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.