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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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