Class 12 OCM Chapter 6: Social Responsibilities of Business

Key concepts: Social Responsibilities of Business

Social responsibility

The obligation of business to take decisions and actions that are desirable for the objectives and values of society, protecting its interests and not harming any part of it.

Social versus legal responsibility

Legal responsibility is met by just obeying the law. Social responsibility is broader: it includes voluntary action for society's benefit beyond what the law requires.

Trusteeship

A philosophy propounded by Mahatma Gandhi under which wealthy people and businessmen act as trustees who look after the welfare of society in general.

Interest groups

Business owes duties to owners, investors, employees, consumers, government and the community. Their interests must be balanced and protected.

Protection of environment

Business should avoid air, water, sound and electronic pollution. The four R's of waste prevention are reduction, reuse, recycling and recovery.

Business ethics

A code of conduct that tells businesses what is right and wrong. It rests on moral and social values, is voluntary, and is a relative and fairly new concept.

Moral and social values

Moral values come from ideas of right and wrong (honesty, integrity, fairness). Social values (patriotism, equality, human dignity) guide conduct in society.

Corporate social responsibility (CSR)

A self-regulating model by which a company is accountable to society. Under Section 135 of the Companies Act 2013, eligible companies must spend at least 2% of average net profit on CSR.

Quick revision: important points

• Social responsibility is broader than legal responsibility and involves voluntary action.
• 12 needs include trusteeship, reputation, trade unions, consumer movement, government control and role of media.
• Responsibilities towards six groups: owners, investors, employees, consumers, government, society.
• 4 R's of waste: reduction, reuse, recycling, recovery. Ethics comes from the Greek word Ethos (character).
• CSR: spend at least 2% of average net profit of three preceding years; CSR Committee has 4 directors and meets at least twice a year.

Practice MCQs with answers

1. Social responsibility of business means that a firm should

   1. Maximise profit at any cost
   2. Do only what the law forces it to do
   3. Take decisions and actions that are desirable for the objectives and values of society
   4. Avoid all contact with society
   Show answer

   Answer: C. Take decisions and actions that are desirable for the objectives and values of society
   It is the obligation of business to act in ways that protect and contribute to the interests of society, not only its own profit.

2. Social responsibility is said to be broader than legal responsibility because it

   1. Includes voluntary action for society beyond what law requires
   2. Covers only what is written in the law
   3. Is enforced by the police
   4. Applies only to large companies
   Show answer

   Answer: A. Includes voluntary action for society beyond what law requires
   Legal duty can be met by just obeying the law, whereas social responsibility includes voluntary obligations not covered by law.

3. The concept of trusteeship, under which businessmen are trustees of society, was propounded by

   1. Chanakya
   2. Keith Davis
   3. Howard Bowen
   4. Mahatma Gandhi
   Show answer

   Answer: D. Mahatma Gandhi
   Trusteeship is a socio-economic philosophy given by Mahatma Gandhi: the wealthy should look after the welfare of people in general.

4. A firm spends heavily on building its brand. It finds that being socially responsible improves its image, sales and helps attract talent. Which need for social responsibility is this?

   1. Government control
   2. Reputation
   3. Globalisation
   4. Trusteeship
   Show answer

   Answer: B. Reputation
   A socially responsible company enjoys a good reputation, which brings more sales, profit, talent and sustained growth.

5. Workers are now aware of their rights and unions demand fair wages and bonus. This creates a need for social responsibility because of

   1. Pressure of trade unions
   2. Globalisation
   3. Role of media
   4. Long term self interest
   Show answer

   Answer: A. Pressure of trade unions
   Growing and active trade unions push management to act responsibly towards workers to avoid conflicts.

All Class 12 OCM chapters

• Chapter 1: Principles of Management
• Chapter 2: Functions of Management
• Chapter 3: Entrepreneurship Development
• Chapter 4: Business Services
• Chapter 5: Emerging Modes of Business
• Chapter 6: Social Responsibilities of Business
• Chapter 7: Consumer Protection
• Chapter 8: Marketing

Class 12 OCM notes: all chapters