Quarter-4-Lesson-1
Business Ethics and Social Responsibility
Corporate Social Responsibility (CSR)
Definition: CSR is defined by the World Business Council for Sustainable Development (WBCSD) as a continuous commitment by businesses to act ethically and contribute to economic development while improving the quality of life of their workforce, families, local communities, and society at large.
Differentiation from Business Ethics: CSR focuses on a corporation’s obligations toward society, including economic, legal, and philanthropic responsibilities, while business ethics emphasizes moral responsibilities of businesses and their agents in ethical decision-making.
Business Ethics
Definition: Refers to the study of moral right and wrong in the business context. It prioritizes ethical responsibilities of individuals and organizations over other concerns.
Foundation in Moral Philosophy: Engages with moral standards including:
a. Utilitarianism: Evaluating actions based on their consequences.
b. Deontology: Duty-based ethics focusing on adherence to rules.
c. Concept of Rights: Emphasizing individual rights in business matters.
d. Justice: Ensuring fairness and equity in business decisions.
e. Virtue Ethics: Prioritizing moral character and virtues in decision-making.
Responsibilities and Accountabilities of Entrepreneurs
Overview: Entrepreneurs have duties toward various stakeholders, including employees, customers, suppliers, and the government.
Key Responsibilities:
13 Social Responsibility of Entrepreneurs towards Employees
1. Reasonable and Attractive Remuneration - The company should have attractive salaries and wages to all employees and workers engaged in various business activities.
2. Assignment of Right Jobs - Rights jobs should be assigned to all employees, according to their abilities and tastes.
3. To Give Security of Employment - The entrepreneur should provide employment security to the employees of his organization, which will cause the sense of satisfaction among them and they will work with full interest, dedication, and commitment and will feel free from the apprehensions of losing a job and will have the higher degree of faith in the employer.
4. To Give Best Working Conditions - Best working conditions mean the provision of pure air, sufficient light, proper temperature, proper space of the workplace, as also arrangements for rest, entertainment, sports and refresh made.
5. Providing Opportunities for Individual Development - Every individual wants to develop. So, the responsibility of the entrepreneur is that he should make all possible efforts for the individual development of the employees and may impartially provide them equal opportunities for that. These opportunities include imparting Education and Training, give timely promotions, transfers at the right time and their participation in the management of the business etc.
6. Development of Mutual Understanding and Trust - The management and employees should develop mutual understanding and trust.
7. Adoption of Welfare Schemes - For assuring social responsibility towards the employees, financial assistance during sickness, unemployment, old age, accidents, and death, should be provided to employees or to their dependents.
8. Human Behavior - The entrepreneur should behave humanly with his employees. They should not be treated as part of some medicine.
9. Establishment of Small Industrial Relations - An entrepreneur may safeguard the interests of the owners, employees, society and the nation, alike by establishing sweet relations with the employees.
10. Participation in Profits and Management - Today, the employees have started realizing that the profit of the organization is not of the owner alone.
11. Well Defined Service Conditions - Various service conditions of the employees, like appointment, promotions, transfers, penalties, Suspensions, and dismissals, retirements, service period, etc. should be clear and well defined.
12. To Adopt Incentives Wages Scheme - Employees are paid wages for their time and work.
13. To Corporate in Execution of Labor Laws - The government has enacted several laws to safeguard the interest of the employees and workers. The entrepreneur has the responsibility to execute these government laws and submit timely reports for their compliance with the government.
Social Responsibility of Entrepreneurs towards Government
1. Compliance of Government Rules - The rules framed by the government for business should be fully complied with. The entrepreneur should follow the laws regarding obtaining licenses for a specified business, the operation of the business, price determination and production, etc.
2. Payment of Taxes - The government imposes various types of taxes, like, Income Taxes, sales tax, exercise duties, tariff duties and wealth tax on the entrepreneur and business, for raising financial resources. The entrepreneur should honestly pay these taxes.
3. Earning Foreign Exchange - The government also expects from business organization that it will earn foreign currency by exporting goods in the foreign market. The government requires this foreign currency for importing valuable and important products.
4. Advising the Government - The business organization has to provide timely advice to the government in respect of framing important policies such as Industrial policy, Import & Export policy, Licensing policy, etc.
5. Contributing to Government Treasury - The commercial organization must contribute the funds to government during the emergencies and natural calamities like floods, earthquakes, etc.
6. Not to Seek Political Patronage by Unfair Means - The responsibility of the entrepreneurs is that they do not seek political patronage by providing undue economic help to any political party or persons, during elections.
7. To Cooperate with Government for Economic Development - The government sets the targets for balanced and Rapid economic development of the country. For that, the entrepreneur should provide Cooperation to the government by proper utilization of available resources in accordance with the government targets.
Social Responsibility of Entrepreneurs towards Creditor
1. To Obtain Loans on Reasonable Conditions - Some certain conditions are required to be fulfilled to obtain any type of loan. These conditions should be reasonable, both for the creditors and the business organization.
2. To Follow the Mortgage Rules - The creditors provide loans in the secured and unsecured forms. If the creditor has provided secured loan on the mortgaged property, the entrepreneur should follow the rules of mortgaged property should be safeguarded and should be handed over the creditor, if so required under the rules.
3. To Follow Business Ethics - Both the entrepreneurs and creditors should follow the business ethics in providing loans and in repayment of loans. The loan procedures should be honestly complied with.
4. Proper Utilization of Debt Capital - Loans are obtained for particular objectives. Hence, the entrepreneurs should utilize the loan amount only for the desired objectives.
5. Regular Payment of Installment and Interest - The entrepreneurs should pay loan installments and interest regularly, according to repayment conditions. If installments and interests are not paid timely, loan burden goes on increasing and it also has an adverse effect on the reputation of the business organization.
6. Repayment of Loan - Loans should always be paid in on the maturity date, which facilitates regular capital flow in the business society and also saves the banks and Financial Institutions from adverse effects.
Social Responsibility of Entrepreneurs towards Suppliers
To Pay Fair Prices of Goods - Entrepreneurs should pay reasonable prices for the materials purchased from the suppliers to ensure fairness in transactions.
To Pay in Reasonable Time- Entrepreneurs must make timely payments to suppliers to prevent financial difficulties and allow smooth operations.
To Inform about Changes in Market - It is the responsibility of entrepreneurs to provide regular updates to suppliers about market changes, including demand and design trends.
To Give Guarantee of Minimum Price - Entrepreneurs should guarantee a minimum price to suppliers, ensuring price stability and encouraging continued cooperation.
To Motivate Indigenous Supplies - Indigenous suppliers should be prioritized and encouraged, and their materials should not be overlooked in favor of foreign suppliers.
To Provide Technical Advice - Entrepreneurs must offer technical assistance to suppliers for the production of new and alternative commodities.
To Inform Suppliers of Future Developments - Providing timely information about potential future developments to suppliers helps them adapt to changing circumstances.
To Promote Healthy Competition - Entrepreneurs should foster healthy competition among suppliers rather than cutthroat practices, focusing on fair pricing without compromising relationships.
Social Responsibility of Entrepreneurs towards Consumers/Customers
Determination of Fair Prices - Entrepreneurs should set fair prices, regulating production costs and ensuring only marginal profits in distribution.
To Render Good and Economic Services-Businesses must provide high-quality and affordable services across various sectors, including banking, insurance, and transportation.
Standardization of Goods - Entrepreneurs are responsible for ensuring that the goods provided are of high quality to avoid customer dissatisfaction.
Best and Economic Packing of Products - Products should be packed securely and attractively while keeping packing costs reasonable to prevent damage during transportation.
Right and True Advertising- Advertisements must be truthful, as they play a crucial role in attracting customers.
To Avoid Adulteration, Low Weight, and Measurement of Products - Entrepreneurs must ensure that products are genuine and accurately measured, especially life-saving goods.
Redressal of Customers Complaints - Prompt resolution of customer complaints related to product quality, pricing, and other issues is essential.
To Maintain Contacts with Customer Associations - Entrepreneurs should engage with customer organizations that protect consumer interests.
To Follow Code of Conduct - Membership in consumer protection organizations and adherence to their rules is vital for entrepreneurs.
After Sales Service - Providing adequate after-sales service with trained personnel is necessary for customer satisfaction.
Avoidance of Hoarding Practices - Entrepreneurs must refrain from hoarding commodities or creating artificial shortages, which is unethical and illegal.
To Promote Customer Research - Encouraging market research helps entrepreneurs understand changing consumer preferences and improve product offerings.
Efficient Distribution System - Streamlining distribution processes to minimize costs and prevent price increases is essential.
Good Behavior - Maintaining respectful and courteous customer service is important for business success and enhances social responsibility towards the public.
Major Ethical Issues in Entrepreneurship
Key issues entrepreneurs often face include:
1. Basic Fairness
2. Personnel and customer relations distribution dilemmas
3. Fraud
4. Unfair Competition
5. Unfair Communication
6. Non Respect of agreement
7. Environmental Degradation
Models and Frameworks of Social Responsibility
Traditional Conflict Model: Posits that social responsibilities conflict with shareholder profits.
Added Value Model: Suggests that social responsibility can enhance profitability by improving public perception and customer loyalty.
Multiple Goals Model: Proposes that companies can have goals beyond just profit, such as improving community welfare and upholding ethical standards without direct financial gain.