CHAPTER-6

Concept Of Social, Responsibility:

A business is a part of society. So, a business enterprise should do business and earn money in ways
that fulfill the aspirations of the society. Thus social responsibility relates to the voluntary efforts on
the part of the businessmen to contribute to the social well being. The businessmen make use of
resources of society and earn money from the members of society so they must do something for
the society.

❖ Need for Social Responsibility:

• Improving Company’s Brand Image: Being socially responsible is of utmost importance to build
company's image and brand. By portraying a positive image, a firm can build a name for itself for not
only being financially profitable, but socially responsible as well.

• Engaging Customers: A company's social responsibility policy may impact customers' purchasing
decisions. Some buyers may pay a greater price for a product if they know a portion of the profit will
be donated to a worthwhile cause.

• Retaining Top Talent: Many employees desire to be a part of something bigger than themselves.
Employees with a sense of social responsibility can use the tools available to them at work to help
others.

• Helping Company Stand Out of Competition: Companies that are involved in the community set
themselves apart from the competitors. Improving the brand's image by cultivating relationships
with customers and their communities.

❖ Arguments in favour of Social Responsibility:

• Justification for Existence and Growth: Business is the creation of society therefore it should
respond according to the demands of the society. To survive and grow in society for long run the
business must provide continuous services to the society.

• Long term Interest of the firm: A firm can improve its image and builds goodwill in the long run
when its highest goal is to serve the society. If it indulges in unfair Trade Practices e.g., adulteration,
hoarding, black marketing, it may not be able to exist for long.

• Avoidance of government regulations: Business can avoid the problem of government regulations
by voluntarily assuming social responsibilities.

• Availability of resources with business: Business has valuable financial and human resources which
can be effectively used for solving problems of the society.

• Better environment for doing business: It is the social responsibility of business enterprise to
provide better Quality of life and standard of living to people. So, business will get better community
to conduct business.

• Contribution to social problems: Some of the social problems have been created by business firms
themselves such as pollution, creation of unsafe workplaces, discrimination etc, Therefore, it is the
moral obligation of business to solve such social problems.

❖ Social Responsibility Towards Different Interest Group:

Some of the specific responsibilities and enterprise may be outlined as under:

• Responsibility towards the shareholders or owners: A business enterprise has the responsibility to
provide a fair return to the shareholders or owners on their capital investment and to ensure the
safety of such investment. The corporate enterprise on a company form of organization must also
provide the shareholders with regular, accurate and full information about its working as well as
schemes of future growth.

• Responsibility towards the workers: Management of an enterprise is also responsible for providing
opportunities to the workers for meaningful work. It should try to create the right kind of working
conditions so that it can win the cooperation of workers. The enterprise must respect the democratic
rights of the workers to form unions. The worker must also be ensured of a fair wage and a fair deal
from the management.

• Responsibility towards the consumers: Supply of right quality and quantity of goods and services to
consumers at reasonable prices constitutes the responsibility of an enterprise toward its customers.
The enterprise must take proper precaution against adulteration, poor quality, lack of desired service
and courtesy to customers, misleading and dishonest advertising, and so on. They must also have the
right of information about the product, the company and other matters having a bearing on their
purchasing decision.

• Responsibility towards the government and community: An enterprise must respect the laws of the
country and pay taxes regularly and honestly. It must behave as a good citizen and act according to
the well accepted values of the society. It must protect the natural environm2ent and should avoid
bad, effluent, smoky chimneys, ugly buildings dirty working conditions.

Business ethics:

Refers to the moral values or standards or norms which govern the activities of a businessman. Ethics
define what is right and what is wrong. By ethic we mean the business practices which are desirable
from the point of view of Society. The purpose of business ethics is to guide the managers and
employees in performing their job. Example of business ethics are charging fair price from
customers, giving fair treatment to workers, earning reasonable profits and paying taxes tithe
government honestly.

Elements of business ethics:

• Top management commitment: The CEO and higher level managers must be committed to ethical
norms of behavior. This would set an example for all employers and encourage them to follow ethical
practice.

• Publication of code: Code of ethics is a formal written document of the principles, values and
standards that guide a firms actions. It may cover areas like honesty, quality, safety, health care etc.

• Establishment of compliance mechanism: A suitable mechanism should be developed to comply

• Measuring results: Although it is difficult to measure the ethical results but it must be verified and
audited that have for work is being carried according to ethical standards.