CBSE Class 11 Business Studies Social Responsibilities Of Business And Business Ethics Notes Set B

Social Responsibility

It is very clear that no business can be survived without the support of the society, as it is run by the people, through the people and for the people. Because of the same reason it has certain responsibilities towards the society.
Social responsibility refers to the obligations of the businessmen which are desirable in terms of the objectives and values of our society.

Arguments for social responsibility

1. Existence and growth – Prosperity and growth of business is possible only through rendering continuous service to society.

2. Long term interest of the firm – A firm and its image stands to gain more profits in the long run when it accepts service as the highest goal. Supporting social goals enhances
public image of any firm.

3. Avoidance of government regulations – Businessman should voluntarily assume social responsibilities, so that they can avoid government regulations. Eg:
Environmental pollution.

4. Maintenance of society – If the people feel that they are not getting their due from the business, they will not support such business organisations.

5. Availability of resources with business – Available resources with the business such as managerial talent and financial resource can be utilized to solve the problems of the society when it is needed.

6. Converting problems into opportunities – Business is always looking for converting risky situations to opportunities, this quality can be utilized for solving the problems in the society.

7. Better environment for doing business – A society with fewer problems and complaints provides better environment for the business.

8. Holding business responsible for social problems – Some of the social problems such as pollution, unsafe work environment, discrimination in employment etc. are created by business enterprises themselves, so that it is their moral obligation to solve them.

Arguments against social responsibility

1. Violation of objective – Business is an economic entity and it s main objective is profit maximization. If the business organizations are engaged in social activities their profit will be reduced. It will affect the success of the business.
2. Burden on consumers – It is an argument that the cost of social responsibility will be shifted to the consumers by charging higher prices.
3. Lack of social skill – It is an argument that the business people have no skill to take up social work as they are always engaged in business activities.
4. Lack of public support – Public usually do not like business interference in social programs, so that they cannot operate successfully in such areas.

Reality of Social Responsibility

1. Threat of public regulation – When business enterprises act in a socially irresponsible manner, government will act by regulating them for safeguarding public interest.
2. Pressure of labour movement – Labour movement has become very powerful now-adays,so that the businessmen are forced to protect the interest of the workers.
3. Consumer consciousness – Business enterprises have started customer oriented policies as they are aware about their rights and privileges.
4. Development of social standard for business – Newly developed social standards consider only legitimate economic activities along with serving the society. Then only the business can survive and grow.
5. Development of business education – Because of development of business education, people are aware of the social purpose of business.
6. Relationship between social interest and business interest – Businessmen have realized that social interest and business interest are not contradictory, but they are complementary to each other.
7. Development of professional managerial class – Professional management education has created a class of professional managers who have got a positive attitude towards the social responsibility as compared to the earlier class of owner managers.

Kinds of Social Responsibility
1. Economic responsibility – Since the business is an economic entity, it has to produce goods and services that society wants and sells them at a profit.
2. Legal responsibility – Business enterprises have the responsibility to operate within the laws of the country.
3. Ethical responsibility – It refers to the moral principles to be followed by the businessmen in relation to the society. Eg: Protecting religious sentiments and dignity of people while advertising a product.
4. Discretionary responsibility – This is voluntary obligation of a business enterprise. Eg; giving charity to an educational institution, helping people in natural calamities etc.

Social Responsibility towards different Interest Groups As a socio-economic institution business is always in touch with various groups such as owners, employees, customers, suppliers etc. and it has to discharge certain responsibilities as follows:

1. Owners:
a. Safety of investment.
b. Adequate return on investment.
c. Accurate financial information should be provided.

2. Employees:
a. Fair wages
b. Job security
c. Promotion opportunities
d. Welfare measures
e. Better working conditions
f. Participation in management

3. Consumers:
a. Regular supply of commodities.
b. Better quality
c. Reasonable Price
d. Avoidance of unfair trade practices.

4. Suppliers:
a. Better relationship
b. Prompt payment.

5. Government and Community:
a. Lawful business.
b. Prompt payment of tax.
c. Help the government in socio-economic development (employment opportunities, literacy, poverty etc.)
d. Optimum use of natural resources.
e. Concentrate in safety and welfare of the people.
f. Control pollution as far as possible.

Business & Environmental Protection

The health and well being of people depends on the quality of environment in which they live and work. Rapid industrialization and growing traffic have caused a great damage to the environment.
Pollution is the injection of harmful substances into the environment largely because of industrial production. It changes the physical, chemical and biological characteristics of air, water and land.

Causes and Types of Environment Pollution:
1. Air Pollution: It is the contamination of air by the accumulation of harmful or toxic substances which will create serious health problems to living organisms, monuments etc.
2. Water Pollution: Water is said to be polluted when it is changed in the quality as a result of waste disposal and other human activities, so that it become less suitable for drinking.
3. Land Pollution / Soil Pollution: It may be due to the dumping of non-degradable waste material into the land from industrial units, hospitals, hotels, dwelling units etc. This damages the quality of soil making it unfit for cultivation.
4. Noise / Sound Pollution: It may cause damages to the human body and mind, thesmooth functioning of hospitals, educational institutions etc. Industrial units,Automobiles etc. are the major sound pollutants.

Need for pollution control
1. Reduction of health hazards – Major diseases like cancer, heart attacks etc. are caused by pollutants in the environment. Pollution control measures only can prevent such diseases up to a certain extent.
2. Reduce risk of liability – In case a disaster has been take place the entire liability will be borne by the enterprise. E.g. Union Carbide Tragedy in Bhopal.
3. Cost savings – Effective pollution control strategy helps to reduce cost of operating business. If they use improper technology with greater wastes leading to high waste disposal cost.
4. Public image – A business enterprise which follows good pollution control measures can enjoy a good reputation in the society and will be perceived as a socially responsible enterprise.
5. Other social benefits – It includes clear visibility, clean buildings and monuments,quality life and availability of pure natural products.

Role of business in Environmental Protection
1. Top level management should create a work culture for environmental protection and pollution control.
2. Sharing the ideas and technical information regarding environmental protection among the employees.
3. Use good quality materials.
4. Adopt modern technology.
5. Follow the rules and regulations by the government.
6. Scientific methods of waste management.
7. Support in government programs like clearing up of polluted water sources, plantation of trees, checking deforestation etc.
8. Timely assessment of pollution control programs.

BUSINESS ETHICS

The word “ethics” derived from the Greek word “ethos” which means character or sentiments of community. Ethics specifies what is good or bad, fair or unfair, right or wrong.
Business ethics refers to the moral principles followed by a businessman in his dealings with the people and it involves better quality, fair price, justice, courage, thrift etc. Business ethics helps to win the confidence of customers which will ensure the prosperity and progress of the business.

Examples of ethical business practices:
1. Fair and reasonable price
2. Correct weight and measures
3. Disclose actual profit and prompt payment of tax
4. Fair treatment to the employees
5. Sale of genuine products to customers
6. Take reasonable profit
7. No bribes

Common unethical business practices are as follows:
1. Adulteration
2. Poor quality
3. Black marketing and hoarding
4. Misleading advertisements
5. Fake goods
6. Deceptive packaging
7. Pollution of environment
8. Exploitation of workers

Elements of business ethics
Practicing business ethics means doing things in conformity with existing norms or standards of society. The main elements are:

1. Top management commitment – The top level managers need to be openly strong in ethical matters, so that they can guide their organization towards ethically upright behavior.

2. Publication of a “Code’ – Code means a written document which contains the moral principles to be followed by the organization. It covers the areas like honesty, adherence to laws, quality, health and safety in workplace, employment practices fairness in selling etc.

3. Establishment of compliance mechanism – A suitable mechanism should be introduced to ensure that actual decisions and practices comply with firm’s ethical standards. Eg: Paying attention to values and ethics in recruiting employees.

4. Involving employees at all levels – Involvement of employees in all the levels in ethical programs is a must, then only they can do accordingly. Eg: Conducting a group discussion among the employees in small groups to discuss the ethical policies to be followed in the firm.

5. Measuring results – The firm can monitor the actual performance with ethical standards and they can take necessary steps for further course of action.