SOCIAL RESPONSIBILITY SOCIAL RESPONSIBILITY OF BUSINESSOF BUSINESS

Defining Social responsibility of BusinessDefining Social responsibility of Business Why Social Responsibility ?Why Social Responsibility ? Making S.R Operational.Making S.R Operational. Social Responsibility of business towards Social Responsibility of business towards different groupsdifferent groups Different ethical views on Social Different ethical views on Social ResponsibilityResponsibility What is Ethical Behavior What is Ethical Behavior Why ethics is vital for Management Why ethics is vital for Management Creating an Ethical workplace.Creating an Ethical workplace. Discussion on case study. Discussion on case study.

“The fundamental obstacle to CSR is that we are caged in our current ideas. This is a picture of a man inside a prison with broken-down technology –

computers, clothes, lamps, and all kinds of things. If we stick with our current technology,

consumption, business model, and decision-making models,

this is where we will end up for sure.”

– ZMET interviewee

L E A R N I N G O B J E C T I V E SL E A R N I N G O B J E C T I V E SL E A R N I N G O B J E C T I V E SL E A R N I N G O B J E C T I V E S

After reading this chapter, you should After reading this chapter, you should be able to:be able to:

1. Identify four general approaches to social responsibility.

2. Explain how issues of social responsibility and ethics affect small business.

3. Assess ethical and socially responsible issues facing you as an employee and as a boss or business owner.

4. Understand the ethical and socially responsible actions of businesses you deal with as a consumer and as an investor.

Meaning Of Social ResponsibilityMeaning Of Social Responsibility Business undertaking was expected to denote its efforts to Business undertaking was expected to denote its efforts to

producing goods & services possible to make innovations producing goods & services possible to make innovations with the objective of maximization of efficiency & profits. with the objective of maximization of efficiency & profits.

An enterprise is a corporate citizen, so it is esteemed & An enterprise is a corporate citizen, so it is esteemed & judged by its action in relation to community & its judged by its action in relation to community & its economic performance.economic performance.

Definition of Social ResponsibilityDefinition of Social Responsibility “ “ Social Responsibility is the personal obligation of every one Social Responsibility is the personal obligation of every one

as the acts for his own interests to assure that the rights & as the acts for his own interests to assure that the rights & legitimate interests of all others are not impinged”. legitimate interests of all others are not impinged”. Prof. Prof. Koontz & O’DonnellKoontz & O’Donnell

It is social liabilityIt is social liability It is for the othersIt is for the others “ “ Social responsibility means to follow such policies and to Social responsibility means to follow such policies and to

implement the decisions those are expected in the context of implement the decisions those are expected in the context of values and aims of society.values and aims of society. Prof. Boven Prof. Boven H.R H.R

““Conceptually social responsibility may be taken to mean Conceptually social responsibility may be taken to mean intelligent and objective concern for the welfare of the intelligent and objective concern for the welfare of the society.society.

Prof. Andrew K. RProf. Andrew K. R

Social Responsibility is multidimensional.Social Responsibility is multidimensional. Not limited upto the production but more Not limited upto the production but more

than the economic functions.than the economic functions.

Four development stages:Four development stages:

11stst stage: stage:

22ndnd stage: stage:

33rdrd stage: stage:

44thth stage: stage:

Supply of public demandSupply of public demand

Forecasting of public expectationsForecasting of public expectations

Compliance of legal obligationsCompliance of legal obligations

New creation of public expectationsNew creation of public expectations

Characteristics Of Social ResponsibilityCharacteristics Of Social Responsibility Related to business enterprise onlyRelated to business enterprise only Development depends upon: Development depends upon: ** Profit maximizing Profit maximizing

management, management, * Trusteeship management,* Trusteeship management,

* Quality of life * Quality of life managementmanagement

Applicable to both Public & pvt. UndertakingsApplicable to both Public & pvt. Undertakings Must be in the mind of businessmanMust be in the mind of businessman Two way processTwo way process Continuous process till the existenceContinuous process till the existence Need for satisfaction & development of societyNeed for satisfaction & development of society Source of social powerSource of social power Establishes ethics, respect for quality of life, Establishes ethics, respect for quality of life,

ideals, innovative norms.ideals, innovative norms.

Importance of Ethics

“The best chance you have of making a big success…is to decide from square one that you are going to do it ethically”

- Alan Greenspan

Chairman, Federal Reserve Board

DIFFERENT ETHICAL VIEWS ON SOCIAL DIFFERENT ETHICAL VIEWS ON SOCIAL RESPONSIBILITYRESPONSIBILITY

Communist viewCommunist view

Imposition of SR through the instrumentality of the stateImposition of SR through the instrumentality of the state Hold that free industrial civilization is not good, as its values Hold that free industrial civilization is not good, as its values

are wrongare wrong Business is evil, because of immorality of business standards Business is evil, because of immorality of business standards

imposition through legislation or forceimposition through legislation or forceCapitalist viewCapitalist view

Business has uncontrolled right to make moneyBusiness has uncontrolled right to make money Maximizing profit is the objectiveMaximizing profit is the objective Business should not have any responsibility beyond obeying Business should not have any responsibility beyond obeying

certain legal codescertain legal codes Leave the solution of social problems to government Leave the solution of social problems to government

Pragmatic view Pragmatic view

Acknowledges the importance of profits but simultaneously Acknowledges the importance of profits but simultaneously stresses on need for social responsibilitystresses on need for social responsibility

Holds that co. can’t make social contribution Holds that co. can’t make social contribution Profits are the test of efficient functioningProfits are the test of efficient functioning Sick org. hardly contributeSick org. hardly contribute 11stst responsibility to keep business solvent, also must responsibility to keep business solvent, also must

voluntarily assume social responsibilityvoluntarily assume social responsibility

Retention for personal use as much necessary for honorable Retention for personal use as much necessary for honorable livelihoodlivelihood

Utilization of the rest for the welfare of the society slogan Utilization of the rest for the welfare of the society slogan ’’enjoy the wealth by renouncing’enjoy the wealth by renouncing’

Origin from Gitas teachings of aparigraha (non-possession) & Origin from Gitas teachings of aparigraha (non-possession) & sambhawa (equalism ) sambhawa (equalism )

Use possession for the welfare of all, code as well as principle Use possession for the welfare of all, code as well as principle of accountability - M. K Gandhiof accountability - M. K Gandhi

Trusteeship view Trusteeship view

According to Moral According to Moral Principles or StandardsPrinciples or Standards

There are seven sins in the world: Wealth without work, Pleasure without conscience, Knowledge without character, Commerce without morality, Science without humanity, Worship without sacrifice and politics without principle.

- Mahatma Gandhi (1869 - 1948)

Arguments in Favour the Social ResponsibiltyArguments in Favour the Social Responsibilty

Origin of professional managementOrigin of professional management Increase in social consciousnessIncrease in social consciousness Increase in InterdependenceIncrease in Interdependence Unit of interest Unit of interest Legal provisionsLegal provisions Need for changeNeed for change Resources V/s SocietyResources V/s Society For better social environmentFor better social environment Public image of businessPublic image of business Consumer’s movementsConsumer’s movements Prevention of social problemsPrevention of social problems Social involvement may be interest of stockholdersSocial involvement may be interest of stockholders Enterprise is bound for compliance Enterprise is bound for compliance Symbol of successSymbol of success

Arguments Against the Social ResponsibilityArguments Against the Social Responsibility

Reduction of profitsReduction of profits Increase in economic burdenIncrease in economic burden Competitive disadvantageCompetitive disadvantage Power if businessPower if business Lack of social skill & accountabilityLack of social skill & accountability Negative attitude of social classNegative attitude of social class Cost of social activities pass on to consumerCost of social activities pass on to consumer Only legal formality , no benefit to societyOnly legal formality , no benefit to society

Corporate CultureCorporate Culture

The Pyramid of Social The Pyramid of Social ResponsibilityResponsibility

Ethical Responsibilitiesbeing ethical; doing what is right, just,

and fair; avoiding harm

VoluntaryResponsibilities

being a “good corporate citizen;”

contributing to thecommunity and quality of life

Legal Responsibilitiesobeying the law (society’s

codificationof right and wrong)

Economic Responsibilitiesbeing profitable

Major Corporate StakeholdersMajor Corporate StakeholdersMajor Corporate StakeholdersMajor Corporate Stakeholders

SOCIAL RESPONSIBILITY OF BUSINESS TOWARDS SOCIAL RESPONSIBILITY OF BUSINESS TOWARDS DIFFERENT GROUPSDIFFERENT GROUPS

11stst duty to do the business, duty to do the business, get the objectives & get the objectives & goals.goals.

To To direct & controldirect & control the business, doing best. the business, doing best. To maintain the To maintain the image.image. To take the To take the membershipmembership of professional in institutions. of professional in institutions. To make justice in purview of To make justice in purview of social justice.social justice. To make To make safety fundssafety funds for future uncertainty. for future uncertainty. To earn To earn profitprofit To adopt new To adopt new innovationsinnovations To motivate To motivate healthy competitionhealthy competition, long-term expansion , long-term expansion

of business. of business. Encourage to Encourage to promote capacity.promote capacity. Not to create Not to create monopoly.monopoly.

Responsibility Towards SelfResponsibility Towards Self

Responsibility Towards OwnershipResponsibility Towards Ownership

Ensuring a Ensuring a fair rate of returnfair rate of return.. Ensure safety of investment, Ensure safety of investment, fair fair

reportingreporting.. Efforts for increasing the Efforts for increasing the share share

capitalcapital.. Behave equally to Behave equally to shareholdersshareholders.. InformInform regarding progress of business. regarding progress of business. Not to be Not to be fraudulentfraudulent, not to earn , not to earn

secret profits.secret profits.

Responsibility Towards CustomersResponsibility Towards Customers

‘‘Customer is king of market’, Customer is king of market’, SatisfySatisfy the the need of the customers need of the customers

Increase Increase PProductivity, improve roductivity, improve QQuality, uality, reduce reduce PPricerice..

To avoid To avoid false publicity false publicity Should not indulge in Should not indulge in anti-social activitiesanti-social activities Avoid misleading by improper Avoid misleading by improper

advertisements.advertisements. Provide Provide after-sale servicesafter-sale services Provide opportunity for being heard & Provide opportunity for being heard &

redress complaintsredress complaints. . Take accurate steps to Take accurate steps to remove remove

imperfectionsimperfections Ensure regular & adequate Ensure regular & adequate supplysupply

Responsibility Towards EmployeesResponsibility Towards Employees

Employees are Employees are assetsassets of a company, not of a company, not robots but robots but emotional creaturesemotional creatures..

Pay fair & reasonable Pay fair & reasonable remunerationremuneration Recognize the social need, provide Recognize the social need, provide

ParticipationParticipation in management & profits in management & profits ArrangeArrange training training programmes programmes Create healthy Create healthy work environmentwork environment, safe work , safe work

place.place. Provide Provide labour welfare labour welfare activitiesactivities Provide Provide social securitysocial security. .

Delegate Delegate workwork as per the interest as per the interest RRecognize, ecognize, AAppreciate & ppreciate & EEncourage for ncourage for

capabilitiescapabilities Issue the orders for Issue the orders for PPromotionsromotions New occasions for New occasions for personality personality

developmentdevelopment CCompensation for accidentsompensation for accidents Give Give respectrespect to employee’s organization to employee’s organization To make code of conduct for service To make code of conduct for service

conditions, by creating conditions, by creating cordial relation.cordial relation.

Responsibility Towards CreditorsResponsibility Towards Creditors

From whom loans are achieved from public From whom loans are achieved from public deposits on behalf of business property.deposits on behalf of business property.

Faithful information Faithful information regarding financial regarding financial healthhealth

Pay timelyPay timely principle amount & interest principle amount & interest on loanon loan

Fair terms Fair terms & conditions for getting the & conditions for getting the loansloans

Maintain cordial Maintain cordial relationsrelations with creditors with creditors Not to Not to misusemisuse of amount t of finance of amount t of finance To To make secretsmake secrets about creditors about creditors

Responsibility Towards suppliersResponsibility Towards suppliers

Persons who supply raw-material, office Persons who supply raw-material, office material, equipments &machinery. material, equipments &machinery.

Ensure reasonable Ensure reasonable priceprice Prompt Prompt paymentpayment limit to contract limit to contract Motivate for Motivate for improvementsimprovements in quality in quality Maintain healthy Maintain healthy competitioncompetition Give occasion for Give occasion for innovationinnovation

Responsibility Towards business InstitutionsResponsibility Towards business Institutions

Maintain healthy competition , Maintain healthy competition , not to not to criticizecriticize

CooperateCooperate in-between public & private in-between public & private sectorsector

Do efforts for Do efforts for industrial developmentindustrial development Not to misuse Not to misuse trade-informationtrade-information.. Follow the Follow the CodeCode of conduct of conduct Not to fluctuate prices artificially by Not to fluctuate prices artificially by

speculationspeculation Not to use Not to use brand & trademark brand & trademark of others.of others.

Responsibility Towards Local communityResponsibility Towards Local community

Place where the org. is situatedPlace where the org. is situated ConserveConserve scarce resources & developing scarce resources & developing

alternativesalternatives InformInform the community about activities & the community about activities &

problemsproblems Good Good HHousing, efficient ousing, efficient TTransportationransportation Contribute for Contribute for RResearch, esearch, iinvestigation, nvestigation,

iinnovation & nnovation & ddevelopmentevelopment Help the weaker sections & Help the weaker sections & backward areasbackward areas Prevent environmental pollution, preserve Prevent environmental pollution, preserve

ecological balanceecological balance Participate in Participate in welfare activitieswelfare activities, buildup better , buildup better

communitycommunity

Responsibility Towards GovernmentResponsibility Towards Government

To To pay taxes pay taxes within the time with within the time with honesty, loyaltyhonesty, loyalty

To follow up the To follow up the acts & lawsacts & laws To follow fair To follow fair trade policiestrade policies & &

practicespractices Not to misuse the Not to misuse the relationrelation with with

political partiespolitical parties To prevent To prevent red-tapismred-tapism & economic & economic

uncertaintyuncertainty Act as per the govt. policiesAct as per the govt. policies

Responsibility Towards World SocietyResponsibility Towards World Society

To co-operate the businessmen of ‘alien-To co-operate the businessmen of ‘alien-friend’ countriesfriend’ countries

Reasonable Reasonable ratesrates in international market in international market Establish business in Establish business in UnderdevelopedUnderdeveloped & &

UndevelopedUndeveloped countries countries Make healthy Make healthy competitioncompetition Exchange technical Exchange technical know-howknow-how Follow the ethics & code of conductFollow the ethics & code of conduct

Importance of Ethics

“There is no such thing as business ethics….There’s just ethics; and we all have to practice them every day in everything we do.”

– Peter Drucker

Best Corporate Citizens

1. Green Mountain Coffee2. Hewlett-Packard3. Advanced Micro

Devices4. Motorola5. Agilent Technologies6. Timberland7. Salesforce.com8. Cisco Systems 9. Dell10. Texas Instruments

11. Intel12. Johnson and Johnson13. NIKE14. General Mills15. Pitney Bowes16. Wells Fargo17. Starbucks18. Wainright Bank & Trust19. St. Paul Travelers20. Ecolab

Making Social

Responsibility

Operational

Self-Regulation of Business Ethics

1.Commitment from Top

Management

2.Formulating S R policies

3.Institutionalization of SR in

Decision Making Process

4.Performance Measurement

System

Recognizing Unethical Business Activities

1.Taking things that don’t belong to you.2.Saying things you know are not true.3.Giving or allowing false impressions.4.Buying influence or engaging in a conflict of interest.5.Hiding or divulging information.6.Taking unfair advantage.7.Committing improper personal behavior.8.Abusing another person.9.Permitting organizational abuse.10.Violating rules.11.Condoning unethical actions.

Ethics in the WorkplaceEthics in the Workplace EthicsEthics

Beliefs about what’s right and wrong or good and badBeliefs about what’s right and wrong or good and bad

Ethical BehaviorEthical Behavior Behavior conforming to individual beliefs and social Behavior conforming to individual beliefs and social

norms about what’s right and goodnorms about what’s right and good

Unethical BehaviorUnethical Behavior Behavior conforming to individual beliefs and social Behavior conforming to individual beliefs and social

norms about what is defined as wrong and badnorms about what is defined as wrong and bad

Business EthicsBusiness Ethics The ethical or unethical behaviors by employees in the The ethical or unethical behaviors by employees in the

context of their jobscontext of their jobs

Unethical BehaviorUnethical Behavior

Unethical behavior in Unethical behavior in business is not just a recent business is not just a recent phenomenonphenomenon

In the sixth century, B.C., the In the sixth century, B.C., the philosopher Anacharsis once said, philosopher Anacharsis once said, “The market is a place set apart “The market is a place set apart where men may deceive one where men may deceive one another.”another.”

WHAT IS ETHICSWHAT IS ETHICS ? ? Ethics may be referred to some standardized Ethics may be referred to some standardized

form of conduct or behavior of individuals form of conduct or behavior of individuals understood and accepted in a particular field of understood and accepted in a particular field of activityactivity

The work “ETHICS” has its origin in Greek word The work “ETHICS” has its origin in Greek word “Ethics” means character, norms, morals and “Ethics” means character, norms, morals and ideals prevailing in a group and society.ideals prevailing in a group and society.

Ethics is a mass of moral principles or set of Ethics is a mass of moral principles or set of values about what conduct ought to be. They give values about what conduct ought to be. They give an idea what is right or wrong, true of false, fair an idea what is right or wrong, true of false, fair or unfair, just or unjust, proper or improper, e.g. or unfair, just or unjust, proper or improper, e.g. Honesty, obedience, equality, fairness, etc and Honesty, obedience, equality, fairness, etc and respect and then doing the right thingrespect and then doing the right thing

IMPORTANCE OF BUSINESS ETHICSIMPORTANCE OF BUSINESS ETHICS

Public expects Public expects business to exhibit high business to exhibit high levels of ethical performance and social levels of ethical performance and social responsibility.responsibility.

Encouraging business firms and their Encouraging business firms and their employees to behave ethically is to employees to behave ethically is to prevent harm to society.prevent harm to society.

Promoting ethical Promoting ethical behavior is to behavior is to protect business from abuse by unethical protect business from abuse by unethical employees or unethical competitors.employees or unethical competitors.

High High ethical performance ethical performance also protects also protects the individuals who work in business.the individuals who work in business.

Essence of  “Management” lies in Essence of  “Management” lies in

Dropping the last alphabet of the Dropping the last alphabet of the word ‘t’= word ‘t’= “MANAGE MEN”“MANAGE MEN”

Still better, Still better,

Drop the last two alphabets ‘n’= Drop the last two alphabets ‘n’=

““MANAGE ME” – i.e. Manage Self, EgoMANAGE ME” – i.e. Manage Self, Ego