Q.2. ‘CSR is about the organisation’s obligations to all stakeholders – and not just shareholders.” Comment.
Ans. There are four dimensions of corporate responsibility:
(1) Economic – responsibility to earn profit for owners.
(2) Legal – responsibility to comply with the law (society’s codification of right and wrong).
(3) Ethical – not acting merely for profit but doing what is right, just and fair.
(4) Voluntary and philanthropic – promoting human welfare and goodwill.
(5) Being a good corporate citizen contributing to the community and the quality of life.
Business ethics and corporate social responsibility are two significant factors that impact a company and how it operates. Business ethics represent the values, principles or characteristics a company follows when conducting business in the economy. Corporate governance is the internal framework a company designs and implements to govern and protect ofthose who have invested into the company. The relationship between business ethics and corporate governance comes from an organisation’s owner or executive managers, who create the governance and decide on which ethical principles employees will follow.
Business ethics typically follow a normative theory. This theory states that individuals and firms will follow ethical principles that are commonly found in society, hence the term normative or standard ethics. Three normative ethical theories include stockholder, stakeholder and social contract theories. The stockholder ethical theory states that a company should create a relationship between business ethics and corporate governance that focuses on stockholders.
Managers will employ strategies and activities that advance or increase the investments of shareholders
Q.3. Write a short note on the free market case against corporate social responsibility.
Ans. The free market case against corporate social responsibility are as under:
(1) The only social responsibility of business is to create shareholder’s wealth.
(2) The efficient use of resources will be reduced if businesses are restricted in how they can produce.
(3) The pursuit of social goals dilutes businesses’ primary purpose.
(4) Corporate management cannot decide what is in the social interest
(5) Costs will be passed on to consumers.
(6) It reduces economic efficiency and profit.
(7) Directors have a legal obligation to manage the company in the interest of shareholders — and not for other stakeholders
(8) CSR behaviour imposes additional costs which reduce competitiveness.
(9) CSR places unwelcomed responsibilities on businesses rather than on government or individuals
The corporate responsibility view:
(a) Businesses do not have an unquestjone right to operate in society.
(b) Those managing business should recognise that they depend on society for their survival.
(c) Business relies on inputs from society and on socially created institutions.
(d) There is a social contract between business and society involving mutual obligations that society and business recognise that they have for each other.
Stakeholder Theory: The basic premise of this thoery is that
business organisatjo5 have responsibility to various groups in society (the
internal and external stakeholders) and not just the owners/ shareholders
The responsibility includes a responsibility for the natural environment.
Decisions should be taken in the wider interest and not just the narrow shareholder’s interest.