SOCIAL RESPONSIBILITY OF

BUSINESS
 Every business enterprise is an integral
part of the society.
 It uses the scarce resources of the
society to continue and grow.

Thus no activity of business should be

injurious to the interests of the society.
Social Responsibility of business
Meaning
 Obligation of business enterprises to adopt
policies and plans of actions that are
desirable in terms of the
 Expectation

 Values

 Interest of the society.

It ensures that the interests of different

groups of the public are not adversely
affected by the decisions and policies of
the business
 Social Responsibilities of Business towards
Different Stake holders
 Responsibility towards the shareholders or
owners.
 Responsibility towards the Employees.

 Responsibility towards the Consumers.

 Responsibility towards the Suppliers.

 Responsibility towards the Financiers.

 Responsibility towards the Government.

 Responsibility towards the Community.

 Responsibility towards the shareholders
or owners.
 Fair return on their investment.

 Appreciation in the value of share.

 Ensure better performance

 Full disclosure of information

 Organizing AGM

 Voting rights
Responsibility towards the Employees
 Ensure a fair wage or salary

 Working Hours

 Good and Safety working condition

 Medical Facilities

 Housing Facilities

 Canteen Facilities

 Leave facilities

 Retirement benefits

 Educational allowances for children

 Reasonable amount of bonus

 Provision for participation in management

Responsibility towards the Consumers
 Quality of products / services

 Reasonable Price.

 Adulteration should be avoided.

 Packaging and labeling.

 Advertisements should not mislead the

customers.
 After sale service.

 Customers grievances should be redressed

immediately.
Responsibility towards the Government
A business enterprise must follow the
guidelines of the government while setting up
the business.
 It conduct the business in lawful manner.

 It should disclose the required information.

 Taxes must be paid honestly and on time.

 It should not indulge in any corrupt practices

or unlawful activities.
Responsibility towards the Community
 Promoting social and cultural values.

 Generating employment opportunities

 Contribution towards the upliftment of

weaker sections.
 Protecting the physical and ecological
environment of the society.
 Contribution to the community development
programmes like public health care, sports,
cultural programmes.
 Public Health Issues: What to do about inherently
dangerous products such as alcohol, tobacco, vaccines,
and steroids.
 Protecting the Environment: Using resources efficiently,
minimizing pollution.
 Recycling: Reprocessing used materials for reuse.
 Developing the Quality of the Workforce: Enhancing
quality of the overall workforce through education and
diversity initiatives.
 Corporate Philanthropy: Cash contributions, donations of
equipment and products, and supporting the volunteer
efforts of company employees.
Responsibility towards the Suppliers
Payment should be made promptly.

Responsibility towards the Financiers

Prompt payment of interest and repayment of
principal amount.
Meaning of Ethics
 ‘Ethics’ originated from the Greek word ‘ethos’ -
Culture – prevalent behaviour in the society.
 Character, conduct and activities of the people based
on moral principles / values.
 It is concerned with what is right and what is wrong
in human behaviour on the basis of standard
behaviour or conduct accepted by the society.
Honesty,
truthfulness,
compassion,
sympathy,
feeling of brotherhood etc.
 Ethics is about voluntarily conforming to what is
good/acceptable/desirable behaviour without the force
of any legal/social obligation.
Choosing to do some thing that is not mandated by
the law or not doing some thing that is permitted by
the law but may cause harm to some one.

Ethics can result from

 Religion
 Philosophy
 Family teachings
 Social value
 Business Ethics:
 The standards of conduct and rules based on moral
principles governing how businesses and employees
should conduct themselves.

 Social responsibility
 Balance between what’s right and what’s profitable
 Often no clear-cut choices
 Often shaped by the organization’s ethical climate
Broad Areas of Business Ethics

 Managerial Mischief
Illegal, unethical, or questionable practices
of individual managers or organizations.

 Moral Mazes
Ethical problems that managers must deal
with on a daily basis
 Business Ethics
Avoiding Malpractices
 Black-marketing,

 Artificial high pricing,

 Adulteration,

 Cheating in weights and measures,

 Secret kick backs to administrators and politicians

 Selling of duplicate and harmful products,

 Hoarding, etc.

Improving Customers' Confidence

 Being honest and truthful about quality and quantity
of goods,
 Charging fair prices.
Safeguarding Consumers' Rights
 right to health and safety,
 right to be informed,
 right to choose,
 right to be heard,
 right to redress, etc.

Protecting the rights - Employees,

Shareholders, Suppliers, Financiers,
competitors.
Encouraging Healthy Competition
Paying taxes and discharging other
obligations promptly.
Theories of Ethics

Utilitarian Theory
Plans and actions of the business should be
evaluated by their consequences.
Basic Rights Theory
Functions / activities of the business must
not violate basic rights.
Theory of Justice
Business decisions must guided by fairness,
equity and impartiality to ensure justice.
NEED FOR BUSINESS ETHICS
 Survival of the business unit
 Growth of the business unit

 Earning goodwill

 Improving the confidence

 Maintaining Inter-relationship

 Solving social problem

 Decision making

 Failure of law

 Tool of Corporate Governance

REGULATION OF BUSINESS ETHICS
 Legislative measures
 Goodwill of business unit

 Social status of businessman

 Trade union

 Business association

 Consumer movement
FACTORS AFFECTING BUSINESS ETHICS
 Unhealthy competition
 Abnormal profit motive

 Political interference

 Political uncertainty

 Lack of ethical attitude

 Corruption

 Lack of education

 Non-cooperation of Employees
PRINCIPLES
 Service should be the first motive
 No discrimination
 Satisfying the requirements of customers
 Environmental concern
 Proper utilization of scarce resource
 Improving the standard of living
 Promoting healthy competition
 Job security to employees
 Payment of fair wage
 Better working condition
 Employees motivation and recognition
 Employees participation in management
 Monetary and Non-monetary incentives to
employees
 Prompt payment of the tax

 Full disclosure of relevant information

 Contribution for the development of economy

 Business should not make promise that cannot be

fulfilled
 Allow freedom of speech in workplace

 Businessmen should not indulge in politics

ADVANTAGES OF BUSINESS ETHICS
 Customers
 Employees

 Industry

 Business

 Society

 Government
Elements of Business Ethics
 High Business Value

 Ethical evaluation of Management Decision

 Adoption of fair means to achieve objectives

 Discharge Social Responsibilities

 Keeping Promise

 Upholding Cultural & Religious value of society

 Ethical Co operation
PROFESSIONAL AND MANAGERIAL ETHICS
Any occupation to be called a profession must fulfill
the following characteristics

1. Specialized body of knowledge

2. Formal education & training
3. Professional body
4. Code of conduct for self regulation
5. Social status
 Professionalism is the conduct, aims or qualities that
characterize or mark a profession or professional
person; it implies quality of workmanship or service

 Professional ethics encompass the personal, and

corporate standards of behavior expected
by professionals

 Professionally accepted standards of personal and

business behavior, values and guiding principles.

 Codes of professional ethics are often established by

professional organizations to help guide members in
performing their job functions according to sound and
consistent ethical principles.
ELEMENTS OF PROFESSIONAL ETHICS
 Integrity
 Objectivity

 Confidentiality

 Professional competence and Due care

 Professional behavior

 Professional codes
 Benefits to Customers, Employees, Organisation,
Industry, and Society
 GOLDEN RULES TO BEING PROFESSIONAL
IN SERVICE TO YOUR ORGANIZATION

 Always strive for excellence

 Be trustworthy

 Be courteous and respectful

 Be honest, open and transparent

 Be competent and improve continually

 Always be ethical

 Always be honorable and act with integrity

 Be respectful of confidentiality

 Set good examples

MANAGERIAL ETHICS
 ‘Management Ethics’ is related to social
responsiveness of a firm. It is “the discipline
dealing with what is good and bad, or right and
wrong, or with moral duty and obligation. It is a
standard of behaviour that guides individual
managers in their works”.
MANAGERIAL ETHICS

 Managerial ethics usually address two separate

areas: principles and policies.
 Principle-based ethics outline what is considered fair
and ethical in the scope of the workplace and might
include information about departmental boundaries
or use of company equipment.
 Policy-based managerial ethics refer to conflicts of
interest, the right response to gifts from vendors or
business partners, or the handling of proprietary
information.
SOCIAL AUDIT
 social audit is a way of measuring, understanding,
reporting and ultimately improving an organization's
social and ethical performance.
 Theodare Kreps regarded as the founding father of
this idea.
 A social audit helps to narrow gaps between
vision/goal and reality, between efficiency and
effectiveness.
 Social auditing creates an impact upon governance.
Social auditing is taken up for the purpose of
enhancing local governance, particularly for
strengthening accountability and transparency in
local bodies.
OBJECTIVES OF SOCIAL AUDIT
 Identification of the firm’s activities having social
impact
 Assessment and evaluation of social cost and
benefits of such activities
 Measurement of social cost and benefits

 Reporting the social performance of a firm

SOCIAL AUDIT FEATURES
1. Social audit influences..
 Ecology and environmental quality
 Consumerism
 Community needs
 Governmental relations
 Labour relations
 Minorities and Disadvantaged persons
 Economic activities
 Shareholder Relations
2. Social audit determines what an oragisation is doing
in social areas
3. It makes use of both qualitative and quantitative
data
4. It is rather difficult to audit the social performance of
the company
METHODS OF SOCIAL AUDIT
 Social audit process
 Financial statement format audit

 Macro-Micro Social Indicator audit

 Constituency Group audit

 Partial social audit

 Comprehensive Audit

 Corporate rating approach

IMPORTANCE OF SOCIAL AUDIT
 It helps the company to take suitable measures
to improve its social performance
 To improve the public image

 It provides necessary data for comparing

effectiveness of the different types of programmes
 It’s a base for self-evalution

 It provides cost data on social programmes

 It provides information for effective response to

external claimants
SOCIAL VALUES
 Values are a set of principles that people cherish.
They enhance the quality of individual and
collective life.
 They involve personal and community discipline
and sacrifice of immediate gratification needs.
 Quality of life is a product of physical, social,
environmental, mental and spiritual health and
wholeness. Values refer to intrinsic worth or
goodness.
 Social values form an important part of the
culture of the society. Values account for the
stability of social order. They provide the general
guidelines for social conduct.
 Terminal values
 Instrumental values

 Values influence managers at work place

 Service to customers
 Company loyalty
 Organisational efficiency
 Ability
 High productivity
 Organisational growth
 Service to public
CORPORATE SOCIAL RESPONSIBILITY
 Corporate Social Responsibility is the continuing commitment by
business to behave ethically and contribute to economic
development while improving the quality of life of the workforce
and their families as well as of the local community and society
at large”
Lord Holme and Richard Watts

 Corporate social responsibility encompasses not only what

companies do with their profits, but also how they make them. It
goes beyond philanthropy and compliance and addresses how
companies manage their economic, social, and environmental
impacts, as well as their relationships in all key spheres of
influence: the workplace, the marketplace, the supply chain, the
community, and the public policy realm.
Harvard University
CSR: COMPANIES ACT 2013-SECTION 135
 Companies Mandated to constitute a CSR Committee
 Networth of Rs 500 Crore or more
 Turnover of Rs 1000 Crore or more
 Net profit of Rs 5 Crore or more
 CSR Committee to have
 Three or more directors
 At least one is to be an independent director
 Board’s Report shall disclose the constitution of CSR
Committee
 CSR Committee will
 Formulate CSR policy and recommend to board indicating
the activities to be undertaken as specified in schedule
vii
 Recommend the amount of expenditure to be incurred
SCHEDULE VII ACTIVITIES
 Eradicating extreme hunger & poverty
 Promotion of education
 Promoting gender equality and empowering women
 Reducing child mortality and improving maternal health
 Combating human immunodeficiency virus, acquired immune
deficiency syndrome, malaria and other diseases
 Ensuring environment sustainability
 Employment enhancing vocational skills
 Social business projects
 Contributions to Prime Minister Fund or any other fund set up
by the Central Government or the State Governments for socio-
economic development and relief and funds for the welfare of the
Scheduled Caste and Schedule Tribe
 such other matters as may be prescribed
LEVELS OF CSR

Social Obligation – Meet minimum regulations,

do what is required by law, no more
Social Responsibility – Go beyond what is
required by law, mitigate negative effects
Social Responsiveness – Proactive approach,
promote positive change
Corporate Social Responsibility (CSR)

LEVELS OF CSR: EXAMPLE IN LABOUR

MARKETS

Social Social Social

Obligation Responsibility Responsive

Comply with Provide added Improve

wage and labour quality of
working time benefits work life
laws,
minimum
benefits
ARGUMENTS FOR SOCIAL RESPONSIBILITY
 Changed public expectations of business
 To foster harmonious relationship

 Favorable financial effects

 Better environment for business

 Enhancing Public image

 Avoiding government regulation

 Citizenship argument

 Moral argument

 Business has resources

ARGUMENTS AGAINST SOCIAL
RESPONSIBILITY

 Not the responsibility of business

 Profit maximization

 Economic burden

 Selfish motive

 Price rise

 Lack of social skills

 Lack of broad support

 Dominance

 Undermining market mechanism

BARRIERS TO SOCIAL RESPONSIBILITY OF
BUSINESS

 The individual manager

 The organization

 The industry

 The Division
LIMITS OF SOCIAL RESPONSIBILITY
 Costs
 Efficiency

 Relevance

 Complexity