1. UNIT III
THE SOCIAL RESPONSIBILITY OF
BUSINESS

2. •In the last few years, the corporate world has come
under increasing pressure to behave in an ethically
responsible manner. In particular, recent
accountability failures have led to bankruptcies and
restatements of financial statements that have
harmed countless shareholders, employees,
pensioners, and other stakeholders. These failures
have created gigantic financial and economic crises of
a magnitude has never seen before.
Part II

3. Without a doubt, one of the causes of such accountability failures
is the failure to practice genuine corporate responsibility, which is
understood to mean at least two things:
1. That profit maximization is not the sole purpose of the
firm;
2. that a firm shareholders are not the only stakeholder
group for whom managers have some responsibilities.

4. Corporate social
responsibility is a gesture of
showing the company’s concern
& commitment towards society’s
sustainability & development.
CSR is the ethical behavior of a
company towards society.

6. Types of Social Responsibility

7. Responsibility towards Society
Carrying on business with moral& ethical standards.
Prevention of environmental pollution.
Minimizing ecological imbalance.
Contributing towards the development of social
health, education
Making use of appropriate technology.
Overall development of locality.

8. Responsibility towards Government
Obey rules & regulations.
Regular payment of taxes.
Cooperating with the Govt to promote social values.
Not to take advantage of loopholes in business laws.
Cooperating with the Govt for economic growth &
development.

9. Responsibility towards Shareholders
To ensure a reasonable rate of return over
time.
To work for the survival & the growth of the
concern.
To build reputation & goodwill of the company.
To remain transparent & accountable.

10. Responsibility towards Employee
To provide a healthy working environment.
To grant regular & fair wages.
To provide welfare services.
To provide training & promotion facilities.
To provide reasonable working standard &
norms.
To provide efficient mechanism to redress
worker’s grievances.
Proper recognition of efficiency & hard work.

11. Responsibility towards consumers
Supplying socially harmless products.
Supplying the quality, standards, as promised.
Adopt fair pricing.
Provide after sales services.
Resisting black-marketing & profiteering.
Maintaining consumer’s grievances cell.
Fair competition.

12. Corporate Social Responsibility (CSR) and its
difference from Business Ethics
The phrase corporate social responsibility refers to a
corporation’s responsibilities or obligations toward society, CSR,
as defined by the World Business Council for Sustainable
Development (WBCSD), is “ a continuing commitment by
business to behave ethically and contribute to economic
development while improving the quality of life of the workforce
and their families, the local community, and society at large”.

13. There is some disagreement
about what those obligations
include. Do companies have
a responsibility to donate to
charities or to give their
employees higher wages and
customer safer products? Or
are they obligated to
maximize profits for their
shareholders or stockholders?

14. In view of Milton Friedman:
• the only social responsibility of business is to increase its
profits
• company’s only responsibility is to legally and ethically
“make as much money as possible for its owners ( to
maximize shareholders’ returns
• A manager has no right to use company money to social
causes when doing so will reduce shareholder’s profits
because the money does not belong to the manager but
to the shareholders

15. According to Friedman, the exercise of a social responsibility by a
corporate executive is:
1.unfair because it constitutes taxation without representation
2. undemocratic, because it invests governmental power in in a person
who has no general mandate to govern
3. unwise, because there are no checks and balances in the broad range
of governmental power thereby turned over to his discretion
4. A violation of trust, because the executive is employed by the owners
as an agent serving the interests of his principal
5. futile, both because the executive is unlikely to be able to anticipate the
social consequences of his actions and because, as he imposes costs on
his stockholders, customers or employees, he is likely to lose their support
and thereby lose his power.

16. Pair and Think: Crticisms to Friedman
•1. the manager or executive is the
employee of the corporation and so the
executive is legally required to serve the
interests of the corporation -his true
employer -not of his shareholders.

17. Pair and Think: Criticisms to Friedman
•2. Shareholders only own stocks and this gives them a
few limited rights, such as the right to elect the board of
directors, the right to vote on major company decisions
and the right to whatever remains after the corporation
goes bankrupt and pays off its creditors. But
shareholders do not have all the other rights that true
owners would have and so they are not really owners
of the corporation

18. •3. the executive’s core responsibility is to run the
corporation as stockholder want it to be run. In
reality, the executive probably has no idea how
stockholders want the company to be run, and
legally, anyway, he is required to run the company in
ways that serve many other interests ( including
employee interests and consumer interests) besides
those of stockholders

19. •4. against Friedman’s view that by seeking to
maximize shareholders’ returns, the corporation will
best serve society. Sometimes competitive forces
fail to steer companies in a socially beneficial way
and, instead lead them to act in a socially harmful
manner. For example, a company might knowingly
pollute a neighborhood with substance that is not
yet illegal, in order o save the costs of reducing its
pollution and thereby be more competitive

20. Review the headlines and contents of any national
newspaper during the past week. This should give you a
general view of the country’s major social problems. You
might be surprised to find out that most of these problems
have been with us for years already, with effective solutions
seeming to be out of reach.

21. ____1. Unemployment ____ 9. Energy Crisis
____ 2. Violence and rising criminality ____ 10. Nuclear Threat
____ 3. Poverty ____ 11. Insurgency
____ 4. Prevalent Prostitution ____ 12. Misinformation and
misrepresentation in
advertisements
____ 5. Increase in number of street children____13. Drug Abuse
____ 6. Lack of primary health care ____14. Spread of AIDS/HIV
____ 7. Pornography ____15. Graft and Corruption
____ 8. Denudation of forest
Go through the list below that put a check mark in the
blank before each of the ten most serious problems
plaguing Philippine Society today

22. You and your group mates will agree on the ten major
social problems from the above list. Rank them from
highest to lowest. Write the results on manila paper
and display for presentation to the class.

23. The following questions should be answered in your
presentation:
1. Which government and private agencies and
institutions are responsible for solving at least
lessening the impact of the given social problems.
2. List at least five companies that are helping to solve or
alleviate the above social problems
3. Have you ever had a chance to involve yourself in
working out solutions to some of the social issues and
problems given? Discuss what you did.

24. React to this question: Should the citizens of a country
always wait for government to take the lead in
providing solutions to the country’s problems?
Express your thoughts on this matter.
Self-Assessment