Social responsibility of business

1. SOCIAL RESPONSIBILITIES OF BUSINESS TOWARDS
DIFFERENT GROUPS
Every businessman is at the centre of a network of relationships which consist of those
berwveci
at one end and his workers, employees. consumers, shareholders. other businesses.comn
l c n t on the other. A businessman's social responsibilities to each of these parties are orieIy
enumerated below.
Towards the Consumer and the Community
1. Production ofcheap and better quality goods and services by developing new
skills, innovations
and techniques, by locating factories and markets at proper places and by rationalising the use of
capital and labour.
2. Levelling out seasonal variations in employment and production through accurate forecasts,
production scheduling and product diversification.

2. Social Responsibilities of Business
3. Deciding priorities of production in the country's interest and conserving natural resources.
4. Providing for social audit (see section below).
5. Honouring contracts and following honest trade practices.
Some important but dishonest trade practices are: making misleading advertisements calculated
to deceive the purchaser; misbranding of articles with respect to their material, ingredients, qualty,
origin, ete., selling rebuilt or secondhand goods as new; procuring business or trade secrets of
competitors by espionage, bribery or other means; restraining free and fair competition by enter
ing into combination agreements; using containers that do not give a correct idea of the weight
and quantity of a product; making false claims of being an "authorised dealer", "manufacturer or
"importer' of certain goods; giving products misleading names so as to give them a value which
they do not possess; declaring oneself insolvent through questionable financial manipulations.
6. Making real consumer needs as the criterion for selecting messages to be given by prouct ad-
vertisements. Nearly all current advertising seeks to create wants. Thus, people no longer buy
soap to make them clean. They buy the promise that it would make them beautiful. Toothpaste
is bought not to kill bacteria but to create white teeth. Cars are bought for prestige rather than
travel. Even foodstuffs such as oranges are bought for vitality, not nutrition. This kind of advertis-
ing promotes over-consumption, forces consumers to constantly compare themselves negatively
with others, creates in them dissatisfaction with the old and outmoded, and makes them feel that
without a particular brand of a product they are losers.
7. Preventing the creation of monopolies. Monopolies are bad in that they make the community
face high prices, short supply and inferior quality of goods. Inequalities of wealth distribution
are accentuated and the standards of public morality deteriorate as bribing the judges, legislators
and the government to gain favours becomes very common.
8. Providing for after-sale servicing.
9. Ensuring hygienic disposal of smoke and waste and voluntarily assisting in making the town
environment aesthetically satisfying.
10. Achieving better public relations (that is, creating a more favourable attitude towards the enterprise)
by giving to the community, true, adequate and easily intelligible information about its working.
11. Supporting education, slum clearance and similar other programmes.
Towards Employees and Workers
1. A fair wage to the workers (and not merely one determined by market forces of supply and
demand) which is possible only when the businessman is willing to accept a voluntary ceiling
on his own profits.
2. Just selection, training and promotion (without any diserimination on grounds ofsex, race, religion
and physical appearance).
3. Social security measures and good quality of work life.
4. Good human relations (i.e. maintaining industrial peace, creating conditions for collective bar-
gaining, educating workers to produce their own leadership and participativemanagement)
5. Freedom, self-respect and self-realisation. A businessman should devote his knowledge and abil-
ity not only to making his worker's life more afiluent, but also to making it more satisfyingand
rewarding, There should be an awareness that the quality of man's life is as important as the
quantity of his material wealth.

3. 52 Principles of Management
. Inerease in productivity and efticiency by recognition of merit, by providing opportunucs 1or
creative talent and incentives.
Towards Shareholders and Other Businesses
1. Promoting good governance through internal accountability and transparency.
2. Fairness in relations with competitors. Competition with rival businessmen should always be tair
and healthy, based on rules of ethics and fair play rather than on rules of warfare. Businessmen
sometimes treat their rivals as enemies and try to harm each other by malicious propaganda,
price-cutting, interference in production and distribution.
Towards the State
1. Shunning active participation in and direct identification with any political party
2. Observing all the laws of land which may have the following objectives:
(a) To provide direction to the economic and business life of the community
(b) To bring about harmony between the limited enterprise interest and the wider social interest
of the country
(c) To provide safeguard against errant business practices
(d) To compel business to play fair to all participants in the economy-employees, sharehold
ers, minority shareholders, etc.
(e) To prevent oppression or exploitation of the weaker partners in business, such as emplovees.
minority shareholders, etc.
(To enforce maximum production according to the priority ofsectors and production lines
laid down by the government
(g) To allocate limited resources according to social priorities and preferences
(h) To enforce distributive justice, especially to weaker sections of the community
i) To implement rural uplift and secure balanced development of the country

4. 6.5 SOCIAL
RESPONSIBILITY
OF
MANAGEMENT
6.5.1. Introduction
Social responsibility or corporate
social responsibility of manager in business is
an ethical concept involving notions of human welfare and improving the quality
of life in society.
Social responsibility of managers particularly in business organisations has, of
late, been one of the most talked about and widely supported subjects. Business
depends on the society for the needed inputs like money, men, and skils.
Business also depends on the sOciety for market where products may be sold to
their buyers. Thus, business depends on society for existence, sustenance, and
encouragement. Once society ceases to have any use for business, it has no place
and reason to live. Being so much dependent, business has definite responsibility
towards society.
According to Koontz and °'Donnel, "Social responsibility is the personal
obligation of every one as he acts for his own interests to assure that the rights
and legitimate interests ofall others are not impinged'.
Corporate social responsibility is the continuing commitment by business to
behave ethically and contribute to economic development while improving the
quality of life of the workforce and their families as well as of the local
community and society at large. Ideally, CSR policy would function as a built-in,
self-regulating mechanism whereby business would monitor and ensure its
support to law, ethical standards, and international norms.
6.5.2.
Nature of social responsibility includes:
Nature of Social Responsibility
1)Business is the primary source of wealth creation, innovation and
employment Business is an integral part of society and is.committed to
operating in a responsible and sustainable manner, alongside other actors.

5. R e c e n t
centTrends in Management (Unit 6)
227
CSR is a positive business-driven response to the business environment of
today. CSR 1s not an add-on for business; it is increasingly being integrated
into business operations, governance, management systems and thinking. It
must therefore be seen within the context ofthe totality of a business toaay.
3) CSR
CSR is a
multi-dimensional concept covering social, economic and
environmental concerns, and is continually evolving within the diversity of
the market. This
diversity of the marketplace makes innovation a critical
aspect in the
development and implementation of the varied CSR initiatives.
Efforts to regulate or standardise such an inherently dynamic process of
voluntary action would stifle this very fundamental characteristic.
4) CSR is not an alternative to
regulation. Governments must be responsible for
the implementation and enforcement ofnational laws.
) Any debate on social
responsibility needs to also include a consideration of
the responsibilities of other actors in society. The appropriate role of each
actor needs to be understood and respected along with the limitations to their
fields of action.
Social Responsibility of Manager with Respect
6.5.3.
to Different Stakeholders
The social responsibilities of managers towards different stakeholders are:
1) Responsibility towards Shareholders or Owners: There is a
separation
of ownership and management in the case of joint stock companies. The
shareholders are empowered to appoint directors on the Board of
Directors and seek regularly accurate and full financial information
about the company. The management or the directors of the company are
responsible for safeguarding the interests of the shareholders. But in
case of sole tradership and partnership concerns, the owners can look
after their interest themselves. Responsibility towards shareholders
includes:
1) Reasonable Dividend: Shareholders are source of funds for the
company. They expect a high rate of dividend on the money invested by
them and also the maximisation of the value of their investment in the
company.
1) Soundness: It is the duty of management to see that the financial
position of the company is sound and the company always looks for
growth.
) Information: It is the responsibility of the management to keep the
share-holders well informed about the progress and financial position of
the company.
Protection of Assets: The assets of the company are purchased with the
funds provided by the shareholders. The management is responsible to
Safeguard these assets.

6. 228 Thakur's BCA First Sem (Principles of Management) UOp
4) Responsibility towards Workers/Employees: The employees should be
treated as human beings and their co-operation must be achieved for the
realisation of organisational goals. The management of a business should
fulfil the following obligations towards itsemployees:
i) Fair Wages: Every business should pay reasonable wages and salaries to
Ts employees so that they may satisfy their needs and lead a good life.
ii) Good Working Conditions: Since workers spend about eight hours on
every working day at their work place, they must be provided with good
working conditions. Good working conditions are necessary to maintain
the health ofthe workers.
ii) Adequate Service Benefits: Workers should be provided service
benefits such as housing and medical facilities, insurance cover and
retirement benefits. They will make them feel secure.
iv) Cooperation: It is the responsibility of the management to
win the co-
operation of the workers by creating the condition in which workers are
willing to put forward their best efforts towards the common goals of the
business.
v) Recognition of Worker's Rights: The management should recognise the
workers' right to fair wages, to participate in decisions affecting their
working life, to form trade unions to collective bargaining and to go on
strike oftheir demands are not accepted.
vi) Opportunity for Growth: The workers should be helped by training
and other means to improve their skills. Management should give the
workers adequate opportunities to develop their capabilities through
training, education and the enjoyment of freedom to the greatest
possible extent.
3) Responsibility towards Customers: Customers' satisfaction is the ultimate
aim of all economic activities. This involves providing products at the lowest
possible price. Adulteration of goods, poor quality; failure to give fair
measure, lack of service and courtesy to the customers, misleading of
dishonest advertising are some of the examplesof violation by business of its
obligations towards the customers of it products. Therefore, it is the duty of
management to take care ofthe following:
i) Need Satisfaction: The management should produce those goods which
meet the needs of the consumers of different classes, tastes and with
different purchasing power.
ii) Regular Flow of Goods: The management should make goods of the
right quality available to the right people at the right time and place at
reasonable price.
ii) Courteous Service: The management should provide a prompt,
adequate and courteous service to customers, and handle their
grievances carefully.

7. RecentIrenas in
Management(Unit 6) 229
iv) Right Information: The management should ensure that advertisement
and
statements issued by the business are true and fair.
V air Trade Practice: The manavement should not indulge into unfair
a nethical practice such as black marketing, hoarding, adulteration,
etc. The
goods and services should be distributed properly so that the
Customers do not face any difficulty in purchasing them.
4) KespOnsibility towards Suppliers: Suppliers are businessmen who
suppiy
raw
materials and other items reauired by manufacturers and traders. Lerain
Suppners, called
distributors, supply finished products to the
consumers.
Management should deal with the suppliers judiciously. Their dealings with
the suppliers should be based on integrity and courtesy in the
absenceor
which the
suppliers will not supply them the goods on credit. The
responsibilities of business towards these suppliers are:
i) Giving regular orders for purchase of goods.
ii) Dealing on fair terms and conditions.
ii) Availing reasonable credit period.
iv) Informing about the tastes of consumers.
vTimely payment of dues.
vi) Informing them for future development plans.
5) Responsibility towards Creditors: Management is also socially responsible
to its creditors in following ways:
i) Provide accurate information regarding the financial health of the
organisation.
ii) Ensure a reasonable price for the articles supplied, and make prompt
repayments (involving interest on
borrowings); there should be fairness
in transactions.
ii) Promote a healthy atmosphere where creditors, suppliers and other
interest groups are treated as patterns in a
co-operative endeavour.
6) Responsibility towards Government: Every business enterprise is governed
by various laws. It is the duty of the management of every enterprise to
manage its affairs according to the laws affecting it. Management's policies
should be laid down taking into consideration the provisions of various
legislations and guidelines issued by the government management should
follow fair trade practices. It should pay taxes and other government dues
honestly, fully and promptly. It should not encourage corruption, black
marketing and other social evils. The specific responsibilities of business
towards government may be enumerated as follows:
1 To abide by the laws ofthe nation.
11) To paygovernment taxes honestly,
i) To avoid corrupting governmentemployees.
iv) To discourage the tendencies of concentration of economic power and
monopoly.
VTo encouragefair trade practices.

8. Thakur's BCA First Sem (Principles of Management)1UOp
230
wes
an
esponsibility towards
Society/Community:
Every business
of
ow.
business
obligation to the society at large. The specific responsibilities of busin.
by the socio-
)Socio-Economic Objectives: Managementmust be guided by the so
ty expects that th
towards the society are as follows:
economic objectives of the society. It should not indulge in any praes
which is not fair from social point of view. Society expects that
business uses the factors ofproduction effectively and efficiently fo
these
satisfaction of the needs of the society. If the business fulfils
expectations, its goodwill and reputation will increase.
11) Improvement of Local Environment:
Good management ea
contribute to the advancement of local amenities where the enterori
functions. It can develop the surrounding area for the well-being of th
workers and the general public. Management has certainly ereat
responsibility to keep the healthy environment conditions where tha
production is being carried on. It should take preventive measures
against water and air pollution, and should contribute to the communit
development activities. If the management rails to discharge its
responsibility, the government will interfere to prevent the enterprise
from polluting the environment.
in) Employment Opportunities: It is the responsibility of management to
help increase direct and indirect employment in the area where it is
functioning.
management can
rise
iv) Efficient Use of Resources: The resources at the command of business
belong to the society. Therefore, the management should make the best
possible use ofcapital, raw materials, machines, technical knowledge and
other resources for the wel-being ofthe society.
v)Welfare Activities: The business should contribute towards the
upliftment of the weaker sections of the society. It should cooperate in
the welfare activities ofthe community.
vi) Business Ethics: The business should not indulge into anti-social and
unfair trade practices such as adulteration, hoarding and black marketing.
It should not issue misleading advertisements.
6.5.4. Arguments for Social Responsibility of Business
Arguments for social responsibility of business are as follows:
1) Changed Public Expectations of Business: One of the most potent
arguments for social responsibility is that public expectations from busine
have charnged. It is reasoned that the institution of business existson
because it satisfies the valuable needs of society. Society gave business
charter to it, andthe charter can be amended or revoked at any time that
its
e, if busines
wishes to r main viable in the long run, it must respond to society's neeu
eds
business fe:ls to live up to society's expectations. Therefore, if businesi
and give the societywhat it wants.

9. Recent Trends in Management (Unit 6) 231
Arguments for Social Responsibility of
Business
Changed Public Expectations of
Business Better Environment for Business
Public Image Avoidance ofGovernment
Regulation
Balance of Responsibility with
Power Business has the Resources
Let Business Try Moral Responsibility
Citizenship Argumen Duty of Gratitude
Prevention is Better than Cure
2) Better Environment for Business: Social responsibility creates a better
environment for business. This concept rationalises that a better society
produces environmental conditions more favourable for business operations.
The firm which is most responsive to the improvement of community quality
of life will as a result has a better community in which to conduct its
business. Labour recruiting will be easier, and labour will be of a higher
quality. Turnover and absenteeism will be reduced.
3) Public Image: Another argument in favour of social responsibility is that it
improves public image. Each individual firm seeks an enhanced public image
so that it may gain more customers, better employees, more responsive
money markets and other benefits. A firm which seeks better public image
should support social goals.
4) Avoidance of Government Regulation: Government is a massive institution
with long arms. It seeks to regulate business in the public interest.
Government regulation is costly and denies the much needed freedom in
decision-making. Before the government stretches its long arms, business
should discharge its obligation to society.
S) Balance of Responsibility with Power: Another argument for social
responsibility is that business's responsibility should be more related to its
power, t is reasoned that businessmen have vast amounts of social power.
They do affect the economy, minorities, and othersocial problems. In turn, an
equal amount of social responsibility 1S required to
match their social power,
6) Business has the Resources: Another argument for social respomsibility is
that business has a vast pool of resources in terms of men, talents, functional
expertise and money. Probaby, business is
without peers in respect ofthe
resources it possesses, With these resources at its comnm¡nd, bu_iness is in a
better position to work for social goals.

10. 232 hakur's BCA First Sem (Principles of Management) UOP
7) Let Business Try: One interesting argument for husiness social
responsibility is a sort of back-handed one. It is that many other institutions
have failed in handling social problems, so why not turn to business. any
people are frustrated with the failures of other institutions, and in their
frustration, they are turning to business.
8) Moral Responsibility: It is said that the acceptance of corporate social
responsibility is the morally correct position. This notion suggests that our
modern industrial societyfaces many serious social problems brought on, to a
large extent, by large corporations. The corporations therefore have a moral
responsibility to help solve or ameliorate these problems. A corollary to this
notion is that because business firms control so many of the resources in our
economy, they shoul
betterment of society.
devote some of these resources to the overall
9) Citizenship Argument: Corporations are institutional members of society. If
individual members of the society have an obligation to improve the society,
then corporations also have this responsibility. After all, corporations unlike
citizens are created by society. Corporations are citizens, and citizens have
civic duties and responsibilities.
10) Duty of Gratitude: Business units benefit from society. On the basis of the
commonly accepted principle that one owes debts of gratitude towards those
who benefit us, the corporation has certain debts that it owes to the society.
11) Prevention is Better than Cure: The last point is that prevention is better
than cure. If business delays with social problems now, it may find itself
constantly occupied with putting out social fires so that is has no time to
accomplish its goal of producing goods and services. Since these social
problems must be dealt with at some time, it is actually more economical to
deal with them before they develop into serious social breakdowns that
consume most of the management's time.
6.5.5. Arguments against Social Responsibility of
Business
Arguments against social responsibility of business are as follows:
of
Arguments against Social Responsibility of
Business
Profit Maximisation
Society Has to Pay the Cost
Lack of Social Skills
Business Has Enough Power
Social Overhead Cost
Lack of Accountability
Lack of Broad Support

11. Recent Trends in Management (Unit 6) 233
1) Profit Maximisation: The first and the most forceful argument disfavouring
social responsibility is that business has profit maximisation as its main
objective. Indeed, the business is most socially responsible when it attends to
its interests and leaves other activities to other institutions. Since business
operates in a world of poverty and hunger, the economic efficiency of
business is a matter oftop priority and should be the sole mission ofbusiness.
Business's function is economic, not social and economic values should be
the only criteria used to measure success. In this kind of system, managers
are the agents of the stockholders, and all their decisions are controlled by
their desire to maximise profits for the stockholders while reasonably
complying with law and social custom.
2) Society Has to Pay the Cost: Another argument is that the costs of social
responsibility will be passed on to the society and it is the society which must
bear them.
3) Lack of Social Skills: Business managers are best at managing matters
relating to business. They are not equally good at solving social problems.
Their outlook is primarily economic and that there skills are the same. They
really do not feel at home in social matters. Corporates like the Lalbhais,
Mafatlals and Shroffs have already attempted to bring in management
professionals into the social responsibility area.
4) Business Has Enough Power: Another argument is that business already has
enough social power; therefore, society should not take any steps which give
it more power. According to this line of reasoning, business is one ofthe two
or three most powerful institutions in society at the present time. A business
influence is felt throughout society. It is felt in education, in govenment, in
the home and in the market place. It moulds many social values. The process
of combining social activities with the established economic activities of
business would give business an excessive concentration of power. Business
is an institution, which is considered to be not so good, and giving more
power to it is not advisable.
5) Social Overhead Cost: Cost on social responsibility is considered to be a
social cost, which will not immediately benefit the business. It is the heavy
social overhead cost which is one of the reasons for the miserable
performance of some of our government undertakings.
6) Lack of Accountability: Another point of view is that the businessmenI
no direct accountability to the people therefore, it is unwise to give
businessmen responsibility for areas where they are not accountable.
Accountability should always go with responsibility, and it is poor social
control to allow any other kind of arrangement. Until the society can develop
mechanisms. which establish direct lines of social accountability fromn
business to the public, business must stand clear of social activities and
pursue only its goal of profit where it is directly accountable through the
market system.

12. 234 Thakur's BCA First Sem (Principles of Management) UOP
7) Lack of Broad Support: Business involvement in social goals lack support
from all groups in society. If business does become socially involved, it will
create so much friction among dissident parties that business cannot perform
its social assignment. Although many persons desire business to become
more socially involved, others oppose the idea. There is lack of agreement
among the general public, among intellectuals, in the govenment and even
among businessmen themselves.
6.6 EXERCISE
6.6.1. Short Answer Type Questions
1) What is meant by change?
2) Give the objectives of change management.
3) List the points as to why organisations resist changing.
4) What is a disaster?
5) Explain natural disasters in brief.
6) Define total quality management.
7) Describe the meaning of stress.
8) What are the various types of stress?
9) Define social responsibility.
10) Describe the nature of social responsibility.
Long Answer Type Questions
6.6.2.
1) Write a detailed note on the types and forces of change.
Give explanation on objectives, components and principles of disaster management.
2)
3) What are the features and elements ofTQM?
4) Explain the individual and organisational strategies of stress management.
5) Give detailed explanation on social
responsibility of manager with respect to different
5)
stakeholders.
6) Describe the arguments for and
against social
responsibility of business.