Business and society
Overview
Companies play an important role in society, impacting on communities and regions as well as individual employees. The concept of corporate social responsibility recognizes that businesses often voluntarily integrate social and environmental concerns into their business models.
Issues of corporate governance come into play particularly in cases of company restructuring. The Foundation monitors developments through its European Restructuring Monitor. A quarterly analysis of trends and in-depth case studies are available in the ERM quarterly.
Through their business operations, companies have an important impact on the natural environment. The corporate sector has found itself in the media spotlight for environmentally problematic activities. Small and medium-sized enterprises are also under increasing pressure to adopt environmentally responsible practices. Introduction
Businesses interact with the wider society they are part of. Businesses are affected by society, for example in the kinds of goods and services they are expected to produce, and businesses affect society by their activities. It is a two-way process. See, for example this article on discrimination in the workplace: http://news.bbc.co.uk/1/hi/business/1605029.stm
Some of the ways in which businesses affect society are negative, and usually governments limit these activities by law. For example, some business activities damage the environment. In addition, there are ethical constraints set by the wider expectations of society. For example, it is legal to sack workers for some actions (eg ignoring a written warning), but society may think the sacking is unreasonable, and the business may feel pressured to not do it.
Groupings of people, such as Trades Unions, can be very effective at putting such pressure on businesses. The environment is a good example. The legal restrictions on environmental damage are relatively few, but society at large has increasingly strong views (orchestrated by some very effective groupings such as Green Peace) about what activities by business are acceptable and unacceptable. This produces pressure for businesses to change their behavior, especially if sales and profits are threatened.
Many consumer businesses now produce ‘green’ versions of their products to attract environmentally conscious customers; their corporate advertising boasts (eg BP) that they have stopped doing this, or started doing that, in order to better look after the environment. Another good example is the way that some businesses (eg Nike) have changed their activities in some developing countries due to concerns by society over ‘sweat-shop’ labour.

Businesses and Stakeholders
A business is owned by its shareholders. A traditional view is that the behavior of the business is nobody’s business but the owners’, the shareholders who are interested in profit.
A more modern view is to consider all the groups of people that are affected by a business’ behavior – employees, customers, suppliers, the local community – and not just the shareholders.
The word ‘stakeholders’ is used to describe this wider community of interests. Some investment funds and pension companies refuse to invest in businesses whose behavior they disapprove of e.g. arms manufacturers.
Business & Ethics
Ethical behavior is morally ‘good’ behavior. Businesses have always been ethical to the extent that their owners and managers have been interested in ethical behavior (sometimes very little). There is now a new and strong interest from a growing number of businesses in ethical behavior, especially in large MNCs which operate in different societies with different ethical standards. Some businesses even employ professional philosophers to help them understand the ethical consequences of their behavior.
The main reason for this is that society at large takes more of an interest in ethical behavior, and society has much bigger expectations of businesses.
There are different reasons given for this development.
1. Employees (including managers) are better educated than they used to be, and so understand these issues better than they used to.
2. We have a less deferential society where ‘ordinary’ people are more willing to questions and challenge the decisions of their ‘elders and betters’.
3. Competition for customers is fiercer, and any possible reason for losing customers has to be taken seriously.
4. The same issue is developing in employment, with employers increasingly dependent on attracting high quality staff who, with more choice than they used to have, are less willing to work for morally ‘iffy’ businesses.
5. The media have become very good at exposing questionable behavior. Allied to this is that information is now so easy to get hold of, and the Internet makes it easier again.
6. Business decisions can be much more complex than they used to be., especially where very advanced technology is involved, and not all the consequences are known.
7. Businesses are entering new and morally more debatable areas. A good example of this is medical businesses where new knowledge about eg genes raises the possibility of products that pose fundamental moral questions; these were simply irrelevant until recently because no-one knew how to do it.
Social Responsibility
Objectives
After studying this lesson, you will be able to: * explain the concept of social responsibility of business; * appreciate the importance of social responsibility; * recognize the responsibility of business towards different interest groups; * explain the concept of social values and business ethics; * identify the causes of environmental pollution; and * Describe the role of business in preventing and controlling environmental pollution.
What is Social Responsibility?
In your daily life, you perform a number of activities. For example, brushing your teeth, listening to your parents, showing respect to elders obeying traffic rules on road etc. Now why do you perform all these activities? It is because you live in a family as well as in a society and the members of your family as well as the society want you to do all of them.
They do several things for you and expect something from you, which you must do. The expectations of the family or society become your obligations, which you need to fulfill. For example, taking care of your parents or children, keeping the road clean by not throwing garbage on it, etc. There are also obligations towards yourself, which you need to fulfill. For example, taking food timely, going to sleep early at night, etc. that keep you fit and takes care of your health. Now you fulfill all these obligations by performing certain activities which are called your responsibilities. Any responsibility you have, particularly towards members of the society with whom you interact or towards the society in general, are called your social responsibility.
This is true in case of business also. As we know, every business operates within a society. It uses the resources of the society and depends on the society for its functioning. This creates an obligation on the part of business to look after the welfare of society. So all the activities of the business should be such that they will not harm, rather they will protect and contribute to the interests of the society. Social responsibility of business refers to all such duties and obligations of business directed towards the welfare of society. These duties can be a part of the routine functions of carrying on business activity or they may be an additional function of carrying out welfare activity.
Let us take an example. A drug-manufacturing firm undertakes extensive research and thus, produces drugs which are qualitatively superior. It also provides scholarships or fellowships to the family members of its employees for studying abroad. We find, in both the cases, the drug-manufacturing firm is carrying out its social responsibility. In case of the former, it is a part of its routine business function while in the latter case it is a welfare function.
Why should business be socially responsible?
Social responsibility is a voluntary effort on the part of business to take various steps to satisfy the expectation of the different interest groups. As you have already learnt, the interest groups may be owners, investors, employees, consumers, government and society or community. But the question arises, why should the business come forward and be responsible towards these interest groups. Let us consider the following points:
Public Image - The activities of business towards the welfare of the society earn goodwill and reputation for the business. The earnings of business also depend upon the public image of its activities. People prefer to buy products of a company that engages itself in various social welfare programmers’. Again, good public image also attracts honest and competent employees to work with such employers.
Government Regulation - To avoid government regulations businessmen should discharge their duties voluntarily. For example, if any business firm pollutes the environment it will naturally come under strict government regulation, which may ultimately force the firm to close down its business. Instead, the business firm should engage itself in maintaining a pollution free environment.
Survival and Growth -Every business is a part of the society. So for its survival and growth, support from the society is very much essential. Business utilizes the available resources like power, water, land, roads, etc. of the society. So it should be the responsibility of every business to spend a part of its profit for the welfare of the society.
Employee satisfaction - Besides getting good salary and working in a healthy atmosphere, employees also expect other facilities like proper accommodation, transportation, education and training. The employers should try to fulfill all the expectation of the employees because employee satisfaction is directly related to productivity and it is also required for the long-term prosperity of the organisation. For example, if business spends money on training of the employees, it will have more efficient people to work and thus, earn more profit.
Consumer Awareness - Now-a-days consumers have become very conscious about their rights. They protest against the supply of inferior and harmful products by forming different groups. This has made it obligatory for the business to protect the interest of the consumers by providing quality products at the most competitive price.
Responsibility towards different groups
Responsibility towards owners
Owners are the persons who own the business. They contribute capital and bear the business risks. The primary responsibilities of business towards its owners are to: * Run the business efficiently * Proper utilization of capital and other resources. * Growth and appreciation of capital. * Regular and fair return on capital invested.
Responsibility towards investors
Investors are those who provide finance by way of investment in debentures, bonds, deposits etc. Banks, financial institutions, and investing public are all included in this category. The responsibilities of business towards its investors are : * Ensuring safety of their investment, * Regular payment of interest, * Timely repayment of principal amount.

Responsibility towards employees

Business needs employees or workers to work for it. These employees put their best effort for the benefit of the business. So it is the prime responsibility of every business to take care of the interest of their employees. If the employees are satisfied and efficient, then the only business can be successful. The responsibilities of business towards its employees include: * Timely and regular payment of wages and salaries. * Proper working conditions and welfare amenities. * Opportunity for better career prospects. * Job security as well as social security like facilities of provident fund, group Insurance, pension, retirement benefits, etc. * Better living conditions like housing, transport, canteen, crèches etc. * Timely training and development.
Responsibility towards suppliers
Suppliers are businessmen who supply raw materials and other items required by manufacturers and traders. Certain suppliers, called distributors, supply finished products to the consumers. The responsibilities of business towards these suppliers are: * Giving regular orders for purchase of goods. * Dealing on fair terms and conditions. * Availing reasonable credit period. * Timely payment of dues.
Responsibility towards customers
No business can survive without the support of customers. As a part of the responsibility of business towards them the business should provide the following facilities: * Products and services must be able to take care of the needs of the customers. * Products and services must be qualitative * There must be regularity in supply of goods and services * Price of the goods and services should be reasonable and affordable. * All the advantages and disadvantages of the product as well as procedure to use the products must be informed do the customers. * There must be proper after-sales service. * Grievances of the consumers, if any, must be settled quickly. * Unfair means like under weighing the product, adulteration, etc. must be avoided.
Responsibility towards competitors
Competitors are the other businessmen or organizations involved in a similar type of business. Existence of competition helps the business in becoming more dynamic and innovative so as to make itself better than its competitors. It also sometimes encourages the business to indulge in negative activities like resorting to unfair trade practices. The responsibilities of business towards its competitors are * Not to offer exceptionally high sales commission to distributers, agents etc. * Not to offer to customers heavy discounts and /or free products in every sale. * Not to defame competitors through false or ambiguous advertisements.
Responsibility towards government
Business activities are governed by the rules and regulations framed by the government. The various responsibilities of business towards government are: * Setting up units as per guidelines of government * Payment of fees, duties and taxes regularly as well as honestly. * Not to indulge in monopolistic and restrictive trade practices. * Conforming to pollution control norms set up by government. * Not to indulge in corruption through bribing and other unlawful activities.
Responsibility towards society
A society consists of individuals, groups, organizations, families etc. They all are the members of the society. They interact with each other and are also dependent on each other in almost all activities. There exists a relationship among them, which may be direct or indirect. Business, being a part of the society, also maintains its relationship with all other members of the society. Thus, it has certain responsibilities towards society, which may be as follows: * To help the weaker and backward sections of the society * To preserve and promote social and cultural values * To generate employment * To protect the environment * To conserve natural resources and wildlife * To promote sports and culture * To provide assistance in the field of developmental research on education, medical science, technology etc.
Environmental Pollution and Role of Business
To preserve the society it is important to protect the environment. And, therefore, every business must take measures to protect the environment rather than damaging it. In this section let us learn more about different types of environmental pollution and role of business. Nature has given us air, land including mountains, hills, forests etc. and water in the form of rivers, lakes, sea etc., which create an environment in which we live. Our health and well being largely depend on the quality of such environment. However, it is observed that the quality of this environment is deteriorating day by day. We are getting neither pure water to drink nor clean air to breathe. We are having untimely rains, storms, cyclones, floods, extended summer, etc. We are also suffering from various diseases because of such lower quality of environment. When the quality of environment deteriorates, it is said that the environment is getting polluted. Thus, environmental pollution refers to contamination of environment by various substances that have adverse effects on living and non-living matters.
Environmental pollution is of three types: 1) Air pollution, 2) Water pollution, and 3) Land Pollution.
Air Pollution
As we know the air we breathe contains several gases, dust particles etc. Our body mechanism helps us in filtering the unwanted ones and retaining those required for our survival. However, if there is an imbalance in the proportion of gases and dust particles in air, beyond a certain point, our body mechanism fails to filter them and we face problem. This is also true in care of other natural things like forests, river etc. Thus, air pollution refers to the presence of any unwanted gases, dust particles etc. in the air, that can cause damage to people as well as nature.
Causes of Air Pollution * Emission of fumes from vehicles. * Emission of smoke dust and chemicals from manufacturing plants. * Emission of gases and dust arising from atomic plants * Emission of smoke from oil refineries, burning of trees and plants in forests, buring of coal, etc.
Impact of Air Pollution
Air pollution has a lot of impact on our surroundings and on us. Some of them are-
Presence of gases in air, which are not required by human beings, animals and birds, creates serious health problems. It can create diseases like asthma, cough and cold, blindness, hearing loss, skin disease etc. It also causes genetic disorders. In the long run and in extreme cases it can also be fatal.
Air Pollution creates smog in the winter, which is caused by smoke and dust when they mix with fog. It reduces natural visibility and irritates the eyes and respiratory tract.
Ozone layer is a protective layer of gases around our earth, which protects us from harmful ultraviolet rays that come from the sun. It gets depleted because of air pollution and thereby causes gene mutation, genetic defects and skin cancer.
The temperature of the earth increases due to air pollution. This is because whatever heat our earth receives from the sun is not radiated to the atmosphere due to the excessive presence of gases like carbon dioxide, methane, nitrous oxide, etc.
Air pollution causes acid rain which means excessive presence of various poisonous gases like sulphur dioxide, nitrogen oxide etc. in the rainwater. This causes lot of damage to vegetation, trees and marine life, buildings and monuments etc.
Water Pollution
Have you seen river Yamuna near Delhi? Are you aware about the clean Ganga project? These two questions almost immediately remind us about the extent to which the water of our rivers has been polluted. Water pollution refers to contamination of water due to presence of unwanted and harmful substances thus, making water unfit for use.

Causes of Water Pollution
The various reasons of water pollution are * Drainage of human excreta into rivers, canals etc. * Improper sanitation and sewage system. * Dumping of wastes and effluents by various industrial units into the rivers and canals. * Drainage of toxic substances like chemicals and fertilizers used in cultivation, into streams and rivers. * Dumping of garbage, dead bodies and almost every thing used in rituals to the nearby water source by households. * Effects of Water Pollution
The effects of water pollution are: * It can create health hazards among human beings, animals and birds. Diseases like typhoid, jaundice, cholera, gastroentytis etc. are common. * It can endanger lives of various aquatic species. * It can lead to scarcity of drinking water as the water of rivers and canals as well as underground water get polluted.
Land Pollution
Land Pollution refers to dumping of useless, unwanted as well as hazardous substances on the land that degrades the quality of soil we use. Our land gets polluted because of the human carelessness towards the soil.
Causes of Land Pollution
The main causes of land pollution are: * Excessive use of fertilizers, chemicals and pesticides in cultivation. * Disposal of solid waste of industries mines and quarries. * Disposal of solid waste from construction of roads, buildings etc. * Effluents of some plants like paper, sugar etc. which are not absorbed by soil. * Excessive use of plastic bags, which are non-biodegradable. * Dumping of non-composable wastes from households, hotels and hospitals as well as * From industries. These may include combustible items like plastic, cloth, wood etc., and non-combustible items like metal, glass, ceramics, cement etc.

Effects of Land Pollution
Land Pollution has the following harmful effects. * Reduces the quantum of cultivable land area. * Causes health hazards as it contaminates the sources of food. * Causes damage to the landscape. * Leads to water and air pollution.
Role of Business in Environmental Pollution
From the above discussion on environmental pollution, one thing can clearly be seen that, it is business that mainly contributes to all sorts of pollution -air, noise, water and land. Business causes pollution in the following ways: * Emission of gas and smoke from manufacturing plants; * Use of machines, vehicles etc. contributing to noise pollution; * Deforestation due to acquisition of forest lands for setting up plants; * Growth of urbanization and industrialization; * Disposal of wastes and effluents into rivers and canals; * Disposal of solid wastes in the open space; * Mining and quarrying activities; and * Increasing use of transport.
Government has taken a major step in protecting the environment by passing the Environment Protection Act, 1986 in addition to having Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981 and several other Acts. Business can equally be instrumental in fighting pollution and protecting the environment. Business can have three types of role - preventive, curative and awareness.
Preventive Role
It means business should take all steps so that no further damage is done to the environment. For this, business must follow the regulations laid down by government to control pollution. For example, more and more environmental friendly products can be produced, filters can be used in chimneys; silencers can be fitted in generators; instead of dumping industrial wastes into river and land it can be treated properly for further productive use etc. Businessmen should come forward to play a major role in preventing further damage done to the environment by human beings. Sulabh International is the leading example of how to provide proper sanitation facilities to the public.

Curative Role
It means business should rectify whatever damage has been done to the environment. In addition, if it is not possible to prevent pollution then simultaneous curative measures can be taken. For example, planting of trees (a forestation programmer can substantially reduce air pollution near the industrial area.
Awareness Role
It means making people (both the employees as well as the general public) aware about the causes and consequences of environmental pollution so that they voluntarily try to protect rather than damage the environment. For example, business can undertake public awareness programmers’. Now-a-days, we find that some business houses have taken the responsibilities to develop and maintain parks and gardens in cities and towns, which shows that they care for the environment.
Business and Culture
India is a culturally rich and diverse country where one can see varied array of language, religion, caste and regionalism. While doing business in India, every organization has to consider all these factors before formulating their business plans and take necessary actions accordingly. The India Business Culture is an extension of the common culture of the society. It is unique in its own way. However, in Indian business culture, the behavior, etiquette and approach of organizations and its professionals change according to the addressee and the context of address.
Language
India is a multilingual country with each of its states having different official languages. However, Hindi is the only officially recognized language in the country. While talking on India business culture, English is the most preferred language, which is followed religiously in every industry.
Meetings, Greetings and Courtesies In India, people greet each other by saying ‘Namaste’, while conjoining the palms together below the chin (position of fingers would point up) and nodding the head. One can also do this while saying good-bye. Use of the Namaste will show that you have understandings of Indian culture. While greeting superiors or showing respect to someone, a slight bow is added. In Indian business culture, people also great each other by a handshake. In a one-to-one meeting with a male counterpart, a woman usually initiates a handshake. If the woman doesn’t, the man will smile and nod slightly. While greeting an individual, people use appropriate formal title. One can also add ‘ji’ after the title to show respect for the person he/she is greeting. While meeting a person or client for business purpose, always exchange business cards at the first meeting. You must exchange the cards with your right hand only. Cards must be put away with due respect.
Relationship Building In India business culture, business development largely depends upon relationship building. Indians tend to give favorable deal to those whom they know and trust. Hence, a good way to earn business is to earn the trust of the customers first. You can earn the trust of people by demonstrating strong, business insight, showing honesty and respect.
Meetings
Any business meeting has to be arranged well in advance. These have to be fixed in writing and confirmed by phone. It is better to avoid fixing meetings on or near national holidays like Independence Day, Republic Day, Gandhi Birthday or either of the two Eids. People often club their leaves to enjoy extended holidays during this time.
Time
Indians value punctuality in others, but they often lag behind the schedule themselves. A 10-minute late is acceptable in most of the cases. It can also be seen that family responsibilities getting preferences over business, which leads to last minute cancellation of meetings, though not quite often.
Inside the Meeting Room After entering into the meeting room, one must approach and greet the senior-most figure first. Every meeting usually has some ‘getting to know you’ process, where the meeting starts with some initial conversation. The favorite topics are business news, how stock market is doing, or the games of cricket. It is good to avoid discussing personal matters. If you are new to India, it is always better to refrain form commenting on volatile issues like poverty or beggars.
Process
If your business meeting involves negotiation, be prepared for a slow process. In India business culture, decision is taken at the highest level and may take more time than one would have expected. You cannot get a favorable decision unless you can establish the trust of the client. Until the trust is not established, you should concentrate on building a rapport with the client. As the decision is taking at the highest level, absence of the any higher-position holder like Director or owner indicates that it is only the early stage of negotiation.
Decision
Statistics, empirical data or commendable power point presentation cannot solely influence the business decision. Indians tend to reckon the intuitions, feelings and faiths before they reach at any decision. You must show your patience and good character before any final verdict comes out. You cannot afford to show frustration or anger.
Negotiation
One should refrain from putting high pressure tactics while negotiation with the clients. Do not confront or be forceful. If you are to disagree or criticize, you need to do it in the most diplomatic language. Indians do not say “no” directly, as it is often considered rude. If during the negotiation process, you come to the terms like “We’ll see”, “Possible” or “We’ll try”, there is every possibility that they are indicating a ‘no’.

Business clothes Business culture in India demands formal attire. Men usually wear formal shirts and pants. Suits or Blazers are also quite worm, often during the winter. Women wear saries or suits. On the last working day of the week, people often wear casuals, however, that has to be a decent one.
Business and Government
Claims that government intervention and regulation in business will promote ethics have become a common argument. However, such government actions have consequences that provoke an equal, opposite negative reaction which negates any positive effects. The laws of "unintended consequences" are quite clear; the complexities involved in regulating outcomes often result in undesirable effects. Government intervention and regulation of business has stunted innovation and business growth, resulting in fewer jobs and the exodus of business to foreign countries.

Promoting Business Ethics Through Regulation
Though regulating businesses for the benefit of society is a valid desire, the resulting unintended consequences actually inflict social harm. If we look at the issue of business ethics rationally, we can see that the vast majority of businesses are operated on the premise of their benefit to society.
Hence, regulations, which are usually spurred by the misdeeds of one or two bad actors, presume that all businesses are unethical and, therefore, they all need regulating. At best, this philosophy is illogical because people learn ethics at a young age from their parents. By the age at which individuals manage businesses, their ethical foundation is already formed.
Business Welcomes More Regulation
An argument often made in favor of regulation is that big business believes there should be more regulation in order to protect society. This is a wonderful sound bite but a poor argument. Any business seeking greater regulation is a business that wants to benefit from such intervention.
Government regulation creates barriers to for new businesses to enter the marketplace. These barriers give existing companies distinct competitive advantages over potential competitors. Thus, increasing regulation benefits large existing companies, which reduces competition and promotes unethical business practices.
Government Regulation: Good Intentions, Bad Outcomes
Certainly, government has a role in protecting society from unscrupulous business practices. However, businesses also have a fiduciary responsibility to their shareholders and a responsibility to their customers.
When government intervention and regulation insert themselves into business activities, the good intentions of regulation cause companies to neglect their shareholders and to fail to provide their customers optimum products and services.
For example, Enron and WorldCom are perfect examples of the few forcing draconian regulation, via the Sarbanes Oxley Act, on the many, perfectly legitimate and ethical businesses. This regulation has motivated public companies to go private and private businesses to go public in foreign countries. As a result, society is no better off, and out of concerns of violating Sarbanes Oxley regulations, businesses are failing in their fiduciary responsibility to shareholders.
The Logic of Government Intervention and Regulation of Business Ethics
The belief or assumption that pervades societal thought in the United States is that government regulation of business will solve the dilemma of businesses acting to the detriment of society. Since both business and government are competitors and both entities are operated by humans, how is it that the individuals operating government are more ethical than those individuals operating businesses? After all, they both seek power and influence over society.

Government Policies in Business
In the final analysis, government decides the balance of socialism and capitalism in the economy. When Americans speak of government policy on business, they're referring to state regulation and intervention in private enterprise.

Importance
Executives consider government policy important to business, according to "McKinsey Quarterly." Some report that it can affect revenue by 10 percent.
Monetary Policy
Government monetary policy determines the amount of money available. As the availability of money increases, so does spending. Monetary tools include raising or lowering interest rates, the sale or purchase of government securities and the regulation of required bank reserves.
Fiscal Policy
Governments can affect business directly through fiscal policy, which involves taxation and government spending. Fiscal policy moderates economic cycles and controls inflation. An expansionary fiscal policy stimulates business by increasing demand.
Roles of Government in Business
The government plays a variety of roles in business primarily to ensure that the public's interests are preserved and to control any and all market failure. Even though most businesses are privately owned, the U.S. government provides certain guidelines for business owners.

Information Control
To ensure that the general public has adequate information to make informed choices, the government ensures that businesses make available all necessary information to the public. This includes proper labeling on all goods available for sale. In this way, the government protects public health and safety.
Monopoly Control
To keep any one business or company from becoming too powerful and cornering the marketplace, the government has created antitrust laws to control or break up any monopolies. This allows the consumer to have a variety of fair options in the market to choose from.
Regulation Control
To ensure that businesses are held accountable for their actions, the government has created strict regulations for each different type of business. Individual businesses must take ownership of any negative effects created while doing business. An example of a business creating negative effects includes a factory creating pollution.