SOCIAL

RESPONSIBILTY
OF BUSINESS
AND
THE TRUSTEESHIP
PRINCIPLE

Manoj Khant(11012)
Raj Makwana(11014)
Hardik Parikh(11021)
Saumil Shah(11033)
Concept of Social Responsibility
 Definition
Social responsibility refers to the businessman’s decision and actions taken for
reasons at least partially beyond the firm’s direct economic or technical interest.

Profit making is not the sole function of business.

It performs a number of social functions, as it is a part of the society. It takes care of

those who are instrumental in securing its existence and survival like- the owners, investors,
employees, consumers and government in particular and the society and community in general.
So, every business must contribute in some way or the other for their benefit. For example,
every business must ensure a satisfactory rate of return to investors, provide good salary, security
and proper working condition to its employees, make available quality products at reasonable
price to its consumers, maintain the environment properly etc.

However, while doing so two things need to be noted to view it as social responsibility of
business. First, any such activity is not charity. It means that if any business donates some
amount of money to any hospital or temple or school and college etc., it is not to be considered
as discharge of social responsibility because charity does not imply fulfilling responsibility.

Secondly, any such activity should not be such that it is good for somebody and bad for
others. Suppose a businessman makes a lot of money by smuggling or by cheating customers,
and then runs a hospital to treat poor patients at low prices his actions cannot be socially
justified. Social responsibility implies that a businessman should not do anything harmful to the
society in course of his business activities.

Thus, the concept of social responsibility discourages businessmen from adopting unfair
means like black-marketing, hoarding, adulteration, tax evasion and cheating customers etc. to
earn profit. Instead, it encourages them to earn profit through judicious management of the
business, by providing better working and living conditions to its employees, providing better
products, after sales-service, etc. to its customers and simultaneously to control pollution and
conserve natural resources.

Why should business be socially responsible?

Social responsibility is a voluntary effort on the part of business to take various steps to
satisfy the expectation of the different interest groups. The interest groups may be owners,
investors, employees, consumers, government and society or community. But the question arises,
why should the business come forward and be responsible towards these interest groups.
 Let us consider the following points:

i. Public Image - The activities of business towards the welfare of the society earn goodwill
and reputation for the business. The earnings of business also depend upon the public image of
its activities. People prefer to buy products of a company that engages itself in various social
welfare programmes. Again, good public image also attracts honest and competent employees to
work with such employers.

ii. Government Regulation - To avoid government regulations businessmen should discharge

their duties voluntarily. For example, if any business firm pollutes the environment it will
naturally come under strict government regulation, which may ultimately force the firm to close
down its business. Instead, the business firm should engage itself in maintaining a pollution free
environment.

iii. Survival and Growth -Every business is a part of the society. So for its survival and growth,
support from the society is very much essential. Business utilizes the available resources like
power, water, land, roads, etc. of the society. So it should be the responsibility of every business
to spend a part of its profit for the welfare of the society.

iv. Employee satisfaction - Besides getting good salary and working in a healthy atmosphere,
employees also expect other facilities like proper accommodation, transportation, education and
training. The employers should try to fulfil all the expectation of the employees because
employee satisfaction is directly related to productivity and it is also required for the long-term
prosperity of the organisation. For example, if business spends money on training of the
employees, it will have more efficient people to work and thus, earn more profit.

v. Consumer Awareness - Now-a-days consumers have become very conscious about their
rights. They protest against the supply of inferior and harmful products by forming different
groups. This has made it obligatory for the business to protect the interest of the consumers by
providing quality products at the most competitive price.

Responsibility Towards Different Interest Groups

After getting some idea about the concept and importance of social responsibility of
business let us look into the various responsibilities that a business has towards different groups
with whom it interacts. The business generally interacts with owners, investors, employees,
suppliers, customers, competitors, government and society. They are called as interest groups
because by each and every activity of business, the interest of these groups is affected directly or
indirectly
i. Responsibility towards owners

Owners are the persons who own the business. They contribute capital and bear the
business risks. The primary responsibilities of business towards its owners are to:

a. Run the business efficiently

b. Proper utilisation of capital and other resources.

c. Growth and appreciation of capital.

d. Regular and fair return on capital invested.

ii. Responsibility towards investors

Investors are those who provide finance by way of investment in debentures, bonds,
deposits etc. Banks, financial institutions, and investing public are all included in this category.
The responsibilities of business towards its investors are :

a. Ensuring safety of their investment,

b. Regular payment of interest,

c. Timely repayment of principal amount.

iii. Responsibility towards employees

Business needs employees or workers to work for it. These employees put their best
effort for the benefit of the business. So it is the prime responsibility of every business to take
care of the interest of their employees. If the employees are satisfied and efficient, then the only
business can be successful.

The responsibilities of business towards its employees include:

a. Timely and regular payment of wages and salaries.

b. Proper working conditions and welfare amenities.

d. Opportunity for better career prospects.

e. Job security as well as social security like facilities of provident fund, group insurance,
pension, retirement benefits, etc.

f. Better living conditions like housing, transport, canteen, crèches etc.

g. Timely training and development.

iv. Responsibility towards suppliers

Suppliers are businessmen who supply raw materials and other items required by
manufacturers and traders. Certain suppliers, called distributors, supply finished products to the
consumers. The responsibilities of business towards these suppliers are:

a. Giving regular orders for purchase of goods.

b. Dealing on fair terms and conditions.

c. Availing reasonable credit period.

d. Timely payment of dues.

v. Responsibility towards customers

No business can survive without the support of customers. As a part of the responsibility
of business towards them the business should provide the following facilities:

a. Products and services must be able to take care of the needs of the customers.

b. Products and services must be qualitative

c. There must be regularity in supply of goods and services

d. Price of the goods and services should be reasonable and affordable.

e. All the advantages and disadvantages of the product as well as procedure to use the products
must be informed do the customers.

f. There must be proper after-sales service.

g. Grievances of the consumers, if any, must be settled quickly.

h. Unfair means like under weighing the product, adulteration, etc. must be avoided.
vi. Responsibility towards competitors

Competitors are the other businessmen or organizations involved in a similar type of

business. Existence of competition helps the business in becoming more dynamic and innovative
so as to make itself better than its competitors. It also sometimes encourages the business to
indulge in negative activities like resorting to unfair trade practices. The responsibilities of
business towards its competitors are

i. not to offer exceptionally high sales commission to distributers, agents etc.

ii. not to offer to customers heavy discounts and /or free products in every sale.

iii. not to defame competitors through false or ambiguous advertisements.

vii. Responsibility towards government

Business activities are governed by the rules and regulations framed by the government. The
various responsibilities of business towards government are:

a. Setting up units as per guidelines of government

b. Payment of fees, duties and taxes regularly as well as honestly.

c. Not to indulge in monopolistic and restrictive trade practices.

d. Conforming to pollution control norms set up by government.

h. Not to indulge in corruption through bribing and other unlawful activities.

viii. Responsibility towards society

A society consists of individuals, groups, organizations, families etc. They all are the members of
the society. They interact with each other and are also dependent on each other in almost all
activities. There exists a relationship among them, which may be direct or indirect. Business,
being a part of the society, also maintains its relationship with all other members of the society.
Thus, it has certain responsibilities towards society, which may be as follows:

a. to help the weaker and backward sections of the society

b. to preserve and promote social and cultural values

c. to generate employment

d. to protect the environment

e. to conserve natural resources and wildlife

f. to promote sports and culture

g. to provide assistance in the field of developmental research on education, medical

science, technology etc.

Following are the various responsibilities of business towards the different interest group as
discussed above.

i. Protection of environment.

ii. Better living conditions like housing, transport, canteen, crèches etc.

iii. Promotion of sports and culture.

iv. Opportunity for better career prospects

v. Regular supply of goods and services

vi. Proper working conditions and welfare amenities

vii. Goods and services at reasonable and affordable price.

viii. Prompt after sales services.

ix. Conservation of natural resources and wildlife.

Social responsibilty of business in India

It is not difficult to find the social missions that have become part of the culture of
Indian businesses. The social mission for Bharti Airtel, for example, was to get cell phones
into the hands of the hundreds of millions of people in India who otherwise had no way to
communicate with each other.

Tata Motors had a similar goal with respect to providing low-cost transportation in the
form of the Nano. The social mission of the pharmaceutical and healthcare company, Dr.
Reddy’s, is to address the unmet medical needs of the poor in India as well as around the
world. Hindustan Unilever’s “Project Shakti” uses microfinance principles to create a sales
force in the poorest regions of the country.
 ITC, a leading conglomerate, made the following statement in describing the
company’s purpose. “Envisioning a larger societal purpose has always been a hallmark of ITC.
The company sees no conflict between the twin goals of shareholder-value enhancement and
societal-value creation.”

These companies put their money where their mouths are with respect to mission. A
large proportion of the profits of the Tata Group companies, for example, go to its charitable
foundations and back into Indian society. The Godrej Group has constructed schools, medical
clinics, and living facilities for employees on a scale unknown in American companies. In
America, directors and executives are far more likely to see employee welfare as a drag on
shareholder value than an asset for company growth.

The list goes on. Dr. Reddy’s guaranteed to meet the healthcare needs of 40,000
children. Infosys has built and staffed entire hospitals, rolled out a nationwide curriculum for
school-age students (in part to improve its future applicant pool) and engaged in hundreds of
other social projects, all in the same year.

ITC developed a rural initiative called Mission Sunehra Kal that has reached five
million people using knowledge portals to help farmers to band together to negotiate with
suppliers, to find job opportunities for women and expand education. Virtually every major
Indian company has similar efforts under way. The focus on mission cuts across all types of
companies, those that are family-controlled, those that operate in international markets and
every other dimension examined.

For B. Muthuraman, the managing director of Tata Steel, efforts to aid the broader
community work wonders for Tata’s reputation. “Our history in corporate social
responsibility,” he acknowledged, “has enhanced the group brand.”

This brand building through community work has proven invaluable for recruiting and
retaining employees at Tata Steel and elsewhere. A recent study of employee turnover in India
found, for example, that the perception of a company’s social responsibility is one of the main
factors in retaining talent.

Acting responsibly may also pay off when dealing with regulators: Obtaining industrial
licenses and environmental clearance in India can depend on being known for public
responsibility.
 Mission as a business goal also affects relationships with customers. Individuals have
long memories and doing good things for people when they have no money can work to a
company’s advantage when those individuals do have money and are in the market for your
products. We also know that consumers care about the values of the companies with which
they do business – witness the current rush of companies touting their “green” environmental
practices. At least some substantial share of customers would rather do business with
companies that do good things for the community.

R. Gopalakrishnan, executive director of Tata Sons, said that he believed the Tata
Group was loved by the people in India, not just by their employees, for the contributions their
companies have made to Indian society.

While it is true that the social needs are greater in India than in most other countries,
the efforts of these companies to address them are nevertheless there for all to see.

The Indian operations of Coca-Cola, General Mills, Kellogg’s India, Nestle, Mars,
PepsiCo and Unilever in their “India Pledge”, as it is called, vowed not to advertise food and
beverage products to children under 12 on television, print or the Internet or in primary
schools. The pledge said they would advertise products that fulfill scientifically proven
“nutrition-based criteria,” meet accepted national and international guidelines or were
specifically requested by the schools or institutions concerned. The seven corporations said
they will also commission an independent compliance monitoring study starting next year.

A sense of social mission and purpose is one of many characteristics of the India way
that has resulted in the incredible success of Indian businesses throughout the years.
Companies such as Tata, Hindustan Unilever and ITC have proved that community
involvement does not have to be relegated to a side project, but rather can be the primary focus
for a firm and lead to not only a better community, but loyal customers and a reliable well of
future talent.

Arguments for and against Social Responsibility

Arguments for Social Responsibility

 Business which survives using the resources of the society has a responsibility to the
society

 Business which is an integral part of the social system has to care for the varied needs of
the society
  Business which is resourceful has a special responsibility to the society.

 Mutual benefit to both – business and society

 Favorable financial effect

 To discourage additional government regulation and intervention

 To create better public image

Arguments against Social Responsibility

 This is the role of Govt and Social Org.

 May adversely affect economic health of the company

 If the cost of social involvement is passed to Consumers … !!!

 Sometimes purpose is for TAX EXEMPTIONS

 Dominance of companies increases on society

Trusteeship Principle
Gandhi's Philosophy On Trusteeship
The concept provides a means of transforming the capitalist order of society into an
egalitarian one. It is based on the principles of ‘Aparigraha’(non-possesssion) and ‘Sambhava’
preached by the Gita.

Leveling Up, Down

Economic equality is the master key to nonviolent independence. Working for

economic equality means abolishing the eternal conflict between capital and labour. It means
the leveling down of the few rich in whose hands is concentrated the bulk of the nation’s wealth
on the one hand, and the leveling up of the semi-starved naked millions on the other.
 A nonviolent system of government is clearly an impossibility, so long as the wide
gulf between the rich and the hungry millions persists. The contrast between the palaces of New
Delhi and the miserable hovels of the poor, labouring class nearby cannot last one day in a free
India in which the poor will enjoy the same power as the richest in the land.

A violent and bloody revolution is a certainty one day unless there is a voluntary
abdication of riches and the power that riches give and sharing them for the common good.

I adhere to my doctrine of trusteeship in spite of the ridicule that has been poured
upon it. It is true that it is difficult to reach. So is non-violence. But we made up our minds in
1920 to negotiate that steep ascent. We have found it worth the effort.

Non-violent Way

By the non-violent method, we seek not to destroy the capitalist, we seek to destroy
capitalism. We invite the capitalist to regard himself as a trustee for those on whom he depends
for the making, the retention and the increase of his capital. Nor need the worker wait for his
conversion. If capital is power, so is work. Either is dependent on the other. Immediately the
worker realizes his strength, he is din a position to become a co-sharer with the capitalist instead
of remaining his slave.

If he aims at becoming the sole owner, he will most likely be killing the goose that
lays the golden eggs. Not need I be afraid of some one else taking my place when I have non-co-
operated. For I expect to influence my co-workers so as not to help the wrong-doing of my
employer. This kind of education of the mass of workers is no doubt a slow process, but as it is
also the surest, it is necessarily the quickest. It can be easily demonstrated in the end of the
worker and as no human being is so bad as to be beyond redemption, no human being is so
perfect as to warrant his destroying him whom he wrongly considers to be wholly evil.

Community Welfare

I am inviting those people who consider themselves as owners today to act as

trustees, i.e., owners, not in their own right, but owners in the right of those whom they have
exploited. It has become the fashion these days to say that society cannot be organized or run
on non-violent lines. I join issue on that point. In a family, when the father slaps his delinquent
child, the latter does not think of retaliating. He obeys his father not because of the deterrent
effect of the slap but because of the offended love which he senses behind it. That, in my
opinion, is an epitome of the way in which society is or should be governed. What is true of the
family must be true of society which is but a larger family.

Supposing I have come by a fair amount of wealth—either by way of legacy, or by

means of trade and industry—I must know that all that wealth does not belong to me; what
belongs to me is the right to an honourable livelihood, no better than that enjoyed by millions
of others. The rest of my wealth belongs to the community and must be used for the welfare of
the community. I enunciated this theory when the socialist theory was placed before the
country in respect to the possessions held by zamindars and ruling chiefs. They would do away
with these privileged classes. I want them to outgrow their greed and sense of possession, and
to come down in spite of their wealth to the level of those who earn their bread by labour. The
labourer has to realize that the wealthy man is less owner of his wealth than the labourer is
owner of his own, viz., the power to work.

In Practice

The question how many can be real trustees according to this definition is beside the
point. If the theory is true, it is immaterial whether many live up to it or only one man lives up to
it. The question is of conviction. If you accept the principle of ahimsa, you have to strive to live
up to it, no matter whether you succeed or fail. There is nothing in this theory which can be said
to be beyond the grasp of intellect, though you may say it is difficult of practice.

I am not ashamed to own that many capitalists are friendly towards me and do not
fear me. They know that I desire to end capitalism, almost, if not quite, as much as the most
advanced Socialist or even Communist. But our methods differ, our languages differ.

No Make-shift

My theory of ‘trusteeship’ is no make-shift, certainly no camouflage. I am confident

that it will survive all other theories. It has the sanction of philosophy and religion behind it. That
possessors of wealth have not acted up to the theory does not prove its falsity; it proves the
weakness of the wealthy. No other theory is compatible with non-violence. In the non-violent
method wrong-doer compasses his own end, if he does not undo the wrong. For, either through
non-violent non-co-operation he is made to see the error, or he finds himself completely isolated.

Acquisition of Wealth

Those who own money now, are asked to behave like trustees holding their riches on
behalf of the poor. You may say that trusteeship is a legal fiction. But if people meditate over it
constantly and try to act up to it, then life on earth would be governed far more by love than it is
at present. Absolute trusteeship is an abstraction like Euclid’s definition of a point, and is equally
unattainable. But if we strive for it, we shall be able to go further in realizing state of equality on
earth than by any other method.

It is my conviction that it is possible to acquire riches without consciously doing

wrong. For example I may light on a gold mine in my one acre of land. But I accept the
proposition that it is better not to desire wealth than to acquire it, and become its trustee. I gave
up my own long ago, which should be proof enough of what I would like others to do. But what
am I to advise those who are already wealthy or who would not shed the desire for wealth? I can
only say to them that they should use their wealth for service.

It is true that generally the rich spend more on themselves than they need. But this
can be avoided. Jamnalalji spent far less on himself than men of his own economic status and
even than many middle-class men.

I have come across innumerable rich persons who are stingy on themselves. For
some it is a part of their nature to spend next to nothing on themselves, and they do not think that
they acquire merit in so doing.

The same applies to the sons of the wealthy. Personally, I do not believe in inherited
riches. The well-to-do should educate and bring up their children so that they may learn how to
be independent. The tragedy is that they do not do so. Their children do get some education, they
even recite verses in praise of poverty, but they have no compunction about helping themselves
to parental wealth.

That being so, I exercise my common sense and advise what is practicable.Those of
us, however, who consider it a duty to adopt poverty and believe in and desire economic equality
may not be jealous of the rich, but should exhibit real happiness in our poverty which others may
emulate. The sad fact is that those who are thus happy are few and far between.
 A trustee has no heir but the public. In a State built on the basis of non-violence, the
commission of trustees will be regulated. Princes and zamindars will be on a par with the other
men of wealth.

The Choice

As for the present owners of wealth, they will have to make their choice between
class war and voluntarily converting themselves into trustees of their wealth. They will be
allowed to retain the stewardship of their possessions and to use their talent, to increase the
wealth, not for their own sakes, but for the sake of the nation and, therefore, without exploitation.
The State will regulate the rate of commission, which they will get commensurate with the
service rendered, and its value to society. Their children will inherit the stewardship only if they
prove their fitness for it.

Supposing India becomes a free country tomorrow, all the capitalists will have an
opportunity of becoming statutory trustees. But such a statute will not be imposed from above. It
will have to come from below.

When the people understand the implications of trusteeship and the atmosphere is
ripe for it, the people themselves, beginning with gram panchayats, will begin to introduce such
statutes. Such a thing coming from below is easy to swallow. Coming from above it is liable to
prove a dead weight.

Zamindars,Kisans

I am quite prepared to say for the sake of argument that the Zamindars are guilty of
many crimes and of omissions and commissions. But that is no reason for the peasant and the
labourer who are the salt of the earth to copy crime. If salt loses its savour, wherewith can it be
salted?…
 To the landlords I say that, if what is said against you is true, I will warn you that
your days are numbered. You can no longer continue as lords and masters. You have a bright
future if you become trustees of the poor Kisans. I have in mind not trustees in name but in
reality. Such trustees will take nothing for themselves that their labour and care do not entitle
them to. They then will find that no law will be able to reach them. The Kisans will be their
friends.

If the Zamindars really become the trustees of their Zamindari for the sake of the
ryots, there never could be an unholy league [between the two]. There is the difficult Zamindari
question awaiting solution…. What one would love to see is proper, impartial and satisfactory
understanding between the Zamindars, big and small, the ryots and the Governments, so that
when the law is passed, it may not be a dead letter nor need force be used against the Zamindars
or the ryots. Would that all changes, some of which must be radical, take place throughout India
without bloodshed and without force!

Practical Trusteeship Formula

Trusteeship provides a means of transforming the present capitalist order of society

into an egalitarian one. It gives no quarter to capitalism, but gives the present owning class a
chance of reforming itself.

It is based on the faith that human nature is never beyond redemption. It does not
recognize any right of private ownership of property except so far as it may be permitted by
society for its own welfare. It does not exclude legislative regulation of the ownership and use of
wealth. Thus under State-regulated trusteeship, an individual will not be free to hold or use his
wealth for selfish satisfaction or in disregard of the interests of society.

Just as it is proposed to fix a decent minimum living wage, even so a limit should be
fixed for the maximum income that would be allowed to any person in society. The difference
between such minimum and maximum incomes should be reasonable and equitable and variable
from time to time so much so that the tendency would be towards obliteration of the difference.
Under the Gandhian economic order the character of production will be determined by social
necessity and not by personal whim or greed.