Social Responsibility in International business

Besides being ethical in business, companies, particularly the large ones, have some social responsibilities.

As the High-Powered Expert Committee on Companies and MRTP Acts observes, in the environment of modern economic development, the corporate sector no longer functions in isolation. If the plea of the companies that they are performing a social purpose in the development of the country is to be accepted, it can only be judged by the test of social response shown to the needs of the community by the companies. The company must behave and function as a responsible member of society, like any other individual. It cannot shun moral vales, nor can it ignore actual compulsion. The real need is for some focus of accountability on the part of the management which is not limited to shareholders alone. In modern lines, the objective of business has to be the proper utilization of resources for the benefit of others. A profit is still a necessary part of the total picture; but is not the primary purpose. This implies that the claims of various interests will have to be balanced, not on the narrow ground of what is best for the shareholders alone but from the point of view of what is best for the community at large. The company must accept its obligation to be socially responsible and to work for the larger benefit of the community.

The nature of the social responsibility of business can be classified into two categories:

The manner in which a business carries out its own business activity involves the acceptance of the fact that business is not merely a profit making occupation but a social function which involves certain duties and requires that appropriate ethics are followed. For example, a business must obey all the laws, even when they are disagreeable; it should produce the maximum goods of good quality, ensure smooth supplies at competitive prices pay taxes, shuns malpractices, pays fair wages to employees and a reasonable dividend to shareholders.

The welfare activity that it takes upon itself as an additional function in addition to its commercial activity, business also plays a role in promoting social welfare activity, even directly.

The following are considered as the principal objectives of a responsible company.

1. The extension, development and improvement of the company’s business and the building up of its financial independence.
2. The payment of fair and regular dividends to the shareholders.
3. The payment of fair wages under the best possible conditions to the workers
4. The reduction in the prices to be charged to consumers

In other words, the primary objectives of a socially responsible business should be to strengthen itself with due regard to the interest of the shareholders, employees and consumers.

A responsible company has certain secondary objectives as well. The important among then are:

1. To enhance labor welfare
2. To enhance customer service and goodwill
3. To assist in developing ad promoting the amenities in the locality
4. To assist in developing the industry of which the firm is a member
5. To contribute to national goals.

There is a growing recognition that the business should pay due attention to the long term welfare of society. The marketing concept, which has gained tremendous popularity, indicates that the key to satisfying organizational goals is customer satisfaction. The societal marketing concept, which has been gaining popularity over the marketing concept, however, calls for generating customer satisfaction and long run consumer welfare as the key to attaining a long run profitable volume. The addition of long run customer welfare asks the businessman to include social and ecological considerations in his product and marketing planning. Social and ecological considerations must be done not only to meet social responsibilities but also because failure to do this may hurt long run interests.

The enormous resources at the disposal of large business corporations enable them to carry out extensive research and development. They should also devote their R&D efforts to the social needs of the developing countries, rather than being completely guided by profit maximization. Because of their resources position, they should also be expected to take a significant contribution social welfare. An amount equivalent to the annual spend on entertainment by some MNCs can go a long way to improve the social welfare in some small poor economies.

The multinationals shall show as much social responsibility in the foreign countries as they do in the home country. One criticism against the MNCs is that they adopt double/multiple standards with different norms/stances for developing countries compared to the home country or developed countries.

  • Siddharth Banerjee

    The social and moral ethos of any organization defines it’s success or failure in the market.