Society gets upset when the social cost of or for that matter any business exceeds the social benefit derived from the business. Over the years since the dawn of industrial revolution and particularly after the 1950s, the activities of the corporations have been increasingly affecting the society by way of environmental pollution which include air, water and sound, ozone depletion and overcrowding on account of unplanned industrialization society expect corporation to limit activities which produce harmful effects and correct the problem that are a result of their previous actions. Social reaction to mindless industrial activity gave rise to the concept of corporate social responsibility. Over the years, it has become obvious that the desire to make a fortune must be executed within the laws of the society. During the 1960s, social activists and environmental groups campaigned for a broader notion of corporate social responsibility. The clash between the economic operation of businesses and the changing social values brought questions of social responsibility to the fore-front. The economic performance of business and the social aspects of business behavior were found to be divergent. In order to enforce corporate social responsibility, in the United State government bodies such as the Protection Agency, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and the Consumer Product Safety Commission were set-up. These bodies saw to it that national public policy recognized the environment, employees, and consumer to be significant and legitimate stakeholders of business. Corporate should help solve some of the social problem because businesses are influenced by the society through government policy and business thrive or starve along with the society.
DEFINITIONS OF CORPORATE SOCIAL RESPONSIBILITY:
It refers to corporate actions that protect and improve the welfare of society along with the corporation’s own interests. According to Rogene Bucholz, “a private corporation has a social responsibility to society that goes beyond the production of goods and services at a profit and that a corporation has a broader constituency to serve than that of stockholders alone.”
SOCIAL AUDIT :–
A social audit identifies social issues in which a corporation should be involved, examine what an organization is actually doing with regard to social issues and determine the performance of the organization in the realisation of social work. Social audit is a statutory requirement in European countries like Germany, France, Spain & Norway. However, it is voluntary in the United States. The measurement of social performance of corporation was first attempted by Theodore Kreps. However, Clark Abt used the term ‘social audit’ for the first time in his work ‘Audit for Management’. Any project or programme implemented for generating social benefits can be subjected to social audit. The following social are the benefits of social audit:-
1. It helps to ascertain the usefulness of the corporation to the community with reference to community’s needs & requirements.
2. It helps to inform & convince opinion makers and influential institutions such as consumer forums, financial institutions, non-government organizations, and the government itself, about the social involvement of the corporation.
3. It helps to establish good corporate image and identify & generate goodwill for the corporation.
4. It helps to make a cooperative study of the efficacy of social work with that of non-government organizations and social or extension work undertaken by the government, universities & colleges.
5. It has huge publicity value and implicit or qualitative benefits to the corporation.
Corporations should strive for higher levels of social responsibility and make their presence felt to all concerned at least in the area surrounding their locations. A code of social service ethics should be developed & implemented by all well-meaning corporations. Corporations should also have an interface with other socially involved institutions such as the NGO’s, universities, colleges & extension departments of the government and financial institutions. A helping hand by the corporates in the event of natural calamities like earthquakes & floods and in drought or drought like situations would only integrate corporations with the society in which it operates. On going corporate social work can be done in the areas of adult literacy, education, health care, wildlife & environmental conservation.
MANAGER’S ROLE IN SOCIAL RESPONSIBILITY:
The manager is the primary link between the corporation and the society. Managerial decisions must reflect the values and expectations of all the stakeholders of the society. Managers must interact with a number of clients both within and without the corporation. Every client or group of people approaches a situation with different values, perceptions & expectation and hence managers must be flexible in their approach. The traditional role of the manager was limited to the internal organization of the corporation. Now with the widespread acceptance of the concept of corporate social responsibility, the role of the manager has increased in its scope and dimension. Now managers must ensure that the corporation works in harmony with the environment and with the society’s expectations. Managers must recognize the social and economic dimension of business operations. Managers must treat employees with respect and provide a better quality work of life. The manager must adopt a more participative approach with regard to employee needs. Managers are expert to set goals which are in harmony with the personal goals of the employees. Thus, participation of all concerned in pursuit of organizational goals in the new management credo and while this is being done each one of the employer is given the freedom to decide upon his way of achieving the organizational goals. Mangers are also expected to be effective in social relationships that are external to the organization. The managers are must be conversant with micro and macro sociological aspects of the society. In a micro-social system i.e. the organization, the manager deals with others from a position of authority while in the macro-social system which is external, the managers must learn to deal with equality. The managers must be equipped with problem solving abilities to be successful in the macro-social system.
ARGUEMENTS IN FAVOUR OF SOCIAL RESPONSIBILITIES :-
The arguments made to emphasize the social responsibility of business deals with the mutual benefits that both the society and the business enterprise are likely to enjoy as a result of involvement of businesses in social activities. There are implicit economic returns for explicit social responsiveness by the firms. The following five arguments in favour of social responsibility made to emphasize the social responsibility on business:-
1. An important argument is that businesses exist because they satisfy important needs of society and therefore businesses should change along with the changes in society. They should both cater to the needs of the society and also create new needs. Thus, while being responsive, businesses should also be pro-active.
2. The second argument made to emphasize social responsibility is that if the results are beneficial to both the society and business, social responsiveness should be encouraged. On account of social responsiveness, businesses may benefit in terms of employer loyalty, improved QWL and increased public support for the operations.
3. Thirdly, Business can avoid additional government regulation, which curtails business freedom, adds economic cost and reduce flexibility in decision making.
4. Fourthly, a socially responsive business organization will have a good public image.
5. Lastly, it is the moral obligation of business to solve social problems and help both the society & the government.
Arguments against corporate social responsibility:-
The most important economic argument made against corporate social responsibility is that of the economic doctrine of profit maximization. When business maximizes profit by improving efficiency and reducing the cost, it is the society which benefits in the ultimate analysis. Thus, the society will benefit much more if business is left to do its own business. The topmost priority of business must be economic efficiency and mixing up the economic function with the social function will only reduce the economic efficiency of business for there is an opportunity cost involved in social involvement and the return on social involvement cannot be cardinally measured or explicitly accounted. Hence, economic criteria can only be the criteria to measure the success of business.
MILTON RRIEDMAN says, if business followed a socially responsive course, their actions would raise the price for customers or reduce the wages of employees and hence the only responsibility of business is to maximize profit. Business person should therefore concentrate on shareholders demands and expectation. According to Friedman, the four basic obligations of business to society are:
(1) Obey the law,
(2) Provide goods and services,
(3) Employ resources efficiently and
(4) Pay resources owners fairly in accordance with the market.
Following Friedman’s argument, it can be concluded that the result of social involvement will be a net economic loss to the business. Another argument made against social responsibility is that as a result of social involvement, business will become weak and defunct. A more charitable view on corporate social responsibilities is that business could spend small amount of its resources in social obligations and that business cannot afford major commitments for social involvement unless the cost is born by another institutions. Excessive social involvement would increase the economics costs and reduce the competitiveness of business. Some thinkers vies that business is a powerful organization and social involvement of business will only enhance the power of business which is not a very desirable idea. Further, business people are found wanting in skills and perceptions to effectively deal with social issues.
Business has no direct responsibility to both employees and society and here there is no valid reason for social involvement of business. Business should therefore keep away from social involvement and pursue the sole goal of profit maximization until society develops rules that establish social accountability of business. Finally, it is argued that social involvement of business lacks support from all quarters of the society. Social involvement of business would encourage stockholders dissent and would adversely affect the pursuit of economic objectives.
DEFINITIONS OF CORPORATE SOCIAL RESPONSIBILITY:
It refers to corporate actions that protect and improve the welfare of society along with the corporation’s own interests. According to Rogene Bucholz, “a private corporation has a social responsibility to society that goes beyond the production of goods and services at a profit and that a corporation has a broader constituency to serve than that of stockholders alone.”
SOCIAL AUDIT :–
A social audit identifies social issues in which a corporation should be involved, examine what an organization is actually doing with regard to social issues and determine the performance of the organization in the realisation of social work. Social audit is a statutory requirement in European countries like Germany, France, Spain & Norway. However, it is voluntary in the United States. The measurement of social performance of corporation was first attempted by Theodore Kreps. However, Clark Abt used the term ‘social audit’ for the first time in his work ‘Audit for Management’. Any project or programme implemented for generating social benefits can be subjected to social audit. The following social are the benefits of social audit:-
1. It helps to ascertain the usefulness of the corporation to the community with reference to community’s needs & requirements.
2. It helps to inform & convince opinion makers and influential institutions such as consumer forums, financial institutions, non-government organizations, and the government itself, about the social involvement of the corporation.
3. It helps to establish good corporate image and identify & generate goodwill for the corporation.
4. It helps to make a cooperative study of the efficacy of social work with that of non-government organizations and social or extension work undertaken by the government, universities & colleges.
5. It has huge publicity value and implicit or qualitative benefits to the corporation.
Corporations should strive for higher levels of social responsibility and make their presence felt to all concerned at least in the area surrounding their locations. A code of social service ethics should be developed & implemented by all well-meaning corporations. Corporations should also have an interface with other socially involved institutions such as the NGO’s, universities, colleges & extension departments of the government and financial institutions. A helping hand by the corporates in the event of natural calamities like earthquakes & floods and in drought or drought like situations would only integrate corporations with the society in which it operates. On going corporate social work can be done in the areas of adult literacy, education, health care, wildlife & environmental conservation.
MANAGER’S ROLE IN SOCIAL RESPONSIBILITY:
The manager is the primary link between the corporation and the society. Managerial decisions must reflect the values and expectations of all the stakeholders of the society. Managers must interact with a number of clients both within and without the corporation. Every client or group of people approaches a situation with different values, perceptions & expectation and hence managers must be flexible in their approach. The traditional role of the manager was limited to the internal organization of the corporation. Now with the widespread acceptance of the concept of corporate social responsibility, the role of the manager has increased in its scope and dimension. Now managers must ensure that the corporation works in harmony with the environment and with the society’s expectations. Managers must recognize the social and economic dimension of business operations. Managers must treat employees with respect and provide a better quality work of life. The manager must adopt a more participative approach with regard to employee needs. Managers are expert to set goals which are in harmony with the personal goals of the employees. Thus, participation of all concerned in pursuit of organizational goals in the new management credo and while this is being done each one of the employer is given the freedom to decide upon his way of achieving the organizational goals. Mangers are also expected to be effective in social relationships that are external to the organization. The managers are must be conversant with micro and macro sociological aspects of the society. In a micro-social system i.e. the organization, the manager deals with others from a position of authority while in the macro-social system which is external, the managers must learn to deal with equality. The managers must be equipped with problem solving abilities to be successful in the macro-social system.
ARGUEMENTS IN FAVOUR OF SOCIAL RESPONSIBILITIES :-
The arguments made to emphasize the social responsibility of business deals with the mutual benefits that both the society and the business enterprise are likely to enjoy as a result of involvement of businesses in social activities. There are implicit economic returns for explicit social responsiveness by the firms. The following five arguments in favour of social responsibility made to emphasize the social responsibility on business:-
1. An important argument is that businesses exist because they satisfy important needs of society and therefore businesses should change along with the changes in society. They should both cater to the needs of the society and also create new needs. Thus, while being responsive, businesses should also be pro-active.
2. The second argument made to emphasize social responsibility is that if the results are beneficial to both the society and business, social responsiveness should be encouraged. On account of social responsiveness, businesses may benefit in terms of employer loyalty, improved QWL and increased public support for the operations.
3. Thirdly, Business can avoid additional government regulation, which curtails business freedom, adds economic cost and reduce flexibility in decision making.
4. Fourthly, a socially responsive business organization will have a good public image.
5. Lastly, it is the moral obligation of business to solve social problems and help both the society & the government.
Arguments against corporate social responsibility:-
The most important economic argument made against corporate social responsibility is that of the economic doctrine of profit maximization. When business maximizes profit by improving efficiency and reducing the cost, it is the society which benefits in the ultimate analysis. Thus, the society will benefit much more if business is left to do its own business. The topmost priority of business must be economic efficiency and mixing up the economic function with the social function will only reduce the economic efficiency of business for there is an opportunity cost involved in social involvement and the return on social involvement cannot be cardinally measured or explicitly accounted. Hence, economic criteria can only be the criteria to measure the success of business.
MILTON RRIEDMAN says, if business followed a socially responsive course, their actions would raise the price for customers or reduce the wages of employees and hence the only responsibility of business is to maximize profit. Business person should therefore concentrate on shareholders demands and expectation. According to Friedman, the four basic obligations of business to society are:
(1) Obey the law,
(2) Provide goods and services,
(3) Employ resources efficiently and
(4) Pay resources owners fairly in accordance with the market.
Following Friedman’s argument, it can be concluded that the result of social involvement will be a net economic loss to the business. Another argument made against social responsibility is that as a result of social involvement, business will become weak and defunct. A more charitable view on corporate social responsibilities is that business could spend small amount of its resources in social obligations and that business cannot afford major commitments for social involvement unless the cost is born by another institutions. Excessive social involvement would increase the economics costs and reduce the competitiveness of business. Some thinkers vies that business is a powerful organization and social involvement of business will only enhance the power of business which is not a very desirable idea. Further, business people are found wanting in skills and perceptions to effectively deal with social issues.
Business has no direct responsibility to both employees and society and here there is no valid reason for social involvement of business. Business should therefore keep away from social involvement and pursue the sole goal of profit maximization until society develops rules that establish social accountability of business. Finally, it is argued that social involvement of business lacks support from all quarters of the society. Social involvement of business would encourage stockholders dissent and would adversely affect the pursuit of economic objectives.
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