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4-BUSINESS ETHICS &

CORPORATE GOVERNANCE.
CORPORATE SOCIAL
RESPONSIBILITY.

Social Responsibility of Business.


Need For Social Responsibility:
1) The Iron Law Of Responsibility: The Institution of Business Exists only
because it performs invaluable Service to Society.
) Society gives Business its charter to exist and that charter can be amended
or revoked anytime if it fails to live up to its expectations.
) Therefore, if Business intends to retain its existing Social Role and Social
Power, it must respond to Societys Needs constructively.
) This is called the Iron Law Of Responsibility, which is that in the Long
Run, those who do not use Power in a manner that Society considers
Responsible will tend to lose it.
2) To Fulfill Long Run Self Interest:
a business Organization most
sensitive to Community Needs would in its own interest, like to have a
Better Community, in which to conduct its Business.
) To Achieve that, it would implement Social Programs for Social Welfare.
) As a result of Social Improvements, Crimes will decrease and less money
will be required to protect property.
) Labor Recruitment will be easier, Turn Over and Absenteeism will be
substantially reduced.
) A Better Society would produce a Better Environment in which the
Business may aim at Long Run Profit Maximization.

Social Responsibility Of Business (Contd).


3) To Establish a Better Public Image:
) Each Business Organization must enhance its Public Image to secure
more Customers, Better Employees and Higher Profits.
) The Public Image Concept may be extended to the Accomplishment of
various types of Social Goals.
) If the Firm wants to capture a Favorable Public Image, it will have to
show that it also supports a number of Social Goals.
4) To Avoid Government Regulation Or Control: Regulation and Control by
Government are costly to any Business, both in terms of Energy and
Money and restrict its flexibility of Decision Making.
) Failure of Businessmen to assume Social Responsibility invites Govt to
intervene and regulate or control their activities.
) By their own Socially Responsible Behavior, they can prevent
Government Intervention.
5) To Avoid Misuse Of National Resources & Economic Power: Businessmen
command considerable Power over Productive Resources of a
Community. They are obliged to use these Resources for the common good
of the Society.
) They should not forget that the Power to command National Resources
has been Delegated to them by the Society to generate more Wealth for its
betterment.

Social Responsibility Of Business (Contd).


6) To Avoid Class Conflicts: Industrial Peace is a Pre-Condition for
Success of a Business.
) Trade Unions are becoming more and more Militant and demand
Social Welfare Measures, Better Wages, Better Working
Conditions etc.
) Businessmen must win over the Confidence of the Workers and
avoid violent Class Conflicts in their own interest.
7) To Convert Resistances Into Resources: If the Innovative ability of
a Business is turned to Social Problems, many resistances can be
transformed into Resources and the Functional Capacity of
Resources may be increased manifold.
) It should be recognized that Prevention is better than Cure.
8) To Minimize Environmental Damage: The Effluents of many
Businesses positively damage the surrounding Environment.
) They are Duty Bound to repair the Damage by recognizing their
Ecological Responsibility towards the Society.

Responsibility Of Business Towards Society


(Corporate Social Responsibility).

1)
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2)
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It is the Duty of Business to provide a fair return to the Shareholders, Fair


Working Conditions and Rewards to the Employees, Fair Deal to the
Suppliers, Fair Deal to Distributors/Dealers, Fair Deal to
Customers/Consumers and Fair Deal to Society and Nation.
Fair Return To The Shareholders: Management should provide Fair,
Adequate and Stable Long Run Rate of Return and steady Capital
Appreciation to the Shareholders for their Investments.
It must also provide them Regular, Accurate Information, about the
Working and Performance of the Company.
The Companys Dealings should be Transparent.
Fair Return and Treatment to Employees: The Company should provide
to the Employees the following:
Good Salary as per Industry Standards and Proportional to their
Performance.
Good and Clean Working Conditions.
Opportunities for Self-Development and Advancement/Promotions in
their Job.
Treat Employees with Respect.
No Racial or Sexual Discrimination.
Health Care Schemes.
Support for Education Of Children.
Training, Motivation, and Building Team Spirit.
Encourage Extra Curricular Activities like Sports, Arts ,Cultural
Activities etc.

Corporate Social Responsibility (Contd).


3) Fair Deal To Suppliers:
) Consider them as Partners in Business.
) Sharing the Prosperity and Encouraging/Supporting them to Grow with the
Company.
) Develop Long Term Mutually Beneficial Relations involving Trust and Integrity.
4) Fair Deal To Distributors/Dealers:
) Provide them Fair Discounts/Commissions/Rewards as per Industry Standards.
) Provide them Reasonable Terms and Conditions like, Terms of Payment, Credit
Facilities, Guarantee etc.
) Train their Mechanics/Salesmen.
) Do not take undue advantage of Your Companys Size, Reputation, and Position in
the Market.
) Provide Goods and Services of required Quality and Quantity at the Right Price.
5) Fair Deal To Consumers/Customers:
) Provide Goods and Services of Good and Required Quality at Reasonable Prices, as
and when required.
) Keep improving the Quality of Goods and Services and pass on maximum Benefits
to Customers.
) Introduce CRM and keep Customers fully Satisfied and Delighted.
) Never Cheat and Mislead a Customer.
) Provide Pre Sales, During Sales &After Sales Service Promptly.

Corporate Social Responsibility (Contd).


6)

Responsibility Towards Society: Businesses should actively


participate in Social Welfare Activities like the following:
Building and Running Hospitals.
Establishing Schools & Colleges for providing Education.
Running Old Age Homes.
Upliftment of Women.
Development of Rural Areas.
Building Temples, Churches, Masjids etc.
Encouraging Sports.
Maintaining Hygiene.
Sponsoring Scholarships.
Providing Drinking Water (Potable Water).
Providing Sanitation Facilities.
Creating Awareness and Prevention Of Aids.
Supporting Family Planning.
Providing Employment Opportunities, etc.

To Whom Are Companies Socially


Responsible?

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2)
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A)
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6)
7)

Total Social Responsibilities of a Firm are as under:


Economic Responsibilities.
Legal Responsibilities.
Ethical Responsibilities.
Discretionary Responsibilities ( Social Roles).
Moral Relationship Between Individual &Organization:
Individual:
Should not use his/her position in the Firm for Personal Gains.
Should not part with Companys Confidential Information to anybody,
specially Competitors.
Should take care of Companys Interest.
Should discharge his/her Duties to the best of his/her abilities.
Should not use Companys Stationary and other Facilities for Personal
use.
Should be Honest and Sincere.
Should maintain Companys good image and reputation while dealing
with outsiders.

Moral Relationship Between


Individual & Organization (Contd).
B) Company:
1) Should take care of the Individual in All Aspects.
2) If anything happens to the Individual, while on Official Duty, like
Accident/Death, Company should take care of the
Employee/Family.
3) Give Reasonable Salary and Perks on time in line with Industry
Standards.
4) Settle all dues on Retirement/on Leaving Services of the Company.
5) Give Respect as a Human Being.
6) Give Fair Rewards/Promotion based on Performance.
7) Do not Discriminate on grounds of Race & Sex.

Balancing Between Family And Office.

Balancing well between Family Life and Office Work is very important,
but not easy.
The Thumb Rule is that do not try to succeed in One at the expense of the
Other.
Some highly ambitious Executives totally neglect their Family and totally
focus on how to progress in their Career.
When they really reach the top in their Career, they find that their Family
Lives are totally ruined-Children have become Drug Addicts and Wives
have left them.
Then, they keep repenting-Was all excessive effort/focus on Office Work
really worth? So it is absolutely necessary to strike a Judicious Balance
between Family and Work.
Organizations have a Moral Responsibility towards the Employee and his
Family. Organizations should not push the Employee beyond a certain
limit, for the benefit of the Company at the expense of his Family Life and
his Family Members.
Family Get-Together of Employees should be arranged by Companies
and should take such opportunities to enquire about the Welfare of all
family Members to ensure that all is well.
This will improve the Team Spirit among Employees and the whole
Company will work together like a well knit family.