Social responsibility of

business simply means social

commitment of business
towards different groups.
 DEFINITION

Social responsibility contends that management

is responsible to the organization itself and to
all the interest groups with which it interacts.
Other interest groups such as workers,
customers, creditors, suppliers, government
and society in general placed essentially equal
with shareholders
Definition

Corporate Social Responsibility

The responsibility of business towards the society

 THE PYRAMID OF CORPORATE SOCIAL
RESPONSIBILITY

• Economic Responsibilities
 Business organizations were created as economic entities designed to provide
goods and services to societal members.

 The profit motive was established as the primary incentive for entrepreneurship.

 Business organization was the basic economic unit in our society. As such, its
principal role was to produce goods and services that consumers needed and
wanted and to make an acceptable profit in the process.

 At some point the idea of the profit motive got transformed into a notion of
maximum profits, and this has been an enduring value ever since.
• Legal Responsibilities
 Society has not only sanctioned business to operate according to the profit
motive; at the same time business is expected to comply with the laws
and regulations promulgated by federal, state, and local governments as
the ground rules under which business must operate.

 As a partial fulfillment of the "social contract" between business and

society firms are expected to pursue their economic missions within the
framework of the law.

 Legal responsibilities reflect a view of "codified ethics" in the sense that

they embody basic notions of fair operations as established by our
lawmakers.

 They are depicted as the next layer on the pyramid to portray their
historical development, but they are appropriately seen as coexisting with
economic responsibilities as fundamental precepts of the free enterprise
system.
• Ethical Responsibilities
 Although economic and legal responsibilities embody ethical norms about
fairness and justice, ethical responsibilities embrace those activities and
practices that are expected or prohibited by societal members even
though they are not codified into law.

 Ethical responsibilities embody those standards, norms, or expectations

that reflect a concern for what consumers, employees, shareholders, and
the community regard as fair, just, or in keeping with the respect or
protection of stakeholders' moral rights.
• Philanthropic Responsibilities
 Philanthropy encompasses those corporate actions that are in
response to society’s expectation that businesses be good
corporate citizens.

 This includes actively engaging in acts or programs to

promote human welfare or goodwill.
 REPONSIBILITY TOWARDS
DIFFERENT GROUPS
1.Shareholders

2.Workers

3.Customers

4.creditors,suppliers STAKEHOLDERS

5.Government

6.Society/Environment
Types of Social Responsibility
S R – Recent trends
• Increasing concern for the
social responsibility of
management, it is now
recognized that besides taking
care of the financial interest of
owners, managers of business
firms must also take into
account the interest of various
other groups such as
employees, consumers, the
government and the
community as a whole.

11
Responsibility towards Society
• Carrying on business with moral& ethical standards.
• Prevention of environmental pollution.
• Minimizing ecological imbalance.
• Contributing towards the development of social health,
education
• Making use of appropriate technology.
• Overall development of locality.
Responsibility towards Government
• Obey rules & regulations.
• Regular payment of taxes.
• Cooperating with the Govt to
promote social values.
• Not to take advantage of
loopholes in business laws.
• Cooperating with the Govt for
economic growth & development.
Responsibility towards Shareholders
• To ensure a reasonable rate of
return over time.
• To work for the survival & the
growth of the concern.
• To build reputation & goodwill of
the company.
• To remain transparent &
accountable.
 Responsibility towards Employee
• To provide a healthy working environment.
• To grant regular & fair wages.
• To provide welfare services.
• To provide training & promotion facilities.
• To provide reasonable working standard & norms.
• To provide efficient mechanism to redress
worker’s grievances.
• Proper recognition of efficiency & hard work.
Responsibility towards consumers
• Supplying socially harmless
products.
• Supplying the quality, standards,
as promised.
• Adopt fair pricing.
• Provide after sales services.
• Resisting black-marketing &
profiteering.
• Maintaining consumer’s
grievances cell.
• Fair competition.
 Nature of social responsibility
• CSR is normative in nature.
• CSR is a relative concept.
• CSR may be started as a proactive or reactive.
• All firms do not follow the same patterns of CSR.
• Legal & socially responsible.
• Legal but socially irresponsible.
• Illegal but socially responsible.
• Illegal & socially irresponsible.
 CSR Principles & Strategies.
• Respect for human rights.
• Respect for the differences of views.
• Diversity & non-discrimination should be the guiding
principle.
• Make some social contribution.
• Enter into e dialogue
• Self-realization & creativity.
• Fair dealings & collaboration.
• Feedback from the community.
• Positive value- added
• Long term economic & social development.
CLASSICAL AND CONTEMPORARY
VIEWS
Classical view

• The classical view is best expressed in terms of the work of the

economist Milton Friedman who believed it was wrong for
corporate officials to extend their social responsibilities beyond
serving the interests of their shareholders.
• Friedman said:
“There is one and only one social responsibility of business – to use its
resources and to engage in activities designed to increase its profit so
long
as it stays within the rule of the game, which is to say, engages in open
and
free competition without deception and fraud.”
Contemporary view

• Business is an ecological one according to which

business is an integral part of a society to serve social
purposes.

• Business is a social institution performing social mission

• It have a broad influence on the way people behave and

work
According to Steiner and Steiner

• Each business must take into account the situation which it

finds itself in meeting stakeholder expectations.

• Business is an economic entity and cannot jeopardize its

profitability meeting social needs.

• Business should recognize that social good benefit to all.

• Directly related to social power to influence outcomes.

• Related to size of company and to thee industry

• Should tackle only social problems in which it has

competence.

• Business must assume its share of the social burden

and be willing to absorb reasonable social costs.
 FACTORS AFFECTING SOCIAL
ORIENTATION

1.Promoters and Top Management

2.Board of Directors
3.Stake Holders and Internal Power
Relationship
4.Societal Factors
5.Industry and Trade Association
6.Government and Laws
7.Political Influences
8.Competitors
9Resources
10.Ethical Influences
1.promoters and Top Management:

• The value and vision of Top management and promoters

is one of the very important factors that influence the
corporate social responsibility

2.Board of directors:

• Board of directors decides major policies and resource

allocation of a company
3.Stakeholders and internal power relationship:
• A firm can only attempt to unite the diverse interest of
various social groups to form a workable coalition

4.Societal factors:
• It is influenced by a certain characteristics of the
society and general attitude and expectation of the
society regarding social responsibility of business
5. Industry and trade associations:
• It influence the behaviour of the firm by
establishing professional and ethical codes and
norms education and collective decisions

6.Government and laws:

• Laws are society’s codification of right and wrong
.business shall play the rules of the game .
7.Political influences:
• Pressure exerted by special interest groups in society
and media to control business practices .eg, Ngo’s like
environmentalist, consumer interest groups etc…

8.competitors:
• Social orientation of companies influence by the
competitive forces . some companies do good to the
society and some are encourage to do some thing.
9.Resources:
• Social involvement of companies is also effected
by the financial position and the other resources
of the company.

10.Ethical influences:
• Another factor influencing the social orientation
is ethical decision making and self-regulation of
business conduct.
SOCIAL AUDIT
 Social auditing
• Social audit is a tool for evaluating how
satisfactorily a company has discharged its
social responsibilities.
• Social audit enables the public as well as the
company to evaluate the social performance
of the company.
• It is similar to that of financial auditing
Steps involved in social auditing
• Identification of the firms activities.
• Assessment and evaluation.
• Measurement of the social costs and benefits.
• reporting
 Objectives and benefits of social
auditing
objectives benefits
• to evaluate the social • Social audit increases the
dimension of the public visibility of the
performance of the organisation.
company. • It will help to boost the
• Take measures to improve public image of the
the social performance of company.
the company on the basis of
audit.
 Methods of social audit
• Social process audit \ whether
objectives met
• Financial statement format audit
• Micro macro social indicator audit
• Constituency group audit \attitude
• Partial social audit
• Comprehensive audit \total
• Corporate rating approach
 Obstacles to social audit
• being a new concept, social audit is yet to gain wide appreciation and acceptance.
• A clear and generally well accepted methodology for conducting the social audits
is not available.
• There is no agreement as to the items to be included for social audit.
• There may be resistance within the company to social audit because of difficulty
involved in the task.
• There may be resistance because of the fear of unsatisfactory picture that may be
presented by the social audit.
 Models of corporate social responsibility

• Friedman model
• Ackerman Model
• Carroll Model
• Environmental Integrity & Community Model.
• Corporate Citizenship Model.
• Stockholders & Stakeholders Model.
• New Model of CSR.
Friedman Model(1962-73)
• A businessmen should perform his duty well, he is performing
a social as well as a moral duty.

• A businessmen has no other social responsibility to perform

except to serve his shareholders & stockholders.
 Ackerman Model (1976)
• The model has emphasized on the internal policy goals & their
relation to the CSR.
• Four stages involved in CSR.
» Managers of the company get to know the most
common social problem & then express a
willingness to take a particular project which will
solve some social problems.
» Intensive study of the problem by hiring experts &
getting their suggestions to make it operational.
» Managers take up the project actively & work
hard.
» Evaluating of the project by addressing the issues.
Contd….
• Six Strategies in the adoption of CSR.
• Rejection strategy
• Adversary strategy
• Resistance strategy
• Compliance strategy
• Accommodation strategy
• Proactive strategy
Carroll Model(1991)
Carroll Model(1991)
• Philanthropic requirements: Donation, gifts, helping
the poor. It ensure goodwill & social welfare.
• Ethical responsibility: Follow moral & ethical values to
deal with all the stakeholders.
• Economic responsibility: Maximize the shareholders
value by paying good return.
• Legal responsibility: Abiding the laws of the land.
 Environmental Integrity & Community Health
Model.

• This model developed by Redman.

• Many corporate in US adopted this model.

• Corporate contribution towards environmental integrity &

human health, there will be greater expansion opportunities.

• Healthy people can work more & earn more.

• CSR is beneficial for the corporate sector.

• CSR in a particular form is welcome.

 Corporate Citizenship Model
• To be a corporate citizen, a corporate firm has to satisfy four
conditions:
• Consistently satisfactory
• Sustainable economic performance
• Ethical actions
• Behaviour.
• A particular firm’s commitment to corporate citizenship
requires the fulfillment of certain social responsibilty.
 Stockholders & Stakeholders Model

Stockholders Stakeholder
ORIENTATION
Model Model

1 2
Self Interest
Productivism Progressivism
MOTIVES

3 4
Duty
Moral
Philanthropy Ethical Idealism
Contd………….
• Productvists believe that the only mission of a firm is to
maximize the profit.
• Philanthropists who entertain the stockholders. CSR is
dominated by moral obligations & not self-interest.
• Progressivists believes the corporate behaviour basically
motivated by self interest & should have ability to transform
the society for good.
• Ethical Idealism concern with sharing of corporate profits for
humanitarian activities.
 New Model of CSR

Ethical Rooting
Strong Poor
Financial Capability

Strong

CSR (+) CSR(-)

CSR(-) CSR(-)
Poor