CSR - corporate social responsibility a new ethical perception and models.

1. Social Responsibility
of
Business

2.  Social responsibility is an ethical or
ideological theory that an entity whether it
is a government, corporation, organization
or individual has a responsibility to society.
 While primarily associated with business
and governmental practices, activist groups
and local communities can also be
associated with social responsibility, not
only business or governmental entities.

3.  Corporate social responsibility (CSR, also called
corporate responsibility, corporate citizenship, and
responsible business) is a concept whereby
organizations consider the interests of society by
taking responsibility for the impact of their activities
on customers, suppliers, employees, shareholders,
communities and other stakeholders, as well as the
environment.
 This obligation is seen to extend beyond the statutory
obligation to comply with legislation and sees
organizations voluntarily taking further steps to
improve the quality of life for employees and their
families as well as for the local community and society
at large.

4.  There has been greater consensus around the fact
that the business enterprise which makes use of the
resources of society and depends on society for its
functioning, should discharge its duties by enhancing
the overall welfare of society.
The nature of social responsibility can be classified
into:
 Manner in which a business carries out its own
activity.
 Welfare activity that it takes upon itself as an
additional function.

5.  Social responsibility is voluntary; it is about going above
and beyond what is called for by the law (legal
responsibility).
 Social responsibility means eliminating corrupt,
irresponsible or unethical behavior that might bring
harm to the community, its people, or the environment
before the behavior happens.
 The shareholders, suppliers of resources, the consumers,
the local community and society at large are affected by
the way an enterprise functions. Thus a business
enterprise should be able to strike a balance between
these divergent groups.

6. Businesses can use ethical decision making to
strengthen their businesses in three main ways
 To use their ethical decision making to increase
productivity. This can be done through programs that
employees feel directly enhance their benefits given
by the corporation, like better health care or a better
pension program. One thing that all companies must
keep in mind is that employees are stakeholders in the
business. They have a vested interest in what the
company does and how it is run. When the company
is perceived to feel that their employees are a
valuable asset and the employees feel they are being
treated and such, productivity increases.

7.  By making decisions that affect its health as seen to those
stakeholders that are outside of the business environment.
Customers and Suppliers are two examples of such stakeholders. If
we were to look at companies like Johnson & Johnson, their
strong sense of responsibility to the public is well known. In
particular, take for instance Johnson & Johnson and the Tylenol
scare of 1982. When people realized that some bottles of Tylenol
contained cyanide they quit buying Tylenol, stocks dropped and
Johnson & Johnson lost a lot of money. But they chose to lose
even more money and invest in new tamper resistant seals and
announce a major recall of their product. In the long run they
gained the trust of their customers.
 By making decisions that allow for government agencies to
minimize their involvement with the corporation. For instance if a
company is proactive and follows the pollution guidelines for
admissions on dangerous pollutants and even goes an extra step to
get involved in the community and address those concerns that the
public might have; they would be less likely to have the authorities
investigate them for environmental concerns.

8. Carroll’s model:
 Carroll has proposed a three dimensional conceptual model of corporate
performance. A firm has the following four categories of obligations of
corporate performance:
 Economic
 Legal
 Ethical
 Discretionary
 Firm being an economic activity, the main responsibility is economic
alongwith complying with the legal responsibilities.
 Ethical responsibilities are norms which the society expects the business
concern to observe even though they are not mandated by law. While
discretionary responsibilities refer to the voluntary contribution of the
business to the social cause like involvement in community development
etc. Carroll points out that these four categories are not mutually exclusive
and presented them as a pyramid of CSR.

9. DISCRETIONARY
Responsibilities
Be a good Corporate Citizen.
Contribute resources to the
community; improve quality of life.
ETHICAL
Responsibilities
Be ethical.
Obligation to do what is right,
just and fair; Avoid harm.
LEGAL
Responsibilities
Obey the Law
Law is society’s codification of right and wrong;
Play by the rules
ECONOMIC
Responsibilities
Be Profitable
The foundation upon which all others rest
Carroll’s Model
The Pyramid of Social Responsibility

10. Halal’s model:
 Halal’s return on resources model of
corporate performance points out that a
firm can only attempt to unite the diverse
interests of various social groups to form
a workable coalition engaged in creating
value for distribution among members of
the coalition. Beyond a certain level of
economic activity the social issues at
stake become conflicting.

11. Ackerman’s model:
There are three phases.
 The first phase is one when top management
recognizes the existence of a social problem and
acknowledges the company’s policy by making it an
oral or written statement.
 The second phase is characterized by the company
appointing staff specialists to study the problem and
provide recommendations.
 The third phase involves the implementation of the
social responsibility programmes.

12. Promoters, Directors and Top Management:
 The values and vision of promoters and top management is a
key influencing factor.
 Stakeholders: Attitude of various stakeholders like
shareholders, creditors, employees etc. also affect the social
orientation of a company.
 Societal Factors: Social orientation could also be affected by
the expectation of the society from the Corporation. Eg: A
resourceful firm located in a poor community may be expected
to contribute to the development of education facilities of the
locality etc.

13.  Industry and Trade Associations:
They influence the behaviour of firms by establishing
professional and ethical codes and norms.
 Government and Laws: Laws to curb corruption,
unfair practices etc. and the government’s view of social
responsibility also acts as an influencing factor.
 Political Influences:
 Competitors
 Resources

14.  Society and Business are interdependent – There is a
clear conviction within sections of the public that
business has an obligation towards the society
 Better environment for business would be conducive
for future success of the Organization
 Public Image: Socially responsible behavior creates a
positive public image for Business.
 Business has the resources and Power: Business has a
reservoir of capital and expertise that is could
leverage

15.  Let Business try
 Prevention is better than Cure. Social involvement of
business would foster a harmonious and healthy
relationship between society and business to the
mutual benefit of both.
 Shareholder interest: Business will prosper from an
improved social environment
 Avoidance of Governmental Regulation: If business
is perceived as meeting its social obligations, costly
and restrictive governmental regulations can be
avoided.
 Social responsibility like recycling of waste may
have favorable financial effects

16.  Profit Maximization: Economic efficiency of business should
be the top priority and the sole mission of business. In this
situation decisions are controlled by their desire to maximize
profits for the shareholders while reasonable complying with
law.
 Society has to pay the Cost: Costs of social responsibility will
be passed on to the society and eventually it is the society
which has to bear them.
 Lack of social skills: Business managers are goods at solving
matters relating to business and not very effective at solving
social problems as their outlook is primarily economic.
 Business has enough Power: Business already has enough
social power and the society should not take any steps which
give it more power as it could mould social values.

17.  Social Overhead Costs: Cost of social responsibility will not
immediately benefit the business. Why spend money on an
object, benefits of which will be realized only in future.
 Lack of accountability: Businessmen have no direct
accountability to the people. Unless the society can develop
mechanisms which establish direct lines of social
accountability from the business to the public, business must
not stay away from social activities.
 Friedman’s Views: Friedman asserted that if managers spend
corporate funds on projects not intended to maximise profits,
the efficiency of the market mechanism will be undermined
and resources will be misallocated within the economy.
 Many companies involve themselves in social
activities because of the tax exemptions on the
income spent on social purposes.

18. Businesses response to social responsibility tend to fall within four
categories:
 Social Opposition: View taken by business is that they have no
obligation to the society in which they operate.
 Social obligation: Companies believe that they have an obligation
to obey the law.
 Social response: Position taken by companies which believe that
their social responsibilities are as dictated by law and will on
selective basis go beyond the legal requirements. These units may
volunteer to participate in limited socially responsible efforts, but
not until they are convinced that the benefits outweigh the costs.
 Social contribution: Position taken by Companies which believe
that they have a deep obligation to serve the society.

19.  Shareholders: The primary business of a business is to stay in
business. To safeguard the capital of the shareholders and to
provide reasonable dividends and returns to its shareholders.
 Employees : The success of the organization depends largely
on the morale of the employees. Employee morale depends
on employer-employee relationship. The responsibility of the
organization to the workers include:
 Payment of fair wages
 Provision of best possible working conditions
 Establishment of fair work standards
 Provision of labor welfare activities
 Arrangement of proper training of workers.
 Reasonable chances of promotion
 Proper recognition, appreciation etc.
 Installation of an effective grievance handling system

20. Consumers:
 The consumer is the king and is the foundation of any business
venture. Important responsibilities of the business to the
customers are:
 Improve efficiency so as to increase productivity and reduce
prices, improve quality and smoothen the distribution system
so as to make the products easily available.
 To do research and development so as to improve quality
 To supply goods at reasonable prices, even in case of a sellers
market
 To provide after sales sevice
 To ensure that the product supplied has no adverse effect.
 To provide sufficient information about the product
 To avoid misleading customers by improper advertising etc.

21. Community:
 Taking steps to prevent environmental pollution
 Rehabilitating the population displaced by the operation
of the business
 Assisting in the overall development of the locality
 Taking steps to conserve scarce resources and develop
alternatives
 Improve the efficiency of the business operation
 Contribute to R & D
 Development of backward areas
 Promotion of ancillary and small scale industries
 Contributing to welfare activities like promotion of
education etc.

22. Meaning:
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.
Social audit involves:
 Identification of the firm’s activities having potential
social impact
 Assessment and evaluation of the social costs and social
benefits of such activities
 Measurement of the social costs and benefits
 Reporting

23. Objectives and Benefits of Social Audit:
 Evaluate the social dimension of the performance of the
company.
 Take measures to improve the social performance of the
company on the basis of feedback provided by the
social audit.
 Social audit increases the public visibility of the
organization.
 In case the social audit reveals a sociialy commendable
performance, it helps boost the public image of the
company.