The Importance Of Social Responsibility Management

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Traditionally, business has been viewed as an Economic institution and profit- maximization as its Sole Objective. However, in recent decades, there has been increasing awareness of the social responsibility of business. Today managers are expected to serve as the trustees of various stakeholders groups such as investors, community. They are required to maintain an equitable balance among the interests of these groups. Enlightened business executives now realize that it is in their own long term self---interest to act with a sense of responsibility towards society.

HISTORICAL DEVELOPMENT

Idea of corporate Social Responsibility appeared around the turn of the 20th Century. Corporations at that time came under sever attack for being too big, too powerful and guilty of antisocial and anticompetitive practices and all this critics were followed by antitrust laws, banking regulations and consumer protection laws

Faced with this kind of social protest a few farsighted business executives advised corporations to use their power and influence voluntarily for broad social purposes rather than for profits alone. some organizations start helping the educational and charitable institutions others like Henry Ford developed plans to support the recreational and health needs of their employees. Still others start ensuring their production processes less pollution adder. The point to emphasis is that these business leaders believed that business had a responsibility to society that went beyond or worked in parallel with their efforts to make profit.

WHAT IS SOCIAL RESPONSIBILITY

"Social Responsibility refers to the obligations of the organization to protect and or enhance the society in which it functions"

Some writers have defined it as follows

"Social Responsibility of a manager is his personal obligation to ensure that he does not impinge upon the rights and legitimate interests of his own organization"

Businessmen must take actions and decisions of considerations beyond the narrow interests of their firms. Social Responsibility is a firm" s obligation to constituent groups in society other than stockholders and beyond that prescribed by law or union contract

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According to Keith Davis

"Social Responsibility is the obligation of the decision makers to take decisions which protect and improve the welfare of the society as a whole along with their own interests"

"Corporate Social Responsibility means that a corporation should be held accountable for and of its actions that effect people, their communities and their environment"

ARGUMENTS FOR SOCIALRESPONSIBILITY

Since long there has been a controversy whether the business should assume social obligations or not. The proponents of the Social Responsibility doctrine put forth the following arguments;

Business a Part of Society

A business firm operates only because society grants it the right to operate. This right will continue only so long as society is satisfied with its results. Business functioning must contribute to the welfare of the society. Business derives its resources from the Society and must, therefore, use the resources for the common food of society.

Long Term Self-Interest

It is the long term interest of business itself to fulfill the demands and aspirations of the society. People who have good environment, education and opportunity make better employees, customers and neighbors for business than those who are peer, ignorant and oppressed. A healthy business cannot exist in a sick society . Fulfillment of Social Responsibility creates a better community in which it can conduct business operations.

Possession of Resources

Business organizations have financial resources, technical experts and managerial talents to support public and charitable projects that need assistance.

Public Expectations

Now the consumer is quiet aware about the changing trends and consumers these days expect something socially oriented from organization

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Better Involvement

Business involvement can help solve difficult social problems, helping create a better quality of life and a more desirable community in which to attract and keep skilled employees

Ethical Obligation

It is the ethical obligation of business to be socially responsible and they can also. Business should be socially responsible because responsible actions are right for their own sake.

Public Image:

The profitability and viability of a business depends of its public image. A firm can enhance its credibility with the public if it performs its social obligations. Good relations with people can be built up only by meeting their legitimate aspirations.

Free Enterprise:

When business fails to discharge its social obligations it invites government regulations and control. By voluntarily assuming social responsibilities, a company can maintain its freedom of enterprise.

Social Power:

Business has capital, managerial talent and other resources. It exercises considerable influence on the lives of citizens. In order to justify and retain their social power businessmen must be responsible to society's needs. In the long run those who do not use power in a manner in which society considers responsible will tend to lose it. This is the iron law of responsibility.

Arguments Against Social Responsibility

The critics of social responsibility advance the following arguments:

Dilution of purpose

The pursuit of social goals dilutes business's primary puropose of economic productivity. Society must suffer if both economic and social goals are poorly accomplished.

Costs:

Every social action is accomplished by costs of one kind or the other. Someone has to pay these costs. Business must absorb the costs or pass on to consumer through higher prices

Violation of profit-Maximization

This is the essence of classical viewpoint. This may decrease the corporation profit. Because being socially responsible, the cost increases and this profit decreases.

Too Much Power

Business is already one of the most powerful sectors of our society. Consider the following facts

1 The world's largest Corporations employ only .05 of 1 percent of the world's population, yet they control 25% if the world's economic output.

2 The top 300 transactional own nearly 25%of the world's productive assets of the world's 100 largest economies.

So are Corporations social responsibility gives corporation too much power

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Lack Of Skill:

The outlook and abilities of business leaders and executives are oriented primarily toward economics. Business people are poorly qualified to address social issues

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Lack Of Accountability

Accountability is still another issue. The company leaders can use its money in any way they want so. The company leaders are not accountable for the results of activities. They may use the money for their own self interests and show for the society.

Scope and Complexity

Some of society's problems are simply too massive, too complex and too deep seated to be solved by even the most socially conscientious companies acting together. For example environmental problems such as Ozone depletion in upper atmosphere and destruction of rain forests . Some others may be AiDs of the Job drug abuse, and tobacco use

Social responsiveness

Social responsiveness can be defined as the degree of effectiveness and efficiency an organization displays in pursuing its social responsibilities. The greater the degree of effectiveness and efficiency , the more socially responsive the organization is said to be.

Social Responsiveness and Dicision Making

The highly socially responsive organization that is both effective and efficient meets its social responsibilities and does not waste organizational resources in the process. Deciding exactly which social responsibilities an organization should pursue and then how to accomplish appropriately activities necessary to meet those responsibilities or two most critical decision making aspects of maintaining a high level of social responsiveness within an organization.

The following chart managers can use as a general guideline for making social responsibility decisions that enhance the social responsiveness of an organization.

Social Responsibility Activity and Management Functions

The social responsibility activity should be subjected to the same management techniques used to perform other major organizational activities such as production, personnel, finance and marketing. The desirable results in these areas are not achieved if managers are not effected in planning, organizing, leading and controlling. Achieving social responsibility results is not any different

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Planning for social responsibility

It involves the following steps:

Social forecasting to identify social tasks and their relevance to enterprise.

Social goal setting i-e incorporating social goals into annual planning process.

Formulating policies regarding social responsibility

Institutionalize social concern in the decision making process.

Deciding the social activities that management should pursue.

Organizing Of Social Responsibility

Management should organize and commit the resources for achieving social goals. A Committee of managers may be formed to look after social responsibility programme.

Leading Individuals Performing Social Activities

It is the management process of guiding the activities organization members in directions that will enhance organization's social objectives. Managers must lead, communicate, motivate and work with groups in ways that result in the attainment of existing social responsibility objectives.

Controlling Social Activities

Controlling is the function managers perform to make things happen as they were planned to happen. To control, managers assess or measure what is occurring in organization and, if necessary, change these occurrences in some way to make them confirm to plans. Controlling in the area of social responsibility entails these same two major tasks.

1 Various areas in which social responsibility measurement takes place.

2 The social audit, a tool for determining progress in the attainment of social responsibility objectives.

Areas of Measurement

The specific areas in which individual companies actually take such measurements vary, of course, depending on the specific social responsibility objectives of those companies. However all companies probably should take such social responsibility measurements in at least following four major areas.

1 The Economic Functions Area:

A measurement should be made of whether or not the organization is performing such activities as producing goods and services that people need, creating job for individuals, paying fair wages and ensuring workers' safety. This measurement gives some indication of the economic contributions the organization is making to society.

2 The Quality Of Life Area:

In this area of measurement, the management should focus on determining if the organization is improving or degrading the general quality of life in society. As an example, some people believe that because cigarette companies produce goods that actually can harm the health of society over all, these companies are socially irresponsible.

3 The Social Investment Area:

This area deals with the degree to which the organization is investing both money and man power to solve community problems. Here the company can involve itself in assisting community organizations selected to education, charities and the arts.

4 The Problem Solving Area:

Measurements in this area should focus on the degree to which the organization deals with social problems as apposed

to symptoms of these problems. Such activities as participating in long range community planning and conducting studies to pinpoint social problems generally could be considered dealing with social problems as apposed to symptoms of those problems

Social Audit:

Social audit is the comprehensive evaluation of the performance o a company in the areas of social responsibility. It is systematic assessment and reporting on the social performance of a business. The basic steps taken to conduct a social audit are monitoring, measuring and appraising all aspects of and organization's Social Responsibility performance. Finally the relationship between firm's economic goals and social goals is examined. The audit itself can be performed by the organization is personal or by and outside consultant

AREAS OF SOCIAL RESPONSIBILITY

Social Responsibilities mean responsibilities towards different segments of society. These segments of stakeholders include shareholders, customers, employees, suppliers, Government and community.

Shareholders:

The first responsibility of management is to protect the interests of shareholders. This can be done in the following ways.

(a) A fair return should be given to the shareholders on the capital investment.

(b) The management should protect the assets of the company so as to safeguard the money of shareholders.

(c) Shareholders should be provided adequate and timely information about the progress and financial position of the company.

(d) As the trustees of shareholders directors should ensure the survival and growth of the company. Shareholder's funds should be invested in the best possible manner to ensure the appreciation of capital

(B) Workers

Management should fulfill the following obligations towards workers:

(a) Fair wages and salaries should be paid.

(b) Workers should be provided healthy and safe working conditions.

Adequate welfare facilities like housing, medical benefits, insurance, etc should be provided.

(c) Management should recognize the workers' right to form trade unions, to collective bargaining, etc.

(d) Workers should be treated as human beings and should be insured quality of work life.

(e) Adequate opportunities should be provided for the training and growth of workers.

(f) Management should ensure workers' involvement and participation in matters affecting their life.

Customers:

Responsibility towards customers consists of the following obligations:

(a) To provide goods and services of reasonable and uniform standard quality:

(b) To charge fair and reasonable prices.

(c) To distribute goods and services so that customers do not face any problems in procuring them.

(d) To avoid false, misleading and exaggerated claims in advertisements.

(e) To avoid antisocial activities like hoarding, blackmarketing, adulteration, etc.

Suppliers and Competitors:

Management should fulfill the following responsibilities towards suppliers, competitors and creditors:

(a) Create healthy and cooperative relationships.

(b) Provide accurate and timely information about the financial position of the company.

(c) Pay fair and prompt prices for materials etc.

Maintain fair competition through fair trade policies and practices.

Government

Management can discharge its obligations to government in the following ways:

(a) Obey the laws of the land.

(b) Pay taxes honestly and promptly.

(c) Avoid corrupting public servants and democratic process.

(d) Educate and assist Government in formulating policies affecting business.

Community:

(a) Reduce poverty and unemployment

(b) Assist development of backward areas and small scale industries:

(c) Preserve environment and national resources by reducing the level of pollution.

(d) Play a proper role in civic affairs.

(e) Promote public amenities and better living conditions.

(f) Avoid ostentatious and wasteful expenditure.

(g) Promote national integration and self-dependence.

(h) Discourage monopoly and concentration of economic power.

APPROACH TO SOCIAL RESPONSIBILITY

How the business behave and react in response to Social Responsibility. In general there are three basic approaches that characterize business postures. Which are as follows:

SOCILA OBLIGATION;

Social obligation refers to meeting economic and legal requirements but not going beyond them.

The company that take this approach is willing to meet its social obligation as mandated by societal norms and Government regulations but it is not willing to do more.

Tobacco companies such as Philip Morris have reduced their advertising in the United States and have put consumer warnings of every package of Cigarettes the sell. However they did not choose to take these measures, they were forced by Government regulations

Another example involves McDonald's which in 1987 began a $20 million advertising campaign designed to improve the nutritional image of its products. Critics complained that the ads were deceptive in that they ignored several unpleasant nutritional components while truthfully listing the positive elements of the food. If true, such claims suggest that McDonald takes a social obligation approach

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SOCIAL REACTIONS

The company using a social reaction approach is one that meets its social obligation but is also willing to react to appropriate societal requests and demands. That is the company will make limited and specific positive contributions to social welfare.

For example many large corporations such as Exxon and IBM. Rotl

Match employee contributions to worthwhi8loe charitable causes with contribution of their own. In the same way the company which voluntarily gives funds to charitable institutions is also following a policy of social reaction

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SOCILA INVOLVEMENT

The firm using the social involvement approach to Social Responsibility fulfills its obligations and responds to requests, just as the other two types of companies do. In addition however, it actively seeks other ways in which to help.

For example McDonald's which has established Ronald McDonald houses to help the families of sick children. Some corporations such as Sears and General Electric have taken an active role in sullorting cultural performances.

Social Responsibility versus economic performance

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