Page 176 - DMGT401Business Environment

Unit 7: Socio-cultural Environment

7.7.6 Arguments for Corporate Social Responsibility Notes

The major arguments supporting a role for the social responsibility of business are as follows:
1. Public Expenditure: There is a deep conviction within sections of the public that business
has a clear obligation towards the greater good of the society.

2. Long Run Viability: If a business fails to meet this need, other groups will assume the
responsibility and the power that goes with it.
3. Public Image: Socially responsible behaviour creates a positive public image for business.

Example: Tata and Birla enjoy a very good image among people because of their social
welfare programmes.
4. Better Environment: Businesses can create a better environment, which will be more
conducive to future business success.
5. Avoidance of Government Regulation: If business is perceived as meeting its social
obligations, costly and restrictive government regulations can be avoided.

6. Balance of Responsibility and Power: Since a business already has a great deal of social
power, its social responsibility should be of equal importance.
7. Let Business Try: Since other social institutions have failed to resolve many social problems,
it's time to give business a try.
8. Business has the Resources: Business has a reservoir of capital and expertise that has great
potential for public service.
9. Problems can become Profit: If the innovative skills of businesses can be applied to social
problems, some efforts might lead to profits in the traditional business sense.

10. Prevention is Better than Cure: If there are any further delays in resolving social problems
they are only going to become worse.
11. Shareholder Interest: Businesses will prosper from an improved social environment.

7.7.7 Arguments against Corporate Social Responsibility

The major arguments against assumption of broad social responsibilities include:

1. Loss of Profit Maximization: Diverting resources away from the firm to socially responsible
programmes undermines the principles of the competitive market and deprives
shareholders of rightful economic gain.
2. Cost: Social obligations can be very expensive and may render firm unable in going for
attractive business investment; or it may even have to go out of business.
3. Lack of Skills: Most of businessmen do not have the requisite skills and training to work
effectively on social issues.

4. Dilution of Purpose: The pursuit of social goals may dilute the economic productivity of
the firm.

5. Too Much Power: Business can be said to already possess much power without encouraging
it to increase its social influence.

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