Kerala Plus One Business Studies Notes Chapter 6 Social Responsibilities of Business and Business Ethics
Contents
1. Social Responsibility – Meaning – Arguments for and against social responsibility – Kinds of social responsibility – Social responsibility towards different interest groups
2. Environmental protection – Causes of pollution – Need for pollution control – Role of business in environmental protection
3. Business Ethics – Meaning – Elements of Business Ethics Social responsibility of business refers to its obligation to take those decisions and perform those actions which are desirable in terms of the objectives and values of our society. Social responsibility involves an element of voluntary action on the part of business people for the benefit of society.
Arguments in favour of Social Responsibility:
1. Justification for Existence and Growth:
The prosperity and growth of business is possible only through continuous service to society.
2. Long term Interest of the firm:
A firm can improve its image and builds goodwill in the long run when its highest goal is to serve the society .
3. Avoidance of government regulations:
Business can avoid the problem of government regulations by voluntarily assuming social responsibilities.
4. Maintenance of society:
Law alone can’t help out people with ail the difficulties they face. A socially responsible business can contribute something for social peace and harmony.
5. Availability of resources with business:
Business has valuable financial and human resources which can be effectively used for solving problems of the society.
6. Better environment for doing business:
Social responsibility creates better environment for business operations as it improves quality of life and standard of living of the people.
7. Contribution to social problems:
Some of the social problems have been created by business firms themselves such as pollution, unsafe work places, discrimination etc, Therefore, it is the moral obligation of business to solve such social problems.
Arguments Against Social Responsibility:
1. Violation of profit maximization objective:
According to this argument, business exists only for the maximum profit to its shareholders and do not have responsibility to the society as a whole.
2. Burden on consumers:
Involvement of business in social responsibilities involve a lot of expenditure which will ultimately be borne by the customers.
3. Lack of Social Skills:
The business firms and managers are not expert to tackle the social problems like poverty, over population etc.
4. Lack of public support:
business cannot fulfill social responsibility because of lack of public confidence & cooperation.
Kinds of Social Responsibility:
1. Economic responsibility:
The primary social responsibility of a business is to produce goods and services that society wants and sell them at a profit.
2. Legal responsibility:
Every business has a responsibility to operate within the laws of the land.
3. Ethical responsibility:
This includes the behavior of the firm that is expected by the society but not included in law. eg: Respect religious sentiment and dignity of people while advertising.
4. Discretionary responsibility:
This refers to voluntary obligation that an enterprise assumes. eg: Giving charitable contributions to educational institutions, helping the people in natural calamities etc.
Social Responsibility towards different interest groups:
1. Responsibility towards share holders or owners:
- Provide a fair and regular return on the investment of shareholders.
- Provide regular and accurate information on the financial position of the firm.
- To ensure the safety of their investment.
2. Responsibility Towards the workers:
- Providing fair wages
- Providing good working conditions and welfare amenities.
- Respect democratic rights of workers to form unions.
3. Responsibility toward consumers:
- Supply right quality and quantity of goods and services at reasonable prices.
- Avoding unfair trade practices like adulteration, poor quality, misleading advertisement etc.
- Inform them about new products, its features, uses and other matters relating to the products.
- To handle the customers grievance promptly.
4. Responsibility Towards Government:
- Respect the laws of the country
- Pay taxes regularly and honestly.
- act according to the well accepted values of the society.
5. Responsibility towards community:
- Make employment opportunities
- Protect the environment from pollution.
- To uplift the weaker sections of society
Business & Environmental Protection Causes of Pollution:
Many industrial organisations have been responsible for causing air, water, land and noise pollution.
1. Air Pollution:
Air pollution is mainly due to Carbon monoxide emitted by automobiles and smoke and other chemicals from manufacturing plants. It has created a hole in the ozone layer leading to global warming.
2. Water pollution:
Water becomes polluted primarily from chemical and waste dumping.. It has led to the death of several animals and posed a serious problem to human life.
3. Land Pollution:
Dumping of toxic wastes reduces the quality of land and making it unfit for agriculture or plantation.
4. Noise Pollution:
Noise caused by the running of factories and vehicles create a serious health hazard such as loss of hearing, malfunctioning of the heart and mental disorders.
Need for Pollution Control:
1. Reduction of health hazard:
Pollution control measures can check diseases like cancer, heart attack & lung complications and support a healthy life on earth.
2. Reduced Risk of Liability:
It is a sound business policy to install pollution control devices in its premises to reduce the risk of liability of paying compensation to the affected people.
3. Cost Saving:
An effective pollution control programme is needed to save costs of operating business.
4. Improved Public Image:
A firm that adopts pollution control measures enjoys a good reputation as a socially responsible enterprise.
5. Other social benefits:
Pollution control results in many other benefits like clearer visibility, cleaner buildings, better quality of life, and the availability of natural products in a purer form.
Role of Business in Environmental Protection:
- A definite commitment by top management to create a work culture for environmental protection
- Ensuring that commitment of environmental protection is shared throughout the enterprise by all divisions and employees.
- Developing clear cut policies and programmes for purchasing good quality raw materials, introducing superior technology, using scientific techniques of disposal of waste and developing employee skills for pollution control.
- Complying with the laws and regulations enacted by the Government for prevention of pollution.
- Participation in government programs relating to management of hazardous substances, cleaning up of polluted rivers, plantation of trees, and checking deforestation.
- Periodical assessment of pollution control programmes in terms of costs and benefits with a view to improve them.
- Arranging educational workshops and training materials to share technical information with everyone involved in pollution control.
Business Ethics:
Ethics is concerned with what is right and what is wrong in human behavior. Business ethics refer to the socially determined moral principles which should govern business activities.
Business ethics is the code of conduct followed and performed by every business. Ethical business behavior improves public image, earn’s public confidence and leads to greater success.
Examples of Business Ethics:
- Charging fair prices from customers
- Using fair weights for measurement of commodities
- Giving fair treatment to workers
- Earning reasonable profits.
- Avoiding adulteration, hoarding etc.
- Using environmentally friendly products
Elements of Business Ethics:
1. Top management commitment:
The Chief Executive Officer and higher level managers must give continuous leadership for developing and upholding the moral values of the organisation.
2. Publication of a Code:
‘Code’ refers to a formal written document of the principles, values and standards that guide a firm’s actions. It may cover the areas of fundamental honesty and adherence to laws, product safety and quality, health and safety in the workplace etc.
3. Establishment of Compliance Mechanism:
A suitable mechanism should be developed to comply with the ethical standards of the enterprise.
4. Employees Involvement:
To make ethical business a reality, employees at all levels must be involved.
5. Measuring Results:
Ethical results must be verified and audited how far work is being carried according to ethical standards.