ED/U3 Topic 3 Social Responsibilities
“The entrepreneur is the pivot of development.”
“The entrepreneur is the pivot of development,” this statement attract our attention towards the importance of entrepreneurs in economic development. Economic development of a country takes place when output increases as a result of entrepreneurial activity. The entrepreneur is the central figure in the process of development. The economic development of a country to a large extent depends on human resources. But the human resources alone cannot bring economic development and for solving this purpose, there must be dynamic entrepreneurs. A country maybe rich in natural resources but if it lacks in dynamic entrepreneurs then, it may not be able to utilise the resources and it may lag in economic development. Entrepreneurs are action oriented, highly motivated
individuals who take risks to achieve goals. An entrepreneur is one who looks for opportunities, identifies and seizes them mainly for profit. Entrepreneurs seizing opportunities set up business undertaking and industries,
economic thereby make transformation.
Entrepreneurs perform vital functions in economic development. They have been referred to as the human agents needed to mobilise capital, to exploit natural resources, to create markets and to carry on trade. It has been well said that entrepreneurial inputs spells the difference between prosperity and poverty among nations.
MEANING AND DEFINITIONS OF SOCIAL RESPONSIBILITY
Business ventures are a unit of society in which they operate. These enterprises depend on society for the needed resources like men, material, capital and also for selling their products. In fact, business depends on the society for its existence, growth and promotion. Hence entrepreneurs have a definite social role and responsibility towards the society. Social responsibility denotes the responsibility of the business towards various sections of the society.
Businessmen must consider wider public interest while taking business decisions. A few scholars have defined ‘social responsibility’ in the following way :
According to Koontz and O’Donnell, “Social responsibility is the personal obligation of every one, as he acts in his own interest, to assure that the rights and legitimate interests of all others are not infringed.”
In the words of Adolph Berle, “Social responsibility is the business’s responsiveness to public consensus, i.e., the obligation of the business to meet those demands and aspirations of the society about which there ispublic consensus. ” H.R. Bowen defines as “Social responsibility is the obligation to pursue those policies, to make those decisions or to follow those lines of action tv hich are desirable in terms of objectives and values of our society,”
Nicholas Sirpolis has defined social responsibility as: “The circle of care and concern that a business has for the well-being of society. ”
PROFIT MOTIVE AND SOCIAL RESPONSIBILITIES
It is a misnomer that the concept of social responsibilities is against the profit motive. Some scholars have views that entrepreneur’s primary responsibility is to earn profit for stock-holders. Milton Friedman has observed, “There is one and only one social responsibility of business i.e., to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game which is to say it engages in open and free competition without deception or fraud.” According to Henry Ford Il the foremost social responsibility of business lies in earying out its operations efficiently and economically. He observes, “Today we need the phrase ‘business is business”‘ to remind us that business is not first and foremost a social institution, a charitable agency, a cultural gathering, community service, a public spirited citizen. It is an action organisation geared to produce economic results in competition with other business. On the other hand, some scholar’s views that enterprise are not independent entities responsible only to stock-holders. They also have a responsibility to the larger society that provide their creation through various laws and regulations and supports them by purchasing their products and services. Peter F. Drucker has observed, “Business should develop concern for society and pursue welfare activities which should form an important area of its operation. It is a demand that quality of life becomes the business of business. The new demand for business is to make social values and beliefs, create freedom for individual and al-together produce good society. ” Socially responsible behaviour of an entrepreneur not only helps the society but is also self-rewarding for the venture in several ways.
ARGUMENTS ‘FOR’ ENTREPRENEUR’S SOCIAL RESPONSIBILITY
The arguments supporting a major role for the social responsibility of entrepreneurs are as follows:
(1) Moral Justification: There is a growing realisation that it is the moral duty of business houses to serve the society. They enjoy wide economic and social power. Their power should be balanced with social responsibility. Business has the resources and capabilities to solve social problems.
(2) Long-term Self-interest of Business: In the long run, no business enterprise can survive and grow unless it enjoys a good image in the public. The image of the firm can be improved in the eyes of the society by serving their (society) interests.
(3) Public Image: Socially responsible behaviour create a positive public image of an enterprise.
(4) Profitable Opportunities: That Business has little chance of success in a society which is plagued with enormous problems and evils. Business can meet the challenges by converting the problems into profitable opportunities. The securities of a socially responsible company enjoy a wider market among the investors.
(5) Ensuring Law and Order: To maintain law and order in a country, business should shoulder its responsibilities towards the society, otherwise people will resort to anti-social activities which may ultimately harm business. The doctrine of social responsibilities is helpful in ensuring law and order in the society. It is a preventive measure against social disorders.
(6) Balance of Responsibility and Power: Since business entrepreneurs already have a great deal of social power, their social responsibility should be equally great.
(7) Public Expectations: There is a deep conviction that entrepreneur has a clear obligation to the good ofthe greater society. The business enterprise is expected to be efficient, profitable and at the same time socially responsible.
(8) Interdependence: Society and business affect each other. For example, goods and services provided by the business determine the standard of living in the society. In case business does not produce and supplies goods of good quality at moderate prices, society will react and stop inputs in business. Therefore, it is in the interest of the business to be responsible to its social obligations.
ARGUMENTS “AGAINST” ENTREPRENEUR’S SOCIAL RESPONSIBILITY
The major arguments against the assumption of broad social responsibilities include the following:
(1) Reduction in Total Profits: It is thought that diverting resources away from the firm to socially responsible programmers may undermine the competitive strength of entrepreneur.
(2) Financial Burden on the Institution: Social obligations can be very expensive and may cause entrepreneurs to forgo attractive business investments or even to go out of business.
(3) Lack of Skills: Most entrepreneurs do not have the skills and training to work effectively with social issues.
(4) Lack of Accountability: There is no way to hold entrepreneurs accountable for the outcomes of its social programmes.
(5) Dilution of Purpose: The pursuit of social goals may dilute the economic productivity of the business enterprise.
SOCIAL RESPONSIBILITY OF ENTREPRENEUR TOWARDS DIFFERENT SECTIONS OF SOCIETY
Business enterprise required to discharge social responsibilities not only towards society but also towards other social groups like employees, customers, suppliers, government, creditors, unions and the global community. Social responsibility of entrepreneur towards different sections. of society may be summarised as follows :
(1) Social Responsibility towards the Customers: It is truely said that “Customers are the life blood of every business.” The major social responsibilities of entrepreneur towards customers includes the following.
(i) Producing and supplying goods at reasonable prices,
(ii) Avoiding creation of artificial scarcities.
(iii) Providing after-sale-services.
(iv) To Furnish needed information to prospective customers concerning product composition and its quality.
(v) To ensure the health and safety of customers,
(vi) To prevent formation of monopolies with the, intention of exploiting customers.
(vii) Revealing truth in advertising and levels.
(viii) To respect the integrity of the culture of the customers.
(ix) To ascertain consumer preferences and consumer satisfaction.
(x) To work within the framework of various consumer laws and legislations.
(2) Responsibility Towards the Employees: Employees produce wealth for the business and give their best service and share in the resulting profits. Business entrepreneurs have significant responsibilities towards employees. Entrepreneur’s basic obligations to its employees are:
(i) To provide the opportunity for training, promotion and advancement.
(ii) To provide better working conditions and good physical facilities.
(iii) To place an employee in a position for which he is best suited by his skills and interest.
(iv) To start welfare and profit sharing plans for employees.
(v) To satisfy “employee dignity” by allowing him work freedom, self-realisation. It is the responsibility to treat each employee as an entity and not as in impersonal part of a group of humans.
(vi) To recognise the workers right to a fair wage, a right to participate in decisions affecting their working life, to membership of a trade union.
(vii) To settle employee’s grievances and disputes smoothly.
(3) Responsibility Towards Suppliers and Creditors: Business also owns responsibility towards suppliers, dealers and creditors as follows:
(i) All dealings with suppliers should be on fair terms regarding price, quality, delivery, payment etc.
(ii) Business must provide accurate and correct information to creditors and suppliers;
(iii) To avoid malicious propaganda, price-cutting, cut-throat competition, unhealthy combinations, interference in production and distribution and other dishonest trade practices.
(iv) To avoid exploitation of small competitors.
(v) To create adequate, fair and inter-business relationship.
(vi) To provide information regarding change in habits, fashion and choices of customers,
(vii) To Promote local suppliers.
(viii) To make payment of interest at appropriate time.
(ix) To make appropriate use of debt capital.
(4) Responsibilities Towards the Community: A few responsibilities of entrepreneur towards the community are as follows:
(i) To preserve, maintain and improve the natural wealth and resources of the society.
(ii) Economic use of natural resources so that these are not eliminated at a faster rate.
(iii) Control of pollution by providing necessary pollution-control devices in the factories, and by facilitating pollution-control measures in the society.
(iv) Establishing of new business units in backward regions, and especially for handicapped people and weaker sections of the society.
(v) Financial support for providing education facilities in rural areas.
(vi) Helping in health and hygiene programmes in the society.
(vii) Creation of their own townships in order to provide living places and facilities to their own workers.
(viii) To provide assistance at the time of any natural calamities like flood, drought, famine etc.
- Responsibilities Towards the State and the Nation: Entrepreneurs owe obligation towards the Government too. Their responsibility is:
(i) To obey the rules, regulations and the laws set forth by local, State and federal governments.
(ii) To pay its dues and taxes to the government fully and honestly.
(iii) To conduct business in accordance with government policies.
(iv) Not to corrupt public servants and democratic processes.
(v) To avoid buying the political favor by any means.
(vi) To help government in overall planning for nation’s well-being.
- Responsibilities towards the Business Enterprise It-self: Entrepreneur is a trustee of the resources of the society. He has to always maintain his business efficient and productive so that he can fulfil his responsibilities towards other sections of the society, only a, healthy business can perform its social obligations. Thus, entrepreneurs have to fulfill the, following obligations towards the business enterprise :
(i) To operate business efficiently at minimum cost
(ii) To make efforls for continuous growth and expansion of business
(iii) To act as an innovator.
(iv) To maintain its wealth-producing resources intact by making adequate profits to offset the risk of economic activity.
(v) He must always, in every decision and action, put economic performance first. Business Can only justify its existence and its authority by the economic results it produces. (Drucker)
(vi) To encourage inventions.
(vii) To protect the interest of the enterprise.
(viii) To make optimum use of resources.
(ix) He must tries to achieve the goals of the business.