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    INTERFACE BETWEEN

    BUSINESS AND SOCIETY

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    Why Do Good?

    Its like Health Care

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    LOOK BETTER

    Potential Customers, Investors,

    Financial Analysts, Business

    Colleagues, Annual Reports,Press and even Parliament

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    FEEL BETTER

    Employees, Current Customers,

    Stock Holders and BoardMembers

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    DO BETTER

    Brand, Bottom Line and

    Community

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    LIVE LONGER

    Strong Reputation

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    Why CSR is Becoming

    Important? Large size of the modern day

    corporations

    Rolling back of the state

    Recognition of benefits of CSR

    Increasing Pressures from different

    Stake Holders

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    Theoretical Positions

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    Milton Friedman

    Nobel Laureate1976 Economics

    The only social responsibility of

    business is to maximize profitsstaying within the realms of law.

    -- Business of Business isBusiness.

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    Andrew Carnegie

    ( legendary steel tycoon)

    -- Advocates benevolent,

    paternalistic leadership

    -- Charity principle

    -- Stewardship principle

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    Keith Davis

    --Enlightened self interest: It is in

    an organizations interest to act in

    ways that society considersresponsible.

    -- Iron law of responsibility:

    Those who do not exercise power

    and responsibility will tend to loose

    it.

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    Tom Cannon

    CEO of a Scottish firm

    and Director of ManchesterBusiness School

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    Business provides

    - Products & Services

    - direct & Indirect Employment

    - Income generation

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    Society provides

    - Meansof exchange

    - Trained Manpower

    - Legal and banking system- Social and physical

    infrastructure

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    With the advent of the Joint Stock

    Company, society or state providesto business, two special rights

    -- Potential Immortality

    -- Limited Liability

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    Business does haveSocial Responsibility

    to fulfill in return for these

    privileges

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    Developments in India

    First Phase: Merchant Charity

    Second Phase: Trusteeship

    Third Phase: Declaration of SocialResponsibilities of Business

    Fourth Phase: Managerial Trusteeship

    Fifth Phase: Corporate Citizenship

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    International Developments

    Philanthropy as old as recorded history

    Initially directed towards the poor and

    infirm

    Later towards research, education etc.

    Role of Andrew Carnegie & Rockfeller

    Donating both time and money Professionalisationestablishment of

    foundations

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    Difference between Old and

    New ConceptsOld Concept

    Based on the

    philosophy of the

    founder Donation of resources

    and money

    New Concept

    Considered decision

    of the boardpart of

    strategy Direct involvement

    Explicit realization of

    interdependence ofbusiness and society

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    Generations of CSR

    The First Generation of CSRCorporate

    Philanthropy

    The Second Generation of CSRLong

    Term Business Strategy

    The Third Generation CSRSignificant

    Contribution towards the Society (mostly a

    vision)

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    Responsibilities of Enterprises

    towards the Society Protecting and improving the welfare

    Beyond legal and social responsibility

    Commitment of social, economic andenvironmental good

    Accountable for their actions

    Obligations towards all stakeholdersCommitment to local community

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    The Social

    ResponsibilityDebate

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    Views for CSR

    Profits lost are recovered in long run

    Optimum profit and not maximum profit

    Cost gets recovered

    Averts penalty

    Mere production is not the sole aim Involves all stakeholders

    Sustained growth

    Problems originating due to business

    Business uses the resources of the society

    Business posses the expertise to solveproblems

    Preventing is better than curing

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    The Counter Argument

    Profits and responsibility are not related

    Difficult to estimate positive impact

    Compliance of law is sufficient Society must safeguard its interest

    Complex ethical issues

    Social policy is the jurisdiction ofgovernment

    Business lacks training in social issues

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    The Counter Arguments

    Another excuse to let big business

    increase its power

    It may lead to business failure

    Not easy to make choice between

    responsible and selfish action

    Divided support in the business

    community

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    Relations between a business firm and its

    primary stakeholders

    Business

    firm

    (Managers)

    Wholesalers

    (Retailers)

    Creditors

    Suppliers

    Customers

    Stockholders

    Employees

    (Unions)

    Invest

    capital

    Lend

    money

    Sell

    materials

    Buy

    products

    Distribute

    products

    Sell

    labor

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    Relations between a business firm and some of

    its other (secondary) stakeholders

    Business

    Firm

    (Managers)

    The

    General

    Public

    Business

    Support

    Groups

    Governments

    Social

    Activist

    Groups

    Media

    Central/State

    and Local

    Governments

    Local

    Communities

    Regulation,

    taxes

    Friendly,

    hostile

    Social

    demands

    Image,

    publicity

    Advice,

    research

    Positive,

    negative

    opinion

    Jobs,

    environment

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    Responsibilities Towards

    Employees

    Proper monetary rewards

    Job security

    Working conditions

    Good HRD practices

    Employees participation

    Open communication and grievance

    procedure

    Recognition of Employees union

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    Responsibilities Towards

    Shareholders

    Fair return on investment

    Proper use of shareholders funds

    Conduct of meetingsDisclosures

    Adapt fair business practices

    Capital appreciation

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    Responsibilities Towards

    Customers

    Quality goods and services

    After sales service

    Fair prices

    Honest advertising Quick redressal of complaints

    Training to customers

    Information on packages and throughadvertising

    Research and development

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    Responsibilities Towards Society

    Protection of environment

    Optimum use of resources

    Upliftment of backward areasUpliftment of weaker sections of the

    society

    Assistance for social causesRestrain from anti social activities

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    Responsibilities Towards

    Government

    Payment of taxes

    Assisting the government in implementingsocio-economic policies

    Observance of rules and regulations Supporting political stability

    Restraining from seeking undue favours

    from government authorities Playing active role during national

    calamities

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    Responsibilities Towards Suppliers

    Good relations

    Payment on time

    Not to force the supplier for unreasonableterms

    Not to disclose secret information

    Work for growth and survival

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    Responsibilities Towards Financial

    Institutions

    All payments on time

    Regular reports

    No bribes to bank officials Proper use of funds

    Not to convert loans into bad debts

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    Responsibilities Towards

    Competitors

    Avoid unfair practices

    Respect the competitors

    Not to block the entry of competitors

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    The Pyramid of Corporate

    Social Responsibility

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    (Source: Archie Carroll fromBusiness Horizons, July/August

    1991Foundation for the

    school of Business at Indiana

    University)

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    Philanthropic

    ResponsibilitiesEthical

    Responsibilities

    Obey the Law

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    Philanthropic

    ResponsibilitiesBe a Good Corporate Citizen

    Ethical Responsibilities

    Be Ethical,

    Be

    Profitable

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    According to Carroll,

    there are four kinds ofsocial responsibilities

    Social

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    Social

    ResponsibilitiesEconomic

    Legal

    Ethical

    Philanthropic

    E i

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    Economic

    Provide goods and services

    Be profitable

    Maintain strong competitiveposition

    Maintain high level of operatingefficiency

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    Ethi l

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    Ethical

    It includes those activities that

    are not expected or prohibited

    by society as economic or legalresponsibilities.

    (Values and norms of thesociety)

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