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Corporate social responsibility

CSR is the managerial obligation to take action that protects & improves both the welfare of society as a whole & the interests of the organization. According to the concept of CSR, a manager must strive to achieve societal as well as organizational goals.

Evolution of social responsibility of business

The development of large corporations which uses tremendous amount of resources called public attention to the need of CSR. Business scholars of the early 20th century recognized a need for some form of corporate social responsibility. The public perception of social responsibility of business has gone through three phases in this century. Phase 1, profit maximizing management, derives from Adam Smiths Wealth of nations. Writing in 1776, when poverty was the common lot of humanity, Smith opened on a paradoxical note, Do we want to promote the welfare of all? If so, we must cater to the selfish desires of a few. Entrepreneurs produce what people want only when they can earn a profit by doing so. If society allows entrepreneurs to give full rein to their desire for profits, then their own self interest will cause them to increase production. This will make more goods available to all. Of course, in a competitive market, entrepreneurs would enter the business & drive prices down. But within the limitations of the competition, Smith believed that entrepreneurs should be allowed to pursue their win self interest for the benefit of all. Phase II, trusteeship management, began with the diffusion of corporate ownership as thousands of stockholders shared ownership in a single enterprise. Where once the owners of a business personally supervised its operations, operating control came to rest in the hands of hired professional managers. Managers b were expected not only to maximize profits, but also to serve as trustees who mediated the opposing claims of employees, stockholders, suppliers, customers & the public at large. This trusteeship concept was a product of the depression ridden 1930s, when business came under severe attack because of widespread unemployment. The trusteeship notion was an attractive & altruistic one, implying that manager trustees were dedicated, not to their own enrichment, but to the welfare of the many diverse groups in the organizations environment. Phase III, quality of life management, came upon the scene in the 1960s, just about the time when the silent generation was giving way to the committed one. This phase stems from the philosophy that managers & companies should involve themselves directly in attempting to cure major social ills.

The values of quality of life managers contrast sharply with both the profit maximiser & the trustee manager. Now the essential equation becomes: what is good for society is good for our company. While accepting profit as essential, the quality of life manager would neither produce nor sell unsafe or shoddy goods. And where the other management types invite against government as a partner in business, the phase III manager recognizes government as a partner in a joint effort to solve societys problems.

Advantages of CSR
1. Improved financial performance: A Harvard University study has found that

stakeholder balanced companies showed four times the growth rate & 8 times the employment generation when compared to companies that focused only in shareholders & profit maximization.
2. Enhanced brand image & reputation:

A company conserved socially responsible can benefit both by its enhanced reputation with the public, as well as its reputation within the business community, that would enhance the companys ability to attract capital. Studies have found that excellent employee, customer & community relations are more important than strong shareholder returns in earning corporations a place in fortune magazines annual Most Admired Companies List. suggested an increase in the sales of companies considered to be socially responsible. Customers have shown a desire to buy products based on value based criteria such as child labor free clothing, products with minimal environmental impact & absence of genetically modified materials or ingredients.

3. Increased sales & customer loyalty: A large number of studies have

4. Increased ability to attract & retain employees:

Companies perceived to have strong CSR commitments often find it easier to recruit employees, particularly in tight labor markets. Retention levels may be higher too, resulting in a reduction in turnover & associated recruitment & training costs. engaging in practices that satisfy & go beyond regulatory compliance requirements are being given less scrutiny & freer rein by both national & local government entities. In many such cases, such companies are subject to fewer inspections & paperwork, & may be given preference or fast track treatment when applying for operating permits, licenses or other forms of government permission.

5. Reduced regulatory oversight: companies that demonstrate that they are

6. Innovation & learning: Innovation & learning are critical to the long term

survival of any business. Corporate responsibility stimulates learning & innovation within organizations helping to identify new market opportunities, establish more efficient business processes & to maintain competitiveness. The long term survival of business is dependent upon its ability to

understand & act on societal & technological change. Many organizations are co-innovating with business partners to identify new approaches that deliver business benefits whilst tackling a social or environmental issue.
7. Risk management: Manu corporations are broadening their definition of risk

to encompass wider & longer term risks that incorporate social & environmental issues. They are engaging with a wider external audience to understand needs & expectations & take action, where appropriate.

Responsibilities of business to different sections of the society Responsibility to shareholders

The responsibility of a company to its shareholders, who are the owners, is indeed a primary one. The fact that the shareholders have taken a great risk in making investment in the business should be adequately recognized. To protect the interest of the shareholders & employees, the primary business of the business is to stay in business. To safeguard the capital of the shareholders & to provide a reasonable dividend, the company has to strengthen & consolidate its position. Hence, it should develop & improve its business & build up its financial independence. Needless to say, to provide dividend, the company should earn sufficient profit. Adequate reserves should be built up so that it will be able to declare a reasonable dividend during a lean period as well. If a company fails to cope with changes in the dynamic world, its position will be shaken & the shareholders interest will be affected. By innovation & growth the company should consolidate & improve its position & help strengthen the share prices. The shareholders are interested not only in the protection of their investment & the return on it but also in the image of the company. It shall, therefore, be the endeavor of the company to ensure that its public image is such that the shareholders can feel proud of their company.

Responsibility to employees
The success of an organisation depends to a very large extent on the morale of the employees & their whole hearted cooperation. Employee morale depends to a large extent on the discharge of the companys responsibilities to them & the employer-employee relationship. The responsibility of the organisation to the workers include: 1. The payment of fair wages 2. The provision of the best possible working conditions

3. The establishment of fair work standards & norms

4. Provision of labor welfare facilities to the extent possible & desirable

5. Arrangements for proper training & education of the workers

6. Reasonable

chances

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promotion. 7. Proper recognition, appreciation & encouragement of special skill & capabilities of the workers
8. The installation of an efficient grievance handling system 9. Opportunity to participate in managerial decision to the extent

possible.

Responsibility to consumers
1. To improve the efficiency of the functioning of the business so as to a. Increase productivity & reduce prices b. Improve quality c. Smoothen the distribution system to make goods easily available. 2. To do research & development, to improve quality & introduce better & new products
3. To take appropriate steps to remove the imperfections in the distribution

system, including black marketing or profiteering by middle men or anti social elements 4. To supply goods at reasonable prices 5. To provide the required after sales service. 6. To ensure that the product supplied has no adverse effect on the consumer 7. To provide sufficient information about the products, including their adverse effects, risks, & care to be taken while using the products 8. To avoid misleading the customers by improper advertisements or otherwise 9. To provide an opportunity for being heard & to redress genuine grievances 10. To understand customer needs & to take necessary measures to satisfy these needs.

Responsibility to the community

1. Taking appropriate steps to prevent environmental pollution & to preserve the ecological balance

2. Rehabilitating the population displaced by the operation of the business, if any 3. Assisting the overall development of the locality 4. Taking steps to conserve the scarce resources & developing alternatives , wherever possible 5. Improving the efficiency of the business operation 6. Contributing to R&D 7. Development of backward areas 8. Promotion of ancillary & small scale industries 9. Making possible contribution to furthering social causes like the promotion of education & population control 10. Contributing to the national effort to build up a better society.

Responsibility to the dealers

1. Fairness & truthness of all the activities including pricing, licensing, to sell & rights to sell. 2. Ensure business activities are free from litigation 3. Develop long term stability in dealer relationship 4. Ensure that there is equity in relationship with all dealers.

Responsibility to the government

1. To behave like a law abiding citizen 2. To pay its dues & taxes to the state fully & honestly 3. Impartiality towards political affairs, i.e., to abstain from direct political involvement, & not to support political parties 4. To follow honest trade practices & avoid activities leading to restraint of trade 5. Not to corrupt public servants for selfish ends 6. To sell commodities & services without adulteration 7. Use scarce national resources properly 8. Environmental protection & abate pollution 9. Respect to the community & citizens of the country 10. Contribute to social development.