Social Responsibilities of Business

Social responsibility is a nebulous idea and hence defined in various ways.

Adolph Berle, has defined that, Social responsisbility as the manager’s

responsiveness to public consensus.

Social responsibilities may vary in each country case by the customs, religions,
traditions, level of industrialization and a host of other norms and standards
about which there is a public consensus at any given time in a given society.

According to keith davis, the term social responsibility refers to two types of
business obligations, viz
(i) The socio – economic obligation
(ii) The socio – human obligation
 Meaning of Social Responsibilities

 The socio-economic obligation of every business is to see

that the economic consequences of its actions do not
adversely affect public welfare.
 The socio-human obligation of every business is to nurture
and develop human values.
 Origin and Growth of the Concept
 As the pace of industrialisation quickened, employers
became more and more concerned with the loss of
productive efficiency.
 The changing image of business in recent years has lent
further support to the idea of social responsibility.
 Different Views on Social Responsibilities

 Communist View: This view advocates the imposition of

social responsibilities on business through the
instrumentality of the State.

 Capitalist View: This view holds that economic

expediency alone is a just standard for business decisions
and that business has an unbridled and an uncontrolled
right to make money free from all sorts of social
responsibilities.

Continued…
 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.

 Trusteeship View: This view advocates the retention for

personal use of so much as is necessary for an
honourable livelihood, no better than that enjoyed by
million others; and the utilization of the rest for the
welfare of the community.
 Social Responsibilities of Business Towards
Different Groups

 Towards the Consumer and the Community

 Towards Employees and Workers

 Towards Shareholders and Other Businesses

 Towards the State

 Social Audit
 A social audit is a systematic study and evaluation of the
organization’s social performance as distinguished from its
economic performance.
 Benefits

 Supplies data

 Develops a sense of social awareness

 Limitations

 Difficult to measure

 Classification under “good” or “bad” is not universally

accepted
 Most of them occur outside the organization
 Business Ethics and Corporate
Governance
Business Ethics: Is the application of moral principles to
business problems.

 The credibility of a business depends on its high business

ethics and integrity.
 How does a manager decide what is ethical or unethical?
 Government legislation

 Business codes

 Pressure groups

 Personal values of the manager

 Corporate Governance: The term “corporate
governance” is used to denote the extent to which
companies run in an open and honest manner in the best
interest of all stakeholders.
 Benefits of Good Corporate Governance

 creates overall market confidence

 leads to an increase in company’s share prices

 ensures the integrity of company’s financial reports

 maximises corporate security

 limits the liability of top management

 improves strategic thinking

 ENTREPRENEURSHIP
● The word ‘entrepreneur’ is derived from French word ‘Entreprendre’ which
was used to designate an organizer of musical or other entertainments.
Later in 16 th century it was used for army leaders.
● It was extended to cover civil engineering activities such as construction in
17 th century.
● Richard Cantillon, an Irishman living in France who first used the term
entrepreneur to refer to economic activities. According to Cantillon “An
entrepreneur is a person who buys factor services at certain prices
with a view to selling its product at uncertain prices”.
● Entrepreneur, according to Cantillon, an entrepreneur is a bearer of risk,
which is non-insurable.
● SchumPeter gave a central position to the entrepreneur who believed that
an entrepreneur was a dynamic agent of change; that an entrepreneur
was a catalyst who transformed increasingly physical, natural and
human resources into correspondingly production possibilities.
 Concept of Entrepreneur
Entrepreneur can be classified into three groups:
1. Entreprenuer as a risk bearer.
2. Entrepreneur as an organizer.
3. Entrepreneur as an innovator.

Entrepreneur can contribute to economic development by bringing a dynamic

change by instituting new combinations of factors of production as follows:
(a) Introduction of new product in the market.
(b) Use of new method of production, which is not yet tested.
(c) Opening of new market.
(d) Discovery of new source of raw materials.
(e) Bringing out of new form of organisation.

SchumPeter also made distinction between inventor and innovator. An inventor

is one who discovers new methods and new materials. An innovator utilizes
inventions and discovers in order to make new combinations.

Hence an entrepreneur can be defined as a person who tries to create

something new, organizes production and undertakes risks and handles
economic uncertainty involved in enterprise.
 Characteristics of a successful
Entrepreneur
The following are some characteristics that every successful entrepreneur must
possess in adequate measure.
● Creativity
● Innovation
● Dynamism
● Leadership
● Teambuilding
● Achievement motivation
● Problem solving
● Goal orientation
● Risk taking and Decision making ability
● Commitment
 Core competencies of an
Entrepreneur
1.Initiative:
Does things before asked for or forced to by events and acts to
extend the business to new areas, products or services.
2 Perceiving opportunities :
Identifies business opportunities and mobilizes necessary resources to make good
an opportunity.
3. Persistence:
Takes repeated or different actions to overcome obstacles.
4. Information gathering:
Consults experts for business and technical advice. Seeks information of client or
supplier’s needs. Personally undertakes market research and make use of
personal contacts or information networks to obtain useful information.
5. Concern for quality:
work States desire to produce or sell a better quality product or service.
Compares his performance favorably with that of others.
6.Commitment to contractual obligations:
Makes a personal sacrifice or expands extraordinary effort to complete a job, accepts full
responsibility in completing a job contract on schedule, pitches in with workers or work in
their place to get the job done and shows utmost concern to satisfy the customer.
7. Efficiency orientation:
Finds ways and means to do things faster, better and economically.
8. Planning:
Various inter-related jobs are synchronized according to plan.
9. Problem solving:
Conceives new ideas and finds innovative solutions.
10. Self-confidence:
Makes decisions on his own and sticks to it in spite of initial setbacks.
11. Experience:
Possesses technical expertise in areas of business, finance, marketing,etc.
12. Self-critical:
Aware of personal limitations but tries to improve upon by learning from his
past mistakes or experiences of others and is never complacent with success.
13. Persuasion: Persuades customers and financiers to patronize his business.
14.Use of influence strategies:
Develops business contacts, retains influential people as agents and
restricts dissemination of information in his possession.
15. Assertiveness:
Instructs, guides those who are failing to perform.
16. Monitoring:
Develops a reporting system to ensure that work is completed and quality
norms.
17. Credibility:
Demonstrates honesty in dealing with employees, suppliers and customers
even if it means a loss of business.
18. Concern for employee welfare :
Expresses concern for employees by responding promptly to their grievances.
19. Impersonal relationship:
Places long-term goodwill over short-term gain in a business relationship.
20. Expansion of capital base:
Reinvests a greater portion of profits to expand capital of the firm.
21. Building product image:
Concerned about the image of his products among consumers and does
everything possible to establish a platform for his products in the market.
 Classification of Entrepreneurs
BASED ON FUNCTIONAL CHARACTERISTICS:
● Innovative Entrepreneur

● Imitative or Adoptive Entrepreneur

● Fabian Entrepreneur

● Drone Entrepreneur

BASED ON DEVELOPMENTAL ANGLE:

● Prime mover
● Manager
● Minor innovator
● Satellite
● Local trading

BASED ON TYPES OF ENTREPRENEURIAL BUSINESS

● Manufacturing
● Wholesaling
● Retailing
● Service
BASED ON NINE PERSONALITY TYPES OF ENTREPRENEURS

 The Improver
 The Advisor
 The Superstar
 The Artist
 The Visionary
 The Analyst
 The Fireball
 The Hero
 The healer
 Schools of thought on
Entrepreneurship
● The great Person school of Entrepreneurship.
● The psychological characteristics school of Entrepreneurship.
● The classical school of Entrepreneurship.
● The management school of entrepreneurship.
● The leadership school of Entrepreneurship.
● The Intrapreneurship school of Entrepreneurship.
 Myths of Entrepreneurship
1. Entrepreneurs are born, not made.
2. Entrepreneurs are academic and social misfits.
3.Entrepreneurs fit an ideal profile.
4.All you need is money to be an entrepreneur.
5.All you need is luck to be an Entrepreneur.
6.A great idea is the only ingredient in a recipe for success
7.My best friend will be a great business partner.
8. Having no boss is great fun.
9.I will definitely become successful.
10. life will be much simpler if I work for myself.
 Entrepreneurial Development
models
(a)Psychological models
This model signifies that psychological factors are responsible for development of
entrepreneurial behavior in individuals.
1.McClelland suggests based on latent need for achievement, motivation training
programme as the policy measure, which will make entrepreneurs really willing and
eager to exploit the new opportunities provided.
2. Everett Hagen’s theory of social change lays emphasis on “Creative Personality” as
a Casual link in entrepreneurial behaviour and “Status withdrawal” as the
determinant of the creative personality.
3.John Kunkel suggests that entrepreneurial behaviour is a function of the surrounding
Social structure, both past and present and can really be influenced by manipulating
Economic and social incentives and this model is based on experimental psychology.

(b)Sociological Model
Frank W.Young suggests that the creation of supporting institutions in society as the
determinant of entrepreneurship.
(c)Integrated Model
T.V Rao in Entrepreneurial disposition has included the following factors:
(i)Need for motive is the dynamic which, for the prospective entrepreneur, has
the greatest possibility of achieving the goals if one performs those activities.
(ii) Long term involvement is the goal either at thinking level or activity level in
Entrepreneurial activity that is viewed as a target to be fulfilled.
(iii) Personal,social and material resources which, he thinks are related to entry
and success in the area of entrepreneurial activity.
(iv) Socio-political system to be perceived as suitable for establishment and
development of his enterprise.

B.S Venkata Rao described 5 stages for promoting small entrepreneurship

1.Stimulation
2.Identification
3.Development
4.Promotion
5.Follow up
Entrepreneurial development cycle
1.STIMULATORY ACTIVITIES
● Entrepreneurial education
● Planned publicity for entrepreneurial opportunities
● Identification of potential entrepreneurs through scientific methods
● Motivational training to new entrepreneurs
● Help and guidance in selecting products and preparing project reports.
● Making available techo – economic information and product profiles.
● Creating entrepreneurial forums.
● Recognition of entrepreneurs.

2.SUPPORT ACTIVITIES
● Registration of unit.
● Arranging finance.
● Providing land, shed,power,water and so on.
● Guidance for selecting and obtaining machinery.
● Supply of scarce raw materials.
● Getting liceneces/importing licenses.
● Providing common facilities.
● Granting tax relief or other subsidy.
● Offering management consultancy services.
● Help marketing the product.
● Providing information
3.SUSTAINING ACTIVITIES
Help modernisation.
Help diversification/expansion/substitute production.
Additional financing for full capacity utilisation.
Deferring repayment/interests.
Diagnostic consultancy services.
Production units legislation/policy change.
Creating new avenues for marketing.
Quality testing and approving services.
Need based common facilities centres.