Module 03: The four

social responsibilities of
a business

Instructor: Ms.Heema Rani

E-mail: vp.lrk@zabtech.edu.pk
• “Social responsibility is the obligation of the
decision makers to take actions which protect and
improve the welfare of the society as a whole along
with their own interests.” - Howard R. Bowen
• Social responsibility is an ethical framework that
obliges every member of the society to act and
behave in a manner that benefits the entirety.
• Even business organisations have a social
responsibility.
• According to the socioeconomic model of corporate
social responsibility, a business has a responsibility
to promote and uphold the interest not only of its
shareholders but also of its entire stakeholders—
including customers, employees, suppliers, and the
public.
Need for Social Responsibility
• Impact of its own Operations.
• Long life of business
• Employee satisfaction
• Fair Pricing & Market dynamics
• Demand & Supply of goods & services
• Taxation & compliances towards Government
• Financial Support to Social & Cultural activities
• Support to Social causes like Poverty, Education,
HealthCare, Environment
• Renewable Energy etc.
Consideration for the cases of
social responsibility of a business
• Public Image
• Resources
• Government Control
• Trusteeship
• Changes
• Consumer Movement
• Help to the Government
• Pressure of trade unions
• Long term self interest
• Globalization
• Role of Media
• Protection of Environment
1. ECONOMIC RESPONSIBILITY
OF A BUSINESS
• The most basic responsibility of a business organisation is to maximise
its profitability not only to attend to the interests of its shareholders
but also to contribute to the progress of the economy.

• A business is thereby an integral actor in economic development and

nation building. The more traditional economic model of corporate
social responsibility echoes this role. American economist Milton
Friedman once mentioned that prime responsibility of a business is to
maximise profits and to ensure that it is able to pay all taxes levied by
the government.

• It is important to note that if a business is unable to produce profitable

products and maintain sustainability, it is impossible to attend to all
other succeeding social responsibilities.
2. LEGAL RESPONSIBILITY
OF A BUSINESS
• The concept of laissez-faire business is virtually inexistent in modern free-
market economies. In the United States, particularly before 1930, businesses
were free to act as they pleased without restrains or restrictions. This
resulted in deplorable practices that made labourers and consumers
vulnerable to exploitation.

• Governments have now become regulators of businesses in order to

maintain the integrity of business practices and protect the interest of the
public. Like individual members of the citizenry, a business also has an
obligation to follow all written and codified laws that concern its existence.

• Some of the laws affecting a business include basic business permits and
requirements, tax laws, labour rights, intellectual property rights, consumer
protection, contracts and obligations, and anti-trust and competition laws,
among others.
3. ETHICAL RESPONSIBILITY
OF A BUSINESS
• The decisions and actions of a business organisation affect the stakeholders in
several and varied ways. This fact makes it a moral actor. It also gives a business
an obligation to follow ethical standards, norms, and values of the
communities wherein it operates.

• An ethically responsible business is able to recognise, interpret, and act upon

multiple principles and values according to standards prescribed by a particular
context or within a given field. It is able to distinguish right from wrong and
make decisions and actions that serve the interests of concerned parties.

• Several business organisations have adopted a written Code of Conduct to

standardise the way managers and employees act or behave within an
identified ethical boundary. However, there are businesses that do not have
any written code. In this case, managers become the prime moral actors and
they base their decisions on their own standards of morality.
 4. PHILANTHROPIC
RESPONSIBILITY OF A BUSINESS
• The fourth social responsibility of a business is dependent on whether it sees itself as an
active member and contributing entity in the society. This philanthropic responsibility
implies that a business has a duty to give back in some ways and contribute to the
betterment of the society.

• Take note that the first three responsibilities are straightforward. Businesses
organisations are obligated to fulfil their economic, legal, and ethical obligations in order
to ensure their survival. However, the fourth responsibility is not a mandatory. There are
businesses that do not have any philanthropic programs. This is especially true for
smaller or struggling businesses with limited resources. But over the years, some
businesses take pride of their philanthropic works. This responsibility gives them a sense
of purpose while also promoting their public image.

• Of course, philanthropy does not necessarily mean giving cash donations. There are
several ways an organisation can become philanthropic without spending too much.
Some large businesses hold capacity-building seminars for budding and emerging
entrepreneurs. Others participate in fundraising activities.
Social Responsibility towards
different groups
• Responsibilities towards:
• Owners
• Employees/Workers
• Consumers/Customers
• Community/Society/Public
• Investors/Shareholders
• Government
Responsibilities towards
Owners
• Profit maximization
• Exploit business opportunities
• Expansion & diversification
• Careful use of capital
• Optimum use of resources
• Fair practice on stock exchange
• Business efficiency
• Periodic Information and Creating Confidence
• Effective use of shareholder’s fund
• Creating Goodwill
Responsibilities towards
Employees/Workers
• Harmonious Employer-Employee Relation
• Job Security, Promotion & career opportunity
• Division of Labor & recognition to trade unions
• Good Working Conditions
• Protect Health & Provide Safety Measures
• Fair Remuneration and allowances
• Proper personal policies, education & training
• Code of conduct & proper grievance procedures
• Workers Participation in Management
• Opportunities for development
Responsibilities towards
Customers/Consumers
• Supply as per demand
• Charging Fair price
• Honest Advertisement/ Advertisement ethics
• After Sales Service
• Reply to Complaints/ Customer Service Cell
• Good Quality Products & Services
• Avoid Monopolistic Competition
• Avoid Unethical Trade Practices
• Consumer Safety
• Accurate Information
• Consumer Welfare
Responsibilities towards the
Community/Society/Public
• Social & Cultural Activities
• Location of Industries/ Rehabilitation
• Development of Backward Area/Locality
• Financial Assistance
• Protect anti-social activities
• Address Social Problem/Avoid Class conflict
• Help during Natural Calamities
• Proper use of economic power
• Providing Employment Opportunities
• Provide Employment & raise standard of living
Responsibilities towards
Investors/Shareholders
• Return on Investment
• Stability
• Information
• Proper Disclosure
• Full and Factual Information
• Proper conduct of Shareholders Meetings
• Good Public Image
• Manipulation of Share Prices
• Maintain Transparency
• Handling Grievance
• Maintain Solvency and Prestige
Responsibilities towards
Government
• Observance of Law and Order
• Guidelines
• Payment of Taxes
• Avoid Unethical Practices
• Foreign Exchange
• Advice to Government
• Help in Emergencies
• Extent Co-operation
• Respecting Rules & Regulations
• Political Stability
• Implementation of Socio-economic programmes
Arguments against Social
Responsibility
• Violation of ‘Profit Maximization’ concept
• Burden on Consumer
• Lack of Social Skills
• Lack of Public Support