4.

0 Corporate Social Responsibility

Lecture Objectives
 To appreciate the concept of corporate social
responsibility
 To learn about the importance of corporate social
responsibility
 To be able to make rational decisions

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Corporate Social Responsibility
1. The concern of the organization for the welfare of
the society as a whole
2. A concept whereby organizations consider the
interest of the society by taking responsibility for
the impacts of their activities on customers,
employees, shareholders, communities, other
stakeholders as well as the environment
3. Social responsibility of corporations means that the
objectives of a corporation should be redefined
except for the maximization of profit

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 Traditional View of Corporate
Responsibility

 In the words of Friedman “ Business’s

business is business”
 Friedman argues that profit earned by
business belongs exclusively to shareholders
 Primary purpose of a business is to maximize
profits

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Modern View of Social Responsibility

 A business is not an end in itself but a means

to an end
 The end is man, be it worker, customer or any
member of the society
 Business is a social and economic institution
that can not live in isolation
 Businesses must not only maximize profits but
contribute something towards solving
problems being created by them
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Corporate Social Responsibility ensures
that:

- Organizations can increase profits as long as

they stay within the rules of the game
- Need to balance social responsibility and
profit
- Action taken showing concern for the society
- Being mindful of other stakeholders

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Major Areas of Social Responsibility

1. Employees
2. Customers/Consumers
3. Shareholders
4. Community
5. Inter-Business
6. State
7. Natural Environment

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 Employees

 Basic responsibility of business is to produce wealth

and also to provide opportunities for meaningful
work
This means for employees
 Fair wage
 Equality of employment
 Conducive work environment
 Protection of human rights

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 Customers/Consumers

Customer satisfaction is the ultimate aim of all economic

activity.
 Fair price
 Superior quality
 Superior service
 Superior product design
 Quick and complete information
Consumers have four basic rights

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 Shareholders

 Fair dividend
 Efficient business
 Optimum use of resources
 Planned growth
 Effective communicate
 Shareholders at AGM should question Board of
Directors of business performance
 Encourage responsible policy formulation of
organization

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 Community

 Business owes great responsibility to the community

and needs to contribute towards community welfare
 The part and parcel of institutions, groups and
individuals are vital for the business
 The need to provide basic services and facilities to
better community livelihood
 The need to provide awareness and education

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 Community

Certain areas of consideration

 Community welfare service
 Employment without discrimination
 Business morality
 Infrastructure development
 Communal harmony

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 Inter-Business

The social responsibility of business includes a healthy

cooperative relationship between different businesses
 Fair competition
 Cooperation for sharing of scarce resources and
facilities
 Collaboration for maximum business efficiency

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 State/ Nation

State being the mouth piece of the citizens allows

business to operate
 Payment of taxes and custom duties
 Abide by the laws
 Observe the policies
 Maintain law and security
 Support in government initiatives for common good

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 Natural Environment

1. The environment comprises of all the elements that a

business operation interacts with when in the process
of producing goods and services to make a profit
2. The natural environment is an important element that
a firm’s activities can cause imbalance in the nature
that can affect the quality of human life
3. Resources are longer unlimited as was the perception
of the past and it becomes necessary for additional
restrictions be applied

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 Natural Environment Cont..

1. Both welfare and equality of rights now require that

natural resources not to be used simply according to
personal profits but public good must be taken into
account
2. Access to livable environment must be conceived as a
right which imposes upon everyone a correlative moral
obligation to respect
3. Pollution is an international issue and everyone is
affected by it

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 Social Audit
 Social audit means a comprehensive
evaluation of the way a business discharges
its responsibilities to its stakeholders
 A social audit involves a four step process
1. Firm itemizes all activities that have a
potential social impact
2. Circumstances leading to these activities be
explained
3. Evaluation of performance conducted
4. Company examines relationship between
goals and society to see how programs
relate to each other 16
 Social Responsibility Benefits

 Social responsibility is profit

 Social responsibility has long term sustainable
benefits
 Social responsibility is for all stakeholders
 Social responsibility leaves long term legacies

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 Professional Responsibility

 The obligation of professionals to serve the public is

commonly made in the code of ethics for various
professions
 A professional typically claims maximal competence in a
given area of knowledge and skills and also claims a moral
commitment to the public good
 A moral commitment to specific individuals served by the
professions
 Many professions are in the position to command large
fees as a result of their legal monopoly over same service
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 Professionals

Therefore
 Must have the appropriate attitudes and reactions
since morality is a matter of relating to people in
special and specifically human way
 Any conflict between the two sorts of standards and
principles ought to be settled by appealing to what
ordinary reasonable people would say
 When values which we hold dear conflicts , something
has to give, some priorities must be established

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 Ingredients of Professional
Responsibility
 Those who have responsibility for matters of concern
are expected to give those matters all attention they
are due
 If there is a negligence on the part of the person
when due care was not taken, he/she would be held
responsible for the mishap

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 Ethics

Ethics: is a set of beliefs about right and wrong

- Ethics guide people in dealing with stakeholders
to determine the appropriate actions
- Conforming to professional standard of conduct
- It is concerned with human character and
conduct
- Ethical standards are referred to as principles or
ideals of human conduct
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 Ethical Models

Social Ethics:
Legal Rules,
customs

Organization’s
Code of Ethics

Professional
Ethics: Individual
Values in Ethics
Work Place

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 Ethical Dilemmas

- Managers often must choose between conflicting

interest of stakeholders.
- It is difficult to know when a decision is ethical.
- A good test is called managerial ethics- when a manager
makes a decision falling within unusual standards, is
willing to personally communicate the decision to
stakeholders and believes, they would approve, then it
is likely an ethical decision
*

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 Nature of Ethics

 Ethical and/or unethical values change over a

period of time
 Law prescribes minimum regulations
necessary for public order whereas ethics
prescribes highest regulations for public good
 Ethical issues are above the legal issues
 Moral behavior pays at least in the long run.
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 Business Ethics

 Business ethics is the application of moral values and

conventions to all business activities
 Is concerned primarily with relationship of business
goals and techniques to specific human needs
 Business is a means but not an end of economic
activity

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 Need for Business Ethics

 Deregulated economy provides freedom to

businesses to do things at will to sustain their
operations
 Businesses should be ethical in order to
survive in the long run
 Protect interest of society and to maximize
human welfare
 Improve confidence of stakeholders
 Regulates roles and activities of business
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 Ethical Principles

1. The rule of publicity – being transparent

2. The rule of equivalent price – value of good
to customer
3. The rule of conscience in business – business
game be honorable to society
4. The rule of spirit of service – activities be
carried out with the motive of service
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 Tutorial Questions

Q1. Discuss the relationship between corporate social

responsibility and profitability
Q2. Discuss how businesses can become more socially
responsible
Q3. Outline the activities that businesses and governments
are undertaking to improve the environment.
Q4. Why is professional responsibility becoming an issue of
concern?
Q5. Discuss the importance of business ethics

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