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Chapter 2 Social Responsibility of Business and Business Ethics
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2.1 Introduction Business is one of the critical organs of the society. Business draws strength from the society. The economic objectives of business could be better achieved by serving the society in a more meaningful manner. In the long run a successful business can be built on the foundations of a happy community around it. The social responsibility of business involves the responsibility of business towards different segments of society associated with it. It is the responsibility to consumers, suppliers, employees and the society at large.
2.2 Concept of Social Responsibility There are many definitions for social responsibility. Basically the social responsibility of a business indicates the responsibilities of a business beyond the production of goods and services and earning profit. The concept of social responsibility received increasing attention since 1960s. It is mainly because of the change in social environment. The business houses have to respect the expectations of the society and attempt to provide maximum contribution to the society while making profit. It creates better understanding between the society and the business. Profit making without considering the society can have harmful effect in the long run. Careless economic growth does not result in social progress. Instead, it can result in damaging the environment, creating unsafe working conditions and unnecessary social tensions, Therefore the idea of economic welfare with reduced social cost is increasingly accepted by the business. Thus the businesses started paying more attention to the social problems and started contributing to the society more than just economic goods and services.
2.3 Case for Social Responsibility Following are the arguments in favour of assuming social responsibility by the business:
i) Changed public expectations One of the most important reasons for increased attention to social responsibility is the change in public expectations from the business. It is generally viewed that the business exists only because it satisfies the needs of the society. Therefore it is essential that the business responds positively towards the expectations of the society.
ii) Better environment for the business A business which reacts favourably to its social responsibility will create a better environment for itself. As a result of better environment a business will be able to provide better products and services with reduced risk
Iii) Public image A responsible business will enjoy better public opinion. A good public image will translate into profit in long run.
iv) Avoidance of government regulation Government regulations can restrict the freedom of business. A business must voluntarily participate in fulfilling its responsibility towards the society so that the government does not have a reason to interfere to regulate the business.
v) Problems can become profits Some of the problems can be changed to profitable opportunities if there is careful planning. For example a factory can possibly convert the waste into useful materials. A
vi) Foreign influence Business communities of developed nations attach great importance to their responsibility towards society. Due to the influence of multinationals, Indian business houses also consider social responsibility as top priority item.
vii) Balance of responsibility with power A business has a great deal of social influence due to the possession of large resources. Therefore it is essential to make use of this social influence to develop the society.
viii) Business has useful resources A business controls large amount of resources. A business is able to take up projects that have long term benefit to the society. In India there are several specialty hospitals and educational institutions run by business houses.
ix) Business has contributed to social problems Some of the social problems are created by business. Large economic disparities, environmental problems etc. are directly linked to business.
2.4 Case against social responsibility Someone famously said the business of business is business. The concept of social responsibility has been criticized on various grounds. Following are some of the arguments against accepting social responsibility.
i) Profit maximization The business operates in the world of competition and opportunities. The economic efficiency is the primary question of survival of business. The first criteria to determine an action is the economic value of that action. The management of a large scale business is representing the shareholders of the company. The primary responsibility of management is to ensure maximum return on investment of the shareholders.
ii) Cost of social involvement Social involvement is a costly affair. Charity also comes with an expensive price tag. The management cannot involve in popularity contest by using the money entrusted to them for utilizing effectively for doing the business.
iii) Lack of social skill The management professionals are usually highly qualified and trained to handle complex business problems. If they attempt to meddle with social issues, they are likely to fail like an aircraft pilot on the riving seat of a bulldozer.
iv) Distraction in achieving social goals Goals in business are set on the basis of realistic assessment of ability and resources. When there are social goals to attain in addition to pre planned economic objectives it leads to tremendous distraction.
v) Undermines the free enterprise system It is argued that the social responsibility undermines the free enterprise system. When the business gets involved in social problems the different interest groups will get a change to influence the managerial decisions.
vi) Corporations are not moral agents It is generally argued that that social responsibility is basically moral concept. It is difficult for professional organization designed to handle industrial or commercial issues to get involved in such problems.
vii) Reduced international competitiveness When the business is involved in social problems it loses its competitive edge. In the present world of international competition a business has to be alert, efficient and effective by undivided focus on its economic objectives.
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