ETHICS AS A DIMENSION OF SOCIAL RESPONSIBILITY

Introduction:

Ethics and social responsibility are often interchanged. Both are related to each other.

Social responsibility refers to the act of returning to the society in terms of certain

services. It is an act of giving back to the society.

A famous American economist Paul Samuelson has argued for social

responsibility. On the other hand another American economist Milton Friedman has

opposed the idea of social responsibility. He says the idea of a businessman is to make

profit.

Peter Drucker says the first social responsibility of any business is to make profit.

What is social responsibilitv of business?

Business has an obligation to society because it has an impact on environments,

institutions and a variety of stakeholders.

Business is generating and distributing wealth. In these activities, the norms

of social behaviour are not effectively followed.

The corporate social responsibility (CSR) is the commitment of business to contribute to

sustainable economic development. It is concerned with treating the stakeholders of the

firm ethically or in a socially responsible manner. The aim of social responsibility is to

create higher standards of living and at the same time preserving the profitability of the

corporation. The interdependence between business and society is an ongoing process.

Arguments for social responsibility:

(1) Changing social values:

In a society where social values are changing, social responsibility has become a

necessity.

(2) Long run benefits:

The idea of social responsibility and the various acts of social responsibility bring long

run benefits to business. In that process, the society is also benefited.

(3) Public image:

A public image is very much essential in modern times for all types of business. The

image of the business firm is becoming brighter and brighter due to the growth of social

responsibility measure. The word of mouth is always working for the firm which

promotes more of welfare activities.

(4) Utilisation of resources:

The available managerial and financial resources in the company can be well utilised for

the benefit of the society.

(5) Promotion of welfare:

Activities related to social welfare promote the social and economic welfare of the

people. As a result, the people will have a better socioeconomic standard which will

ultimately promote the welfare of the economy.

(6) Interests of stakeholders:

All the stakeholders like investors, employees, customers, suppliers, and government

encourage social responsibility measures because they are also benefited by these

measures in one way or other.

(7) Full fledged growth:

Measures of social responsibility promote the full fledged growth of the economy. This

changed situation is a conducive factor for promoting good business.

Arguments against social responsibility:

(1) Violation of profit:

The major aim of profit making is affected by the promotion of social responsibility acts.

(2) Difficult to measure social action:

It is difficult to exactly measure the effect of social responsible activities like investment

in education or health related programmes.

(3) High cost:

Sometimes, the cost of social responsible activities may be very high making the business

organisations to suffer for want of resources.

(4) Lackof expertise:

In spite of best business skills the business people do not have adequate expertise in

analysing and solving social problems.

(5) Lackof public support:

People do not have the practice of appreciating the values of social responsibilities. They

sometimes look at these activities with doubt and suspicion.

(6) Not supported bv the Board of Directors:

The Board of Directors may not fully support these activities fearing that the return on

investment may fall down.

Steps of social responsibility:

The concept Corporate Citizenship is used to express the extent to which business is

strategically meeting the economic, legal, ethical and philanthropic responsibilities place

on them by the various stakeholders. Corporate citizenship includes the activities adopted

by business to meet their social responsibilities.

There are four steps of social responsibility, namely,

economic,

legal,

ethical and

philanthropic.

first step, economic is maximising stakeholder wealth and value. The second step, legal is

concerned with abiding by all laws and government regulations. The third step deals with

ethical issues like following standards of acceptable behaviour. The last step is

philanthropic of giving back to the society.

Economic issues:

Fixing a fair price for a product or service is a well expected measure of both demand and

supply.

The price should also influence the producers in a positive way.

The stakeholders should be reasonably benefitted like fair wages, good returns for

investment and fair price for suppliers.

The economic responsibility of the organisation cannot be under estimated. Companies

should come forward to increase the employment opportunities and promote the growth

of living standards of employees.

Rise in unemployment is a drain on the economy apart from the personal hardships and

suffering.

Competitive issues:

A healthy competition is necessary for the success of any market. Social responsibility

aims at increasing the level of competition. It enhances responsible behaviour by the

sellers in the market.

For example the Competition Act of India suggests that healthy practices have to be

followed in order to provide good services to all the stakeholders.

The anticompetitive strategies like price cuts, price discrimination and price wars have to

be prohibited. Corporate espionage is the result of intense competition.

Legal and regulatory issues:

The governments in many countries of the world are fixing minimum standards for

responsible behaviour. The public policy should be dynamic and promote the long term

growth of people and institutions.

The democratic nature of the government in many countries of the world can find out the

best alternative for any business or business related problem. The civil law protects the

rights and duties of the individuals and business organisations. The criminal law is

prohibiting certain activities like business fraud, violations of trade and malpractices in

markets.

According to the Competition Act, 2002, no enterprise can abuse its dominant position.

Dominant position refers to a position of strength, enjoyed by an enterprise, in the

relevant market in India.

Any unfair or discriminatory practice is considered unethical and illegal.

In the U.S.A.,The Sarbanes - Oxley Act, 2002 has the following major

provisions.

(1) Requires the establishment of a Public Company Accounting Oversight Board in

charge of regulations administered by the Securities and Exchange Commission.

(2) Requires CEOsand CFOsto certify that their companies financial statements are true

and without misleading statements.

(3) There should be independent directors in the Board of Directors.

(4) Requires code of ethics for financial officers.

(5) Whistleblowers should be protected.

(6) Establishes a ten year penalty for mail or wire fraud.

Philanthropic issues:

Philanthropy helps the society in a number of ways. It improves the quality of life and

helps communities to enjoy life better. It reduces the burden of the government. It

promotes many leadership qualities and skills. Above all it builds the morale of the staff.

In modern days, strategic philanthropy is given prominence.

It is the synergistic and mutually beneficial use of an organisation's core competencies

and resources to deal with key stakeholders so as to bring about both organisational and

societal benefits. Many organisations run literacy and community service.

Areas of social responsibility:

(1) Consumers:

(a) Quality of products or services should be good.

(b) Prices should be fair in the sense only a reasonable profit to be ensured.

(c) The type of advertisement should be advertisement should be relevant and

meaningful.

(d) There should be fair treatment to the consumers. No discrimination should be made

among the customers.

(e) All the relevant and recent information should be provided to the customers. On any

account the customers should not be kept in darkness.

(f) There should be an excellent customer services available to the customers at all times.

(2) Emplovees:

(a) Fair wages to maintain a decent standard living.

(b) The work environment should be safe and conducive.

(c) Human beings in general and employees in particular like a good treatment. The HR

policies should try to find out ways and means of treating the employees in a human

way.

(d) Special training and educational opportunities have to be provided to the employees.

Sometimes, they are not able to understand the need for the training.

(e) The employees need the support of the employers in dealing with the physical, mental

and emotional problems.

(f) The family welfare of the employees has to be taken care of.

(g) Sometimes unions have to be recognised because it is easier to empower the

employees through the unions.

(3) Environment:

(a) All forms of pollution to be reduced.

(b) There should be a provision for recycling of wastes.

(c) An efficient planning and effective execution of waste management.

(4) Government:

(a) Payment of taxes in order to strengthen the hands of the government.

(b) Extending all forms of co-operation to the government in the implementation of

policies.

(5) Community:

(a) The corporation should come forward to rehabilitate the displaced population.

(b) Participation in local development and maintenance.

(c) Improving the efficiency of business operations in the larger interests of society.

(d) Development of backward areas in order to achieve balanced regional development.

(e) CSRshould give a prominence to Research and Development activities in all areas of

business.

(f) Promotion of ancillaries and small scale industries can generate employment

opportunities and promote the growth of entrepreneurs.

(g) CSRshould include the promotion of social causes like adult education, better health,

population control and sustainable development.

(h) To build a better society in terms of values and mutual help.

CSR has an ethical dimension. To quote Henry Ford, "the management must provide

those goods and services which the society need at a price which the society can afford to

pay".

The areas of CSRcan be identified through the following

methods:

(1) Social forecasting.

(2) Opinion surveys.

(3) National issues.

(4) Social scanning.

(5) Social audit.

Conclusion:

CSRhas become a reality in the modern days of globalisation and liberalisation. Business

should not aim at profit only but profit and promotion of social welfare. Socially

responsible organizations should come forward to promote responsible behaviour in order

to make the business society as a more ethical society.

Summarv

(1) Meaning of social responsibility.

(2) Arguments for social responsibility:

Changing social values.

Long run benefits.

Public image.

Utilisation of resources.

Promotion of welfare.

Interests of stakeholders.

Full fledged growth.

(3) Arguments against social responsibility:

Violation of profit.

Difficult to measure social action.

High cost.

Lackof expertise.

Lackof public support.

Not supported by the Board of Directors.

Questions

Section 'A'

(1) Define social responsibility.

(2) What is strategic philanthropy?

Section 'B'

(1) Explain the arguments for social responsibility.

(2) Present the arguments against social responsibility.

Section 'c'

(1) Examine the concept of social responsibility with reference to various implications

and areas.