RBSE Solutions Class 12 Business Studies Chapter 14 Social Responsibility of Management and Corporate Social Responsibility

 

RBSE Class 12 Business Studies Chapter 14 Textbook Exercise

RBSE Class 12 Business Studies Chapter 14 Very Short Answer Type Questions

 

Question 1. What is Social Responsibility?
Answer: Social responsibility means that businesses have many expectations from society. Management works hard to meet these expectations. Society provides various resources to businesses, and in return, businesses are expected to fulfill certain duties. This is the social responsibility of the business enterprise towards society.
In simple words: Social responsibility means a business must meet what society expects from it because society provides resources to the business.

🎯 Exam Tip: When defining social responsibility, remember to mention both the expectations of society from business and the fulfillment of those expectations by management.

 

Question 3. What is meant by social consciousness?
Answer: Social consciousness means that society is aware and alert. Society must understand that its basic needs are met by business enterprises. Therefore, businesses and management should be responsible for meeting society's expectations. Social welfare includes programs to reduce unemployment, poverty, hunger, and to provide good quality products at fair prices.
In simple words: Social consciousness is society's awareness of its needs and expectations from businesses, which includes working for welfare like reducing poverty and providing fair products.

🎯 Exam Tip: Link social consciousness to both societal awareness and the role of business in fulfilling basic needs and promoting welfare.

 

Question 4. What is meant by corporate body?
Answer: A corporate body is a system that guides and controls how a company operates. This structure ensures that the business runs in an organized and managed way.
In simple words: A corporate body is the system used to manage and control a company's actions.

🎯 Exam Tip: Define a corporate body by highlighting its function of directing and controlling a company.

 

RBSE Class 12 Business Studies Chapter 14 Short Answer Type Questions

 

Question 1. Describe in brief the concept of social responsibility of management.
Answer: Management acts as an economic and social driving force for society. Therefore, management must develop social and economic values. This includes ensuring customer benefits and meeting the expectations of various groups in society, such as men, women, young people, children, working women, and the unemployed. Through various programs, management trains society for its improvement and well-being. All these actions are part of management's social responsibilities.
In simple words: Management's social responsibility means it must create economic and social value for all parts of society, meeting their needs and working for their upliftment through different programs.

🎯 Exam Tip: Briefly explain that management's social responsibility involves developing both economic and social values for all sections of society.

 

Question 2. Explain the new concept of social responsibility of business.
Answer: In the past, social responsibility was mostly limited to welfare activities. However, since the mid-20th century, the idea of social responsibility has completely changed, leading to what is now called the new concept. Management's true nature is humane and social, as it acts as a trustee of society's resources. This means managing these resources without negatively impacting social beliefs, quality of life, stability, or integrity. This new concept encourages management to create plans and programs that solve societal problems and help society grow and develop.
In simple words: The new concept of social responsibility means businesses are trustees of society's resources, focusing on human and social welfare, solving problems, and ensuring growth without negative social impact, beyond just welfare activities.

🎯 Exam Tip: Highlight the shift from mere welfare activities to a broader role where management acts as a trustee of society's resources, aiming for holistic social development.

 

Question 3. Explain in brief the social responsibilities of management towards itself.
Answer: Management has several duties towards itself:
1. To make smart decisions that consider society's best interests.
2. To show respect for its own profession.
3. To join professional groups and organizations.
4. To follow ethical rules and standards of conduct for its profession.
5. To be polite and respectful in professional interactions.
6. To help improve management research and knowledge.
In simple words: Management's responsibilities to itself include making good decisions, respecting its profession, joining professional bodies, following ethical rules, being courteous, and contributing to knowledge.

🎯 Exam Tip: When listing responsibilities towards self, focus on professional conduct, ethical decision-making, and contribution to the field.

 

Question 4. Explain in brief the responsibilities of business towards consumers/ customers.
Answer: Consumers are very important in the market; their satisfaction is key to business success. Governments protect consumer interests, so businesses must fulfill their responsibilities towards them to avoid serious consequences. These responsibilities include:
1. To study what consumers need, want, prefer, and like.
2. To provide goods and services of the right quality and quantity at fair prices.
3. To offer products that have a consistent and standard quality.
4. To make sure products are distributed fairly.
5. To avoid practices like overpricing, hoarding, or creating artificial shortages of products.
6. To provide fast and efficient services to consumers.
7. To handle consumer complaints quickly and effectively.
8. To avoid using misleading advertisements to promote products.
In simple words: Businesses must satisfy customers by understanding their needs, providing good quality products at fair prices, ensuring fair distribution, avoiding unfair practices, and handling complaints quickly.

🎯 Exam Tip: Remember that consumer satisfaction is paramount, and responsibilities involve fair pricing, quality products, ethical practices, and efficient service.

 

Question 5. Explain in brief the responsibilities of business towards the government.
Answer: The government plays a significant role in how businesses operate, so businesses have duties towards the government. These responsibilities include:
1. To follow all government policies, rules, and regulations.
2. To conduct business operations according to government guidelines.
3. To pay all taxes and other duties completely, honestly, and accurately.
4. To avoid trying to corrupt or influence government officials.
5. To make full use of their production capacity and business licenses.
6. To use economic resources in a way that benefits the nation.
7. To work together with the government on national policies and programs like small savings, Swachh Bharat Abhiyan, and family welfare.
In simple words: Businesses must follow government rules, pay taxes honestly, avoid corruption, use resources wisely for national benefit, and cooperate with government programs.

🎯 Exam Tip: Focus on compliance with laws, honest tax payments, and cooperation with national policies as key responsibilities towards the government.

 

RBSE Class 12 Business Studies Chapter 14 Long Answer Type Questions

 

Question 1. What do you understand by social responsibility of management. Discuss its concepts.
Answer: Social responsibility of management means that society has many expectations from management, and management works to fulfill these expectations. Society provides essential resources to businesses, and in return, businesses have a duty to meet society's necessary requirements.

**Concept of social responsibility:**
Different thinkers have different views on social responsibility. Some experts believe that a manager fulfills their duty to society by creating goods and services for profit within legal limits. Others see social responsibility as behavior that responds to current social norms, values, and performance expectations. Public welfare and community services related to social responsibility include poverty reduction, rural development, health, pollution control, environmental conservation, education, and employment.

**Four levels of hierarchy by R. Joseph Monsen:**
* **Obeying the law:** Managers feel they are socially responsible just by following the law.
* **Catering to public expectations:** Beyond obeying the law, social responsibility also involves meeting what the public expects from a business.
* **Speculation of public expectation:** At this level, management tries to guess public demands and needs and takes steps to meet them.
* **Creation of public expectations:** At the highest level, managers not only meet public demands but also set new standards for social responsibility to benefit society.

**Three phases of social responsibility by Robert D. Hay and Edmund R. Gray (1980):**
(i) **Profit maximising management:** In this phase, the main goal was to maximize profits, seen as a way to end economic scarcity. This idea is based on Adam Smith's "Wealth of Nations," which states that businesses produce only when they can earn profit. The belief was, "what is good for me is good for my country."
(ii) **Trusteeship management:** This concept emerged from the Great Depression. It acknowledges that management's goal is not just profit but also responsibility towards various stakeholders like employees, customers, suppliers, banks, and the community. Management should protect shareholders' interests like a trustee, assuming that what benefits the business benefits the whole nation.
(iii) **Quality of life management:** In this phase, companies are expected to solve major social issues using their knowledge and resources. The idea is, "what is good for society is good for our company." Accepting profit maximization, while believing in improving the quality of life, means management will not produce goods that harm society.

**According to R. Ackerman:**
He stated that society now has new expectations from management, especially providing leadership to eliminate social problems. Edward Cole added that the biggest challenge for management is to understand changing social desires and act in a socially desirable way.

Therefore, social responsibility is a broad concept that encourages managers to make decisions considering social interests. It can be understood in three phases:
* **Lowest level:** At this stage, management must work for social betterment by following existing laws and economic systems. Managers feel they fulfill their social duty by simply obeying laws or working for their own interest.
* **Middle level:** Here, social responsibility goes beyond basic obligations; it reaches a higher level where it aligns with prevailing norms, values, and performance expectations. Management at this stage does not ignore public or social issues.
* **Highest level:** This involves adapting corporate behavior to social needs. It is about anticipating and preventing problems. Management becomes proactive and sensitive to social issues, problems, and important global concerns. It anticipates social changes and problems, developing effective policies to meet these needs.
In simple words: Social responsibility means businesses meet society's expectations. It has evolved from just obeying laws or maximizing profit to actively solving social issues, creating public expectations, and improving the quality of life for everyone, acting like a trustee of resources.

🎯 Exam Tip: For this broad question, clearly define social responsibility, then systematically discuss Monsen's hierarchy and Hay & Gray's phases, and finally summarize Ackerman's perspective on the different levels of responsibility.

 

Social responsiveness: Quality of life approach

 

Question 2. Explain in brief the social responsibilities of business.
Answer: The scope of social responsibilities under management is wide and varied. Management plays a significant role in taking on social responsibilities. Management's duties towards different stakeholders can be understood as follows:

**Management's social responsibility towards important groups:**
(i) **Towards itself and their profession:**
1. To make rational decisions keeping social interests in mind.
2. To respect the profession.
3. To become a member of professional organizations.
4. To follow the professional code of conduct.
5. To show professional courtesy.
6. To contribute to the growth of managerial research and knowledge.

(ii) **Responsibility towards their business organization:**
6. To encourage research and development activities and plans.
7. To maintain the company's ability to earn profits.
8. To build and improve the business's good reputation and public image.

(iii) **Towards the owners:**
1. To act as a guardian of the capital invested by owners, ensuring its safety.
2. To share relevant information with owners.
3. To ensure regular payment of returns on capital.
4. To continuously increase the value of capital to ensure its growth.
5. To treat all shareholders equally and act as their trustee.
6. Not to make personal gains or commit fraud/embezzlement.
7. To provide regular, accurate, and complete information about the company's operations and future growth plans.

(iv) **Responsibility towards creditors:**
1. To make productive use of borrowed funds.
2. To ensure fair terms for interest and principal when taking loans.
3. To make regular and timely payments of interest and the principal amount borrowed.
4. To keep mortgaged assets safe.
5. To provide creditors with all necessary information.

(v) **Responsibility towards workers:**
1. To pay fair wages and salaries and treat employees fairly.
2. To implement incentive pay plans.
3. To provide safe working conditions.
4. To provide healthy working conditions.
5. To give them job security.
6. To implement welfare programs for labor.
7. To give employees meaningful work that matches their skills and qualifications.
8. To organize training and development programs for their overall growth.
9. To meet legal requirements for worker safety.

(vi) **Responsibility towards consumers:**
1. To research their needs, wants, tastes, and preferences.
2. To provide the correct quality and quantity of goods and services at fair prices.
3. To offer products of consistent standard.
4. To ensure fair distribution of products.
5. To avoid profiteering, hoarding, and creating artificial scarcity.
6. To provide quick and efficient service to consumers.
7. To handle consumer complaints promptly.
8. To avoid misleading product advertisements.
9. To conduct research on markets, consumers, and useful goods.
10. To respect consumer protection laws.
11. To inform consumers about product usage and features.

(vii) **Responsibilities towards suppliers:**
1. To offer fair prices for goods received.
2. To set or negotiate fair payment conditions.
3. To make timely payments to creditors.
4. To give suppliers chances to offer new types of raw materials.
5. To provide necessary market information.

(viii) **Responsibilities towards other businesses:**
1. To maintain healthy competition.
2. Not to oppose or criticize other competing businesses.
3. To encourage cartels or unions for business efficiency and to promote society's interests.
4. To avoid monopolies and unfair trade practices.
5. Not to use trademarks, brands, etc., of other competitors.

(ix) **Responsibility towards trade associations and professional organizations:**
1. To become a member of chambers of commerce and other business associations.
2. Not to misuse literature published by them.

(x) **Responsibilities towards the community:**
1. To adopt socially desirable behavior and a good standard of living, avoiding showing off and wasteful spending.
2. To play a fair role in community matters.
3. To provide and promote general facilities and help.
4. To create better living conditions for everyone.
5. To protect and preserve natural resources.
6. To help develop backward areas.
7. To protect and promote social and cultural values.
8. To create job opportunities for local people.
9. To protect the environment from pollution.
10. To establish public welfare institutions like schools, hospitals, and night shelters for the poor.
11. To provide financial help to women, disabled people, and weaker sections of society.

(xi) **Responsibility towards government:**
1. To abide by the government's policies, rules, and regulations.
2. To operate the business according to government policies.
3. To pay taxes and other duties fully, honestly, and truthfully.
4. To refrain from corrupting government systems.
5. To make full use of production capacity and business licenses.
6. To use economic resources in the national interest.
7. To cooperate with national policies and programs such as small savings, Clean India, and family welfare.

(xii) **Responsibility towards the world:**
1. To help promote international trade.
2. To avoid interfering in other nations' business policies or internal affairs.
3. To adopt international technology and methods.
4. To follow international business ethics and standards.
5. To respect the social and cultural values of trading nations.
6. To provide technical and managerial assistance to developing and backward nations.
In simple words: Businesses have social responsibilities to many groups: themselves, their organization, owners, creditors, workers, consumers, suppliers, other businesses, trade groups, the community, the government, and even the world, covering everything from ethical conduct to environmental protection and global trade.

🎯 Exam Tip: For this comprehensive question, categorize responsibilities by stakeholder group (e.g., owners, employees, government, community) and provide 2-3 key points for each to ensure full coverage.

 

Question 3. Explain the provisions for Corporate Social Responsibilities under Companies Act, 2013.
Answer: The Companies Act, 2013, includes specific rules for Corporate Social Responsibility (CSR):

(i) **Applicability:**
Any company with a net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more in any financial year, must form a Corporate Social Responsibility Committee. This committee needs at least three directors, with at least one being an independent director. [Section 135(1)]

(ii) **Expression in Board Report:**
The board's report, as per sub-section (3) of Section 134, must disclose the members of the corporate social responsibility committee. [Section 135(2)]

(iii) **Functions of Corporate Social Responsibility Committee:**
* The committee must create and suggest to the board a CSR policy. This policy will outline the activities the company will undertake, as listed in Schedule VII.
* It should recommend how much money to spend on these CSR activities.
* It must regularly check and oversee the company's CSR policy. [Section 135(3)]

(iv) **Action Taken by Board:**
The board of directors of every company mentioned in sub-section (1) must:
* Approve the CSR policy for the company after reviewing the committee's suggestions. This policy's details must be included in the company's report and, if required, on its website.
* Make sure that the activities mentioned in the CSR policy are actually carried out by the company. [Section 135(4)]

(v) **CSR Expenditure:**
The board of every company mentioned in sub-section (1) must ensure that the company spends at least two percent of its average net profit from the past three financial years on CSR activities. This expenditure should be in line with its corporate social responsibility policy. [Section 135(5)]

(vii) **Mention of Failure to Spend:**
If a company fails to spend the required amount, the board must explain the reasons for this in its report made under clause (O) of sub-section (3) of Section 134. [Section 135(5)]

(viii) **Calculation of Net Profits:**
For CSR purposes, the average net profit will be calculated following the rules in section 198.

(ix) **Other Functions of Social Responsibility:**
* Every company (including its holding or subsidiary, and foreign companies with a branch or project office in India) that meets the criteria in sub-section (1) of Section 135 of the Act, must follow these provisions.
* A company can also partner with other companies to undertake CSR projects or programs. Their respective CSR committees must be able to report separately on these projects or programs according to the rules.
* CSR projects or programs undertaken *only* in India will count as CSR expenditure, subject to sub-section (5) of Section 135 of the Act.
* CSR projects or programs that benefit *only* the employees of the company and their families will *not* be considered CSR activities as per Section 135 of the Act.
* An unlisted public company or a private company covered under sub-section (1) of Section 135 that is not required to appoint an independent director (as per sub-section (4) of Section 149 of the Act) must still have a CSR committee without such a director.
* A private company with only two directors on its board must form its CSR committee with these two directors.
* The CSR committee must set up a clear system for monitoring how CSR projects or programs are implemented.
* CSR expenditure includes all costs, even contributions to a fund for projects approved by the board based on the CSR committee's recommendations. However, it does not include spending on items that are not listed in Schedule VII of the Act.
In simple words: The Companies Act, 2013, requires certain companies to form a CSR committee, spend at least 2% of their average net profit on social activities, and report these actions, focusing on projects that benefit society generally, not just employees.

🎯 Exam Tip: When explaining CSR provisions, make sure to cover the applicability criteria, the formation and functions of the CSR committee, the mandatory expenditure percentage, and the reporting requirements.

 

RBSE Class 12 Business Studies Chapter 14 Additional Questions

 

Question 1. Define provisions under section 135(1) of Companies Act, 2013.
Answer: As per Section 135(1) of the Companies Act, 2013, any company that has a net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more during any financial year, must establish a Corporate Social Responsibility Committee. This committee should consist of three or more directors, and at least one of these directors must be an independent director.
In simple words: Section 135(1) of the Companies Act says that big companies (based on net worth, turnover, or profit) must have a CSR committee with at least three directors, including one independent director.

🎯 Exam Tip: Clearly state the three financial criteria (net worth, turnover, net profit) and the composition of the CSR committee as per Section 135(1).

 

Question 2. How much expenditure can a company make under corporate social responsibility policy? How is the profit calculated and under which section?
Answer: The board of every company mentioned in sub-section (1) must ensure that the company spends at least two percent of its average net profit from the three immediately preceding financial years on corporate social responsibility activities. This is done following its CSR policy. These provisions are outlined in Section 135 and sub-section 135(5) of the Companies Act, 2013. For calculating average net profit, Section 198 of the Companies Act is used.
In simple words: A company must spend at least 2% of its last three years' average net profit on CSR activities, as per Section 135(5). The profit calculation follows Section 198.

🎯 Exam Tip: Remember the 2% expenditure rule, the "average net profit of three preceding financial years," and the relevant sections (135 and 198) for full marks.

 

Question 3. What is said in section 135 (3) of Companies Act, 2013?
Answer: Section 135(3) of the Companies Act, 2013, states the following points:
1. The Corporate Social Responsibility Committee must create and recommend to the board a CSR policy. This policy should clearly state the activities the company will undertake, as listed in Schedule VII.
2. The committee must recommend the specific amount of money to be spent on the activities mentioned in Clause (a).
3. The committee is also responsible for regularly monitoring the company's corporate social responsibility policy. [Section 135(3)]
In simple words: Section 135(3) explains that the CSR committee must formulate a policy, recommend the amount to spend on activities from Schedule VII, and continuously monitor the policy.

🎯 Exam Tip: Focus on the three key functions of the CSR committee: policy formulation, expenditure recommendation, and ongoing monitoring, as defined in Section 135(3).

 

Question 4. Explain the management's responsibility towards the creditors in brief.
Answer: Management has several key responsibilities towards its creditors:
1. To make productive and efficient use of the money borrowed from them.
2. To maintain fair terms for interest rates and the principal amount when taking loans.
3. To ensure regular and timely payment of both interest and the principal amount borrowed.
4. To keep any mortgaged assets safe and secure.
5. To provide all necessary financial information to the creditors when requested.
In simple words: Management must use borrowed money well, ensure fair loan terms, pay back interest and principal on time, keep secured assets safe, and share needed information with creditors.

🎯 Exam Tip: When discussing responsibilities towards creditors, emphasize timely payments, fair dealings, efficient use of funds, and transparency.

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