Social Responsibilities of Management

The term social responsibilities can be defined as the obligation of management towards the society and
others concerned.

Reason for Social Responsibilities: Business enterprises are creatures of society and should respond to
the demands of society. If the management does not react to changes in social demands, the society will
either force them to do so through laws or will not permit the enterprise to survive. Therefore the
longterm interests of business are best served when management assume social responsibilities. The
image of business organization liked with the quality of its products and customer service and the extent
to which it fulfills the expectations of owners, employees, consumers, government and the community at
large. For longterm success it matters a great deal if the firm has a favourable image in the public mind.
Every business enterprise is a organ of society and its activities have impact on the social scene.
Therefore, it is important for management to consider whether their policies and actions are likely to
promote the public good, advances the basic values of society, and constitute to its stability, strength and
harmony.

Increasing concern for the social responsibility of management, it is now recognized that besides taking
care of the financial interest of owners, managers of business firms must also take into account the
interest of various other groups such as employees, consumers, the government and the community as a
whole. These interested groups are directly or indirectly affected by the pursuit of business activities and
they are the stake-holders of the business enterprise.

Responsibility towards owners: The primary responsibilities of management is to assure a fair and
reasonable rate of return on capital and fair return on investment can be determined on the basis of
difference in the risks of business in different fields of activity. With the growth of business the
shareholders can also expect appreciation in the value of their capital.

Responsibility towards employees: Management responsibility towards employees relate to the fair
wages and salaries, satisfactory work environment, labour management relations and employee welfare.
Fair wages should be fixed in the light of labor productivity, the prevailing wage rates in the same or
neighbouring areas and relative importance of jobs. Managers salaries and allowances are expected to be
linked with their responsibility, initiative and skill. But the spread between minimum wages and highest
salaries should be reasonable. Employees are expected to build up and maintain harmonious relationships
between superior and subordinates. Another aspect of responsibility towards employees is the provision
of welfare amenities like safety and security of working conditions, medical facilities, housing, canteen,
leave and retirement benefits.

Responsibility towards consumers: In a competitive market, serving consumers is supposed to be a

prime concern of management. But in reality perfect competition does not prevail in all product markets.
In the event of shortage of supply there is no automatic correction. Besides consumers are often victims
of unfair trade practices and unethical conduct of business. Consumer interests are thus protected to some
extent with laws and pressure of organized consumer groups. Management should anticipate these
developments, satisfy consumer needs and protect consumer interests. Goods must be of appropriate
standard and quality and be available in adequate quantities at reasonable prices. Management should
avoid resorting to hoarding or creating artificial scarcity as well as false and misleading advertisements.

Responsibility towards the Governments: As a part of their social responsibility, management must
conduct business affair in lawful manner, honestly pay all the taxes and dues, and should not corrupt
public officials for selfish ends. Business activities must also confirm to the economic and social policies
of the government.

Responsibility towards the community and society: The socially responsible role of management in
relation to the community are expected to be revealed by its policies with respect to the employment of
handicapped persons, and weaker sections of the community, environmental protection, pollution control,
setting up industries in backward areas, and providing relief to the victims of natural calamities etc.
Social responsibility is defined as the obligation and commitment of managers to take steps for
protecting and improving societys welfare along with protecting their own interest. The managers must
have social responsibility because of the following reasons:

1. Organizational Resources - An organization has a diverse pool of resources in form of men,

money, competencies and functional expertise. When an organization has these resources in
hand, it is in better position to work for societal goals.

2. Precautionary measure - if an organization lingers on dealing with the social issues now, it
would land up putting out social fires so that no time is left for realizing its goal of producing
goods and services. Practically, it is more cost-efficient to deal with the social issues before they
turn into disaster consuming a large part if managements time.
3. Moral Obligation - The acceptance of managers social responsibility has been identified as a
morally appropriate position. It is the moral responsibility of the organization to assist solving or
removing the social problems
4. Efficient and Effective Employees - Recruiting employees becomes easier for socially responsible
organization. Employees are attracted to contribute for more socially responsible organizations. For
instance - Tobacco companies have difficulty recruiting employees with best skills and
competencies.
5. Better Organizational Environment - The organization that is most responsive to the betterment
of social quality of life will consequently have a better society in which it can perform its business
operations. Employee hiring would be easier and employee would of a superior quality. There
would be low rate of employee turnover and absenteeism. Because of all the social improvements,
there will be low crime rate consequently less money would be spent in form of taxes and for
protection of land. Thus, an improved society will create a better business environment.
But, managers social responsibility is not free from some criticisms, such as -
1. High Social Overhead Cost - The cost on social responsibility is a social cost which will not
instantly benefit the organization. The cost of social responsibility can lower the organizational
efficiency and effect to compete in the corporate world.

2. Cost to Society - The costs of social responsibility are transferred on to the society and the
society must bear with them.

3. Lack of Social Skills and Competencies - The managers are best at managing business matters
but they may not have required skills for solving social issues.

4. Profit Maximization - The main objective of many organizations is profit maximization. In such
a scenario the managers decisions are controlled by their desire to maximize profits for the
organizations shareholders while reasonably following the law and social custom.