Social Responsibility of Business (towards Society, Shareholders, Employees and Consumers)

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Everything you need to know about the social responsibility of business towards different sections of society.

Social responsibility means an intelligent arid objective concern for the genuine welfare of the society that limits or prevents individual and corporate behaviour from ultimately destructive activities no matter how immediately profitable, and that leads the managerial actions in the direction of positive economic and social contributions, wherever feasible, to the betterment of human resources in different ways as desired by society.

Social responsibility indicates personal responsibility and obligation of managers and employees, as they act in their own interests, to ensure that rights and legitimate interests of others are in no way sacrificed or prejudiced by their behavi­our and actions.

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Learn about the social responsibility of business towards different sections of society:- 1. Shareholders 2. Employees 3. Consumers 4. Community 5. Workers 6. Owners/Investors 7. Government 8. World Public in General 9. Inter-Business 10. State.


Social Responsibility of Business towards Society, Shareholders, Employees and Consumers

Responsibilities of Business towards Society – To Shareholders, Employees, Consumers and Community

There is no unanimity of opinion as to what constitutes social responsibility of business.

The important generally accepted responsibilities of the business to different sections of the society are described below:

1. Responsibility to Shareholders:

The responsibility of a company to its shareholders, who are the owners, is indeed a primary one. The fact that the shareholders have taken a great risk in making investment in the business should be adequately recognized.

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To protect the interests of the shareholders and employees, “the primary business of a business is to stay in business”. To safeguard the capital of the shareholders and to provide a reasonable dividend, the company has to strengthen and consolidate its position.

Hence, it should develop and improve its business and build up its financial independence. Needless to say, to provide dividend, the company should earn sufficient profit. Adequate reserves should be built up so that it will be able to declare a reasonable dividend during a lean period as well. If a company fails to cope with changes in a changing and dynamic world, its position will be shaken, and the shareholders’ interests will be affected. By innovation and growth, the company should consolidate and improve its position and help strengthen the share prices.

The shareholders are interested not only in the protection of their investment and the return on it but also in the image of the company. It shall, therefore, be the endeavour of the company to ensure that its public image is such that the shareholders can feel proud of their company. It may be mentioned here that the shareholders also have certain responsibilities, which they have to discharge to protect their own interests.

They shall not only offer wholehearted support and cooperation in the positive efforts of the company but shall also guide and control properly its policies and activities. At the same time, they shall appreciate the responsibility of the business to other sections of society – to the workers, consumers and the community.

2. Responsibility to Employees:

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The success of an organization depends to a very large extent on the morale of the employees and their wholehearted cooperation. Employee morale depends to a large extent on the discharge of the company’s responsibilities to them and the employer-employee relationship.

The responsibility of the organization to the workers include:

(i) The payment of fair wages;

(ii) The provision of the best possible working conditions;

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(iii) The establishment of fair work standards and norms;

(iv) The provision of labour welfare facilities to the extent possible and desirable;

(v) Arrangements for proper training and education of the workers;

(vi) Reasonable chances and proper system for accomplishment and promotion;

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(vii) Proper recognition, appreciation and encouragement of special skills and capabilities of the workers;

(viii) The installation of an efficient grievance handling system;

(ix) An opportunity for participating in managerial decisions to the extent desirable.

The Committee that conducted the social audit of Tata Iron and Steel Company (TISCO) observes that “not only should the company carry out its various obligations to the employees as well as the larger community as a matter of principle, but this has also led to a higher degree of efficiency in TISCO works and an unparalleled performance in industrial peace and considerable team spirit and discipline which have all resulted in high productivity and utilization of capacity”.

Thus, by discharging its responsibilities to the employees, the business advances its own interests. It may, however, be pointed out that the expenditure on labour welfare, etc., should have relevance to the financial position of the company and the economic conditions of the nation. This aspect has to be particularly taken note of by public sector enterprises.

Such expenditure shall not exceed the socially and economically warranted limits and shall not cause undue burden on the consumers or the general public. It shall not result in the formation of islands of affluence or comfort in the midst of poverty and suffering at the expense of society.

3. Responsibility to Consumers:

According to Peter Drucker, “there is only one valid definition of business purpose; to create a customer.” Drucker observes – “The customer is the foundation of a business and keeps it in existence. He alone gives employment. To supply the wants and needs of a consumer, society entrusts wealth-producing resources to the business enterprise”. It has been widely recognized that customer satisfaction shall be the key to satisfying the organizational goals.

Important responsibilities of the business to the customers are:

(i) To improve the efficiency of the functioning of the business so as to

(a) Increase productivity and reduce prices,

(b) Improve quality, and

(c) Smoothen the distribution system to make goods easily available.

(ii) To do research and development, to improve quality and introduce better and new products.

(iii) To take appropriate steps to remove the imperfections in the distribution system, including black-marketing or profiteering by middlemen or anti-social elements.

(iv) To supply goods at reasonable prices even when there is a seller’s market.

(v) To provide the required after-sales services.

(vi) To ensure that the product supplied has no adverse effect on the consumer.

(vii)To provide sufficient information about the products, including their adverse effects, risks, and care to be taken while using the products.

(viii) To avoid misleading the customers by improper advertisements or otherwise.

(ix) To provide an opportunity for being heard and to redress genuine grievances.

(x) To understand customer needs and to take necessary measures to satisfy these needs.

Despite the popularity of the Marketing Concept and the growing awareness of consumer rights, consumers all over the world are, by and large, dissatisfied. Consumerism is an organized endeavour of the consumers to protect their rights. In shortage economies like India many businessmen pay scant attention to their responsibilities to consumers. To protect consumer rights and to make the business discharge its responsibilities to them, the consumers should give up their indifferent attitude and build up a strong consumer movement.

4. Responsibility to the Community:

A business has a lot of responsibility to the community around its location and to the society at large.

These responsibilities include:

(i) Taking appropriate steps to prevent environmental pollution and to preserve the ecological balance.

(ii) Rehabilitating the population displaced by the operation of the business, if any.

(iii) Assisting in the overall development of the locality.

(iv) Taking steps to conserve scarce resources and developing alternatives, wherever possible.

(v) Improving the efficiency of the business operation.

(vi) Contributing to research and development.

(vii) Development of backward areas.

(viii) Promotion of ancillarization and small-scale industries.

(ix) Making possible contribution to furthering social causes like the promotion of education and population control.

(x) Contributing to the national effort to build up a better society.


Responsibilities of Business towards Society – With Conclusion

Changing Philosophy of Business:

Public demands on private business have expanded greatly in recent years. Business enterprise was once expected to devote its efforts to producing and distributing goods and services as efficiently as possible and to making innovations and improvements in products and processes with the ultimate objective of maximization of profits.

Now, business is increasingly called upon to promote a variety of social purposes in addition to these long standing economic ones. The demands for “social responsibility” have provoked enthusiastic discussion and debate on what new roles, if any, business firms should play in the social system.

It is sometimes argued by economists as well as by business men accused of neglecting the public interest, that the business of business is just business. To their way of thinking end is all, means mean nothing, and Maximization of profits seems to be the prevailing norm. Money-chasing continues to be the economic objective of business. Strangely enough, the idea of trusteeship has not had general acceptance in the land of its birth, in spite of the efforts on the part of Gandhiji to revive it.

Despite the laws (partly because of court costs and inordinate delays) firms can often get by with false advertising, misleading information, and products that have lower quality and greater hazards than indicated to customers. There is hardly anything that is not adulterated. Most of these practices boil down to cheating and playing with the lives of people. The businessman in India, whose main aim is to make money, by fair means or foul, should take a leaf out of the biography of Henry Ford, who declared.

“The best way to make money is not to think too much about making it”. His company was organised to do “as much good as we can for everybody”. His philosophy and practice was “more and more goods for more and more people at lower and lower prices”. But why should one do this? For human betterment and self-improvement, for “service”.

Social and Economic Objectives of Business:

The purpose of business enterprise is to produce quality goods and distribute them and do it ethically so as to serve the general welfare. Since the economic and social objectives of business are not mutually exclusive, but are intertwined, the management has both social and economic responsibili­ties.

In this context the function of management is to see that the business enterprise fulfills its purpose by paying investors a fair return on their capital, by paying workers a fair compensation for their effort, by paying vendors a fair price for the materials and supplies, and by “paying” the consumers in terms of reasonable price, quality and service and, above all, by helping our society to function in harmony as an organic whole.

This function imposes upon the business and its managers a higher responsibility than that arising out of private property and self-interest. Self-interest and public good cannot be kept apart. The manager must assume responsibility for public good, because management’s responsi­bility to the enterprise and to society “is inextricably interwoven”.

This is based on the fact that the enterprise is an organ of society, and that its actions have a decisive impact on the social scene. If a business provide a product or service that is useful or otherwise of value to the community, then it is socially desirable that it continues to function.

The social responsibilities of business and its economic activities are so intermingled that so far we have discussed the two together. We will now attempt a summary discussion of the obligations of business separately to itself, to the shareholders, the workers, the consumers and the community.

1. Obligations of Business to Itself:

The first task of business enter­prise is to stay in business. This can be achieved by effective and profitable production. The next obligation is to grow bigger and constantly to grow better through innovation. To be able to discharge its social responsibilities an enterprise must work towards growth, expan­sion and stability. This can be accomplished by operating at a reasonable profit which will enable it to maintain as well as increase its wealth- creating and wealth-producing capacity and so the wealth of society.

2. Obligation of Business Enterprise to Shareholders:

As the company pervades almost all business activities, its shareholders who provide the necessary funds have certain expectations. Management has a double responsibility to the shareholders. The first half is to manage the business effectively so as to produce a reasonable profit for them, and the second is to see that the shareholders are aware of company’s progress and are satisfied with its progress.

So, in addition to giving a fair return on the capital invested and risk taken, the company should supply to its shareholders continuous, comprehensive and accurate reports giving full information about its working.

The shareholders have also certain obligations. They should support the management’s efforts to balance the needs of the company for strong resources and continued development. They should not expect maxi­mum possible dividends but ought to be satisfied with a fair return on their investment which should not exceed the risk and the cost of loans. Voluntary dividend restriction is desirable. This will enable the company to plough back ample profits for innovation and expansion.

3. Obligations to Workers:

The business enterprise must provide security with fair wages to its workers, and an equal opportunity for growth and development within the company. The development of human potentiality is so important that it is not wrong to say that “management is the development of people and not the direction of things”. In fact, business is people. It is incumbent on business enterprise through its management to give all possible assistance in the improve­ment of education, training and upgrading of skills so that every member of the enterprise has a chance to grow.

Participation of workers in management is desirable but it can succeed only if workers are educated. Again, productivity ratio depends as much on education and training of workers as on economic factors. Collective bargaining is another right of workers and strikes a sharp edged weapon. “Management should create such a work environment that the workers are not obliged to use their weapon.”

4. Obligations to Consumers:

Once the company is viable the consumers’ claim on its profits is the greatest of all. After all consumer satisfaction is the primary and ultimate aim of business activity. This involves more than offering products at lowest possible price. Adultera­tion, poor quality, failure to give full measure, lack of service and courtesy to the customer, misleading or dishonest advertising, are all examples of violation by business enterprise of its obligation to the consumers of its products.

Free competition provides good protection of consumers’ interests in normal circumstances. Indeed, the principal reason for social irresponsibility is the failure of transactions to occur. Government regulation is one of the methods of protecting the interest of consumers. The management should encourage the establishment of Consumers’ Advisory Councils and Consumers’ Association should bring their complaints before these councils to be finally handled by the management.

5. Obligations to Society:

In the words of Peter Drucker, “the business enterprise should be so managed as to make the public good become the private good of the enterprise”. Then only can it build its image of a responsible business enterprise and be esteemed. By producing goods and services efficiently and by fair means, business can contribute to the economic well-being of the community and its social uplift.

Good management can directly advance social well-being by contributing to the advancement of local amenities of the particular locality and community where the enterprise functions. All manage­ments also contribute indirectly to social welfare measures undertaken by the State by honestly paying the taxes out of which the State finances its welfare activities. Managements also, make a contribution to society as a whole by bringing about economic growth and increased prosperity to the nation.

As a good citizen, business enterprise should bear the social cost of its anti-social conduct, e.g., fouling the air, destruction of natural beauty of the surrounding landscape, creation of slums and congestion. It must also make a contribution to another social cost – the schools, the armament, medical aid, etc., – of society. Business can make a greater and more direct contribution to public weal.

This can be done by establishing a corporation and endowing it with capital out of earnings and savings. The corporation is to earn no profits and pay no taxes, but its earnings are to be utilised for public weal. In this way great wealth can live up to its non-commercial responsibilities.

Business houses can make direct contribution by deputing their expert personnel to educational and technical training institutions on short assignments, thereby giving practical bias to teaching.

Business has a definite responsibility towards the community in areas from where people have been displaced as a result of its activities. Special training should be given to the displaced people apart from the cash compensation usually offered to them.

Business as an Agent of Government:

There are certain matters of social policy which go with being in business. They involve the business firm as an agent of social policy or social reform. The business firm acts as a social instrument in respect to certain activities. Deducting tax at source (e.g., from salaries) represents a drafting of the firm into service of the Central Board of Revenue. Setting up of Provident Fund and Family Pension Schemes is another example of the firm being the “chosen instrument” for enabling workers to save for retirement.

“Affirmative action programmes” in hiring and promotion of weaker sections of society is another example of business used as a social instrument. Health is another field in which business firms are uniquely convenient agents.

Conclusion:

To conclude, it is suggested that business firms should act on the facts of business. They should seek their profits in a truly scientific way, and use them for public good. Let it be remembered, that every business individually and all businesses collectively to be profita­ble, must be organised to provide the greatest possible service to the masses of the population. Let our business enterprise combine public spirit and shrewd business sense and give up exploitation of the workers and consumers.

As a businessman is as human as any other human being, he has to participate in human life, and human life is very largely social. The modern businessman should not tolerate a social order with so many economic corpses lying around. He should bury the dead and turn to building of a better world in which there will be no profits except the earned profits that come from real service and-no privilege of participation in the upward march of human life.

If, however, business firms fail to move voluntarily very far their traditional economic role to assume new responsibilities for social problems, social costs, and social benefits, the government should step in. It should then assign social responsibilities to business enterprise through mixture of compulsion and inducement.


Responsibilities of Business towards Society – Owners/Investors, Employees, Consumers, Government, Community and World Public in General

Managers have a social responsibility towards different classes of people:

(1) Towards Owners/Investors:

If the management and the owner happen to be different, the managers have the following responsibilities towards the owners (the shareholders):

(i) To ensure safety of the capital.

(ii) To ensure proper dividend.

(iii) Timely payment of dividend.

(iv) Informing about the progress of the organisation by presenting correct accounts.

(v) To ensure the proper utilisation of invested capital.

(vi) To treat different types of shareholders equally.

(2) Towards Employees:

Employees form a reasoning and sensitive element of production. Their feelings should be given special attention. If the employees are satisfied the enterprise can achieve all round progress.

Managers have the following chief responsibilities towards employees:

(i) Giving them appropriate remuneration.

(ii) Providing clean working atmosphere.

(iii) Respecting individual’s dignity.

(iv) Giving them a share of profit.

(v) Giving security of service.

(vi) Giving participation in management.

(vii) Adopting incentive-giving system.

(viii) Solving labour problems in time.

(ix) Providing for their education and training.

(x) Providing opportunity for promotion and development.

(3) Towards Consumers:

It is meaningless to think about business without consumers. When consumers are so important for business, it is equally important for business to perform some functions for them.

Following are the chief responsibilities of business towards consumers:

(i) To make available good quality goods at cheap rates.

(ii) To bring out reality in advertisement.

(iii) To avoid adulteration.

(iv) To provide after-sales service.

(v) To make goods available according to the taste of the consumers.

(vi) To make goods available to the consumers at the nearest point.

(vii) To be civil and polite to consumers.

(viii) Treating customers like god.

(ix) Solving their problems politely.

(x) To avoid profiteering and stock-piling.

(4) Towards Government:

To ensure the progress of a country government makes certain laws and creates a tax structure. A manager should help the Government in the development of the country by observing these laws.

A manager has the following responsibilities towards the government:

(i) To pay taxes honestly.

(ii) To observe rules laid down by the government.

(iii) Helping the government by establishing new industries.

(iv) Not to exploit government machinery by unfair means.

(5) Towards Community:

A manager is himself a social being and the people of society have the following expectations from him:

(i) To make available opportunities for employment.

(ii) To avoid polluting the environment.

(iii) To contribute to the raising of the standard of living.

(iv) To be a partner in social development by establishing Charitable Institutions, Dispensaries, Educational Institutions, etc.

(v) Not to resort to indecent advertisements.

(6) Towards the World Public in General:

Today business has crossed national frontiers and assumed international dimension and, therefore, international feelings should be respected.

From this point of view a manager has the following responsibilities:

(i) To contribute towards international peace.

(ii) To observe rules of international market.

(iii) To help in the development of economically backward countries.

(iv) To do business honestly.

(v) To ensure safeguards of Human Rights.


Responsibilities of Business towards Society – Consumers/Customers, Employees, Shareholders/Stockholders, Inter-Business, State and Community

The social responsibilities of business towards different stakeholder’s viz., consumers/customers, employees, shareholders/stockholders, other business firms, state and community.

1. Responsibilities towards Consumers/Customers:

Consumer satisfaction is the ultimate aim of all economic activity.

This includes:

i. The goods must meet the needs of the consumers of different classes, tastes and the purchasing power;

ii. They must be reasonably priced, be of a dependable quality and of sufficient variety;

iii. The sale of such goods must be followed by after sales service to ensure advice, guidance and maintenance;

iv. There should be a fair and wide spread distribution of goods and services among all the sections of consumers and community and

v. There should be prevention of concentration of goods in the hands of a limited number of producers, purchasers or groups.

In other words, business owes to itself the primary obligation to give a fair and square deal to its customers and consumers. They should be charged a fair and reasonable price which should be well within their reach. The supply of goods should be of uniform standard and of reasonably good quality.

Their distribution must be widespread as to be within the easy reach of the consumer. No business should directly or indirectly indulge in profiteering, hoarding or creating artificial scarcity. Business should not mislead the consumer and community by false, misleading and exaggerated advertisements, because obscene advertisements are demoralizing the society and a danger to public morals.

Consumer satisfaction is the ultimate aim of all economic activity. But adulteration of goods, poor quality, failure to give fair measure, lack of service and courtesy to the customer, misleading and dishonest advertising, are all examples of violation of its obligations by a business enterprise towards the consumers.

Therefore, free competition must be allowed to operate and should be encouraged by anti- monopoly legislation. Where certain monopolies are accepted as unavoidable or in public interest, the price of their toleration has to include the government’s right to impose any controls that may be needed to check undue monopoly power. Legislation is required to prevent deception and fraud being practiced on consumers, and where essential goods are in short supply, their fair distribution should be ensured.

Moreover, internal accountability to consumers should be extended. The Memorandum of Association (MoA) of public limited companies and state enterprises should embody a specific declaration of these wider responsibilities of management. The management should encourage the establishment of the Consumers’ Advisory Councils/Committees so that these bodies could represent the grievances of consumers to the management.

The consumers themselves have social responsibilities to their fellow-consumers. If they passively submit to exploitation, they help to lower the standards of service. Equally, they are a support to consumers’ associations which, by investigation and reporting on the comparative prices and quality of products, can assist them in making a more informed choice of their purchases.

2. Responsibilities towards Employees:

It is the basic responsibility of the enterprise to produce wealth and also to provide opportunities for meaningful work. The management should develop its administration in such a way so as to promote a spirit of cooperative endeavour between employers and employees.

There should be a sense of participation between capital, on the one hand, and labour and skill, on the other, in their objective towards prosperity and progress. The cooperation of workers can be won by creating conditions in which workers are enabled to put forward their best efforts in the common task as free men.

This means recognition:

i. Of the workers’ right to a fair wage;

ii. Of the right to participate in decisions affecting their working life;

iii. To membership of the trade union;

iv. To collective bargaining and

v. To the right to strike.

Management should give workers opportunity to develop their capabilities through training, education and enjoyment of freedom to the greatest possible extent. Management should develop among workers a sense of belonging to the business and provide them with healthy living conditions, cheap houses, leisure and amenities, profit-sharing and an efficient system of communication.

The business or a plant is a community and justice should be its rule. This means there should be a company code of conduct with a recognized procedure for settling grievances which result in improved performance. The code should guarantee religious, political and social independence of the workers and make reasonable provisions for them to take part in civic activities which benefit the community.

The image of business should be improved in the eyes of the workers so that persons of high calibre and capacity could be drawn to it. Routine monotony and boredom should be broken by job enrichment and job enlargement programmes. Finally, industrial peace and new techniques of professional management must be ensured within the precincts of the industry itself.

Likewise, workers should realise their moral duty to do a good day’s job for a good day’s salary, to cooperate in increasing productivity, to come forward with suggestions and to participate in discharging their responsibility to the life of the plant and the community.

3. Responsibilities towards Owners/Shareholders:

Management’s first duty is to see that enterprise is stable, enterprising and actively engaged in accomplishing its objectives. It would then be capable of providing those who commit their capital to it with such a fair and adequate reward for risk taken.

It permits the company to attract the necessary capital from the market. This capital is raised by the owners (proprietors, retailers, wholesalers, sole- traders) owning business, its property and looking after its management; the share of stockholders who contribute to the shares and debentures of the company or the partners (if there are any).

The expectations of these types of owners are:

i. A fair and reasonable return on the capital invested by them;

ii. A part in profit, if the Memorandum so specifies, in the shape of profit-sharing or bonus payment schemes;

iii. Political and economic security for investment through a stable government, good law and order situation and stable tax policies and fiscal measures;

iv. Knowledge about the working of the enterprise, its periodical progress report, so that they may be satisfied that their capital has been faithfully and usefully employed;

v. A fair amount of dividend or retained earnings and

vi. Profiteering, black-marketing, cornering of supplies, unfair trade practices are curbed and legally prohibited.

The shareholders also have their obligations. Shareholders in the General Meetings should question the Directors on the accounts and discuss policy matters and make their representation more effective through their associations. They can thus ensure that the company is pursuing a dynamic policy and that sufficient profit is laid aside for innovation and expansion.

They should play a constructive role in encouraging the directors to pursue a responsible policy towards the company, its obligations to the community, employees and customers, upon which in the long run, the company’s reputation and future prospects depend.

4. Responsibilities towards Inter-Business:

The social responsibilities of business include a healthy co-operative business relationship between different businesses. Businessmen must resist unfair and unethical competition and avoid unfair interference in their rival’s business such as price-rigging, undercutting, patronage, unfair canvassing, supply of substandard goods, application of undue financial, legal and political pressure; spreading false rumours/statements about the rival’s products, creating labour troubles for the competitors’ industry or launching a boycott campaign of their products, employing unethical advertisements and controlling the supply of particular goods/services produced by them only so that an artificial scarcity is created in the market, giving rise to monopolistic conditions, artificial high prices as per quality of goods etc.

Destructive competition is always harmful, as it destroys confidence in business and introduces chaos instead of order and discipline. Therefore, the correct solution is not retaliation but the development of true ideas among the business community and to secure such legal regulation as is necessary to protect businessmen.

A good businessman should adopt fair means to meet his rival’s competition. This may be by adopting better designs, good advertisements, quick and safe delivery with after-sales service, reasonable price etc.

It is needless to say that unfair competition enters with extortion, bribery, kick-backs and granting of discriminatory advertising allowances or brokerage fees and these should be avoided at all costs.

5. Responsibilities towards the State:

The social responsibilities of business towards the state (government) demands that:

i. It will be a law-abiding citizen;

ii. It will pay its dues and taxes to the state fully and honestly;

iii. It will not corrupt public servants and the democratic process for his selfish ends;

iv. It will not purchase political support by unfair means;

v. It will strive fairly and honestly to stimulate economic growth even by making reasonable sacrifices on occasions of national need;

vi. It will participate in the public life of the country in helping to make policies, fair legislation and working on advisory bodies;

vii. It will sell his goods, commodities and services without adulteration at fair and reasonable prices and

viii. It will maintain fair trade practices and refrain from activities like restraint of trade and will not take recourse to hoarding, cornering and profiteering and other such unfair practices.

The government has also some obligations towards business, such as to provide:

i. A clean, prompt and efficient administration;

ii. Intelligent, practical laws, easily understood and easily applied;

iii. Reasonable political and social stability without frequent changes in legislative, administrative and fiscal policies;

iv. Law and order ensuring safety of life, property and continuing business;

v. A dynamic framework for rapid economic growth (infrastructure, legal aid);

vi. Rule of law;

vii. Holding of scales evenly between groups and sections in society;

viii. Political and social stability where business can grow and develop;

ix. Reasonable legislation for protecting units of business against monopoly and

x. Healthy atmosphere to industrial peace.

Unfortunately, both have failed to fulfill their reciprocal obligations because of the following causes:

i. Economic-Political and Organisational Factors:

a. Breach of law by employers;

b. Monopolism/groupism among all sectors;

c. Business’s apathy to change for lack of time and unwillingness;

d. Ideological and methodical conflicts and differences between different states;

e. Existence of price-cutting, malpractices and unfair trade practices;

f. Division of management and labour into two warring groups, one endeavouring to win over the other and

g. Technological changes, rationalisation, modernisation, leading to false notions of mass employment among labour.

ii. Government Administrative Factors:

a. Breach of law by employers;

b. Discriminatory authority vested in government officials;

c. Excessive political bias in the formulation of targets, policies and procedures without regard to basic economic laws;

d. Loose, short-lived uncoordinated administrative structure;

e. Multiplicity and complexity of laws;

f. Frequent changes in laws and policies;

g. Absence of integrated economy linking the private-public, large-medium, small and tiny sectors;

h. Administrative delays and red-tapism and

i. Unstable law and order situation.

What is, therefore, needed is that the government should adopt progressive legal tax policies, and to ensure their strict observance; reduction in tax burden; careful planning, keeping in view the economic principle; strict supervision of and penalty for defaulters; easily understandable laws which are not frequently changed.

6. Responsibilities towards the Community:

The business owes great responsibility to the community in various directions.

Some of the major areas where business can and does contribute towards community welfare as part of its social responsibility are:

(i) In the Field of Industry:

Industry/business can help rural areas by introducing ‘self- help’ and ‘earn-while-you-learn’ programmes. Initially, such programmes may be labour-intensive in areas like carpentry, pottery, spinning, weaving, agro-based industry, farming, dairy farming, poultry and pig rearing, storage etc., so that increasing employment could be provided in rural areas. For this purpose, identification of areas needing improvement, facilities, skill requirements and financial assistance may be surveyed by business experts.

(ii) In the Field of Agriculture:

As a social responsibility, a large business house can play an important role in agricultural development, to provide full-time employment to the vast unemployed rural labour force. For this purpose, the business should get the survey done by its experts in the field of climate, soil conditions, breeding of livestock facilities for irrigation, water supply and actual supply of fertilizers, seeds, pesticides, expertise, and finances. Non- agricultural activities seeking linkage with the agricultural sector and the industrialised sector can also be developed.

(iii) Housing Facilities:

The social responsibility of business in this sphere is great, specially because a major proportion of the rural population is doomed to illnesses, squalid existence in techniques ill-planned and filthy houses.

Business can, therefore, play its role in changing house-building, extending loans and financial-aid facilities, providing material and manpower support. In the urban areas, slum clearance schemes, one or two room tenements with facilities for sanitation should be provided in labour colonies.

(iv) Transportation:

Business and other agencies can help the government by undertaking studies and programmes of technical and financial assistance for the development of cheap public transport and distribution systems through improved journey planning and traffic regulation, increased operational efficiency and utilisation of road capacity, improved systems and procedures of granting licenses, more rational and scientific estimates for vehicle fleet size and manpower for different modes of transport, improved maintenance and replacement policy for the spares and structural changes in urban and rural layouts.

(v) Health and Education:

Business organisations also hold a responsibility towards improvement of the quality of life the people in the community. They can and should be engaged in works like providing water sources for drinking and bathing, improving sewage disposal system, cleaning dirty areas of the solid waste, reducing pollution (caused by soot of chimneys, and crowded industrial units, disposal of waste water and other residues; noise, etc.), improving sanitary facilities (through construction of underground drains, cleaning of existing foul water and waste-carrying open drains, improving roads by filling pits and giving them a regular slope, provision of public toilets and bathrooms and maintaining their cleanliness).

Such measures would reduce preventable and water-borne diseases. They can also distribute free medicines, nutritious food to school-going children and pregnant mothers, the aged and the sick. Holding of open camps for operation of minor ailments, eye diseases, family planning (vasectomy or tubectomy) can also be arranged by them. The explosion in population can be held in check by making available cheap contraceptives and advice for their use.

The problems responsible for ill-health in the rural areas need solution, for they result from no proper health education, unhealthy environment, unclean habits of living, poverty, poor diet and the social culture. These problems can be solved through medical help, and the help of social workers.

Besides, rural education could provide individuals with knowledge and skills to enable them to manage their families, to participate in cultural and economic life and to sharpen problem-solving capabilities.

(vi) Industrial Aid to Education in Urban Areas:

Progressive individual businessmen and individual business houses (such as Birlas, Tatas, Modis, Ruias, Lalbhais, Shreerams and others) are running and supporting schools, colleges and technical/professional educational institutions. In fact, it is a part of modern social responsibility of business that it should support educational programmes, more particularly technical education. In some cases, they help by lending the services of their specialists (as visiting experts) and giving financial help.

The National Industrial Conference Board of America in its Report on ‘Industrial Aid to Education’ has suggested five different forms of educational aid which business can render to the community.

a. Cash contribution to educational institutions;

b. Scholarship and loans to undergraduate students;

c. Contribution of material and equipments to educational institutions;

d. Teaching aids for students and teachers and

e. Contribution of company manpower.

(vii) Social Audit on Factual Assessment:

This should be done by trained and professional personnel to show the social performance of business. The team ‘social audit’ generally means a comprehensive evaluation of the way a company discharges all its responsibilities to shareholders, customers, employees, community and the government.

A social audit should generally adopt a four-step process, viz.:

a. Firm must itemize all the activities that have a potential social impact;

b. The circumstances leading to these actions or activities must be explained;

c. Some evaluation of the performance must be conducted and

d. The company must examine the relationship between the goals of the firm and those of society to see how the programmes relate to one another.

In brief, it may be said that “business must accept responsibility to the society and its various constituents as a trustee for the goods and services that it produces, consumes, saves and reinvests.”

Such responsibilities extend beyond the business to the lives of the people and the community and as such they should endeavour to:

a. Play a proper role in civil affairs within the goals of the business;

b. Promote amenities and help, create better living conditions;

c. Help in making people law-abiding and improving legislation and administration in municipal and industrial affairs and

d. Set up socially desirable standards of living, themselves avoiding ostentatious, wasteful expenditure and improvident display in weddings, festivities and parties.

1. Towards Input Suppliers:

The business owes responsibility towards input suppliers and ancillary industries.

They include:

(i) Providing technical know-how and assistance

(ii) Providing fair price

(iii) Assuring continuous purchase of inputs

(iv) Helping them in expansion and development

2. Towards Bankers and Financial Institutions:

Responsibilities towards bankers and financial institution include:

(i) Providing correct data and information for project appraisal.

(ii) Prompt payment of interest.

(iii) Clearance of the principal amount on or before due date.

3. Towards Market Intermediaries:

Business should render its responsibilities towards wholesalers, retailers and franchises.

They include:

(i) Providing products quiet in advance.

(ii) Providing freedom to have price margins

(iii) Taking back poor quality products.

(iv) Providing technical managerial know-how.

(v) Training the personnel.

(vi) Providing freedom in promotional programmes.

Business is continuously influenced by the environment. In fact, business also influences and manipulates the environment. Now, we shall study the business environment.


Responsibilities of Business towards Society

A business is a socio-economic institution which is responsible to various interest groups.

(I) Responsibility towards the Shareholders or Owners:

1. To pay a fair return on their capital investment (dividend or interest).

2. To ensure the safety of such investment.

3. To provide the shareholders with regular, accurate and full information about its working as well as schemes of future growth.

4. To provide opportunities for participation of shareholders in policy decisions.

5. To protect the interest of all types of investors in the business.

6. To maximise shareholder’s wealth, i.e., increase in market value of shares.

(II) Responsibility towards the Workers:

1. To provide good working conditions.

2. To pay fair wages and salaries to the workers and employees.

3. To provide service benefits such as medical facilities, education to children, retirement benefits, etc.

4. To win their cooperation by creating good human relations.

5. To develop their skills through training and education.

6. To recognize worker’s participation in decisions affecting their working life.

(III) Responsibility towards Consumers:

1. To avoid adulteration, poor quality, misleading and dishonest advertising, hoarding, black marketing, etc.

2. To supply right quality and quantity of goods and services at reasonable prices.

3. To ensure regular and adequate supply of products.

4. To handle the customer’s grievances promptly.

5. To inform them about the new products and new uses of the existing products.

(IV) Responsibility towards the Government:

1. To respect the laws of the country.

2. To pay taxes regularly and honestly.

3. To cooperate with the government voluntarily in solving national problems such as poverty, unemployment, illiteracy etc.

4 To adopt fair dealings in foreign trade in order to maintain country’s image.

5. To work and contribute towards the rescue and relief work in case of flood, earthquake, etc.

(V) Responsibility towards the Community:

1. To generate more employment opportunities.

2. To uplift the weaker sections of the society.

3. To protect the natural environment and avoid bad, effluent, smoky chimneys, dirty working conditions.

4. To provide assistance to educational institutions, dispensaries, religious institutions etc., of the community.

5. To promote communal harmony and peace in the society.


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