Social responsibilities of business

Social responsibilities of business

You have observed how business and society interact with each other. Business exits in the context of a society. IN a (traditional) pre-industrial society, business transactions are  negligible or nil; in that society production is mainly done for self-consumption and the need for exchange is minimum. In a modern industrial society, business grows by leaps and bounds; production is meant for the market; the subsistence system is replaced by  the commercialized system and, therefore, exchange transaction multiply. In a postindustrial (Recent) society business gets specialised and professionalised. With growing Monet satin, both primary and secondary, the complexity of business grows manifold.

Business grows in variety. Business becomes more and more services-oriented from being production-oriented. Thus as transition takes place in a society through various stages, business changes in arms of size, structure, strategy and system. On the other hand, as business changes in terms of its form and organisation, society also undergoes changes. Soil values social intuitions, social order social contract, social conflict, social problems – everything changes along with a change in the business culture. In other words, business determines society as much as society determines business. Therefore, business must be socially responsible.

Over two decades age, Peter ducker stated in the context of American business, “If there is one development during the last ten years that stands out above all others, it is the eagerness with which business has embraced social responsibilities”. This is rule of Indian or any other national business today. It is no longer fashionable for business corporations the rod over to take a gleeful pride in making money. What is more fashionable is to show that it is a great innovator, more specially a great public benefactor and that it exists to serve the public.

From the standpoint of business, we have already identified each element of this public. They are : ownes/shareholder, managers, workers, suppliers, distributors, consumers, Government officials and similar social groups. All these have a stake in business and can be known as stakeholders.

Each and every social group has a very definite expectation from business. The shareholders, promoters, and owners expect a fair return on their investment; unless lucrative dividends are paid, they do not want to supply venture capital for business.

The workers expect fair wages and bonus, otherwise they feel exploited when they produce output more in value than the input. The salaried managers likewise expect a ruminative packet of pay and perks, otherwise they do not find any incentive to work had
and long for their business concern. The consumers expect a quality product and service at fair pries, otherwise they feel cheated. The suppliers expect a prompt steeliest of their bills. The distributors expect after sales service as well as fair commission on sales, otherwise they do not find incentives to promote sales. The government expects business to pay taxes and tube accountable for subsidies. And, importantly, there are others who are not directly concerned with business, yet they have a lot of expectations of some type,
expecting charitable donations for promoting education and culture; the ecologist who want business to minimize, if not avoid totally, pollution and degradation of the physical environment; the social workers who want business to adopt backward villages and undertake all round development of housing, health, and sanitation. There is no end to the
expectations of these various social groups. The more you come up to their expectations,
the more they expect from you and your business.

 Business has to balance these manifold expectations and optimize a general social welfare function subject to the constraint of maintaining social harmony. This is a difficult and stupendous task and it involves a measure of social efficiency of business operations. Normally, private business enterprise do not bother about social efficiency, they are guided by the commercial profitability criterion. Form them, social responsibility is more a façade and a decoration; it is mostly a means of maximizing the long-run return on investment. But, for public enterprises, social desirability is an important consideration. Therefore, they have to attempt a detailed social cost-benefit analysis of their projects and operations. Such enterprises whcih produce public goods and services have to maximise net social return. However, social responsibility does not mean that they should continue to run losses. After all, they are not meant for supplying free or Subsidised social service. Social obligations should not eclipse their economic viability, which in itself is a social purpose. Thus, even pubic enterprises have social as well as commercial obligations. In fact, in India we want our public enterprises degenerate surplus for development finance. The profit of a pubic enterprise is unimportant source of financing planned economic development. A losing pubic enterprise is ultimately a burden on society, and therefore if the unit is sick, even if it is a public unit, it is better to liquidate it. Such liquidation certainly would cause unemployment and hardship in the short run but in the long run it will be good for society. Social achievements like employment creation and import substitution should never be made an alibi for an unsatisfactory economic and financial performance.

Public enterprises in a democracy like ours are accountable (a) to Parliament, (b) through  audit and (c) through annual reports. Parliamentary control over public enterprises is a  well established from of social control. Similarly, as an instrument of accountability, public enterprises are subject to financial audit, efficiency audit and prosperity audit. Finally, a well-drafted annual report is an important medium of communication between the enterprises and the public.

Public accountability of private enterprises is also statutorily required. Very often, the Annual General Meeting (AGM) is an occasion where annual reports/balance-sheets can be seriously examined and the shareholders can take their public limited company to task.

But this requires the shareholders’ movement to be organised and strong. In fact, strong trade unionism, a strong conservationist movement, and a strong consumer movement are
additional requirements to enable any business – private or public, national or multinational, small or big – to discharge its social obligations and commitment.