unit 3 corporate social responsibility

8/8/2019 Unit 3 Corporate Social Responsibility

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Corporate Social Responsibility

(CSR)


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What is Social Responsibility?

There is no single definition of social responsibility but it

can be said as:

Acting with concern and sensitivity, aware of theimpact or the disadvantages of the action to the

others.


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It is generally to be understood to include:

The obligations of a business to protect the interests of;

Customers

Employees

SuppliersGeneral public


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Social responsibility goes beyond the firmsrelationships with their:

Customers

Environmental protection

Consumerism

Support for education

Compliance with governmental regulations

Response to community needs

Firms contributions to the communityorganizations.


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Different entities have different responsibility,

For example;

A state has to ensure the citizens civil right.

The business organizations should concern with

human rights of their employees.


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Responsibility to human means:

being responsible to people

for the action of people

the affect of any action to the people.

This is concern with the way of the organization in

treating their customers with respect and

attention, which is not for profit but taking care

of the customers wants and needs.

Responsibility to Human


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For example,

When the customer feel that the organization have

done something wrong, the company will take the

blame and do some steps needed to fix the problem.

Organization has the moral responsibility that

empowered them to help people and not to harm them.


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Social responsibility is a doctrine that state:

Whether it is a village, town, state, corporation,

organization, government or individual, each have

the responsibility to the society as a whole.


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It means that:

the organization is responsible to the environment and

the world than to individual; because:

the impact on the environment is larger and broad thanthe impact to consumer.

Responsibility to environment

impact on the

environmentEnvironment ConsumerImpact

Larger & Broad Smaller & Narrow


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An organization which concern with its social

responsibility, will take every consideration into account

when making their decision.

This has been proved to become one of the reasons of

the company to be profitable in the long run.

Nowadays, many companies are more concern in

fulfilling their social responsibility and every choicethey made affect the consumers environmental.


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Some companies produce products that are packed inmore than required packaging thus all the cost and

impact was passing directly to the consumer.

Some become more socially responsible they design their

packaging to be more environmental friendly such asusing items that can be recycle rather than using and

wasting more resources that can be used for another

important task.


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Business and its Environment

Modern business get affected by environment in which it

exists. The environment is of two types

Internal environment

External environment

Where as external environment is very wide and consists of

micro level and macro level.


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Micro Environment

1. Suppliers

The major force in the micro environment of a company is

the suppliers,

i.e. those who supply the inputs like raw materials and

components to the company.

The smooth flow of supply of sources to the company is very

important in order to have a control on inventory and

availability of products just in time.


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2. Customers

A business survives only because of its customers.

A company may be targeting towards different segmentationof consumers like:

Individuals

Households

Industries

Government and other institutions.


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3. Competitors

This is very rare these days where the monopoly is existing.

Almost in all kinds of product there is competitions for

e.g. products like FMCGs to consumer durables, there isa big competition.

Even the maximum competitions is in service industries.


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4. Marketing Intermediaries

The marketing intermediaries include middleman such as:

Agents and merchants who act as a link between themanufacturers and customers.

If these marketing intermediaries do not supply the

products in time, the customers will switch over to other

brands.

Marketing intermediaries are vital links between the

company and final customers.


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5. Publics

The public acts as an opportunity for the business

companies and get seriously affected.

Anything by word of mouth by public has a greater

influence than other medias.

Such campaigns or exposures by the media might even

influence the government decisions which affect the

company.


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Macro Environment

1. Economic Environment:

The economic policies are through political decision.

If economic policies are good, customers will spend more

and responsibility of business towards different economic

factors is different.

Economic environment includes industries policy, fiscal

policy, export-import policy.


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2. Political and Regulatory Environment:

The following have impact on business:

The policies of the political parties

The nature of the constitution Government system

If there is stable government shareholder will invest more,

so keeping in mind about latest political factors and

Government factor.


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3. Social / Cultural Environment:

Culture is defined as:

A set of learned core values, beliefs, standards, knowledge,

morals, laws and behaviors shared by individuals andsocieties that determine how an individual acts, feels and

views oneself and others.

The culture is passed from generation to generation in a

society.

What is liked by people of one culture may not be liked by

those of other culture.


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Responsibility of Business Towards Society

1. Owners ofBusiness:

Management must provide fair, adequate and stable

long-run rate of return and steady capitalappreciation to the shareholders for their

investments.

It must also provide to them regular, accurate, and

up-to-date information about the working of thecompany.

Maximum disclosure about the progress and

achievements of the company is very satisfying to the

shareholders.


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Employees need security of job, higher wages, full

employment, better conditions of work, opportunities

for self-development and promotion.

Management as a part of its social responsibilities, is

expected to provide for their social security, welfare,

grievances settlement, machinery and sharing of

excess profits.

Employees may be allowed to participate in the

decision-making process at all levels of management.

A feeling of fellowship and a sense of belonging to the

company as a whole should be allowed to grow.

Responsibility of Business Towards Employees


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Management should provide those goods and services

that the society needs at a price that the society can

afford to pay. Management is supposed to provide good quality

products to the consumers at reasonable prices.

It should develop a liberal and fair attitude towards

the consumers.

Responsibility of Business Towards Consumers


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It is the duty of the management to protect consumers

interest at any cost.

Consumer must guard against: Adulteration

Poor quality

lack of service to the consumer

Misleading and dishonest advertisement

under-weighing.


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To provide prompt, courteous and friendly service to

customers.

To improve their standard of living in society by

producing goods and services which they need.


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Responsibility of Businessman Towards

Governments

He will be law-abiding citizen

He will pay his dues and taxes to the government

honestly. He will not corrupt public servants.

He will not purchase political support by unfair

means.

He will sell his commodities and services without

adulteration.


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Social Audit

The measurement, evaluation and reporting of

performance of an organization in the area of social

responsibility is called social audit.

It is also defined as A commitment to systematic

assessment of and reporting of some meaningful

definable domain of a companys activities that have

social impact.


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Organizations can inform the public regarding theiractivities for society.

The true picture of corporate accountability can be

given to the society.

Social audit may be measured in the areas of:

Employment

production

Consumer effort

Consumer funds absorbed

Payrolls


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To Whom are Organizations socially responsible?

Total Social Responsibilities

Economic

Responsibilities

LegalResponsibilities

DiscretionaryResponsibilities

EthicalResponsibilities


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Economic Responsibility is:

making a profit by producing a product or service

valued by society.

Its been a businesss most basic social

responsibility.

Economically, firms are required to maximize their

shareholders' earnings.

This is done by producing goods and services that are

in demand in the market.

Economic Responsibility


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Legal Responsibility is the expectation that companies

will obey a societys laws and regulations as they try

to meet their economic responsibilities.

Legal Responsibility


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Ethical Responsibility is societys expectation that:

Organizations will not violate accepted principles

of right and wrong when conducting theirbusiness.

Ethical Responsibility


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Discretionary Responsibility relates to the:

Social roles that businesses play in society beyond

their economic, legal and ethical responsibilities. They may include charity runs or setting up "day-

care" centres within the office.

Discretionary Responsibility


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Social Responsibilities of Business


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Social responsibility is:

An ethical or ideological theory that an entity whetherit is a government, corporation, organization orindividual has a responsibility to society.


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Corporate Social Responsibility (CSR, also called

corporate responsibility, corporate citizenship, and

responsible business) is a concept whereby:

Organizations consider the interests of society bytaking responsibility for the impact of their activities

on:

o Customers

o Suppliers

o Employeeso Shareholders

o Communities and other stakeholders


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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.


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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.


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To use their ethical decision making to

increase productivity.

This can be done through programs that employees feeldirectly enhance their benefits given by the

corporation, like:

better health care

better pension program.

Businesses can use ethical decision making to

strengthen their businesses in two main ways


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Companies must keep in mind that:

Employees are stakeholders in the business.

They have a vested interest in what the company

does and how it is run.

The productivity increases:

When the company is perceived to feel that theiremployees are a valuable asset

The employees feel they are being treated


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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.

Example:

Johnson & Johnson and the Tylenol scare of1982.

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 oftheir product.

In the long run they gained the trust of their customers.


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Can a business be socially

responsible?

If it can be then what criteria does it need to ensure? The

measurements are:

Economic function

Quality of life

Social investment

Problem solving


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In economic function,

The goal that is trying to be achieved should be

measured to see:

If it meets with the cost guidelines that the businessis willing to contribute.

For instance;

If the business were to try to better the plant by reducingits carbon footprint; how would it go about doing this?

Economic Function


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Quality of life measures:

Whether the organization is improving or degrading

the general quality of life in society.

Quality of life


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Social investment looks at what the business is doing for

the community:

Does the business work with the community to fixoutstanding issues and social problems?

How much of an investment does it make? What

issues are they addressing?

Social Investment


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Problem solving looks at:

To what extent the business will work to fix the

problem.

Will the business simply contribute money to an

organization working on the issue?

Will they allow company employees to volunteeron company time to fix the problem?

Problem Solving


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Six common ethical standards are

"The Golden Rule:

Act in a way you would want others to act toward you.

The utilitarian principle: Act in a way that results in the greatest good for the

greatest number.

Kant's categorical imperative:

Act in such a way that the action taken under thecircumstances could be a universal law, or rule, of behavior.


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The professional ethic:

Take actions that would be viewed as proper by adisinterested panel of professional peers.

The TV test:

Always ask, "Would

Ifeel comfortable explaining toa national TV audience why I took this action?

The legal test:

Ask whether the proposed action or decision is legal.

Established laws are generally considered minimumstandards for ethics.


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ArgumentsArguments against Social Responsibilityagainst Social Responsibility

Society has to pay the Cost:

Costs of social responsibility will be passed on to thesociety

It is the society which has to bear them.

Lack of social skills:

Business managers are goods at solving matters relatingto business

They not very effective at solving social problems.


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Social Overhead Costs:

Cost of social responsibility will not immediately benefitthe business.

Why spend money on an object, benefits of which will berealized only in future.

Friedmans Views: Friedman asserted that if managers spend corporate

funds on projects not intended to maximize profits, then;

o The efficiency of the market mechanism will beundermined and resources will be misallocated within

the economy.

Many companies involve themselves in social activitiesbecause of the:

Tax exemptions on the income spent on social purposes.


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Profit Maximization Vs. Social Responsibility

Some People believe that the concept of social

responsibilities is against the profit motive. This is a

misconception.

Social responsible actions may reduce immediate profits.

For instance, installation of an expensive anti-

pollution device involves cost which cannot be passed

on to consumers.

But in the long-run, actions taken in the interest of

society help to improve the image of the firm and add to

its profitability.


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Social Responsibility of Business

To make the best use of national resources so as to raise

the level of national income and standard of living of the

people.

To make more and more employment opportunities for

engineers, technicians and other skilled persons from

educational institutions.

To protect the national environment and ecological

balance from all types of pollution.

To contribute to the economic development of backward

regions and weaker sections of society.


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To recognize and respect social values, business ethics and

cultural heritage.

To cooperate with the government in solving problems like

communalism, illiteracy, over-population, concentration of

income and wealth, monopoly etc.

To make the country economically self-reliant throughexport promotion and import substitution.


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Decision Making


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The concept of decision making is defined as:

The selection from among alternatives of a course of

action; it is at the core of planning.

Decisions are of three types:

1. Strategic Decision

2. Tactical

Decision

3. OperationalDecision


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Decision Making Process

Specific

Objectives

Identification

of problems

Search for

alternatives

Evaluation of

alternatives

Choice of

alternativeActionResult

Feedback


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Specific Objectives

Decisions have to be taken to achieve a particular

objective / goal of the organization.

The manager has to understand first the specific

objective of taking the decisions before

diagnosing a problem.


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Identification of problems

In order to take a decision:

The problem has to be diagnosed first.

Just like doctor diagnosing a disease before

prescribing a medicine, similarly

a manager has to diagnose the real problem

before solving a problem.

For example, if there is high rate of absenteeism in the

organization, the management has to analyze the rate

of absenteeism from different perspectives.


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Search for alternatives

After diagnosing;

The management has to search for alternative solutions.

For example, for reducing absenteeism:

The management has to announce some incentives,

Take serious action;

Convince employees to attend work regularly, etc.


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Evaluating alternatives

The management has to evaluate the impact and

implementation of all the alternatives.


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Choosing the Best Alternative

From the available alternatives, the best alternative

has to be selected for implementation.


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Action

After choosing the best alternative:

It is to be implemented by the managers.

It requires organizational support and cooperation

at all levels.


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Result

When the best alternative is implemented,

Its impact has to be examined.

Managers have to take follow-up action in the light

of the feedback received from the results.


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Three different ways to frame decision for ethical

choices

1.Utilitarian criterion:

The main aim of utilitarian is to provide, greatest goodfor the greatest number.

Decisions are made solely on the basis of their out

comes

For e.g. as hike in prices, laying off large number ofemployees, shut down plants are the cases in

utilitarian terms.


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2. Right criteria:

The individuals take decision on the basis of their rights

mentioned in the constitution.

3. Focus on justice criteria:

This needs an individual to impose and enforce rules

fairly and impartially so there is equitable distribution

of benefits and costs.


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Factors influencing managers to make decision

Amans personal code of ethics

The companys policies and procedures.

Government regulations


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Apart from these managerial values, the values which

emerged as most preferred are given below:-

Honesty

Fair minded

Competent

Broad minded

Supportive

Optimistic


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MANAGEMENT INFORMATION SYTEMS

AManagement Information Systems (MIS) refers to the

system by which the required information is:

Collected

Processed

Presented

to the management to take better decisions.The output helps the manager in the decision-making

process.


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Managers take decisions to have better results in theorganization.

In MIS, data is the input which is processed to provide

output in the form of information reports,

summaries etc.


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MIS must have the following characteristics.

Timeliness:

The required information is to be provided at the right

time.

Accuracy:

The accuracy of the information is very information in

taking decisions.

Relevance:

The information has to be relevant to take the right

decisions.


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Impact of Decision Making

The cost of production may be reduced

The quality of the product may be increased

The customer satisfaction may be improved

Employee relations may be improved in several decisions.


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Group Decision making has advantages and

disadvantages:

Advantages:-

1. Groups can accumulate more knowledge and facts.

2. Groups have a broader perspective and consider more

alternative solutions.

3. Individuals who participate in decisions are more

satisfied with the decision and are more likely to supportit.


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Disadvantages:-

1. Groups often work slowly than individuals.

2. Groups decision making involves considerable

compromise which may lead to less than optimal

decisions.

3. Groups are often dominated by one individual or a small

clique.

unit 3 corporate social responsibility

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