L ECTURE -10-11 # S YNOPSIS

S O CI A L R E S P O N S I B I L I TY

OF

BUSINESS:

Social Responsibility of Business refers to management decisions and actions taken for reasons at least partially beyond the organizations direct economic or technical interest. It is the philosophy which justifies business involvement in its social community. Fact: Business is a major social institution. It is importantly involved with social values In the operation of pluralism-many groups influence business and in turn business influences them. Societys expectations of business are increasing dramatically-perhaps excessively. Business leaders need to develop value systems that recognize responsibilities to applicants other than stockholders.

E X PE CTA TI O N S

TO A N D F RO M

BUSINESS

AND

S O CIE TY :

Expectations of Business to Society: Rules and organizational boundaries, minimum standards, performance criteria must be clear. Make sure that rules and economically feasible(In case of higher price or tax payment) Make rules perspective not retroactive.( Retroactive means-Something that is applicable. Keep the rule within boundary. Business cannot do the impossible. Make rules goal seeking not following others rules or standards. Expectations of Society to Business: Availability, quality and Standard as declared. Reasonable price rate Buy raw materials from the society Resources used over time will not exploit. Employ societys unemployed persons.

 Will not engage in antisocial activities. Increase living standard Minimize environmental pollution Should develop social audits for organizational appraisal Introduce new technology Responsive to the public opinion Upheld unfair interests like harmful packaging, dumping etc Should maintain non-discriminatory employment policies Maintain proper aesthetic values.

A R G UM E N TS
In Favor:

F OR A N D A G A I N S T

S O CI A L R E S PO N S I B I L I TY :

1. Business creates problems and should therefore help solve them. 2. Corporations are citizens in our society. 3. Business often has the resources necessary to solve problems. 4. Business is a partner in our society, along with the Government and the general population 5. Business act to prevent creation of social problems. 6. May perform better to earn social image and status. 7. Talented managers and specialists may render better social work. 8. More innovative social ideas come from business. 9. High Image issue(will draw more customer) 10.Solving social problems may turn into blessings(Earn more) 11.Shareholders issue 12.External involvement makes a firm internally more efficient 13.Reduces need for involvement Against: 1. Social involvement may affect economic efficiency and reduces profit. 2. Involvement in social programs gives business too much power. 3. There is potential conflicts of interests 4. Business lacks the expertise to manage social problems 5. Social involvement raises cost per unit and thus increases prices 6. Raises costs of exported goods causing difficulty in foreign competition.

7. There will remain no social accountability. 8. Divergent viewpoint may cause social friction 9. Without expert skill standard quality of such services may be low 10.No legal sanction for diverting business resources 11.overlapping 12.political commitment 13.Measurement of social audit may be difficult.

C H E CK L I S T (W H A T

TO DO ):

Ecology and environmental quality 1.cleanupexisting population 2. Design of processes to prevent populations. Aesthetic improvements. Noise control etc

Minorities and disadvantaged persons Training of hard-core unemployed. Equal employment opportunities Operation of programs for alcoholics and drug addicts Employment of persons with prison records. etc

Consumerism Trust in lending, advertising Product warranty and service Control of harmful product Community Needs Solve community problem, urban renewal etc. Government Relation Restriction on lobbying Control of business political action Restriction on international operations Business Giving Financial Support Gifts to education

Labor Relation Ensure Daycare, maternity leave, employee rights, pension, safety issues Stock Holder Relation Opening for public groups Financial disclosure etc.

Unethical Practices requiring Managerial Attention: 1. Seeking preferential treatment through lavish (abundant)

entertainment. 2. Collusion in contract bidding, inferior workmanship or material. 3. Misleading and overstated advertisement. 4. Kick-back (Bribe) to the purchase department employees. 5. Obscene and demoralizing advertisement. 6. Undercutting 7. Pay-off the Government officials. 8. Price vary through favoritism 9. Unfair operation A recent survey of 2000 major US Corporations revealed that the following ethical problems concerned managers: 1. Drug and alcohol abuse. 2. Discrimination in hiring and promotion 3. Abuse of company expense accounts. 4. Conflicts of interest 5. Misuse of company assets 6. Employee theft. 7. Misuse of proprietary information 8. Plant closings and layoff 9. Quality control issues 10.Environmental pollution

Specific Types of Morally Questionable Acts: Type Non-role Direct Effect Against the firm Examples Expense account cheating Embezzlement(Misuse) Stealing supplies Bribery Price fixing Manipulating suppliers Superficial Performance appraisal Palming off poor performers with inflated praise Investing in prohibited areas Using Nuclear technology for energy generation Not withdrawing product line for inadequate safety.

Role distortion(lie)

For the firm

Role failure

Against the firm

Role Assertion(Declare)

For the firm

P A R TI E S

A FF E CTE D B Y

M A N A G E ME N T D E CI SI O N S :

Management decisions affect employees, customers, suppliers, competitors, investors etc. Employees: Workers were viewed as being similar to machines. Employers want lowest possible cost with highest possible productivity. Employees not only feel lack of pay good and minimum favorable working condition but also missed the opportunity to grow and achieve their full potential. Employees sometimes do not have the right to free speech and adequate privacy. Most employees expect to be able to say what they think about their jobs and companies without comeback being take action against them. There is a growing pressure for a company to demonstrate economic justification before such an action. There is a greater job security arise everywhere.

Customers: The attitude toward customers is changing too . Business has become increasingly conscious with the fair price, good quality and honest merchandising. There is a concept develops which is called Consumerism which refers to organized efforts to protect the users of various products from harmful or deceptive business practices. Suppliers: Ethical considerations also arise in relation to suppliers. The decision of one company to buy from another depends on price, quantity, suppliers, capabilities, shipping costs and similar factors. Unfavorable purchasing decisions can put a supplying company out of business. Competitors: The central problem of ethical competition is how to compete fairly without losing the aggressiveness and will to win needed for success. Investors and Creditors: Maximize profit priority is a big problem concern now a days. Creditors deserve protection from fraud and deception on the part of the borrowers who refuse to meet obligation

R E CO MM E N D ED Q U E S TI O N S D E CI S IO N S :

TO E N S U R E

E TH I CA L

M A N A G E ME N T

Have you defined the problem accurately? What situation demands? How did this situation occur in the first place? What are the historical events that lead this situation? To whom and to what do you give your loyalty as a person and as a member of the corporation? What do you want to accomplish in making this decision? How can you match the current result with your desired result? Whom could your decision or action injured? Can you discuss the problem with the affected parties before you make your decision? Are you confident about your position for longer period?

Could you disclose your decision with your boss, CEO, the board of directors, your family and society as a whole? What would this decision symbolize for others? Under what circumstances would you allow exceptions to your stand?