1. UNIT II – BUSINESS & SOCIETY
Objectives of Business
Social Responsibility of Business (CSR)
Social Audit
Government and Business
Corporate Governance
2. Today the operations of business enterprises
affect a wide spectrum. The resources they
make use of are not limited to those of the
proprietors and the impact of their operations is
felt also by many a people who are in no way
connected with the enterprises. The
shareholders, the suppliers of resources, the
consumers, the employees, the local community
and society at large are affected by the way an
enterprise functions. Hence a business
enterprise has to be socially very responsive so
that a social balance may be struck between the
opposing interests of these groups.
3. There has been a growing acceptance of the
plea that business should be socially
responsible in the sense that the business
enterprise, which makes use of the resources of
society and depends on society for its
functioning, should discharge its duties and
responsibilities in enhancing the welfare of the
society of which it is an integral part.
4. Introduction
Business is an integral part of the society. With earning
profits business must also keep in view the social aspiration
and observe the discipline of the society.
No businessman can now afford to be money mad or gross
materialistic. He can no longer exist for longer period if his
policies are just self centered. Business has to catch a
number of objectives which are needed in every area
where performance and result directly or vitally effect its
survival.
5. Thus, a businessman has to be very dynamic in his
approach, upto-date in knowledge and progressive in
views. Success in business cannot be achieved without
proper selection of right objectives. Selection of
objectives is a very difficult task for businessman. We
shall now discuss the objectives of business. Business
has mainly two types of objectives:-
1. Profit motive which is essential for its survival.
2. Social motive which is also very important for the
whole community.
7. Profit
Survival
Growth & Expansion
Motivation
Measurement of
Efficiency
Research &
Development
Prestige &
Goodwill
Social contribution
to cost &
welfare
8. Social
Responsibility Responsibility Responsibility Responsibility
to to to to
Shareholder Employee Consumer Community
9. Responsibility to Shareholder
Stay in Business
Safeguard capital of Shareholder
Provide reasonable dividends
Stable Prices
Good public image
10. Responsibility to Employee
Fair Wages
Better Working Condition
Growth and Expansion
Self Development of Worker
Partnership in Prosperity of Business
Good Trade Union System
11. Responsibility to Consumer
Better Products
Cheaper Products
Avoid Misleading Consumer
Supplied Goods do not have
Adverse Effect
Heartier Grievances
12. Responsibility to Community
Better Environment
More Employment
Research and Development
Improved Efficiency
Develop Backward Area
Promote Educate and Pollution Control
Better Society
13. The Indian Situation
The Indian business sector presents a mix picture as far as
social responsibility is concerned. J.R.D Tata was among the
first in designing and conducting the first ever social audit
in India.
Social audit is undertaken in countries like U.S.A., U.K,
Japan and some more western countries. The subject has
not yet obtained the status of science and hence there is no
unanimity in their objectives. However, there is a growing
concern for consumer protection, environment, pollution
control etc
14. The modern concept of business is, thus, a very broad one.
Business is viewed as subsystem of the total social system.
Three ideas are significant in addition to the systems idea.
The three ideas are
Values
Viability
Public visibility.
15. Social Responsibility of Business
According to Steiner & Steiner, social responsibility is:
• Each business must take into account the situation in which it
finds itself in meeting stakeholder expectations.
• Business is an economic entity.
• Business should recognize that in the long-run,it should benefit
everyone.
• The social responsibility is directly related to social power to
influence outcome.
• Social responsibility is based upon the size of the company.
• Social responsibility absorbs some investment.
16. Social Orientation of Business
Carroll has defined social responsibility on a
three dimensional conceptual model.
1. Economic obligation.
2. Legal obligation.
3. Ethical obligation.
4. Discretionary obligation.
17. Social Orientation of Business
William E Halal’s return-on-resource model of
corporate performance recognizes the fact
that no corporate social posture will be value-
free. The firm can only attempt to unite the
diverse interests of various social groups to
form a workable coalition engaged in creating
value for distribution among members of the
coalition.
18. Social Orientation of Business
Ackerman’s model states that there are three
phases in the development of social
responsiveness of a company.
1. The top management recognizes the
existence of social problem.
2. The company appoints staff specialists or
external consultants.
3. Implementation of social responsibility
programs.
19. Extent of Social Orientation
• Anti-social.
• Indifferent.
• Peripheral.
• Socially oriented.
• Committed & Very active.
20. Factors Affecting Social Orientation
• Promoters & Top management.
• Board of Directors.
• Stakeholders & Internal Power relationships.
• Societal factors.
• Industry& trade associations.
• Government.
• Competitors
• Political influences.
• Resources
• Ethical influences.
21. Factors Affecting Social Orientation-
Ethical Influences.
• The Golden rule.
• The utilitarian principle.
• Kant’s categorical imperative.
• The Professional ethic.
• The TV test.
23. Arguments against Social
Involvement
• Business should confine itself to its own work.
• Economic health of the company gets affected.
• Cost of social involvement gets passed on to
consumers.
• Social activities are done to get tax-exemption.
• Leads to increase in dominance or influence over
society.
24. Social Audit
Social audit is a tool for evaluating how
satisfactorily a company has discharged its
social responsibilities.It enables the public as
well as the compny to evaluate the social
performance of the company.
25. Social Audit
Social Audit involves:
1. Identification of the firm’s activities having
potential social impact.
2. Assessment and evaluation of the social
costs and social benefits of such activities.
3. Measurement of the social costs & benefits.
4. Reporting the social performance.
26. Objectives & Benefits Of Social Audit
• Evaluation of social dimensions of
performance.
• Take measures to improve social performance
based on feedback.
• Public visibility of the organization is
enhanced.
• Boost the public image of the company.
27. Methods of Social Audit
• Social process audit.
• Financial Statement format audit.
• Macro-Micro social indicator audit.
• Constituency Group audit.
• Partial social audit.
• Comprehensive audit.
• Corporate rating approach.
28. GOVERNMENT AND BUSINESS
The Government play an important role in almost every
national economy of the world. The two most powerful
institutions in society today are business and government;
where they meet on common ground-amicably or
otherwise-together they determine public policy, both
foreign and domestic, for a nation.
29. Different Roles of Government
Government normally play four important roles in an
economy, viz.
i. Regulation
ii. Promotion
iii. Entrepreneurship
iv. Planning
The extent and nature of these roles in a given situation
depend on a number of factors. Some salient features
of these roles are outlines below:
30. Regulatory Role: The reservation of industries to
small scale, public and co-operative sectors, licensing
system etc. regulate the entry. Regulations of product
mix, promotional activities etc. amount to regulation of
the conduct of business. Results of business operations
may be regulated by such measures as ceilings on
profit margins, dividend etc. The state may also
regulate the relationship between enterprises.
Government regulation of the economy may be broadly
divided into:
i. Direct controls; and
ii. Indirect controls
31. Indirect Controls are usually exercised through various
fiscal and monetary incentives and disincentives or
penalties.
Direct Controls is discretionary in nature. They can be
applied selectively from firm to firm and industry to
industry, at the discretion of the state.
Industrial controls include prevention of the market
structure from becoming monopolized, the
development of small and new entrepreneurs,
balanced regional development, etc.
32. Promotional Role: The promotional role played by
the Government is very important in developed
countries as well as in the developing countries.
Considering the whole of its activities, government does
more to assist and to help develop industrial, labor,
agricultural, and consumers interests than it does to
regulate them.
In developing countries where the infrastructural facilities
for development are inadequate and entrepreneurial
activities are scarce, the promotional role of the
Government assumes special significance.
33. The state will have to assume direct responsibility to build
up and strengthen the marketing, institutions for
training and guidance and other promotional activities.
The promotional role of the State also encompasses the
provision of various fiscal, monetary and other
incentives, including measures to cover certain risks,
for the development of certain priority sectors and
activities.
34. Entrepreneurial Role: In many economies, the state also
plays the role of an entrepreneur – establishing and
operating business enterprises and bearing the risks. A
number of factors such as socio-political ideologies;
dearth of private entrepreneurship; neglect of certain
sectors, like the unprofitable sectors, by the private
entrepreneurs; absence of or inadequate competition
in certain segments and the resultant exploitation of
consumers, etc. have contributed to the growth of
state owned enterprises (SOEs) in many countries.
35. Planning Role: Especially in the developing countries,
the state plays a very important role as a planner. The
need for economic planning is very well implied in the
famous ‘scarcity definition’ of Economics. As Robbins
points out in his ‘scarcity’ definition the main business
of the science of Economics is the optimum allocation
of the scarce resources between the competing ends.
The resources that are readily available are quite
insufficient to meet all the ends. The resource
constraints demand that some of the purposes should
go unserved. This calls for the determination of the
more urgent needs or national priorities and the
optimal allocation of
36. Corporate Governance
Governance is the process whereby people in
power make decisions that create, destroy or
maintain social systems, structures and
processes.It is the process whereby people in
power direct, monitor and lead corporations,
and thereby create, modify, or destroy the
structures where they operate. It hinges
primarily on complete transparency, integrity
and accountability of the management.
37. Prerequisites for Good Corporate
Governance
• A proper system consisting of clearly defined
and adequate structure of roles, authority
and responsibility.
• Vision,principles and norms which indicate
development path, normative
considerations.and guidelines and norms for
performance.
• A proper system for guiding, monitoring,
reporting and control.
38. Government Action Should focus on:
• Fairness: protecting shareholder rights and ensuring the
enforceability of contracts with resource providers.
• Transparency: requiring timely disclosure of adequate
information on corporate financial performance.
• Accountability: clarifying governance rules and
responsibilities and supporting voluntary efforts to ensure the
alignment of managerial and shareholder interests.
• Responsibility: ensuring corporate compliance with the other
laws and regulations that reflect society’s values, including a
broad sensitivity to the objectives of the society in which
corporations operate.
39. J.R.D. Tata has incorporated in TISCO’s article of
association the social and moral responsibility in
1970.
Conclusion
