social responsibilty of corporate sector...Deepak Srivastava, Lecturer

[vikram chawla]

Corporate social responsibility is concerned with the obligations that corporations owe to their different segments of society, such as shareholders, employees, customers, and citizens at large.

Corporate social responsibility is concerned with the different segments of society to which corporations have obligations and the nature and the extent of those obligations. Organizations have been coming to terms with the amount of resources they should devote to being socially responsible.

Present time business is under dilemma between good corporate governance and profit maximization. After globalization importance of corporate governance is increasing day by day. Success of business will depend on good corporate governance. Corporate governance is the system of monitoring, managing, controlling and accomplishing the ethics and social responsibility. The only way for a corporation to exist and capitalism to survive is to be part of the whole society. Companies have to be concerned with owners, the employees, and the customers and
the communities.

Efficiency Perspective:

It is a particular perspective of corporate social responsibility that argues that the obligation of managers is to maximize profits for shareholders and leave social causes to governments and other organizations.

This assumes that markets are competitive and that competitive forces move firms toward fulfilling societal needs as expressed by consumer demand. Firms that do not respond to consumer demands in terms of products, price, delivery, safety, environmental impact, or any other dimension important to consumers will, through competition, be forced out of business.

The other major concern with the efficiency perspective is that corporations can impose indirect consequences that may not be completely understood or anticipated. From the efficiency perspective, it is impossible for managers to maximise shareholders wealth and simultaneously attempt to fulfill all of society's needs. It is the responsibility of government to impose taxes and determine expenditure to meet society's need. If managers pursue actions that benefit society but do not benefit shareholders, then they are exercising political power, not managerial authority.

Social Responsibility Perspective:

The social responsibility perspective contends that society grants existence to firms; therefore, firms have responsibilities and obligations to society as a whole, not just shareholder. Thus while the efficiency perspective states that it is socially responsible to maximize the return to the shareholder, the social responsibility perspective states that it is socially irresponsible to maximize only shareholder wealth because shareholders are not the only ones responsible for the firm's existence.

In the social responsibility perspective, managers must consider the legitimate concerns of other segment of society beyond the shareholders. These are individuals or groups that have an interest in and are affected by the actions of an organization. They include customers, employees, communities, and society. Customers have special standing within this set of constituencies because they provide the company with revenue. In this approach shareholders are not entitled to a maximum return because they are not solely responsible for the existence of the firm. Thus, managers must make decisions and take actions that provide a reasonable return to shareholders, balanced against the legitimate concerns of customers, employee, and communities.

One of the key concerns with the social responsibility perspective is that important terms such as "reasonable returns" or "legitimate concerns" cannot be defined adequately. Given that reasonable returns to shareholders and legitimate concerns of other stockholders could come into conflict, not knowing exactly what is reasonable or legitimate reduce managers' ability to find the appropriate balance and act in socially responsible ways. It is possible that customers, employees, financiers, communities, and society at large will have conflicting and competing concerns.

Good corporate governance is not something that company displays by distributing blankets to the needy in winter or dropping food in flood- affected areas. It is far beyond and involves company time and resources as much as any other business issue. Branding, image-building and social responsiveness go together. Companies should realize that helping the society is not an obligation but a duty as any other business act.

In addition to recognizing both the negative and positive impact that social responsibility can have, managers need to understand the various approaches for making ethical and social responsibility decisions in order to make better decisions themselves and understand decisions made by others.