EXERCISES
Short Answer Questions
1. What do you understand by social responsibility of business? How is it different from legal responsibility?
Answer: Social responsibility of business is its obligation to make decisions and perform actions that are desirable in terms of societal objectives and values. It goes beyond legal responsibility; while legal responsibility is about complying with the law, social responsibility includes voluntary actions and obligations not covered by law, for the benefit of society.
2. What is environment? What is environmental pollution?
Answer: The environment is the totality of man’s surroundings, encompassing both natural (land, water, air, flora, fauna, raw materials) and man-made elements (cultural heritage, socio-economic institutions, people). Environmental pollution is the injection of harmful substances into the environment, largely due to industrial production, which alters its physical, chemical, and biological characteristics, harming life and degrading living conditions.
3. What is business ethics? Mention the basic elements of business ethics.
Answer: Business ethics refers to the socially determined moral principles that should govern business activities. It concerns the relationship between business objectives, practices, and the good of society, going beyond mere legal compliance to include adherence to moral principles and values. The basic elements of business ethics are:
- Top management commitment
- Publication of a ‘Code’ of conduct
- Establishment of compliance mechanisms
- Involving employees at all levels
- Measuring results
4. Briefly explain (a) Air Pollution, (b) Water pollution, and (c) Land pollution.
Answer:
- (a) Air Pollution: Lowering of air quality due to substances like carbon monoxide from automobiles and smoke/chemicals from manufacturing plants, leading to issues like ozone layer depletion and global warming.
- (b) Water Pollution: Primarily caused by dumping chemicals and waste into rivers, streams, and lakes, posing threats to human and animal life.
- (c) Land Pollution: Results from dumping toxic wastes on land, which damages its quality and renders it unfit for agriculture or plantation.
5. What are the major areas of social responsibility of business?
Answer: The major areas of social responsibility of business are towards different interest groups:
- Shareholders or owners
- Workers
- Consumers
- Government and community
6. State the meaning of Corporate Social Responsibility as per the Companies Act 2013.
Answer: As per Clause 135 of the Companies Act, 2013, Corporate Social Responsibility (CSR) refers to the responsibility of enterprises for their impacts on society. Companies meeting certain financial thresholds (annual turnover of ₹1,000 crore or more, net worth of ₹500 crore or more, or net profit of ₹5 crore or more) are encouraged to spend at least 2% of their average net profit from the previous three years on CSR activities in India, excluding activities exclusively for employees and their families.
Long Answer Questions
1. Build up arguments for and against social responsibilities.
Answer:
Arguments for Social Responsibility:
- Justification for existence and growth: Businesses thrive by serving societal needs.
- Long-term interest of the firm: A good public image and stakeholder cooperation lead to sustained profitability.
- Avoidance of government regulation: Voluntary adoption of social responsibilities reduces the need for restrictive laws.
- Maintenance of society: Business contribution helps prevent anti-social activities.
- Availability of resources: Businesses possess financial and human resources to address social problems.
- Converting problems into opportunities: Businesses can innovate to solve social issues profitably.
- Better environment for doing business: A healthier society offers a more stable operating environment.
- Holding business responsible for social problems: Businesses, often contributors to social issues (e.g., pollution), have a moral obligation to help solve them.
Arguments against Social Responsibility:
- Violation of profit maximisation objective: Primary business goal is profit; social responsibility diverts resources from this.
- Burden on consumers: Costs of social responsibilities may be passed to consumers through higher prices.
- Lack of social skills: Business managers lack the expertise to effectively address complex social problems.
- Lack of broad public support: The public may not fully support business involvement in social programs.
2. Discuss the forces which are responsible for increasing concern of business enterprises toward social responsibility.
Answer: Several forces have led to increasing business concern for social responsibility:
- Threat of public regulation: Governments may impose laws on irresponsible businesses.
- Pressure of labor movement: Organized labor demands better worker welfare.
- Impact of consumer consciousness: Educated consumers demand quality and rights.
- Development of social standard for business: Society expects businesses to serve social needs, not just profit.
- Development of business education: Modern business education emphasizes social responsibility, making individuals more sensitive to social issues.
- Relationship between social interest and business interest: Businesses recognize long-term benefits from serving society well.
- Development of professional, managerial class: Professional managers prioritize satisfying various interest groups, not just owners.
3. ‘Business is essentially a social institution and not merely a profit making activity’. Explain.
Answer: This statement implies that while profit is crucial for a business’s survival and growth, its fundamental purpose extends beyond mere financial gain to serving societal needs. Businesses exist within society, utilize societal resources, and impact various stakeholders (employees, customers, community). Therefore, society permits businesses to operate with the expectation that they will contribute to overall well-being. Sustained success and public acceptance depend on responsible conduct, respecting societal values, and addressing social problems, thus making business a socio-economic entity rather than purely economic.
4. Why do the enterprises need to adopt pollution control measures?
Answer: Enterprises need to adopt pollution control measures for several crucial reasons:
- Reduction of health hazards: Pollution causes numerous diseases; control measures improve public health.
- Reduced risk of liability: It minimizes the risk of legal action and compensation payments for environmental damage.
- Cost savings: Efficient pollution control can reduce waste, disposal costs, and cleaning expenses.
- Improved public image: Firms actively involved in pollution control gain a good reputation and are seen as socially responsible.
- Other social benefits: Leads to a cleaner environment, better quality of life, and preserves natural resources.
5. What steps can an enterprise take to protect the environment from the dangers of pollution?
Answer: An enterprise can take several steps to protect the environment from pollution:
- Top management commitment: Strong leadership to foster an environmental protection culture.
- Enterprise-wide commitment: Ensuring all divisions and employees share the commitment.
- Clear policies and programmes: Developing policies for quality raw materials, superior technology, scientific waste disposal/treatment, and employee training in pollution control.
- Compliance with laws and regulations: Adhering to all government-enacted pollution prevention laws.
- Participation in government programmes: Engaging in initiatives like hazardous substance management, river cleanups, and tree plantation drives.
- Periodical assessment: Regularly evaluating pollution control programs based on costs and benefits to ensure continuous improvement.
- Educational workshops and training: Organizing sessions to share technical information and experience with suppliers, dealers, and customers to involve them in pollution control efforts.
6. Explain the various elements of business ethics.
Answer: To foster ethical behavior within an enterprise, several key elements are essential:
- Top management commitment: The strongest driving force; the CEO and senior managers must openly and consistently demonstrate ethical leadership.
- Publication of a ‘Code’: Enterprises establish written documents outlining principles of conduct, covering areas like honesty, law adherence, product safety, fair employment, and financial reporting.
- Establishment of compliance mechanisms: Systems are put in place to ensure ethical standards are met, including emphasizing values in hiring, ethics training, and auditing for compliance.
- Involving employees at all levels: Employees are crucial for implementing ethical policies, so their involvement and feedback are vital.
- Measuring results: Firms conduct audits to monitor adherence to ethical standards, with results discussed by management and employees for corrective action.
7. Discuss the guidelines enumerated by the Companies Act 2013 for Corporate Social Responsibility.
Answer: The Companies Act 2013, specifically Clause 135, lays down guidelines for Corporate Social Responsibility (CSR) in India:
- Applicability: Applies to companies with an annual turnover of ₹1,000 crore or more, a net worth of ₹500 crore or more, or a net profit of ₹5 crore or more.
- CSR Committee: Such companies must establish a CSR committee, including at least one independent director.
- Mandatory Spending (Encouraged): Companies are encouraged to spend at least 2% of their average net profit from the preceding three financial years on CSR activities.
- Geographical Focus: Only CSR activities undertaken within India are considered valid.
- Exclusions: Activities exclusively for the benefit of employees and their families do not qualify as CSR.
- Indicative Activities: Schedule VII of the Act specifies indicative activities that can be undertaken as part of CSR.