Module-3

Social responsibility of business

Meaning of social Responsibility

• Adolph Berle : The manager's responsiveness to public consensus.

• Keith Davis : The term "Social Responsibility" refers to two types of

business obligation

a) The socio-economic obligation

b)The socio-human obligation
Origin & growth of concept
• Welfare State

• Growth of Democracy & human dignity

• New policies- for aged, compensation for disablement at work,relief

during sickness & wage legislation
Different views of social
responsibility
• Communist view

• Capitalist view

• Pragmatic view

• Trusteeship view
Social Responsibility of Business Towards Different Groups

Govt Share holder

workers Employees

Business man

consumers Community

other business
Towards the consumer and the
community
1)Production of cheap and better quality goods and services by developing new
skills, innovation and techniques, by locating factories and markets at proper place.

2) Levelling out seasonal variations in employment and production though accurate

forecasts, production scheduling and product diversification.

3) Deciding priorities of production in the country's interest and conserving natural

resources.

4) Honoring contracts and following honest trade practices.

5) Making real consumer needs as the criterion for selecting message to be given by
product advertisement.

6) Providing for after-sale servicing.

7) Achieving better public relations.

8) Ensuring hygienic disposal of smoke & waste
Towards Employees and workers

1) A fair wage to the workers.

2) Social security measures and good quality of work life.

3) Just selection, training and promotion ( without any
discrimination on ground of sex, race, religion and physical
appearance).

4) Increase in productivity and efficiency by recognition of merit,

by providing opportunities for creative talents and incentives.

5) Good human relations ( i.e, maintaining industrial peace,

educating workers to produce their own leadership and
6) Freedom,self respect & self realisation

7) Increase in productivity & efficiency by recognition of merit,

Towards shareholders and other
Businesses
1) Promoting good governance through internal accountability and
transparency.

2) Fairness in relations with competitors. Competition with rival

businessman should always be fair and healthy, based on rules of
ethics and fair play rather than on rules of warfare.
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 provide safeguard against errant business practices.

c) To allocate limited resources according to social priorities and preferences.

d) To enforce distributive Justice, especially to weaker sections of the community.

e) To implement rural uplift and secure balanced development of the country.

f) To bring about harmony between a ltd. Enterprise interest & the wider social
interest of Country.

g) To compel business to play fair to all participants in the economy.

h) To prevent exploitation of the weaker partners in business-minority

shareholder

i)To enforce max production according to the priority of sectors & production lines
laid down by the Govt.
Social audit:
• A social audit is a systematic study and evaluation of the
organisation’s social performance as distinguished from its economic
performance.
• The term “social performance” Refers to any organisational activity
that effects the general welfare of society.
Benefits of Social audit
• It supplies data for Comparison with the organization’s social policies and
standards. The management can determine how well it is living up to its
social objectives.
• It develops a sense of social awareness among all employees.
• It provides data for comparing the effectivness of different types of
programs.
• It provides data about the cost of social programs, so that the management
can relate this data to budgets, available resource, company objectives, etc.
• It provides information for effective response to external groups which
make demands on the organisation.
Limitations of social audit
Social audit is a process audit rather than an audit of results. It determines only what an
organization is doing in social areas and not the amount of social good that results from
these activities.
This audit of social results is not made because:-
• They are difficult to measure.
• Their classification under “good” Or “bad” Is not universally accepted.
• Most of them occur outside the organisation, making it difficult for the organisation to
secure data from the outside sources.

Social audits can be made either by internal experts, outside consultants. Or combination of
the two.

The Tata Iron and Steel Company is the first industrial organisation in India to have
carried out a social audit of its performance in 1979.
Business Ethics :
Business ethics is the application of moral principles to business
problems. However, ethics extend beyond the question of legality and
involve the goodness or badness of an act. Therefore, an action may be
legally right but ethically wrong.
Sexual harassment, discrimination in pay and promotion and the
right to privacy are some other issues specially relevant to the study of
ethics.
Factors from which manager
decides what is ethical or
unethical
• Government legislation.
• Business codes .
• Pressure groups.
• Personal values of manager himself.
Ethics and corruption in international Business:-
• Smuggling.
• Money laundering.
• Piracy and counterfeiting.
• Bribery.
Corporate Governance
The term “corporate governance” Is used to denote the extent to which
companies run in an open nd honest manner in the best interest of all
stake-holders.
The key elements of good corporate governance are transparency
and accountability projected through a code which incorporates a
system of checks and balances between all key players.
Benefits of good corporate
Governance
• It creates overall market Confidence and long –term trust in the
company.
• It leads to an increase in company’s share prices.
• It ensures the integrity of company’s financial reports.
• It maximises corporate security by acting as a whistle blower.
• It limits the liability of top management by carefully articulating the
decision-making process.
• It improves strategic thinking at top.
Corporate governance in India
The Securities and Exchange Of India (SEBI) monitors Corporate governance of
listed Companies in India through clause 49.
All listed Companies have to comply with the provisions of this clause which are:-
• 50%of the board should consist of independent directors if the company has an
executive chairman.
• In case of non –executive chairman, one-third of the board should consist of
independent directors.
• A shareholder with more than 2% shareholding, a former executive who left
company less than 3 years ago, a partner of current legal, audit, and consulting
firm are not qualified to act as independent directors.
• The CEO and CFO should certify the financial statements.
• The world council has instituted in 2001, The Golden Peacock award to foster
competition among companies to improve their quality in corporate goverence
• India has several bodies to rate the companies credit worthiness-
CRISIL,CARE,ICRA
Need for a corporate whistle
blower
protection act
• Whistle blower is a person who expose information within
organisation that is illegal, unsafe, or fraud.
• Whistle blowers has killed in past out many years.
• We can have a whistle-blower protection Act , To promote the Good
and transparent Corporate governance in Our country.