS DESIRABLE
  27. 27. RESPONSIBILITY TO CONSUMERS CONSUMER SATISFACTION IS THE KEY TO SATISFYING ORGANIZATIONAL GOALS I. PROVIDE IMPROVED QUALITY GOOSDS AND SERVICES,ENSURE EASLY AVAILABILITY AT REASONABLE PRICE II. PROVIDE ENOUGH SALES AND AFTER SALES SERVICE CENTERS III. ELIMINATE BLACK MARKETING, PROFITEERING BY MIDDLEMEN AND ANTI-SOCIAL ELEMENTS IV. PROVIDE SUFFICIENT INFORMATIONS AND PRECUATIONS ABOUT THE PRODUCTS AND ADVERSE THE USE V. AVOIDE MISLEADING THROUGH ADVERTISEMENTS AND OTHER WAYS VI. UNDERSTAND THE NEEDS AND WANTS OF THE CUSTOMERS AND MEET THEIR NEEDS
  28. 28. RESPONSIBILITY TO COMMUNITY I. PREVENT ENVIORNMENTAL POLLUTION AND PRESERVE THE RESOURCES II. REHABILATING THE PEOPLE DISPLACES BY THE OPERATON OF THE BUSINESS III. ASSSISTING THE OVERALL DEVELOPMENT OF THE LOCALITY IV. ENSURE CONSERVATION OF SCARCE RESOURCES V. CONTRIBUTING TO RESEARCH AND DEVELOPMENT VI. PROMOTION OF ANCILLARISATION AND SMALL SCALE INDUSTRIES VII. MAKING POSSIBLE CONTRIBUTION TO THE SOCIETY VIII. DEVELOPMENT OF BACKWARD AREA IX. CONTRIBUTING TO THE NATONAL PRODUCTION
  29. 29. CSR IN INDIA
  30. 30. INTRODUCTION CSR is not a new concept in India. Ever since their inception, corporates like the Tata Group, the Aditya Birla Group,and Indian Oil Corporation, to name a few, have been involved in serving the community. Through donations and charity events, many other organizations have been doing their part for the society. The basic objective of CSR in these days is to maximize the company's overall impact on the society and stakeholders. CSR policies, practices and programs are being comprehensively integrated by an increasing number of companies throughout their business operations and processes. A growing number of corporates feel that CSR is not just another form of indirect expense but is important for protecting the goodwill and reputation, defending attacks and increasing business competitiveness.[6]
  31. 31. Companies have specialised CSR teams that formulate policies, strategies and goals for their CSR programs and set aside budgets to fund them. These programs are often determined by social philosophy which have clear objectives and are well defined and are aligned with the mainstream business. The programs are put into practice by the employees who are crucial to this process. CSR programs ranges from community development to development in education, environment and healthcare etc.[7]
  32. 32. A more comprehensive method of development is adopted by some corporations such as Bharat Petroleum Corporation Limited, Maruti Suzuki India Limited. Provision of improved medical and sanitation facilities, building schools and houses, and empowering the villagers and in process making them more self- reliant by providingvocational training and a knowledge of business operations are the facilities that these corporations focus on. Many of the companies are helping other peoples by providing them good standard of living. Also, corporates increasingly join hands with non-governmental organizations (NGOs) and use their expertise in devising programs which address wider social problems. EXAMPLE
  33. 33. CSR has gone through many phases in India. The ability to make a significant difference in the society and improve the overall quality of life has clearly been proven by the corporates. Not one but all corporates should try and bring about a change in the current social situation in India in order to have an effective and lasting solution to the social woes . Partnerships between companies, NGOs and the government should be facilitated so that a combination of their skills such as expertise, strategic thinking, manpower and money to initiate extensive social change will put the socio-economic development of India on a fast track.[8]
  34. 34. ARGUMENT FOR AND AGAINST SOCIAL INVOLVEMENT
  35. 35. ARGUMENT FOR SOCIAL RESPONSIBILITY •Public Image: Social responsible firm gain more customers and employees are motivated •HANDLING GOVERMENT REGULATION: Government seeks to regulate business in public interest. •PREVENTION IS BETTER THAN CURE: problems with labour union should be handled tactfully
  36. 36. •Stock holders interest: social responsibility will improve the price of business’s stock in the long run the stock market will view the socially responsible company as less risky and open to public attack there for it will award it’s stock a higher price earning ratio •Possession of resources : business has the financial resources, technical experts and managerial talent to provide support to public and charitable project that need assistance •Better environment: involvement by business can solve difficult social problems those creating better quality of life and more desirable community in which to attract a and hold skilled employees
  37. 37. ARGUMENTS AGAINST SOCIAL RESPONSIBILITY •Profit maximization is the ultimate goal: since business operates in a world of poverty and hunger, the economic efficiency of business in the sole priority •Lack of social skills: business people do not possess social skills to solve social problems •Social over head cost: costs on social responsibility will not immediately benefits the business • Lack of board support
  38. 38. COST: many socially responsible activities do not pay their own way. Some one has to pay this cost . Business must absorb this cost or pass the on to consumer in higher prices Too much power: business already one of the most power full institution in our society . If it pursued social goals, it would have even more power. Society has given business enough power
  39. 39. SOCIAL AUDIT
  40. 40. Social auditing • Social audit is a tool for evaluating how satisfactorily a company has discharged its social responsibilities. • Social audit enables the public as well as the company to evaluate the social performance of the company. • It is similar to that of financial auditing
  41. 41. Steps involved in social auditing • Identification of the firms activities. • Assessment and evaluation. • Measurement of the social costs and benefits. • reporting
  42. 42. Objectives and benefits of social auditing objectives • to evaluate the social dimension of the performance of the company. • Take measures to improve the social performance of the company on the basis of audit. benefits • Social audit increases the public visibility of the organisation. • It will help to boost the public image of the company.
  43. 43. Methods of social audit • Social process audit whether objectives met • Financial statement format audit • Micro macro social indicator audit • Constituency group audit attitude • Partial social audit • Comprehensive audit total • Corporate rating approach
  44. 44. Obstacles to social audit • being a new concept, social audit is yet to gain wide appreciation and acceptance. • A clear and generally well accepted methodology for conducting the social audits is not available. • There is no agreement as to the items to be included for social audit. • There may be resistance within the company to social audit because of difficulty involved in the task. • There may be resistance because of the fear of unsatisfactory picture that may be presented by the social audit.
  45. 45. Social auditing in India • Idea of social audit originated in USA centuries ago. • But received attention recently. • First comprehensive social audit was conducted by TISCO in 1980. • It was done by board of directors of the company to examine the extent to which the company has fulfilled its objectives.
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