Corporate Social Responsibility

The concept of social responsibility is not new, although the idea was already considered in early part of the 20th century but modern approach of social responsibility is getting more important. According to Howard Bowen social responsibility is what businesses should consider the social implications of their decisions. Corporate social responsibility involves serious considerations of the impact of the company s actions on society.

Social Responsiveness
A newer concept, but still very similar to social responsibility is social responsiveness that simply means the ability of a corporation to relate its operations and policies to the social environment in ways that are mutually beneficial to the company and the society.

Views on Social Responsibility
According to K.R.Andrews, social responsibility may be taken to mean intelligent and objective for the welfare of the society that restrains individual as well as corporate behavior from ultimately destructive activities. According to Keith Davis, social responsibility begins where the law ends. A firm is not being socially responsible if it merely complies with the minimum requirements of law because is what any good citizen would do.

Social responsibility means that organizations have significant influence on the social system and that this influence must be properly considered and balanced in all organizational actions. It simply means that business organizations must function as a part of larger social system because they are, in fact, a part of that system.

The Need for Social Responsibility
The Iron Law of Responsibility : The institution of business exists only because it performs invaluable service for society. Society gives business its charter (legal permission) to exist and that charter can be amended or cancelled at any time if it fails to fulfil the desired expectation of the society therefore business must respond to society s needs constructively. This is known as iron law of responsibility. To Fulfill Long-Run self-Interest: A business organization which is most sensitive to community needs its own self interest, like to have better community to conduct business. To achieve that, it would implement special programmes for social welfare. As a result of social improvement less money will be required to protect property, Labour recruitment will be easier, turnover and absenteeism will be reduced. A better society would produce a better environment in which the business may aim at long-run profit maximisation.

To Establish a better public image : each business organisation must enhance its public image to secure more customers, better employees and higher profit. And this can be done by accomplishment of various types of social goals. To Avoid Government Regulation or Control : Regulation and control by a third governing body are costly for business, both in terms of energy and money because they restricts its flexibility of decision making. Failure of business to fulfill social responsibility invites government bodies to intervene and regulate their activities and business can only prevent this intervention only by Socially responsible behaviour.

To Avoid Misuse of National Resources and Economic power: Business command considerable power over the productive resources of the community so they are obliged to use those resources for the common good of society . They should not forget that the power to command national resources has been given to them by the society to generate more wealth for its betterment. They must honour social obligations while using the delegated economic power otherwise the society will not tolerate their misdeeds in wasting these national resources. To Avoid Class conflict: Industrial peace is a precondition for the success of business. Trade unions are becoming more millitant and demand social welfare measures, better wages, better working conditions etc. so business must win over the confidence of workers to avoid violent class conflicts in their own interest.

To avoid resistances : If the innovative ability of a business is turned to social problems, many resistances can be occurred and the functional ability of resources may be decreased so business has maintain a balance between its innovation & Social responsibility. To minimize Environmental damage: The effluence of many businesses directly damage the surrounding environment so they are duty bound to repair the damage recognising their ecological responsibility towards society.

Responsibility of business towards society
According to Earnest Dale a business is responsible for its actions & decisions towards: Owners of business (shareholders). Employees. Consumers. Stakeholders (Suppliers, partners etc ). Government. Surviving Community. Business competitors. Our Self.

Towards Shareholders : The business must maximize the profit of the owners and stable long-run rate of return and safe their investment and provide true information about business timely. Employees : Employee need security of job, higher wages, full employment, better working conditions, opportunities for self-development and promotion. They also want good HR policies and Reward system so the business must provide these facilities based on their functional Record.

Consumers : In words of Henry ford, Business must provide those goods and services of good quality that the society needs at a price that the society can afford to pay. It should maintain regular supply of higher demanded products & services and to avoid adulteration, poor quality, lack of service ,misguiding customers, dishonest advertising and it must respond to the complaints of customers carefully & efficiently.

Stakeholders : Business must be loyal towards suppliers & partners and to maintain a proper balanced competition among them, it must pay them at the committed time for their goods & services and always try to get quality goods from them. Government : A business must obliged towards the government for providing the charter to regulate properly so it must pay all the taxes within time, and regulate the business with rules, regulations & policies.

Surviving Community :Surviving community is the place where the business is located so it is the responsibility of business to prevent the pollution, maintain the balance between social culture of the community & business actions, to participate & conduct activities which are in the welfare of the society. Business Competitors : business have to maintain a healthy competition with competitors and avoid cut-throat practices, not to involve in bad practices to dispromote the product & services of other businesses. Our-self : Apart from external factors, business must be responsible for its own actions and strategies i.e. it must Scan its working environment, Management & controlling strategies etc and the use of resources in an efficient way.

Social responsibility is a business s obligation to do work for the benefit of the society & to protect its own existence and rights. According to the shareholder model , the only social responsibility of business is to maximize the profit. According to stake holder model , companies must satisfy the needs and interests of multiple corporate stakeholders, not just shareholders. However the needs of primary stakeholders, on which the organization relies for its survival, take precedence over those of secondary stakeholders.

Companies can provide best benefit their stakeholders by fulfilling their Economic, legal, ethical and discretionary responsibilities.
Total Corporate social responsibility
Economic Responsibility

Legal Ethical Responsibility Responsibility


Economical and legal responsibilities play a larger part in a company¶s social responsibility more than ethical & discretionary responsibilities.

Economic responsibility is related to the revenue generation & profit maximization. Legal responsibility is the expectation that that companies will obey a society s laws and regulations as they try to meet their economic responsibilities. Ethical responsibility is society s expectation that organizations will not violate accepted principles of right & wrong while conducting their business. Discretionary responsibilities are related to the social roles that business play in society beyond their economic, legal and ethical responsibilities and are voluntary i.e. companies will not be considered unethical if they do not perform them.

Individual Responsibility
What is individual responsibility? As related to business conduct, individual responsibility involves two duties. The first is the duty to be accountable. The second duty is for ethical behavior. A company is ethical because its people directors, officers, and employees are ethical as individuals. When the number of ethical individuals in a company reaches a critical mass, they create a culture that nurtures ethical behavior. A culture can be so sick that it corrupts or at least suppresses ethical individuals. In a sick company, an individual has a duty to resist such corruption or suppression. In a healthy company, an individual has a duty to nurture and protect ethical behavior.

The leaders, especially the senior leaders, almost always have a dominant effect on a company s culture. And so leaders have a special responsibility to embrace and act upon these duties. Every day a senior corporate executive is under enormous pressure to see that his company makes its numbers. he confronts many difficult choices, any one of which could make or break the numbers. Each of her decisions could sets the boundary between what is legal and illegal, ethical and unethical. he knows that if her company does well, he will do well, but his primary objective is the success of his company. he is loyal to his company, to its employees and customers. he wants to do a good job for them and, in doing that, he wants his company to be profitable for its investors. he is always mindful of his fiduciary responsibility.

Forces That Work Against Ethical Behavior
The first force is the use of warfare as a business model. The second force is the struggle for competitive advantage. The third force is the nature of shareholder ownership. The fourth force is the necessity to act without complete information. The fifth force is the limits of economic analysis. The sixth force is that good decisions can have mixed results.

Ethical conduct involves much more than simply a philosophical consideration of what is the right way to behave. It involves much more than simply putting words on paper in a corporate value statement or a code of ethics We don t say that our corporate executive is ethical simply because he knows the difference between right and wrong. We say he is ethical when we observe that he can be depended upon to always do the right thing.

Our corporate executive always keeps these four lessons in mind:
1. Ethical behavior does not guarantee profitable results and 2 it doesn t prevent unprofitable results. 3. The corollary is also true: Profitable results do not prove ethical behavior and unprofitable results do not prove unethical behavior. 4. Ethical behavior is good for its own sake.

Individual Corporate Responsibility
The social responsibility of a businessman towards government demand that: He will be a law-abiding citizen. He will pay his dues and taxes to the government honestly and promptly. He will not corrupt public servants and the democratic processes for his selfish ends. He will not purchase political support by unfair means. He will sell his commodities and services without adulteration. He will maintain fair trade in advertising & promoting their services.

Individual Work Ethos
Individual work ethos refer to certain norms of behaviour governing the conduct of workers involved in work situation to achieve certain objectives Work Ethics will be different at different levels: 1) At a basic level it is about discipline , i.e., to maintain punctuality, coming to work on time, behaving properly with superiors, colleagues and subordinates and not wasting time during working hours.

2) At the top level, it is about commitment and accountability, to feel responsible for the task assigned to him. 3) Protecting the interest of the organization. No employee should make any adverse comments about the organization in public 4) To perform one s jobs with devotion. The worker should contribute his best to the organization

Work ethos is also concerned with a worker s loyalty and sense of belonging to the organization. A employee is involved in an organization with 4 P s of Ethics, i.e. Pay, prospect, promotion & performance and ethical value system says that through good performance an employee should receive pay, prospect & promotion.

Corporate Excellence
In the new millennium, every element of business environment has been changing. This transformation may be the result of economic liberalization, privatization & globalization . In the process of this transformation, every organization started searching for new ways and means of achieving excellence. It is clear that mere Financial performance can't be a basis for measuring company's excellence.

Corporate Excellence (contd..)
Any corporate worth its name should not bask in past success, as past success is no guarantee for continued and future success. Past success only increases expectations and therefore any management has necessarily to strive harder and harder to meet challenges and to emerge continually successful. Past success is static success and managements should pursue the path of dynamic success. Ethics of success is important for dynamic success. Ethics of success is entwined in corporate governance.

Corporate Excellence (contd..)
Corporate Excellence is defined as the ability of the company to outsmart Competitors consistently over a long period of time. In this context, successful organizations are different from excellent organizations. Success may be of one dimensions but excellence is of multiple dimensional in the company . In the everchanging business environment, the following are the critical areas that facilitate the company to achieve excellence.

BUSINESS PROCESS REENGINERING:As the business scenario is fast changing day by day, to meet the ever-changing demands of the market the organizations need to restructure & redesign their Business processes. The BPR facilities sweeping changes in all the functional areas of the organization. It reinvents the way the business is carried out, and ultimately helps the company to engender corporate excellence CRM (CUSTOMER RELATIONSHIP MANAGEMENT): In the process of achieving corporate excellence in the present day highly competitive market, the organizations ability to compete depends on its relationship with its target customers. The basis for continuity of relation between the company and the customer, over a period & time is value maximization to customers, which will lead to customer loyalty. In an attempt to achieve corporate excellence the organizations should try to develop strong Customer Relationship Management.

CORE COMPETENCE: A unique strength either in technology or in the processing of functional areas, that an organization enjoys exclusively and which can't be copied by the competitors is called Core Competence. This unique strength helps the company to get competitive advantage over a long period of time, which in turn facilitates the company to excel. Core competencies contribute significantly to customer benefits and satisfaction, which is a primary aim of any business. Core competencies help the firm in a multifaceted manner. A company can achieve competence superiority only by means of core competence, and it will lead to corporate excellence e.g. : china got core-competence & dominant position by designing low cost electronic goods. RESOURCE UTILIZATION: Excellence in organization can be achieved through proper utilization of the basic Human, Physical & financial, resources. New and advanced technologies have to be adopted in all the functional areas like production, marketing, finance, HRD, of the organization. Organizations need to strengthen their Research and Development departments in order to embrace latest technologies.

GROWTH SUSTAINABLE DEVELOPMENT: The corporate objective of mere growth may just lead to maximization of sales Revenue or profits, which don't help the organization to be excellent. Many organizations are growing at a rapid speed, but they failed to develop consistently. Hence the companies need to redefine their objectives towards sustainable development. USE OF E-COMMERCE: As the competition in business area is growing rapidly the business organizations started redefining their business activities. According to Fortune Magazine "Electronic Commerce is the new industrial order. It will change the relationship between consumers & Producers. As Electronic Commerce involves the exchange of products, Services, and information of payment through the electronic medium of computers & networks, it facilitates the continious relation between the company and the customer, which is a pre requisite for a company to excel

SOCIAL CONSCIOUSNESS:Organizations can achieve corporate excellence by means of contributing to the well being of the society. As the customers are becoming aware of the cause and effect of polluted environment, all the business firms should have a concern for society, by introducing ecologically friendly products or services. Many companies in India are redesigning their business activities, giving importance to society and are launching NonGovernment Organizations. Example :- Satyam Computers of Hyderabad started Byrraju Foundation, which is specialized in the field of rural development. Emergency ambulance services by the name 108 has been a mega hit in various districts of Andhara Pradesh. Dr. Reddy's Laboratories of Hyderabad floated Dr. Reddy's Foundation in field of youth welfare and development.

BUSINESS ETHICS :In order to achieve excellence, the companies should have basics positive values and attitudes. Ethics deals with what is wrong and what is right in various disciplines of the organization. Unethical practices may yield short term gains but organization can't be successful in the long run. The organization should develop and formulate the right approaches and strategies to excel. Because it is to be noted that being right in ethical behavior always pays off. EXCELLENCE THROUGH MANUFACTURING :In the manufacturing area, some new concept called World Class Manufacturing ( WCM ),CAD,CAM,CASE,TQM has emerged recently. The companies adopting these technology are able to introduce the products and services very much closer to the needs and wants of the costumer. This helps the company to be successful because these technologies have the following characteristics I). Products of high quality II.) Products with enhanced features III.) Products at the right price.

EXCELLENCE THROUGH MARKETING MIX :In the ever changing, highly competitive business field new directions have to be shown in order to strive & ultimately to achieve corporate excellence. All organizations, irrespective of the product they offer and the service they provide are always in search of achieving excellence. The basic area of concern to accomplish corporate excellence is effective management of Marketing Mix (4 P s of marketing) of the company. Innovation in product attributes, reasoning in prices, wide spread & easy reach in placing, the right distribution networks, objective in promotion, are the fields that a firm seeking excellence should concentrate on. EXCELLENCE THROUGH HRM:Among all the organizational resources, the human resources are the most vital and require constant refinement. Organizational objectives and strategies must match with HR strategies. Since the change is the fundamental element in achieving corporate excellence, change management is to be backed by human resources of the firm. The change can be facilitated by means of HR activity- Training. Hence the training programmes in the new age business organizations should focus on - Team work, leadership, initiation, interpersonal communication.

Key Characters for achieving moral corporate Excellence

A Vivid Shared Vision
A meaningful common purpose that the team has helped shape. Most teams are responding to an initial mandate from outside the team. But to be successful, the team must own this purpose, develop its own spin on it, and they must create this vision together as a team.

Clear Measurable Goals
Specific performance goals that flow from the common purpose. For example, getting a project completed in less than half the normal time. Compelling goals inspire and challenge a team, give it a sense of urgency. They also have a leveling effect, requiring members to focus on the collective effort necessary rather than any differences in title or status.

Competence + Diversity
A mix of complementary skills. These include technical or functional expertise, problem-solving and decision-making skills, and interpersonal skills. Successful teams rarely have all the needed skills at the outset they develop them as they learn what the challenge requires.

Individual greatness leading to team excellence

Solid Work Ethic
A strong commitment to how the work gets done. Teams must agree on who will do what jobs, how schedules will be established and honored, and how decisions will be made and modified. On a genuine team, each member does equivalent amounts of real work; all members, the leader included.

Team Trust
Mutual accountability. Trust and commitment cannot be coerced. The process of agreeing upon appropriate goals serves as the crucible in which members forge their accountability to each other not just to the leader.

You must Consistently Communicate that you are Competent and that you truly Care about the Team

o n c e r n





John Spence Team Model

D irection vivid, clear, inspiring, shared M easurments specific, observable Competence good at what they do C ommunication (C.C.C.C.T.) M utal Accountability all team members D iscipline do this every day
Courage Candid Clarity Consistency Timeliness

Managing Organization Performance to achieve excellence
Establish a sense of urgency, demanding performance standards and a clear direction. Select members for skill and skill potential not just personality. Set clear rules of behavior and very high expectations. Pay particular attention to meetings and actions. Challenge the group regularly with fresh facts and information. Spend lots of time together in team. Exploit the power or positive feedback.

Corporate governance
Corporate governance is concerned with the establishing of a system whereby the directors are entrusted with responsibilities and duties in relation to the direction of corporate affairs. It is concerned with accountability of persons who are managing it towards stakeholders. It is concerned with the morals, ethics, values, parameters of conduct and behaviour of the company and its management. Corporate governance is nothing but a voluntary ethical code of business of companies. This is based on the core values of the top management and the guiding principles that emanate from it.

According to the Cadbury committee on financial aspects of CG, corporate governance is the system by which companies are directed and controlled. The board of directors is responsible for the governance of the company. The directors and the auditors are to satisfy themselves that an appropriate governance structure is in place

Adherence to good governance practices enhances the efficiency of corporate sector in the following manner. 1. Good governance provides stability and growth to the companies. 2. Good governance system, demonstrated by adoption of good corporate practices, builds confidence. 3. Effective governance reduces perceived risks, consequently reducing cost of capital. 4. In the knowledge driven economy, excellence icon skills like management will be the ultimate tool for corporate houses to leverage competitive advantage in the financial market. 5. Adoption of good corporate practices promotes stability and longterm sustenance of stakeholders' relationship. 6. A good corporate citizen becomes an icon and enjoys a position of pride. 7. Potential stakeholders aspire to enter into a relationship with enterprises whose governance credentials are exemplary.

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