Role of Business in Development & Social Responsibility

Lecture 2

References & websites

Tom Cannon, Corporate Responsibility, Pitman Publishing, 1994. IIM, (B) Management Review June 2000 Porter Michael and Kramer Mark Philanthropys New Agenda : Creating Value, HBR, Nov Dec, 1999. Business for Social Responsibility

www.bsr.org

Introducing the subject

Business has an obligation to society that extends beyond its narrow obligation to its owners What an organisation does to positively influence the society of which it is a microcosm Society or larger community as a stakeholder

Shareholder v/s stakeholder debate

Debate is ongoing with strong proponents on both the sides Moot point is the timeframe In the long run, sustainability of the enterprise is what matters Interests of all stakeholders are likely to converge in the long run

Defining CSR

CSR is operating business in a manner in a manner which meets or excels the ethical, legal, commercial and public expectations that a society has from business

Perceptions differ..

Beyond the purview of law

Social Responsibility as a value Social responsibility as a means to an end Business enterprise as a citizen

Why CSR is becoming important

Large size of the modern day corporations (Out of the 100 largest economies of the world, 51 are corporations and only 49 are nation states) Rolling back of the state Both on account of liberalisation and shrinking of resources

Why CSR is becoming important

Recognition of business benefits of CSR practices (Enhanced brand image, customer loyalty and retaining employees) Increasing pressures from - customers, - employees, - investors & - other stakeholders

Arguments against CSR

Violations about shareholders property rights CSR as an extra cost Companies struggling to survive in bad times cannot afford it Social responsibility rests with the government and the state

Theoretical positions.. (1)

Milton Friedman - Nobel Laureatte - The only social responsibility of business is to maximise profits staying within the realms of law - Business of business is business. Wang & Coffey, Hayek & Heilbroner

Theoretical positions ..(2)

Andrew Carnegie
- Legendary steel tycoon - Advocates benevolent, paternalistic leadership - Enunciated
-

Charity principle & Stewardship principle

Theoretical positions.. (3)

Keith Davis - Enlightened self interest It is in organisations interest to act in ways that society considers responsible. - Iron law of responsibility Those who do not exercise power responsibly will tend to loose it.

Theoretical positions ..(4) Tom Cannon

Business provides

Society provides

Products & services Direct & indirect employment Income generation

Means of exchange Trained manpower Legal & banking system Social & physical infra-structure

Cannons views

With the advent of the Joint Stock Company, society or state provides to business, two special rights

Potential immortality Limited Liability

Business does have social responsibility to fulfill in return for these privileges.

Developments in India

Merchant charity Dates back to Vedic period Religious and social ethics

Relief in natural disasters Dharam Shalas Drinking water

Trusteeship - Gandhiji & Vinoba Bhave

Developments in India

Declaration of social responsibility Role of Jaiprakash Narayan Conferences and study group in 1965 66 Setting up of Fair Trade Practices Association Managerial Trusteeship 1970s & later realisation that continued profitability depended on involvement with local communities Emergence & role of NGOs

Developments in India

Corporate citizenship Realisation that if social development is neglected, business cannot prosper Govt alone cannot handle all social issues
Self interest that is propelling social engagement Management skills as an input in the voluntary sector

Survey by Partners in Change

86 % of sample cos say that corporates have social responsibility Only 19 % have a policy written or unwritten Donation remains the most preferred mode Health & education most chosen sectors Cos realise social engagement help in image building

International Developments

Philanthropy as old as recorded history Initially directed towards the poor & infirm Later towards research, education etc Role of Andrew Carnegie & Rockfeller Donating both time & money Professionalisation of altruism

Differences between the old and the new concepts

Based on the philosophy of the founder Donation of resources / money

Considered decision of the board a part of strategy Direct involvement Explicit realisation of complementarity of business and society

Concluding Observations

Changed perception about CSR on account of

Contracting role of government Expanding role and large size of business / corporations Emergence of the voluntary sector Changing intellectual climate