CHAPTER-6

SOCIAL RESPONSIBILIRTY OF BUSINESS AND BUSINESS ETHICS

LEARNING OBJECTIVES:
*Concept of Social Responsibility
*Case for Social Responsibility
*Social Responsibility towards Different Interest Groups
*Business and Environmental Protection
*Causes of Pollution
*Business Ethics

Business is an indispensable part of the society and gets its manpower and other resources from the society.
It is permitted by the society to carry on industrial or commercial activities and thereby earn profits. Business
should not ignore its obligation towards the society It should not indulge in any socially undesirable
practices(like black marketing, adulteration, etc) . Business can get success in the long run only when it is
socially responsible and follows ethical behaviour.
CONCEPT OF SOCIAL RESPONSIBILITY:
Social responsibility of business its obligation to take those decisions and perform those actions which are
desireable in terms of the objectives and values of our society.

CASE FOR SOCIAL RESPONSIBILITY:

The various points given in favour of business assuming social responsibility are as follows:
[Link] for existence and growth: As business is apart and parcel of the society, it must think of social
obligations. It is expected to satisfy human needs by providing goods and services.
[Link]-term Interest of the firm : It is in the long-term self -interest of the business to fulfill its social
responsibility towards various groups of society.
[Link] of Govt. Regulation: It is in the interest of businessman to voluntarily fulfill its obligations to the
society and avoid govt. intervention in the activity of business.
[Link] of Society: If the people related to a business feel that they are not getting their dues, then
they may re-sort to anti-social activities, This may be harmful for the business, So,business enterprises must
fulfill social responsibilities.
[Link] of resources with business: Business enterprises have considerable financial resources which
can be effectively used for solving social problems.
[Link] Problems into opportunities: It is not only helps in solving social problems but can also be used
effectively as an opportunity for growth.
[Link] environment for doing business: In order to have better environment for doing business, the
business should assumesocial responsibilities to solve social problems of the society.
[Link] business responsible for social problems :t is the moral responsibility of business to help society in
solving social problems and devoting some of its resources in the overall development of the society.
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SOCIAL RESPONSIBILITY TOWARDS DIFFERENT INTEREST GROUPS:

A business unit has to decide in which areas it should carry out social good. Few areas are explained below.

Responsibility towards shareholders or owners

To provide fair return on their investment, ensure safety of their investment and to provide regular, accurate and full
information about the business.

Responsibility towards the workers

To provide opportunities for meaningful work, create the right kind of working conditions, respect the democratic rights
of the workers and ensure a fair wage deal from the management.

Responsibility towards the consumer

To provide right quality and quantity of goods and services at reasonable prices and to avoid adulteration, hoarding,
dishonest and misleading advertisements.

Responsibility towards the government & community

To respect the laws of the country and pay taxes regularly and honestly and act according to well accepted values of the
society and to protect environment.

Business & Environmental Protection

Protection of the environment is a serious issue that confronts business
managers and decision makers. Business organizations are major pollutants so
they have to do something to control pollution.

Causes of Pollution
Waste generated by various industries, agriculture, mining, construction, energy production,
transportation etc., cause pollution.

Environmental Problems
Pollutions results in following environmental problems identified by UNO

1. Ozone Depletion 5. Deforestation

2. Land Degradation 6. Global Warming
3. Solid & Hazardous Wastes 7. Water Pollution
4. Danger to biological diversity 8. Fresh water quality and quantity

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 Types of Pollution

Air Pollution
Carbon monoxide emitted by automobiles, smoke and other chemicals from
manufacture and pollutes the air & lowers its quality. It also created a hole in the ozone
layer leading to global warming.

Water Pollution
This is primarily from chemical and waste dumping into water bodies. This lead to death of several animals and posed a
serious threat to human life.

Land Pollution
Dumping of toxic wastes reduces the quality of land and making it unfit for agriculture or plantation.

Noise Pollution
Noise caused by the running of factories and vehicles create a serious health hazard such as loss of hearing, malfunctioning
of the heart and mental disorders.

Need for Pollution Control

To preserve precious environmental resources & improve the quality of human

life pollution control becomes essential. Let us list out some reasons for pollution
control.

Reduction of health hazard

Pollution control measures can check diseases like cancer, heart attack & lung complications and support a healthy life on
earth.

Reduced Risk of Liability

When people are affected by toxicity released by any business, the business is liable to pay compensation. If the business
installs pollution control devices, it can escape from such a liability.

Cost Saving
Pollution control needs improved production technology which automatically reduces cost.

Improved Public Image

A firm that promotes the cause for environment will enjoy public confidence and good reputation.

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Other social benefits
Cleaner buildings, cleaner roads, clearer visibility, better quality of life, availability of natural products in a purer form are
some of the other social benefits the society can get through proper pollution control system.

Role of business in environmental protection

Most of the pollution is caused by business enterprises and therefore they should take the lead in providing their own
solutions to environmental problems. Some of the specific steps that can be taken by a business are as follows.

1. A definite commitment by top management to systematically protect environment.

2. Involving all divisions and sections of employees in environmental protection.
3. Developing clear cut policies and programs with regards to quality, method and process of
production and disposal of waste.
4. Complying with laws of the land in relation to environmental protection.
5. Participation in government programs such as management of waste, forestation etc.
6. Periodical assessment of pollution control programs of their own, with a view to improve them.
7. Arranging educational workshops and training materials to share technical information with
everyone involved in pollution control.

Business Ethics

Business ethics refers to the socially determined moral principles which should govern business activities.

Examples of Business Ethics

- Charging fair prices
- Using correct/accurate weights
- Giving fair treatment to all employees
- Avoiding adulteration, hoarding etc.
- Not engaging in any illegal methods of operation and not doing anything which is
being considered as undesirable by the society.
- Using environmentally friendly products, methods and processes.
Which businesses need to behave ethically?
All businesses irrespective of size (big or small), nature and location should behave ethically.

Why should businessmen behave ethically?

The businessman gets access to all resources such as finance, human capital, land etc. from the society and makes profits
by selling the same to the socie

Benefits of doing Ethical Business

- Ethical business is good business
- It improves public image and support
-
- Leads to greater success
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 - Helps in long-term standing

Elements of Business Ethics

Top Management commitment

Higher level managers need to be openly and strongly committed to ethical conduct. They should continuously try and
uphold the values of the organization and the society.

which normally covers the

Establishment of Compliance Mechanism

levels & throughout the life of the business.

Involving employees at all levels

To make ethical business a reality, employees at all levels must be involved.

Measuring Results
Measuring the results of ethics programs may be difficult but can have an audit at regular intervals to monitor compliance
with ethical standards and decide about further course of action.

QUESTIONS:-

Q. MCQ type Questions MARK

NO
1. It is very difficult to measure the end of ethical programmes , the firms can audit to monitor 1
compliance with ethical standards. Is related to which element of business ethics:
(a)Establishment of compliance mechanism
(b) Measuring results
(c) Involving employees at all levels
(d) Top management commitment
2. It is the moral obligation of business to get involved in solving social problems, instead of 1
expecting other social agencies dealing with them. Is related to which justification of social
responsibility:
(a) Better environment for doing business

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 (b)Holding business responsible for social problems
(c) Maintenance of society
(d) Converting problems into opportunities.
3. It is the responsibility of every business to provide accurate and full information about its 1
working as well as schemes of future growth. Towards which interested group is this social
responsibility related to :
(a) Consumers
(b) Employees
(c) Investors
(d) Government
4. 1

responsibility.(a) Maintenance of society

(b)Availability of resources
(c )Long term interest
(d)Better environment

5. Ajay Ltd pays wages to its employees at a rate, which is much lower than the minimum wages 1
prescribed by the government. The working conditions in the factory are inappropriate as there
is lack of proper ventilation and there is a strict, rule against formation of trade union. Against,

(a) Consumers
(b) Workers
(c) Society
(d) Shareholders
6. Assertion (A) Legal obligations are the compulsions which should be followed as per the 1
provisions of law.
Reason (R) Social responsibility is the voluntary action on the part of business for its society.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation
of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

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7. A business is socially responsible towards the community to ensure that the environment is not 1
adversely affected by its activities. The quality of environment is deteriorating rapidly
particularly due to industrial activities. The basic reason for deterioration of environment is
pollution. A business should take lead in protecting environment because
(a)They are leading creators of wealth
(b)They command huge human resources
(c)Theycannotremainunaffected by environmental destruction.
(d)All of these
8. Business exists only for profit maximisation. Therefore, any talk of social responsibility is 1
against this objective. Businessmen are likely to simply shift their burden of social
responsibility by charging higher prices from the consumers instead of bearing it themselves.
Which of the following activities are against social responsibility of business?
(a) selling goods at lower prices
(b) selling goods of good quality
(c) selling goods of low quality
(d) charging fair prices.

9. Which of the following alone can ensure effective ethics programme in a business 1
enterprise?
(a)Publication of a code
(b)Involvement of employees
(c )Establishment of compliance

(d)None of them mechanism

10. 1

Choose the correct option of different types of pollution:

(a)Air Pollution

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 (b)Water Pollution
(c )Land Pollution
(d)Noise Pollution

Short Answer Type Questions (Case Study and Others)

11. Money is very important resources for the organisation. It is called the life blood and without 3
it business can not be run. A business enterprise has the responsibility to provide a fair return
to the shareholders on their capital investment and to ensure the safety of such investment.
(a)Towards which interested group is this social responsibility related to.
(b)Write two other social responsibility related to that group.
12. Employee is the most valuable resources of the organization rather than capital resources. They 3
can give a huge profit. Management of an enterprise is also responsible for providing
opportunities to the workers for meaningful work.
(a)Towards which interested group is this social responsibility related to.
(b)Write two other social responsibility related to that group.
13. State any three benefits of doing ethical business. 3

14. Define Business Ethics. Give any two examples. 3

15. A business is socially responsible towards the community to ensure that the environment is not 4
adversely affected by its activities. The quality of environment is deteriorating rapidly
particularly due to industrial activities. This damages the quality of land and makes it unfit for
agriculture or plantation. Running of factories and vehicles which is not only annoying, but also
causes serious health problems like loss of hearing, mental disorder, etc.
(a)Write any two roles of Business in Environment Protection.
(b)Write any two ways to protect the environment.
16. Oilseed Ltd. manufactures edible oil in Indian market and it occupies 70% market. In order to 4
increase sales of their product, they encouraged their salesman to make false claims to
customers about quality of their. The company also hires a superstar and claim the good quality
of product through advertisement to increase the sale of its product.
(a)Identify the group whose interest is being ignored by Oilseed Ltd.
(b)Write any three social responsibility related to that group
17. Explain briefly the different types of pollution. 4

18. Explain the role of business in environment protection.(any four) 4

Long Answer Type Questions (Case Study and Others)

19. Akash Ltd is a very reputed company of Mumbai dealing in Food product. The Company is not 6
involved any kind of illegal practices like black marketing or adulteration and charging fairly
from its customers and maintain quality .The company is treating everyone with respect and
dignity without discriminating on the basis of caste, creed, gender etc. It not only abide by all
the laws and pay taxes on time, but also make service and participate in social service projects.

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 The Company is ensuring the safety of investment and maximising the return to their
shareholders. The company is also running a school and college to provide free education to
the people of slum area. For this purpose Company is spending 2% of its average net profit for
the immediately preceding three financial years. In reality, business houses do not assume their
social responsibility on their own but due to threat of public action.
(1)The Company is not involved any kind of illegal practices like black marketing or
adulteration and charging fairly from its customers and maintain quality In the above lines,
identify towards which interest group company is fulfilling its social responsibility?
(a) Owners (b) Employees (c) Consumers (d) Investors

(2)The company is treating everyone with respect and dignity without discriminating on the
basis of caste, creed, gender etc.. Identify towards which interest group, company is fulfilling
its social responsibility?
(a) Government (b) Consumer (c) Community (d) Employees

(3)It not only abide by al

interest group company is fulfilling responsibility?
(a) Government (b) Consumer (c) Society (d) Employee
(4)The Company is ensuring the safety of investment and maximising the return to their
shareholders. In the above lines, identify towards which interest group company is fulfilling its
social responsibility? (a) Shareholders/owners (b) Community/society (c) Employees (d)
Government
(5) The company is also running a school and college to provide free education to the people
of slum area., identify towards which interest group company is fulfilling its social
responsibility?
(a) Shareholders (b) Community (c) Employees (d) Consumer

(6) For this purpose, Company is spending 2% of its average net profit for the immediately
preceding three financial years. Identify the concept is known as:
a. Business ethics
b. Financial Planning
c. Budgeting
d. Economic responsibility

20. Radheyshyam started a sugarcane factory in Moradabad two years back. He pays wages to 6
the male workers at a rate which is much lower than the minimum wage rate prescribed by
the government. The wages paid to the female workers are even lesser. He has also
employed child labour extensively in the factory to further reduce the labour cost. Moreover
the working conditions in the factory are inappropriate as there is lack of hygiene, proper

82
 ventilation, facility for safe drinking water etc. His business has always faced the problem of
shortage of labour since its inception.

In context of the above case:

(a)Radheyshyam has ignored his social responsibility towards which interest group?
(b)Why do you think it is important for a business enterprise to function in a socially
responsible way? Explain by giving any five suitable points.

[Link] for existence and growth: As business is apart and parcel of the society, it
must think of social obligations. It is expected to satisfy human needs by providing goods
and services.
[Link]-term Interest of the firm : It is in the long-term self -interest of the business to fulfill
its social responsibility towards various groups of society.
[Link] of Govt. Regulation: It is in the interest of businessman to voluntarily fulfill its
obligations to the society and avoid govt. intervention in the activity of business.
[Link] of Society: If the people related to a business feel that they are not getting
their dues, then they may re-sort to anti-social activities, This may be harmful for the
business, So,business enterprises must fulfill social responsibilities.
[Link] of resources with business: Business enterprises have considerable financial
resources which can be effectively used for solving social problems.

21. Explain briefly the need for pollution control. 6

22. Discuss the elements of business ethics. 6

ANSWERS:
Q. ANSWER(MCQ type Questions)
NO
1. (b) Measuring results

2. (b)Holding business responsible for social problems

3. (c) investors

4. (c )Long term interest

5. (b) Workers

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6. (b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of
Assertion (A)
7. d)All of these

8. (b) selling goods of good quality

9. (b)Involvement of employees

10. (b)Water Pollution

Answer of Short Answer Type Questions (Case Study and Others)

11. (a)Responsibility towards the shareholders or owners

(b)(i). Provide the shareholders with regular, accurate and full information about its working as well as
schemes of future growth
(ii) Provide true and fair pictures of financial position of business
12. (a)Responsibility towards the Employee
(b)(i). Good working conditions within the organization
(ii) Participation in management
13.
Benefits of doing ethical business:

( a)Ethical business is good business.

(b)It improves public image and support

(d)Leads to greater success

14.
Business Ethics:

It refers to the combination of moral principles, value and norms that govern the
business decisions and actions.

Exmples of Business Ethics

- Charging fair prices
- Using correct/accurate weights
- Giving fair treatment to all employees
- Avoiding adulteration, hoarding etc.

15. (a)Eco -friendly, low waste and clean technology for equipment used in such industries.

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 (b)The companies and industries should comply with the rules laid down by the government with
respect to prevention of environmental pollution
16. (a)The group whose interest is being ignored by Oilseed Ltd is Consumers.
(b)(i). The enterprise must take proper precaution against adulteration, poor quality, lack of desired
service and courtesy to customers, misleading and dishonest advertising.
(ii) Right of information about the product, the company and other matters having a bearing on their
purchasing decision.
(iii)No black marketing or adulteration to the product.
17.

Types of Pollution

Air Pollution

Carbon monoxide emitted by automobiles, smoke and other chemicals from

manufacture and pollutes the air & lowers its quality. It also created a hole in
the ozone layer leading to global warming.

Water Pollution
This is primarily from chemical and waste dumping into water bodies. This lead to death of several
animals and posed a serious threat to human life.

Land Pollution
Dumping of toxic wastes reduces the quality of land and making it unfit for agriculture or plantation.

Noise Pollution
Noise caused by the running of factories and vehicles create a serious health hazard such as loss of
hearing, malfunctioning of the heart and mental disorders.

18. Role of business in environmental protection (any four)

Most of the pollution is caused by business enterprises and therefore they should take the lead in
providing their own solutions to environmental problems. Some of the specific steps that can be taken
by a business are as follows.

8. A definite commitment by top management to systematically protect environment.

9. Involving all divisions and sections of employees in environmental protection.
10. Developing clear cut policies and programs with regards to quality, method and process of
production and disposal of waste.
11. Complying with laws of the land in relation to environmental protection.
12. Participation in government programs such as management of waste, forestation etc.

85
 13. Periodical assessment of pollution control programs of their own, with a view to improve
them.
14. Arranging educational workshops and training materials to share technical information with
everyone involved in pollution control.

Answer of Long Answer Type Questions (Case Study and Others)

19. (1)(c )Consumer (2) (d) Employees (3) (a) Government

(4)(a) Shareholders/owners (5)(b) Community (6)(a) Business ethics

20. (a)Radheshyam has ignored his social responsibility towards the workers.
(b)It is important for a business enterprise to function in a socially responsible way due to the
following reasons:
[Link] for existence and growth: As business is apart and parcel of the society, it must think
of social obligations. It is expected to satisfy human needs by providing goods and services.
[Link]-term Interest of the firm : It is in the long-term self -interest of the business to fulfill its social
responsibility towards various groups of society.
[Link] of Govt. Regulation: It is in the interest of businessman to voluntarily fulfill its
obligations to the society and avoid govt. intervention in the activity of business.
[Link] of Society: If the people related to a business feel that they are not getting their dues,
then they may re-sort to anti-social activities, This may be harmful for the business, So,business
enterprises must fulfill social responsibilities.
[Link] of resources with business: Business enterprises have considerable financial resources
which can be effectively used for solving social problems.

21.

Need for Pollution Control

To preserve precious environmental resources & improve the quality of

human life pollution control becomes essential. Let us
list out some reasons for pollution control.

86
 Reduction of health hazard
Pollution control measures can check diseases like cancer, heart attack & lung complications and
support a healthy life on earth.

Reduced Risk of Liability

When people are affected by toxicity released by any business, the business is liable to pay
compensation. If the business installs pollution control devices, it can escape from such a liability.

Cost Saving
Pollution control needs improved production technology which automatically reduces cost.

Improved Public Image

A firm that promotes the cause for environment will enjoy public confidence and good reputation.

Other social benefits

Cleaner buildings, cleaner roads, clearer visibility, better quality of life, availability of natural products
in a purer form are some of the other social benefits the society can get through proper pollution
control system.

22.

Elements of Business Ethics

Top Management commitment

Higher level managers need to be openly and strongly committed to ethical conduct. They should
continuously try and uphold the values of the organization and the society.

which

all dealings.

Establishment of Compliance Mechanism

Si
implementation at all levels & throughout the life of the business.

Involving employees at all levels

To make ethical business a reality, employees at all levels must be involved.

Measuring Results
Measuring the results of ethics programs maybe difficult but can have an audit at regular intervals to
monitor compliance with ethical standards and decide about further course of action.

87