Social responsibility refers to the obligations of businessmen to pursue those policies, to make those decisions or to follow those lines of action, which are desirable in terms of the objectives and values of our society.
In the words of Joseph W. McGuire, The idea of social responsibilities supposes that the corporation has not only economic and legal obligations but also certain responsibilities to society, which extend beyond these obligations.”
Objectives of Social Responsibility:
The main objectives of social responsibilities on the following:
1. Corporations are creatures of society and should, therefore, respond to the demands of society.
2. The long-term self-interests of business are best served when business assumes social responsibilities.
3. It is the moral and right thing to do.
Kinds or Types of Social Responsibility:
Kinds of Social Responsibility Are:
1. Economic Responsibility:
The basic objective of any business enterprise is to earn profit and meet the obligations and social responsibility out of it.
Therefore, the business institutions are primarily responsible to provide goods and services according to the demand of the society and to earn a profit.
2. Legal Responsibility:
It is the responsibility of all business institutions to operate and involve only in lawful activities and perform within the area of law of the land.
Since these laws are framed for the welfare and protection of the interest of the society, hence a law-abiding business institution is a socially responsible enterprise as well.
3. Ethical Responsibility:
The word ‘ ‘ethics” refers to the character or ideal standard of behavior. Ethical means a professional standard of conduct, principles of human conduct or principles or ideals of human conduct.
It is not covered by the law but the expected behavior of business institutions by society.
For example, respecting the religions sentiment and dignity of people while advertising for a product. There is an element of voluntary action in performing this responsibility.
4. Discretionary Responsibility:
These obligations are assumed by the enterprises voluntarily. For example, a donation to charitable institutions, helping the affected people during floods or earthquakes, etc.
The management of the company is responsible to safeguard the capital investment by avoiding speculative activities and investing the money in healthy business ventures to get good returns.
Different Ethical Views on Social Responsibility:
There are four ethical views on the SR of business:
1. Communist View:
This view advocates the imposition of SR on business through legal measures of the state. Communists are of the opinion that free industrial civilization is not good because it is concerned only with material gains.
Because of this immorality, this view advocates an imposition of SR through legislation of force.
2. Capitalist View:
This view holds that the business has an uncontrolled right to make money free from all sorts of social responsibilities. It is argued that by maximizing its profit objectives.
Therefore, a business should not have any responsibility beyond obeying certain legal codes in achieving their goals.
3. Pragmatic View:
This view acknowledges the importance of profits but simultaneously stresses the need for social responsibility. It holds that a company cannot make a social contribution if it is not profitable.
Hence a businessman’s first responsibility is to keep his business solvent. He must also voluntarily assume social responsibilities.
4. Trusteeship View: This view advocates the retention for the personal use of so much as is necessary for an honorable livelihood and the utilization of the rest for the welfare of the community.
The trusteeship slogan is that ‘even your crores by all means but and understand that your wealth is not yours; it belongs to the people. ‘
Arguments in Favour of Social Responsibilities:
The important arguments offered in favour of business assuming social responsibilities are as follows:
1. Business is the creation of society, hence it should respond to the demand of the society.
2. The long-term self-interest of business is best served when business assumes social responsibilities.
3. If the business does not assume social responsibilities voluntarily, the government will intervene.
4. Social responsibilities must be assumed by the business to achieve good public image. Social-cultural norms of society require the business to fulfill their social image.
5. Consumer’s movement is spreading at a fast speed to take action against the dishonest businessmen.
6. The emergence of strong trade unions compels the business organizations to safeguard the interest of workers.
Arguments Against Social Responsibilities:
The important arguments are as follows:
1. The assumption of social responsibilities leads to a violation of the rule of profit maximisaüon.
2. If the business spends more funds on social responsibilities, the customer will have to pay higher prices to call the goods into the market.
The reality of Social Responsibility:
The following factors and reasons have resulted in such a change:
1. The threat of Public Regulation:
At present, the government is very much concerned about taking care of all the sections of society.
Appropriate action against business firms is taken by them to safeguard the interest of the people, in case they operate in a socially undesirable manner.
Therefore, this is an important reason for persuading business firms to assume social responsibility.
2. Pressure of the Labour Movement:
Today, workers have become more educated and organized. Labour movements throughout the world have become very powerful and are successful in extracting gains for the working class.
Hence, this has forced business firms to give due attention to the Welfare of the workers.
3. Impact of Consumer Consciousness:
Increased competition in the market and mass media have made the consumer very much conscious of his rights and powers.
Today, the consumer is the king of the market. All this has forced the business enterprises to follow consumer-oriented policies.
4. Development of Social Standards for Business:
Business cannot be done in isolation from society. Business exists grom.vs only at the permission of the society.
Also, the functioning of the business is to be ultimately judged on the basis of social standards.
5. Development of Business Education:
With the development of business education, workers, investors, consumers etc have become aware of the various social objectives of the business.
6. Relationship between Social Interest and Business Interest:
At present the relationship between social interest and business interest has completely changed. Now both are considered complementary to each other and not contradictory.
The belief of exploitation of society for the growth of the business has been changed to serving society for the long-term interest of the business.
Similarly, business is now being recognized as an essential element of modern civilized society.
7. Development of Professional Managerial Class:
Professional managers created out Of various managerial universities and institution have a completely different attitude towards social responsibilities as compared to the earlier class of managers.
They believe in satisfying the various interest groups associated with the business for running their enterprise successfully.
Different Responsibilities of Social Responsibility:
1. Responsibility Towards Shareholders:
Shareholders expect a reasonable return on their investment. The management of a company is responsible to its shareholders for giving reasonable profits to them.
The interest of small shareholders., who are scattered throughout the state or country, need to be protected.
2. Responsibility Towards Employees:
The major responsibilities of business towards the people employed by them may be summed up as follows:
(a) To pay salaries and wages in time;
(b) To ensure good working condition;
(c) To arrange for safety of workers;
(d) To pay compensation in case of death/injury as prescribed by the law in force; and
(e) To provide housing, educational, recreational, medical. transport and other facilities for workers and their families etc.
3. Responsibility Towards the State:
It is responsible for the state to abide by the rules and regulations, to pay taxes and dues honestly, submit required information or documents correctly and not to resort to immoral practices.
4. Responsibility Towards Institutions:
There is a great need for co-operation between business houses and various institutions that are preparing young men and women for a career in business.
The industrial houses have to cooperate with business and economics institutions by providing practical training facilities, scholarships, stipends, etc. to the deserving students.
For instance, in India, the institutes of higher learning and research by Tatas, Birlas and other industrialists have contributed a lot to the growth of science, technology, social sciences, and other disciplines.
5. Responsibility Towards Village Community:
Industrial houses and businessmen are responsible to the villages which provide them with manpower and raw materials and markets for their finished products.
The projects which they should set up for rural development may include:
(a) Establishment and running of schools, vocational training centers, hospitals, etc.
(b) Construction and maintenance of village roads, drinking water facilities, etc.
(c) Rural electrification.
(d) Development of dairies and poultry farms.
(e) Supporting in the establishment and running of cottage and village industries.
9. Responsibility Towards Society at Large:
Business-class is the richest in the society. It does influence social customs and traditions in a big way.
The business community must not affect the rich traditions and cultures of society by displaying ‘money power’.
They are responsible for the society at large to follow norms, moral values and assist in the development of educational, medical, sports and other facilities.
They should encourage artists, musicians, poets, writers, and scholars.
The business people are also responsible for creating a better environment and higher standards of living for people and improving the image of the business.