CHAPTER 6

SOCIAL RESPONSIBILITIES OF BUSINESS AND

BUSINESS ETHICS

CONCEPT OF SOCIAL, RESPONSIBILITY

A business is apart of society. So, a business enterprise should do business and earn money in
ways that fulfil the aspirations of the society. Thus social responsibility relates to the voluntary
efforts on the part of the businessmen to contribute to the social well being. The businessmen
make use of resources of society and earn money from the members of society so they must do
something for the society.
Arguments in favour of Social Responsibility:
There is a need for Social Responsibility of business for Existence and Growth :-
1. Justification for Existence and Growth :- Business is the creation of society therefore
it should respond according to the demands of the. society. To survive and grow in
society for long run the business must provide continuous services to the society.
2. 'Long term Interest of the firm : A firm can improve its image and goodwill in the
long run when its highest goal is to serve the society . it indulges in unfair Trade
Practices e.g. adulteration, hoarding black marketing it may not be able to exist for long.
3. Avoidance of government regulations :- Business can avoid the problem', of
government regulations by voluntarily assuming social responsibilities.
4. Availability of resources with business :- Business has valuable and human resources
which can be effectively used for serving problems of the society.
5. Better environment for doing business :- Social responsibility Quality of life and
standard of living of people. So, business will get better community to conduct
business.
6. Contribution to social problems :- Some of the social problems have beer created by
business firms themselves such as pollution, creation of unsafe work places,
discrimination etc, Therefor, it is the moral obligation of business to solve such social
problems.
Arguments Against Social Responsibility : major arguments against social responsibility are:
1. Profit Motive :- A business is an economic entity that is guided by profit motive. It
should not waste its energies and resources in fulfilling social responsibility.
2. Burden on consumers :- Involvement of business in social responsibilities involve a
lot of expenditure which will ultimately be borne by the customers.
3. Lack of Social Skills :-The business firms and managers have the skills to handle
business operation. They are not expert to tackle the social problems like poverty over
population etc. Therefore, social problems must r e tackled by social experts.
4. Lack of public support :- Generally public does not like business involvement in
social problems. Therefore, business cannot fulfil social responsibility because of lack
of public confidence & cooperation.
SOCIAL RESPONSIBILITY TOWARDS DIFFERENT INTEREST
GROUPS
Business has interaction with several interest groups such a shareholders, workers. consumers,
government, and community
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Business is responsible to all these groups.

1. Responsibility towards shareholders:-

(i) To ensure a fair and regular return on the investment of shareholders.
(ii) To ensure the safety of their investment
(iii) To strengthen financial position of the company.
(iv) To safeguard the assets of the business.
(v) To protect the interest of all types of investors in the business.
2. Responsibility Towards workers : (i) Providing fair compensation and benefits,
(ii) Providing good and safe Working conditions, iii) To develop a sense of belonging-ness.
3. Responsibility toward consumers :-
(i) To supply right quality of goods & services at reasonable prices.-
(ii) To ensure regular and adequate supply of products.
(iii) To inform them about new products and new uses of exist in products.
(iv) To handle the customers grievance promptly.
4. Responsibility Towards Government -
(i) To pay taxes honestly
(ii) To observe rules laid down by the government, (iii) to avoid corrupting
government employees.
5. Responsibility towards community -
(i) To make available opportunities for employment,
(ii) To avoid polluting the environment,
(iii) To up lift the weaker sections of society
BUSINESS AND ENVIRONMENTAL PROTECTION:-
Meaning of Environment: - The environment is defined as the totality of man's surroundings
- both natural and man made. Natural Resources-all land, water, air and man made - cultural
heritage. socio economic institutions and the people.
Meaning of Environmental pollution :- It means injection of harmful substances into the
environment. The greatest problem that industries and businessmen are creating is that of
pollution - which is the result of industrial production. So, section of environment is must.
Causes of Pollution :- Many industrial organizations have been responsible for .using air,
water and noise pollution.
1. Air Pollution :- Due to smoke, chemical emitted by factories, vehicle. It has created a
hole in the ozone layer leading to global warming.
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2. Water pollution :- Due to chemicals and waste dumped into the rivers, streams & lakes.
It has led to the death of several animals and posed a serious problem to human life.
3. Land Pollution :- Due to dumping of garbage and toxic wastes which affect the fertility
of land and makes it unfit for agriculture.
4. Noise Pollution : Caused by the running factories and vehicles. Noise pollution can be
responsible for many diseases like loss of hearing, violent behaviour and mental
disorder.
NEED FOR POLLUTION CONTROL :-
1. To ensure healthy life :- Many diseases like cancer, heart attack and lung
complications all caused by pollutants in the environment. Pollution control is must to
keep a check on these diseases.
2. To ensure safety :- Due to environmental pollution and smoke the visibility is reducing
due to which chances of accidents have been increasing. To reduce the number of
accidents there must be a check on pollution.
3. Economic Losses :- Pollutants in the environment bringing heavy economic losses for
the country, for example Taj Mahal is losing its beauty due to pollution.
4. Improved Public Image :- A firm that adopts pollution control measures enjoys a good
reputation as a socially responsible enterprise.
ROLE OF BUSINESS ENVIRONMENTAL PROTECTION:
1. Eco-friendly and clean or low waste technology should be used by industrial
organization.
2. Industrial Wastes should be recycled as far as possible.
3. Plant and machinery should be modernized to minimize pollution.
4. The business houses should comply with the laws and regulations enacted for
prevention of pollution.
5. Positive steps should be taken to save environment. These include, plantation of trees,
cleaning of rivers, ponds etc.
BUSINESS ETHICS:
Refers to the moral values or standards or norms which govern the activities of a businessman.
Ethics define what is right and what is wrong. By ethic we mean the business practices which
are desirable from the point of view of Society. The purpose of business ethics is to guide the
managers and employees in performing their job. Example of business ethics are charging fair
price from customers, giving fair treatment to workers, earning reasonable profits and paying
taxes to... the government honestly.
ELEMENTS OF BUSINESS ETHICS
1. Top management commitment :- The CEO and higher level managers must be
committed to ethical norms of behavior. This would set an example for all employers
and encourage them to follow ethical practice.
2. Publication of code :- Code of ethics is a formal written document of the principles,
values and standards that guide a firms actions. It may cover areas like honesty, quality,
safety, health care etc.
3. Establishment of compliance mechanism :- A suitable mechanism should be
developed to comply with the ethical standards of the enterprise. , The mechanism
should be properly communicated to all in the organisation.
4. Employee involvement :- It is the employees of the lower levels who implement ethical
principal so they must be involved in the process of developing ethical code.
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5. Measuring results : Although it is difficult to measure ,the ethical results but it mist
be verified and audited that have for work is being carried according to ethical
standards.
Key terms
Social Responsibility — Obligation of business firms to contribute
resources for solving social problems and
work in a socially desirable manner
Environment — Totality of natural and man-made things
existing around us.
Business Environment — Totality of all external forces with which
business interacts.
Environmental Protection — Deliberate process of protecting the environment from threats of
any nature.
Pollution — Process of emission or release of harmful
substances into environment which harm
human life.
Ethics — Based on moral values and beliefs.
Business Ethics — Socially determined moral principles which
govern the business activities.

Multiple Choice Questions

1. Which of the following are examples of socially responsible Indian companies:-
(a) Asian Paint (b) Pepsi
(c) TISCO (d) All of these
2. Which of the following is not the social responsibility of business towards investors?
(a) To ensure safety of capital
(b) To ensure proper dividend
(c) To ensure the proper utilisation of capital
(d) To give appropriate salary
3. Which of the following is the social responsibility of managers towards the employees:
(a) Providing clean working atmosphere
(b) Giving security of service
(c) Adopting incentive - giving system
(d) All of the above
4. Which causes land pollution —
(a) Chemical & waste dumping into rivers & lakes
(b) Dumping of garbage and toxic wastes
(c) Noise caused by running of factories & vehicles
(d) None of the above
5. Elements of Business Ethics are —
(a) Publication of a ‘Code’
(b) Establishment of compliance mechanism
(c) Measuring results
(d) All of the above
6. Which is the example of economic responsibility —
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 (a) Not to create pollution
(b) Charity to an orphanage
(c) Producing goods and services according to the needs of the customers and selling
them at a profit
(d) Respecting the religious sentiments of people.
7. Social responsibility is
(a) Same as legal responsibility
(b) Narrower than legal responsibility
(c) Broader than legal responsibility
(d) None of the above
8. If business is to operate in a society which is full of diverse and complicated problems,
it may have
(a) Little chance of success
(b) Good, chance of success
(c) (c) Little chance of failure
(d) (d) No relation with success.
9. Ethics is important for
(a) Top management
(b) Middle-level managers
(c) Non-managerial employees
(d) All of the above
10. Environmental protection can best be done by the efforts of
(a) Business people (b) Government
(c) Scientists (d) All of the above

One Word Answer

1. Give an example of ethical responsibility of business.
2. Out of medical, law and business, ethics are related to which activity.
3. In business ethics what does ‘equality’ mean?
4. Give an example of discretionary responsibility of business.
5. “An enterprise must provide good quality and unadulterated goods and services” It is
an example of its responsibility towards which group?
6. Give an argument in favour of social responsibility of business.
7. Name the Greek word from which the ‘ethics’ has been derived.
8. Mention anyone factor which make a case for pollution control.
9. Give one example of business activity which are considered unethical.
10. Which is capable of doing maximum good to society?
True & False
1. The only obligation of a business towards its employees to pay them well so that they
work to their maximum capacity.
2. legal responsibility means compliance with the law i.e. payment of taxes regularly and
honestly.
3. A business is a socio-economic institution.
4. The principle of ‘Caveat Vendor’ means ‘let the buyer beware’.
5. Business ethics is not related to law.
6. Water pollution is caused by dumping of garbage and toxic wastes.
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7. What is good for the society is also good for the business.
8. Providing accurate and up-to-date information on the financial position of the company
is a responsibility of the business towards government and community.
9. High moral values lead to higher ethics.
10. To work and contribute towards the rescue and relief work in case of flood, earthquake,
etc. is the social responsibility of business towards shareholders/investors/owners.
Multiple Choice Questions
1. (d) 2. (d) 3. (d)
4. (b) 5. (d) 6 (c)
7. (c) 8 (c) 9. (a)
10. (a)
One Word Answer
1. To respect religious sentiments of people.
2. Related to all activities.
3. Means no distinction between, rich-poor, religion and caste
4. To help the flood/earthquake affected people.
5. Consumers
6. Long-term interest of the firm/avoidance of govt. regulations.
7. Ethos.
8. Cost savings/improved public image.
9. Exploitation of workers/making deceptive advertisements.
10. Ethics.
True & False
1. F 2. T 3. T 4 . F 5. T 6. F 7. T 8.F 9. T 10. F

1 MARKS QUESTIONS :-
1. Define social responsibility of a business.
2. Write two examples of business ethics.
3. State two effects of noise pollution?
4. What is environmental pollution?
5. To give complete information regarding finance position of the company is the social
responsibility of organization towards which interest group ?
6. "Responsibility of a business extends beyond its economic responsibility." Mention the
name of this responsibility. (Social Responsibility)
7. "A business organization has adopted the policy of refraining from profiteering and
hoarding." Mention the interest group for which this policy is relevant?
8. "An Industrial unit discharges toxic gases from its chemical plant." Mention the type of
pollution created by the unit. (Air Pollution)
9. Mention the element which refers to a set of mass moral principles which govern the
conduct of people in a business organization. (Business ethics)
10. "Business must focus on the varied interest of the society. Give any one reason in
support of this statement. (As business is a part of society)
3/4 MARKS
11. Why is business responsible for Environment Protection?
12. Enumerate any three responsibilities of business towards employees.
13. Why should a business assume social responsibility?
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14. Explain the major cause of environmental pollution?
15. Define business ethics and explain its significance?
16. LMN Ltd. is filing its income tax returns on time. They are also updating their
shareholders about their projects and provide for return to them. Towards which interest
group are they fulfilling their responsibility? Which values are being followed by the
Co.?
17. ABC Ltd. deals in health drinks. It is found that there are components of pesticides in
their drinks. Mention which 2 kinds of responsibilities and 2 values are missing from
this approach.
18. ABC Ltd. while advertising its deodorant range presents females in a derogatory
manner which offends religious group also. Which kind of social responsibility is being
neglected. Also, what value are being compromised?
19. XYZ Co. is providing facilities for their female staff like day care centre for kids and
work form home facility. By doing this they are following social responsibilities
towards which interest group? Also, what values are they presenting?
20. ABC Ltd. is a small company which makes disposable paper plates which are
environment friendly. They are made from the bark and dry leaves of tress available in
the north east states of India .
i) Towards which interest group is the business following its social responsibility ?
ii) Write any two values presented by the company.
21. Maruti Suzuki Ltd. is a car manufacturing company which found that 7700 Belano
Desire cars manufactured by it had some problems with their engines. By Fulfilling
Business Ethics the company recalled all the cars and corrected the problems. State any
four values followed by the company.
22. It is a complex problem that motivates business managers and decision makes to face
boldly the problem of environmental population. Environment consists of natural
surrounding of the man as well as conditions developed by man. Environment is being
constantly polluted which is not good for the survival of human-beings.
i) Recognize the complex problem in the above paragraph.
ii) Enumerate the two points regarding the causes of this complex problem.
23. Your friend Rajesh runs a factory in you city. His factory is spreading air, water and
noise pollution. What advice would you give him for keeping the environment pollution
free.
24. Besides looking after the interest of its owners a business ought to look after the
interests of other groups as well. These other groups include employees, consumers,
suppliers, competitors government, the community and the world also. Now a days only
those business are considered good which besides looking after the interest of its owners
also cater to the interests of these groups also. Which concept of business is explained
in this statement? Recognize that concept and explain its meaning as well.
25. The owners of Gupta and Gupta pvt. Ltd. are taking special interest in getting plants
planted ground their factory. Apart form it, they dump the waste water of their factory
only after passing through the efficient treatment plant. Explain the value which this
company is following.
26. This is the speciality of the Rajdhani Floor Mills that it gives handsome remuneration
to its employees. The employees of the mill are a happy lot and they motivate their
friends to work here. Enumerate which values are being affected here?
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27. The Chief manager of Surya Ltd. Mr. Mohan is taken huge interest in fulfilling his
social responsibilities towards the government. Explain the company is showing its
commitment, regarding the fulfilment of its social responsibility. Give any three points.
28. XYZ Ltd. is a cigarette manufacturing company. It does not put the mandatory
disclaimer that Cigarette smoking is injurious to health.
i) Towards which interest groups is it not following its
responsibility.
ii) What are the values lacking here ?
29. LMN Ltd. Co., a car manufacturing company, found that 100 cars of a particular batch
had some problem with their engines. It recalled all the cars and corrected the specified
problem.
i) What values are being followed by the company?
ii) Towards which interest group are they being responsible here?
5/6 MARKS
30. Explain the forces which are responsible for increasing concern of business enterprise
towards social responsibility?
31. It is in the interest of business to fulfill its social responsibilities towards different
interest groups. Explain?
32. MNO Ltd., a renowned computer follows the vision of "reaching new heights with its
people on its side". It not only provides quality products but also provides various
facilities to its employees for 5 years of service. It also provides computer skills to
youth in remote areas for free.
(a) What according to you are the business ethics of the company?
b) It is fulfilling its social responsibilities towards which interest groups?
33. There is a group discussion taking place in class XI regarding social responsibility of
business' Ravi feels that a business should be socially responsible towards the society
it exists in v, bile shama is against it as basic objective of a business is to earn project.
Whom do you think, you favuor? Write points with respect to you opinion.
34. ABC bank is providing e-banking facility to its customers. A group of employees of
the bank are sharing the personal Financial details of the customers with some
unscrupulous individuals to back their accounts.
(a) From the above given information what risks of e-business do you identify.
(b) Towards which interests group is the bank not paying- attention?
35. A BPO is providing 24 x 7 handing of customer queries and grievances. But in this
process. it is making its employees work for 16 hours a day. They are not even provided
a rest period of more than 45 minutes in a day.
(a) What is a BPO? What services does it provided to its customers?
(b) Which responsibility is not being taken care of by the BPO? (c) Interests of
which group are not being catered to here?
36. An organization manufacturing paints has been enjoying a prominent market position
since many years. It has been dumping its untreated poisonous waste on the river bank
which has created many health problems for the nearby villages.
a) What kind of pollution is caused by the above cited organization.
b) Which responsibility is not being taken care by the concerned organization.
[Hints : (a) Water pollution (b) Social Responsibility towards community (c) Environment
Protection, compliance of legal laws]
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37. A Vehicle manufacturing company has adopted the following practice.
i) Only those components will be used by the company which are environment
friendly. ii) There will be discharge of harmful wastes only after their proper
treatment. iii) Pollution level of every vehicle will be maintained as per
international standards.
Identify and explain the aspect of business with which the above actions are related

Mention any 2 values which are involved in above care.

[Hint : Environmental protection, values (a) Concern for environmental protection, Social
welfare.
38. "Bhardwaj & Sons is a partnership firm. Anil and Sunil are two partners. Sunil's liability
is unlimited where as Sunil's liability is limited, its is given in partnership dead. Sunil
wants to install a pollution control device in its factory but Anil is against it. All the
transactions are done only on the internet by this firm. This specializes in selling its
products only to other business units. This firms get her research and development work
done through another firm. This another firm has specialization in research and
development work.
On the basis the above paragraph answered the following questions.
i) Tell the type of partnership.
ii) Recognize the unethical behaviour of the firm and which two values are being
neglected here.
iii) Which type of e-business the firm is running ?
iv) Name that process by which the use of which quality of this another firm is being
made?
[Hint : Limited and unlimited liability partnership]
39. According to which principle Business forms should carry on business activities and
earn profits keeping in mind social aspirations of the society ? My explaining the need
of the concept of social responsibility give four points in its favour.
[Hints : Social Responsibility]
40. HCL is a well known computer company. It has the ambition of touching new heights
with the help of its employees. It provides quality products and offers various facilities
and incentives to its employees such as cab facility, after completing five years
employees are given company shares also. It provides free computer skills to the youths
of backward areas.
a) In your view what is the Business Ethics of the company ?
b) It is fulfilling its responsibility to which interest group?
41. XYZ bank is providing e-banking facilities to its customers. Some employees of this
bank have been sharing the personal details of some customers to some the with
unethical tendencies. The accounts of these customers can be hacked by these dishonest
customers. On the basis of the above paragraph answer the following questions :-
i) To which e-business risk you can recognize on the basis of the above information
? ii) The bank is not fulfilling its responsibility towards which interest group ?
[Hint : Dishonest Trade Practice a Unethical Trade Practice]