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Question-1

What do you understand by social responsibility of business? How is it different from legal responsibility?

Solution:
Social responsibility of business deals with taking those decisions and performing those actions that benefit the society. By assuming social responsibility, the business enterprise not only respects the aspirations of the society but also helps in implementing these aspirations along with their profit interest. This is in contrast to the common notion in the society that business exists only for profit maximization and not for the welfare of the public. It follows that a responsible business must act with due concern for the effects on the lives of other people. Accordingly we can say that social responsibility is broader than legal responsibility of business. Legal responsibility is fulfilled by mere compliance with the law. But social responsibility follows obligations laid down by law along with part of business which benefits the society.

Question-2

What is environment? What is environment pollution?

Solution:
The environment comprises both natural and man-made. These resources are natural resources like land, water, air, fauna and flora and raw materials; or man-made resources such as cultural heritage, socioeconomic institutions and the people. It is a fact that the quality of the environment is fast deteriorating particularly due to industrial activity. Pollution changes the physical, chemical and biological characteristics of air, land and water. Pollution harms human life and the life of other species. It also degrades living conditions while wasting or depleting raw materials. Some hazardous wastes or toxic by-products and chemicals have characteristics that the environment cannot assimilate. Pollution thus causes risks to environmental quality, human health and damage to natural and man-made resources.

Question-3

What is business ethics? Mention the basic elements of business ethics.

Solution:
Ethics is concerned with identifying what is right and what is wrong in human behaviour Ethics can also refer to codes or other system for controlling means so that they serve human ends. Ethical standards are often enacted into laws but are just and fair conduct which goes beyond observing laws and government regulations. It means adhering to moral principles, being guided by particular values, and behaving in a way people ought to act. The set of principles called ethics may be written or unwritten codes or principles governing a professional or human activity. Business ethics concerns itself with the relationship between business objectives, practices, and techniques and the good of society. Business ethics refer to the socially determined moral principles which should govern business activities. A few examples of business ethics are: charging fair prices from customers, using fair weights for measurement of commodities.

Question-4

 


Solution:
a) Air pollution

Carbon monoxide emitted by automobiles and smoke and other chemicals from manufacturing plants are the major causes of air pollution. Resultant air pollution has created a hole in the ozone layer leading to dangerous warming of the earth.

b) Water pollution:

Water becomes polluted primarily from chemical and waste dumping. For years, business enterprises have been dumping waste into rivers, streams and lakes with little regard for the consequences. Water pollution has led to the death of several animals and aquatic organisms and posed a serious threat to human life.

c) Land pollution:

Dumping of toxic wastes on land causes land pollution. This damages the quality of land making it unfit for agriculture or plantation. Restoring the quality of the land that has already been damaged is a big problem.

Question-5

What are the major areas of social responsibility of business?

Solution:
(i) Responsibility towards the shareholders or owners:

A business enterprise has the responsibility to provide a fair return to the shareholders or owners on their capital investment and to ensure the safety of such investment and provide the shareholders with regular, accurate and full information about its working as well as schemes of future growth.

(ii) Responsibility towards the workers:

Management should try to create a right kind of working conditions so that it can win the cooperation of workers. They must respect the democratic rights of the workers to form unions and the worker must also be ensured of a fair wage and a fair deal from the management.

(iii) Responsibility towards the consumers:

Supply of right quality and quantity of goods and services to consumers at reasonable prices constitutes the responsibility of an enterprise toward its customers. The enterprise must take proper precaution against adulteration, poor quality, lack of desired service and courtesy to customers, misleading and dishonest advertising, and so on. They must also have the right of information about the product, the company and other matters having a bearing on their purchasing decision.

(iv) Responsibility towards the government and community:

An enterprise must respect the laws of the country and pay taxes regularly and honestly. It must behave as a good citizen and act according to the well accepted values of the society. It must protect the natural environment and should restrict pollution, ugly buildings poor working conditions. It must also develop a proper image in society through continuous interaction with various groups of people.

Question-6

Build up arguments for and against social responsibilities

Solution:
Arguments for Social Responsibility

Justification for existence and growth:

The prosperity and growth of business is possible only through continuous service to society. Though, profit motive is an important justification for undertaking business activity, it should be looked upon as an outcome of service to the people. Thus, assumption of social responsibility by business provides justifications for its existence and growth.

Long-term interest of the firm:

Long term interest is achieved by following the goal which is to service the society. If the society feels that the business enterprise is not serving with its best interest, they will eventually withdraw their support to the enterprise. Therefore to maintain their image a firm must fulfill its social responsibility.

Avoidance of government regulation:

Government regulation limits the freedom of business and hence they are not desirable. Therefore by voluntarily assuming social responsibilities, businessmen can avoid the problem of Government regulations which helps to reduce the need for new laws.

Maintenance of society:

Laws cannot be passed for all possible circumstances. People who feel that they are not getting their due from the business may resort to anti-social activities, not necessarily governed by law. This may harm the interest of business itself. Therefore, it is desirable that business enterprises should assume social responsibilities.

Availability of resources with business:

Business institutions have valuable financial and human resources which can be effectively used for solving problems. Therefore, it can help society to tackle its problems better with the huge financial and human resources at its disposal.

Converting problems into opportunities:

Business has this tendency to convert risky situations into profitable deals. This can help solve social problems and also make them effectively useful by accepting the challenge.

Better environment for doing business:

A business cannot succeed in an environment full of diverse and complicated problems. Therefore, it must primarily equip themselves for such situations where its own survival is endangered due to enormous social illnesses. It is better to choose an environment with fewer problems to conduct its business successfully.

Holding business responsible for social problems:

Business is held responsible for social problems like environmental pollution, unsafe workplaces etc. Therefore, it is the responsibility of the business enterprise to solve the problem created by them instead of waiting for other groups to deal with it.

Arguments against Social Responsibility

The following are the arguments that are against social responsibility:

Violation of profit maximization objective:

It is argues that business exists only for profit maximization. But it can be considered that if business maximizes profits by increased efficiency and reduced costs, it can best fulfill its social responsibility.

Burden on consumers:

Investing and managing pollution control and environmental protection are very costly and requires huge financial investments. Therefore businessmen simply shift this burden of social responsibility to the consumers by charging higher prices. It is therefore considered unfair to tax the consumers in the name of social responsibility.

Lack of social skills:

Social problems differ from that of business problems and are difficult to solve without proper training and understanding. Therefore it is advisable for specialized agencies to solve social problems instead of business enterprises.

Lack of broad public support:

Since public in general does not like business involvement or interference in social programmes, it is difficult for them to operate successfully. Full public confidence and cooperation is needed in solving social problems.

Question-7

Discuss the forces which are responsible for increasing concern of business enterprises toward social responsibility

Solution:
On the basis of the arguments for and against social responsibility, one may wonder what the businessmen do in reality. The most important recent change in the attitude of business people has been the realization towards social obligations besides ensuring their own existence through profitable activity. Sometimes this realization is not genuine and is just quoted for the survival of private enterprise. But at the same time it cannot be denied that private business does realize and recognize that people in the democratic society have certain human rights and therefore, can demand responsible conduct from the business. Unless the business is prepared to play its legitimate role as an organ of society, it has little chance of success. Some of the reasons and factors, which have persuaded businessmen to consider their responsibilities to the development of business with social responsibilities, are:

(i) Threat of public regulation:

Democratically elected governments of today are expected to take care of all sections of society. Therefore, where ever business institutions falter, action is taken to regulate them thus safeguarding people’s interest. Due to this public regulation business enterprise feels concerned with social responsibility.

 

(ii) Pressure of labour movement:

Since labour has become far more educated and organized and that labour moment has become powerful, business enterprises are forced to pay due regard to the welfare of workers instead of following a policy of ‘hire and fire’ under which they could deal with workers at their will.

(iii) Impact of consumer consciousness:

Consumer is now conscious of his right and power in determining market forces due to the awareness created by the media and education. The principal followed these days by business enterprises is ‘customer is king’ which has replaced the old principal of caveat emptor (or let the buyer beware).

(iv) Development of social standard for business:

New social standards consider business activity to be profit oriented as well to serve social needs. No business can be done in isolation from society. Society permits business to exist and grow and it is on the basis of social standards that business functioning is to be ultimately judged.

(v) Development of business education:

Development of business education has created an increased awareness among the people and helped them to have become more sensitive towards social issues.

(vi) Relationship between social interest and business interest:

Business enterprises have started realising the fact that social interest and business interest are not contradictory but are complementary to each other. The feeling that business can grow only through exploitation of society has given way to the belief that long-term benefit of business lies in serving the society well.

(vii) Development of professional, managerial class:

Management universities and institutes have helped to create separate class of professional managers who have got a different attitude towards social responsibility. Professional managers are more interested in satisfying the society for running their enterprises successfully than merely following profit goals. They have combined together with a number of other social and economic forces to make business a socioeconomic activity. While there is no denial of the fact that business is essentially an economic enterprise and that it must ultimately justify itself on economic performance, it is also true that business is an organ of society and as such it must justify its continuance by fulfilling its roles and responsibilities of society.

Question-8

‘Business is essentially a social institution and not merely a profit making activity’. Explain

Solution:
The arguments for and against social responsibility explains as to why business is essentially a social institution and not merely a profit making activity.

Arguments for Social Responsibility Justification for existence and growth:

The prosperity and growth of business is possible only through continuous service to society. Though, profit motive is an important justification for undertaking business activity, it should be looked upon as an outcome of service to the people. Thus, assumption of social responsibility by business provides justifications for its existence and growth.

Long-term interest of the firm:

Long term interest is achieved by following the goal which is to service the society. If the society feels that the business enterprise is not serving with its best interest, they will eventually withdraw their support to the enterprise. Therefore to maintain their image a firm must fulfill its social responsibility.

Avoidance of government regulation:

Government regulation limits the freedom of business and hence they are not desirable. Therefore by voluntarily assuming social responsibilities, businessmen can avoid the problem of Government regulations which helps to reduce the need for new laws.

Maintenance of society:

Laws cannot be passed for all possible circumstances. People who feel that they are not getting their due from the business may resort to anti-social activities, not necessarily governed by law. This may harm the interest of business itself. Therefore, it is desirable that business enterprises should assume social responsibilities.

Availability of resources with business:

Business institutions have valuable financial and human resources which can be effectively used for solving problems. Therefore, it can help society to tackle its problems better with the huge financial and human resources at its disposal.

Converting problems into opportunities:

Business has this tendency to convert risky situations into profitable deals. This can help solve social problems and also make them effectively useful by accepting the challenge.

Better environment for doing business:

A business cannot succeed in an environment full of diverse and complicated problems. Therefore, it must primarily equip themselves for such situations where its own survival is endangered due to enormous social illnesses. It is better to choose an environment with fewer problems to conduct its business successfully.

Holding business responsible for social problems:

Business is held responsible for social problems like environmental pollution, unsafe workplaces etc. Therefore, it is the responsibility of the business enterprise to solve the problem created by them instead of waiting for other groups to deal with it.

Arguments against Social Responsibility

The following are the arguments that are against social responsibility:

Violation of profit maximization objective:

It is argues that business exists only for profit maximization. But it can be considered that if business maximizes profits by increased efficiency and reduced costs, it can best fulfill its social responsibility.

Burden on consumers:

Investing and managing pollution control and environmental protection are very costly and requires huge financial investments. Therefore businessmen simply shift this burden of social responsibility to the consumers by charging higher prices. It is therefore considered unfair to tax the consumers in the name of social responsibility.

Lack of social skills:

Social problems differ from that of business problems and are difficult to solve without proper training and understanding. Therefore it is advisable for specialized agencies to solve social problems instead of business enterprises.

Lack of broad public support:

Since public in general does not like business involvement or interference in social programmes, it is difficult for them to operate successfully. Full public confidence and cooperation is needed in solving social problems.

Question-9

Why do the enterprises need to adopt pollution control measures?

Solution:
Pollution prevention or control is needed to preserve precious environmental resources and to improve the environmental quality. The amount of damage to a particular medium (air, water, land) varies according to the type of pollutant, the amount of pollutant disposed of, and the distance from the source of pollution. But all pollutants alter the quality of the environment and render it, to some degree, unfit to preserve normal life. People are now raising their voice loudly against pollution generating activities. Business enterprises need to take suitable measures for pollution control not merely to avoid criticisms against them but also to enjoy other benefits of such measures. Some of the important reasons which make a case for pollution control are as follows:

(i) Reduction of health hazards:

There is increasing evidence that many diseases like cancer, heart attacks and lung complications are caused by pollutants in the environment. Pollution control measures can not only check the seriousness of such diseases but can also be supportive of a healthy life on earth.

(ii) Reduced risk of liability:

There are possibilities that an enterprise is held liable to pay compensation to people affected by the toxicity of gaseous, liquid and solid wastes it has released into the environment. Therefore, it is safe to install pollution control devices in its premises to reduce the risk of liability.

(iii) Cost savings:

An effective pollution control programme is also needed to save costs of operating business. Cost savings are particularly noticeable when improper production technology results in greater wastes which leads to higher cost of waste disposal and cost of cleaning the plants.

(iv) Improved public image:

As society becomes increasingly conscious of environmental quality, a firm’s policies and practices for controlling wastes will increasingly influence people’s attitude towards its working. A firm that promotes the cause for environment will be able to enjoy a good reputation and will be perceived as a socially responsible enterprise.

(v) 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.

Question-10

Explain the various elements of business ethics.

Solution:
Since ethical business behavior is good for both the business enterprise and society, we foster ethics in their day-to-day working. Some of the basic elements of business ethics while running a business enterprise are as under:

(i) Top management commitment:

Top management has a crucial role in guiding the entire organisation towards ethically upright behaviour. To achieve results, the Chief Executive Officer (or CEO) and other higher level managers need to be openly and strongly committed to ethical conduct.

(ii) Publication of a ‘Code’:

Enterprises with effective ethics programmes define the principles of conduct for the whole organisation in the form of written documents which is referred to as the "code". This involves areas such as fundamental honesty and adherence to laws; product safety and quality; health and safety in the workplace etc

(iii) Establishment of compliance mechanisms:

Company must ensure that actual decisions and actions comply with the firm’s ethical standards by establishing suitable mechanisms. Some examples of such mechanisms are: paying attention to values and ethics in recruiting and hiring; emphasizing corporate ethics in training; auditing performance regularly to analyze the degree of compliance; and instituting communication systems to help employees report incidents of unethical behaviour.

(iv) Involving employees at all levels:

Involvement of employees in ethics programmes is a must as at different levels they are the ones who implement ethics policies to make ethical business a reality.

Although it is difficult to accurately measure the end results of ethics programmes, the firms can certainly audit to monitor compliance with ethical standards. The top management team and other employees should then discuss the results for further course of action.





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