INTERFACE BETWEEN

BUSINESS AND SOCIETY

Why Do Good?

Its like Health Care










LOOK BETTER


Potential Customers, Investors,
Financial Analysts, Business
Colleagues, Annual Reports,
Press and even Parliament










FEEL BETTER


Employees, Current Customers,
Stock Holders and Board
Members







DO BETTER



Brand, Bottom Line and
Community







LIVE LONGER




Strong Reputation

Why CSR is Becoming
Important?
Large size of the modern day
corporations
Rolling back of the state
Recognition of benefits of CSR
Increasing Pressures from different
Stake Holders






Theoretical Positions






Milton Friedman

Nobel Laureate 1976 Economics

The only social responsibility of
business is to maximize profits
staying within the realms of law.

-- Business of Business is
Business.






Andrew Carnegie
( legendary steel tycoon)

-- Advocates benevolent,
paternalistic leadership
-- Charity principle
-- Stewardship principle









Keith Davis

--Enlightened self interest: It is in
an organizations interest to act in
ways that society considers
responsible.
-- Iron law of responsibility:
Those who do not exercise power
and responsibility will tend to loose
it.







Tom Cannon

CEO of a Scottish firm
and Director of Manchester
Business School







Business provides

- Products & Services
- direct & Indirect Employment
- Income generation









Society provides

- Means of exchange
- Trained Manpower
- Legal and banking system
- Social and physical
infrastructure






With the advent of the Joint Stock
Company, society or state provides
to business, two special rights

-- Potential Immortality

-- Limited Liability





Business does have
Social Responsibility
to fulfill in return for these
privileges
Developments in India
First Phase: Merchant Charity
Second Phase: Trusteeship
Third Phase: Declaration of Social
Responsibilities of Business
Fourth Phase: Managerial Trusteeship
Fifth Phase: Corporate Citizenship
International Developments
Philanthropy as old as recorded history
Initially directed towards the poor and
infirm
Later towards research, education etc.
Role of Andrew Carnegie & Rockfeller
Donating both time and money
Professionalisation establishment of
foundations
Difference between Old and
New Concepts
Old Concept
Based on the
philosophy of the
founder
Donation of resources
and money
New Concept
Considered decision
of the board part of
strategy
Direct involvement
Explicit realization of
interdependence of
business and society
Generations of CSR
The First Generation of CSR Corporate
Philanthropy
The Second Generation of CSR Long
Term Business Strategy
The Third Generation CSR Significant
Contribution towards the Society (mostly a
vision)


Responsibilities of Enterprises
towards the Society
Protecting and improving the welfare
Beyond legal and social responsibility
Commitment of social, economic and
environmental good
Accountable for their actions
Obligations towards all stakeholders
Commitment to local community

The Social
Responsibility
Debate
Views for CSR
Profits lost are recovered in long run
Optimum profit and not maximum profit
Cost gets recovered
Averts penalty
Mere production is not the sole aim
Involves all stakeholders
Sustained growth
Problems originating due to business
Business uses the resources of the society
Business posses the expertise to solve
problems
Preventing is better than curing


The Counter Argument

Profits and responsibility are not related
Difficult to estimate positive impact
Compliance of law is sufficient
Society must safeguard its interest
Complex ethical issues
Social policy is the jurisdiction of
government
Business lacks training in social issues


The Counter Arguments
Another excuse to let big business
increase its power
It may lead to business failure
Not easy to make choice between
responsible and selfish action
Divided support in the business
community
Relations between a business firm and its
primary stakeholders
Business
firm
(Managers)
Wholesalers
(Retailers)
Creditors
Suppliers
Customers
Stockholders
Employees
(Unions)
Invest
capital
Lend
money
Sell
materials
Buy
products
Distribute
products
Sell
labor
Relations between a business firm and some of
its other (secondary) stakeholders
Business
Firm
(Managers)
The
General
Public
Business
Support
Groups
Governments
Social
Activist
Groups
Media
Central/State
and Local
Governments
Local
Communities
Regulation,
taxes
Friendly,
hostile
Social
demands
Image,
publicity
Advice,
research
Positive,
negative
opinion
Jobs,
environment
Responsibilities Towards
Employees
Proper monetary rewards
Job security
Working conditions
Good HRD practices
Employees participation
Open communication and grievance
procedure
Recognition of Employees union
Responsibilities Towards
Shareholders
Fair return on investment
Proper use of shareholders funds
Conduct of meetings
Disclosures
Adapt fair business practices
Capital appreciation
Responsibilities Towards
Customers
Quality goods and services
After sales service
Fair prices
Honest advertising
Quick redressal of complaints
Training to customers
Information on packages and through
advertising
Research and development


Responsibilities Towards Society
Protection of environment
Optimum use of resources
Upliftment of backward areas
Upliftment of weaker sections of the
society
Assistance for social causes
Restrain from anti social activities



Responsibilities Towards
Government
Payment of taxes
Assisting the government in implementing
socio-economic policies
Observance of rules and regulations
Supporting political stability
Restraining from seeking undue favours
from government authorities
Playing active role during national
calamities
Responsibilities Towards Suppliers
Good relations
Payment on time
Not to force the supplier for unreasonable
terms
Not to disclose secret information
Work for growth and survival
Responsibilities Towards Financial
Institutions
All payments on time
Regular reports
No bribes to bank officials
Proper use of funds
Not to convert loans into bad debts
Responsibilities Towards
Competitors
Avoid unfair practices
Respect the competitors
Not to block the entry of competitors






The Pyramid of Corporate
Social Responsibility






(Source: Archie Carroll from
Business Horizons, July/August
1991 Foundation for the
school of Business at Indiana
University)
Philanthropic
Responsibilities
Ethical
Responsibilities
Obey the Law







Philanthropic
Responsibilities
Be a Good Corporate Citizen

Ethical Responsibilities
Be Ethical,
Be Profitable






According to Carroll,
there are four kinds of
social responsibilities
Social
Responsibilities
Economic
Legal
Ethical
Philanthropic






Economic

Provide goods and services
Be profitable
Maintain strong competitive
position
Maintain high level of operating
efficiency





Legal

Conform to laws and regulations
formulated by governments







Ethical

It includes those activities that
are not expected or prohibited
by society as economic or legal
responsibilities.
(Values and norms of the
society)







Philanthropic

It involves being a good
corporate citizen and include
active participation in acts or
programmes to promote human
welfare or goodwill