SOCIAL RESPONSIBILITY

AND
BUSINESS ETHICS
• Business depends on the society for the needed inputs like men, material and labour.
They also depend on the society for selling their products.
• Thus, business depends on the society for existence, sustenance and encouragement.
Hence, business being so much depended on society has definite responsibility towards
the society.
Definition of social responsibility
According to Koontz and O’Donnell “social responsibility is the Personal obligation of
every one, as he acts in his own interest, to assure that the rights and legitimate interests of
all others are not infringed”.
In the words of Adolph Berle “social responsibility is the business’s responsiveness to
public consensus, i.e., the obligation of the business to meet those demands and aspirations
of the society about which there is public consensus”.
H.E. Bownen defines as “social responsibility is the obligation to pursue those policies,
to make those decisions or to follow those lines of action which are desirable in terms of
objectives and values of our society.”
• social responsibility implies responsibility of the entrepreneur towards smooth operation
of the society by efficient utilization of national resources for greater interest of the
people.
• To remain in business on a sustainable basis, an entrepreneur has to exercise his
responsibilities to the society in the following ways:
1. Responsibility of the entrepreneur towards conservation of national resources:
• The first and foremost social responsibility of an entrepreneur is to efficiently conserve
and utilize national resources for the public good.
2. Responsibility towards owners/shareholders:
• An entrepreneur is responsible to safeguard the capital invested by the shareholders and
the owners of the enterprise.
• He should ensure that they get adequate dividend from their investment.
3. Responsibility towards customers: An entrepreneur has to satisfy his customers by the
following two ways:
(i) Providing quality products to the customers
(ii) Charging reasonable and affordable price for the product
4. Responsibility towards employees: Social responsibility of an entrepreneur is to provide
adequate measures to make the employees contented in all respects so as to encourage
them to contribute their best. The responsibility of an entrepreneur towards the employees
may include the following:
(a) Providing at least minimum wages to the employees
(b) Providing conducive working environment for good work culture
(c) Provision of social security measures
(d) Granting weekly holidays
(e) Settling employees grievances
(f) Giving opportunity to employees participation and management
5. Responsibility towards creditor/banker: One of the most important social responsibilities
of an entrepreneur is responsibility towards creditors and bankers who provide financial
assistance. This responsibility includes the following:
(a) Regular repayment of principal and interest
(b) Effective utilization of funds
(c) Adhering to the repayment schedule without any default.
(d) Restricting diversion of loans to the uses other than the specific purpose for which it has
been advanced
6. Responsibility towards community: An entrepreneur should have the concern for
the community where the enterprise is located. The following are the responsibilities
of the entrepreneur towards the community:
(a) Generation of employment opportunities for local youth
(b) Prevention of environmental pollution
(c) Restricting the problem of congestion housing and crime in the community where
the enterprise is located
(d) Creating awareness about population pressure and the family welfare measures
(e) Reducing the deleterious effects of industrial products on human health and
environmental balance
(f) Reduction of illiteracy among the people, both for men and women.
7. Responsibility towards government: India is considered the largest democracy in the
world. Its policies aim at public welfare. In the country, the responsibility of the entrepreneur
towards the government includes the following:
(a) To pay taxes, duties in time and discourage tax evasion
(b) To comply with the government rules, procedures and legal requirements
(c) To support the socio-economic development policies of the government
(d) To work in close association with the government for social welfare.
8. Responsibility to uphold general values and philosophy of the country: In Indian context,
this includes:
(a) Respect towards ideologies of the society like democracy, freedom and tolerance
(b) Fair play in marketing and establishing enterprises
(c) Due respect towards secularism
(d) Emancipation of weaker sections of the society
(e) Empowerment of women in the society
(f) Highlighting technological dynamism
The following are the arguments cited against social responsibility:
• The concept of social responsibility is vague. It is difficult to distinguish it from economic
responsibility.
• Entrepreneurs and business managers are familiar with economic aspects of the activities.
They are not social scientists and, therefore, lack social skills.
• It would be unjust to overburden the businessmen since they have several economic
responsibilities like payment of tax, payment of tariff, etc.
• A social responsibility approach may not always be viable and hence be suicidal
in the long run..
• Business enterprises have hardly any social power. No responsibility can be accepted
without the necessary power.
• Private entrepreneurs are essentially responsible only to their shareholders.
• Social responsibility influences the decision-making process and would involve additional
cost.
• It would entail certain division of resources meant for economic activities
BUSINESS ETHICS: MEANING
• “Earning of profit cannot be the objective of a business any more than eating is the
objective of living”.
• A truly successful business can be built up only if the objective of service to community
is constantly kept in view. Then, profit will come automatically.
• Therefore, business ethics are of much importance to business.
• Business ethics refers to the moral principles which are considered right by the society,
and so; should govern and guide the activities of a business.
• They are the moral principles and rules of conduct which should guide the activities of a
business.
• Business ethics are derived from social values. They lay down the norms of behaviour
for the business.
• In short, business ethics is the study of good and evil, right and wrong, and just and
unjust actions of businessmen.
• The council for Fair Business Practices (CFBP) established in 1966, by leading private
sector industrialists in western India, have given certain ethics applicable to business. They
are
(1) To Charge only fair and reasonable price and take every possible step to ensure that the
prices to be charged to the consumer are brought to his notice.
(2) To take every possible step to ensure that the agents or dealers do not charge prices
higher than fixed.
(3) In times of scarcity, not to withhold or suppress stocks of goods with a view to hoarding
or profiteering.
(4) Not to produce or trade in spurious goods of standards lower than specified.
(5) Not to adulterate goods supplied.
(6) Not to publish misleading advertisements.
(7) To invoice goods exported or imported at their correct prices.
(8) To maintain accuracy in weights and measures of goods offered for sale.
(9) Not to deal knowingly in smuggled goods.
(10) Providing after-sales service where necessary or possible.
(11) Honoring the fundamental rights of the consumers like, Right of safety, Right to choose,
Right to information and Right to be Heard.
(12) Discharging social responsibilities and the responsibility to protect the environment and
nature’s infrastructure.
(13) Ensuring that the product warranty is offered in simple, unambiguous and concise
language, highlights the rights of consumer under it.
The CFBP has instituted a set of prizes and awards called ‘Jamnalal Bajaj Uchit Vyavahar
Puraskar’ to promote exemplary application of the above norms.
The Federation of Indian Chambers of Commerce and Industry has recently issued a
declaration of ‘Norms of Business Ethics’, which is almost identical to that of CFBP. The
Punjab, Haryana and Delhi Chamber of commerce has also lately formulated a ‘Code of
Ethics’ applicable to business. The code says -
(1) Business must maintain the highest standards of behaviour for the benefit of industry,
employees, customers, shareholders and the society.
(2) Goods and services must conform to the commitment promised to customers.
Business must be realistic and truthful in stating claims.
(3) Customers must be given best possible service and treated with respect and fairness.
(4) Business must understand and respect the needs, concerns and welfare of the
community and society. It should use knowledge and experience for upgrading the quality
of life. All business endeavours must combine the qualities of private excellence for public
good.
(5) The best way of promoting high standard of business practices is through self regulation.
Therefore, it is mandatory for all business firms to follows Business Ethics, which will
result in its own welfare.