GROUP 2

THE SOCIAL RESPONSIBILITY OF BUSINESS

The Social Responsibility of Business (SRB) refers to the idea that

companies should operate in a manner that enhances society and the
environment, beyond just maximizing profits. This concept encompasses
various dimensions, including:

1. Ethical Practices – Business should conduct operations with integrity,

honesty, and fairness.
2. Environmental Stewardship – Companies are expected to minimize
their ecological footprint and promote sustainability through responsible
resource management
 THE SOCIAL RESPONSIBILITY OF BUSINESS

3. Community Engagement – Businesses should contribute to the

communities in which they operate, supporting local initiatives, charities,
and development projects.
4. Employee Welfare – Fair treatment, safe working conditions, and
opportunities for professional growth are essential to uphold employee
rights and well-being.
5. Transparency and Accountability – Firms should communicate openly
with stakeholders about their practices and impacts, fostering trust and
responsibility.
 THE THEORY OF MILTON FRIEDMAN ON
THE SOCIAL RESPONSIBILITY OF BUSINESS
Milton Friedman, a prominent economist, articulated his views on
the social responsibility of business primarily in his 1970 article in
“The New York Times Magazine”. His theory on the social
responsibility of business advocates for a clear focus on profit
maximization as the primary objective of business. While his views
have significantly influenced corporate governance and economic
thought, the evolving landscape of business ethics and stakeholder
expectations continues to challenge and expand the conversation
around corporate social responsibility.
 THE THEORY OF MILTON FRIEDMAN ON
THE SOCIAL RESPONSIBILITY OF BUSINESS

1. Profit Maximization – Friedman argued that the primary

responsibility of a business is to maximize shareholder value. He
believed that businesses should focus on generating profits within
the bounds of the law and ethical custom. This profit-driven
approach is seen as the best way to serve society as a whole.
 THE THEORY OF MILTON FRIEDMAN ON
THE SOCIAL RESPONSIBILITY OF BUSINESS

2. Role of Business in Society – According to Friedman, businesses

operate in a free market system where the role of business is to
produce goods and services efficiently. He maintained that the
market, through competition, would allocate resources in a manner
that benefits society. When businesses pursue profits, they
inadvertently contribute to economic growth and societal
wellbeing
 THE THEORY OF MILTON FRIEDMAN ON
THE SOCIAL RESPONSIBILITY OF BUSINESS

3. Corporate Social Responsibility (CSR) – Friedman was critical of

the concept of corporate social responsibility as it was often
interpreted. He contended that engaging in social initiatives that
do not directly benefit shareholders amounts to a misuse of
corporate resources. He argued that it is not the responsibility of
business executives to allocate company resources to social causes
unless it directly contributes profit maximization.
 THE THEORY OF MILTON FRIEDMAN ON
THE SOCIAL RESPONSIBILITY OF BUSINESS

4. The Role of Individuals – Friedman believed that individuals,

rather than corporations, should take on the responsibility for
social issues. He argued that social responsibility should be a
personal commitment, not one imposed on businesses. If
executives want to support social causes, they should do so with
their own money, not at the expense of shareholders.
 THE THEORY OF MILTON FRIEDMAN ON
THE SOCIAL RESPONSIBILITY OF BUSINESS

5. Market Mechanisms – He asserted that businesses operating

under freemarket principles would naturally address societal needs
through their pursuit of profits. For example, by providing better
products or services, businesses can improve consumer’s quality of
life, thereby fulfilling a social role without explicitly trying to be
“socially responsible”.
 THE ROLE OF ECONOMICS IN DEFINING
CORPORATE SOCIAL RESPONSIBILITY (CSR)

Economics plays a crucial role in defining Corporate Social Responsibility

(CSR) by providing a framework for understanding the relationship between
business practices, societal impact, and economic outcomes. It involves
analyzing how businesses balance profit motives with social and
environmental concerns.
1. Cost – Benefit Analysis – Businesses use cost-benefit analysis to assess
the financial implications of CSR initiatives. For example, investing in
environmentally friendly technologies might require upfront costs but can
lead to long-term savings through energy efficiency and waste reduction.
This analytical framework helps companies decide which CSR activities are
viable and sustainable, ensuring that investments yield both social benefits
and financial returns.
 THE ROLE OF ECONOMICS IN DEFINING
CORPORATE SOCIAL RESPONSIBILITY (CSR)

2. Market Demand and Consumer Preferences – Economics studies how

consumer preferences evolve, showing an increasing demand for products
from socially responsible companies. Brands that prioritize sustainability or
ethical practices can capture market share and enhance customer loyalty.
Research indicates that consumers are often willing to pay a premium for
goods and services that are ethically produced or environmentally friendly.
This economic insight drives companies to adopt CSR practices as a strategy
to enhance profitability.
 THE ROLE OF ECONOMICS IN DEFINING
CORPORATE SOCIAL RESPONSIBILITY (CSR)

3. Stakeholder Theory – Economics emphasizes the importance of

stakeholder theory, which posits that businesses must create value for all
stakeholders – not just shareholders. This includes employees, customers,
suppliers, and communities. By considering the interests of various
stakeholders, companies can foster better relationships and mitigate risks,
ultimately leading to more sustainable business practices and enhanced
reputation.
 THE ROLE OF ECONOMICS IN DEFINING
CORPORATE SOCIAL RESPONSIBILITY (CSR)

4. Competitive Advantage – Firms can gain a competitive advantage through

CSR by differentiating themselves in the marketplace. Companies that
actively promote their social and environmental initiatives are often attract
more customers and retain talent. Engaging in CSR can spur innovation,
leading to new products and services that meet evolving consumer demands,
thus enhancing market positioning
 THE ROLE OF ECONOMICS IN DEFINING
CORPORATE SOCIAL RESPONSIBILITY (CSR)

5. Regulatory Framework – Economic theories help businesses understand

the regulatory environment related to CSR. Companies often analyze
potential costs and benefits associated with compliance to environmental
regulations or labor laws. Economics examines how government policies –
such as tax incentives for sustainable practices or penalties for pollution –
impact corporate behavior, influencing companies to adopt CSR initiatives.
 THE ROLE OF ECONOMICS IN DEFINING
CORPORATE SOCIAL RESPONSIBILITY (CSR)

6. Impact Measurement and Reporting – Businesses employ economic

metrics to evaluate the impact of their CSR initiatives. This includes
measuring social returns on investment (SROI) and analyzing how CSR
contributes to overall economic performance. Economic analysis supports the
need for transparency in reporting CSR outcomes. Companies that provide
clear metrics on their social and environmental impact can build trust with
stakeholders and enhance their credibility.
 THE ROLE OF ECONOMICS IN DEFINING
CORPORATE SOCIAL RESPONSIBILITY (CSR)

7. Corporate Governance – Economics informs corporate governance

practices that prioritize CSR. Effective governance structure ensure that
companies consider ethical implications in decision-making processes.
Economic principles can guide the design of executive compensation
packages that reward socially responsible behaviors, aligning corporate goals
with broader societal interests.

8. Risk Management – Economics helps companies identify potential risks

associated with ignoring CSR, such as reputational damage, legal issues, and
operational disruptions. By proactively engaging in CSR, businesses can
mitigate risks related to environmental concerns, ultimately safeguarding
their long-term viability.
 THE ESSENCE OF BUSINESS
The essence of business lies in creating value by meeting needs and
solving problems. It involves understanding customer desires, efficiently
managing resources, and fostering relationships. At its core, business is
about innovation, adaptability, and sustainability, all while aiming for
profit and positive societal impact.
1. Value Creation – At the heart of any successful business is the ability
to identify and understand customer needs. This involves market
research, customer feedback, and awareness of trends. Business exist to
solve specific problems or fulfill particular needs. Whether it’s providing a
product, service, or experience, the goal is to create a solution that adds
value to the customer’s life.
 THE ESSENCE OF BUSINESS

2. Innovation – Innovation is crucial for business to stay relevant. This can

take a form of new products, improved processes, or novel business
models. Companies that prioritize innovation can adapt to changing
market conditions and consumer preferences. By innovating, businesses
can differentiate themselves from competitors, establishing a unique
position in the market. The uniqueness can attract customers and foster
brand loyalty
 THE ESSENCE OF BUSINESS

3. Resource Management – Effective resource management – including

human, financial, and physical resources – is essential. Efficient
operations lead to cost savings and improved profitability. Modern
businesses are increasingly focused on sustainable practices. This
includes ethical sourcing, reducing waste, and minimizing environmental
impact, which can enhance brand reputation and customer loyalty.
 THE ESSENCE OF BUSINESS
4. Building Relationships – Successful businesses prioritize building strong
relationships with their customers. This includes excellent customer service,
loyalty programs, and personalized marketing, which contribute to repeat
business and referrals. Business must also engage with various stakeholders,
including employees, suppliers, investors, and the community. Healthy
relationships can lead to collaboration, support, and a positive reputation.

5. Financial Viability – While creating value is paramount, business must also

be financially viable. Profit allows for reinvestment, growth, and
sustainability. A sound financial strategy involves budgeting, forecasting, and
managing cash flow effectively. Businesses face various risks, from market
fluctuations to operational challenges. Effective risk management strategies
help mitigate potential threats, ensuring long-term stability.
 THE ESSENCE OF BUSINESS
6. Adaptability – The business environment is constantly evolving due to
technological advancements, regulatory changes, and shifting consumer
preferences. Successful businesses are agile, able to pivot their strategies and
operations in response to these changes. A culture of continuous learning and
adaptation within the organization fosters innovation and responsiveness,
allowing business to stay ahead of the competition.

7. Social Responsibility – Modern businesses are increasingly held

accountable for their impact on society. Corporate social responsibility (CSR)
initiatives demonstrate a commitment to ethical practices, community
engagement, and positive social impact. Beyond profits, businesses are
focusing on creative value for stakeholders, including employees, customers
and the community, fostering a more inclusive approach to success.
 A PARALLELED MACROECONOMIC PROBLEM
SHARING IN THE DEVELOPMENT

Unemployment is a critical macroeconomic problem that directly affects

economic development. Addressing it requires a multifaceted approach
that combines monetary and fiscal policies with targeted programs to
enhance skills and create quality jobs. By understanding the
interconnectedness of unemployment and economic development,
policymakers can implement strategies that promote long-term growth
and stability.
 A PARALLELED MACROECONOMIC PROBLEM
SHARING IN THE DEVELOPMENT

Unemployment – Occurs when individuals who are capable and willing to work
cannot find a job. It is typically measured as percentage of the labor force.

Types of Unemployment:
• Frictional – Short-term, transitional unemployment as individuals move between
jobs.
• Structural – Mismatch between skills and job requirements, often due to
technological changes.
• Cyclical – Results from economic downturns, where demand for labor decreases.
 Impact on Economic Development
• Reduced Consumer Spending – High unemployment leads to lower
disposable income, reducing consumer spending, which is major
component of GDP. This decrease can slow economic growth and
limit business revenues, creating a vicious cycle.

• Increased Government Spending – Unemployment often results in

higher government spending on social safety nets (e.g.,
unemployment benefits, welfare programs). This can strain public
finances and divert funds from investments in infrastructure or
education.
 Impact on Economic Development
• Loss of Human Capital – Extended unemployment can lead to skill
erosion and loss of human capital. Workers who are out of the labor
market for long periods may find it harder to re-enter, reducing the
overall skill level of the workforce.

• Social Issues – High unemployment rates can lead to increased

crime, mental health issues, and social unrest. This societal instability
can deter investment and hinder development efforts.
 Macroeconomic Policies to Address Unemployment
• Monetary Policy – Central banks can lower interest rates to
stimulate borrowing and investment. Lower rates make it cheaper for
businesses to expand and hire more workers.
• Fiscal Policy – Government can increase public spending on
infrastructure projects, which creates jobs directly and indirectly. Tax
cuts can also encourage consumer spending and investments.
• Education and Training Programs – Investment in education and
vocational training can help reduce structural unemployment by
aligning skills with market demands. Programs aimed at reskilling
workers for in-demand industries can enhance employability.
 Summarizing Corporate Objectives/ Conventional Theory of the Firm

Corporate Objectives – Are specific goals that a company aims to achieve,

guiding its operations and strategies. Corporate objectives provide a
framework for decisionmaking and strategic planning. They help align the
interest of various stakeholders, including shareholders, employees, and
customers, ensuring that the company can achieve its long-term goals
effectively.
1. Profit Maximization – Increase overall profitability by boosting revenues and
reducing costs. Essential for long-term sustainability and attracting investors.
2. Revenue Growth – Expand sales and market share over time. Ensures the
company remains competitive and can invest in future projects.
3. Market Share Expansion – Increase the company’s share of the market
relative to competitors. A larger market share often leads to increased pricing
power and brand recognition.
4. Return on Investment (ROI) – Achieve high returns on capital employed.
Measures the efficiency of investment decisions and overall financial health.
5. Customer Satisfaction – Enhance customer experience and loyalty through
quality products and services. Satisfied customers are more likely to return
and refer others, driving growth.
6. Employee Satisfaction and Development – Foster a positive work
environment and invest in employee training and development. Motivated
employees contribute to productivity and retention.
7. Sustainability and Corporate Social Responsibility (CSR) – Implement
practices that benefit society and the environment. Enhances brand reputation
and meets the expectations of socially conscious consumers.
8. Innovation and Development – Encourages research and development to
drive innovation. Staying ahead of the industry trends and competitors can
lead to new products and market opportunities.
9. Risk Management – Identify and mitigate risks to the business. Protects the
firm’s assets and ensures long-term viability.
 THE CONVENTIONAL
THEORY OF THE FIRM
Is an economic framework that seeks to explain how firms operate,
make decisions, and interact with markets. The conventional theory
of the firm provides a foundational understanding of how firms
operate within economic systems, emphasizing profit
maximization, rational decision making, and relationship between
inputs and outputs. It serves as basis for more complex theories
that incorporate behavioral and strategic elements in firm behavior.
1. Objective of the Firm – The primary goal of a firm is to maximize its profits.
This is achieved by increasing revenues while controlling costs.
2. Market Structure – The theory often assumes a perfectly competitive market
where many firms exist, and no single firm can influence market prices. In
such a market, firms are price takers. The firm’s output decisions depend on
market demand and supply conditions, influencing pricing and production
levels.
3. Decision-Making Process – Firms are assumed to make decisions based on
rational calculations aimed at maximizing utility, primarily profit. Firms
determine the optimal level of production where marginal cost (MC) equals
marginal revenue (MR). This ensures maximum profit at the quantity where
additional revenue generated.
4. Production Theory – The theory examines how firms convert inputs (labor,
capital, raw materials) into outputs (goods or services) efficiently. Firms utilize
production functions to determine the relationship between input levels and
the resulting output, aiming for cost efficiency.

5. Short-Run vs Long-Run – In the short run, firms may experience fixed costs
and variable costs, affecting their pricing and output decisions. They can
operate at a loss if it covers variable costs. In the long run, firms can adjust all
inputs and enter or exit the market. The long run equilibrium is reached when
firms earn normal profits (zero economic profit) due to free entry and exit in
the market.
6. Constraints on the Firm – Firms operate within the limits of available
technology, impacting their production capabilities and efficiency. Availability
of resources (labor, capital, raw materials) affects production decisions and
firm growth.

7. Role of Information – The theory of acknowledges that firms often operate

under conditions of imperfect information, which can influence decision-
making and market behavior
 ENFORCING SOCIAL
RESPONSIBILITY
Enforcing social responsibility involves integrating ethical practices and
community welfare into business operations. It requires a comprehensive
approach that involves commitment from leadership, employee engagement,
stakeholder involvement, and transparency. By embedding social
responsibility into the corporate culture and practices, businesses can create
a positive impact on society while also enhancing their brand reputation and
long-term success. Here are the key strategies to effectively implement and
enforce social responsibility within an organization:
 ENFORCING SOCIAL RESPONSIBILITY

1. Develop Clear Policies and Guidelines – Establish a comprehensive code of ethics

that outlines expectations for social responsibility. Create specific policies focused on
environmental sustainability, fair labor practices, and community engagement.
2. Leadership Commitment – Ensure that executives and management demonstrate
a strong commitment to social responsibility through their actions and decisions.
Hold leaders accountable for social responsibility initiatives, making them a part of
performance evaluations.
3. Employee Enhancement and Trainings – Conduct training sessions to educate
employees about the importance of social responsibility and how they can
contribute. Encourage employees to participate in community service or
sustainability initiatives, fostering a sense of ownership.
 ENFORCING SOCIAL RESPONSIBILITY

4. Stakeholder Involvement – Involve stakeholders – including customers, suppliers,

and community members – in discussions about social responsibility goals and
initiatives. Implement channels for stakeholders to provide feedback on the
company’s social responsibility practices.
5. Transparency and Reporting – Publish annual sustainability or corporate social
responsibility reports detailing progress, challenges, and future goals. Maintain
transparency about practices and policies, allowing stakeholders to assess the
company’s commitment to social responsibility.
6. Collaboration and Partnerships – Partner with non-government organizations and
community groups to implement social initiatives effectively. Work with the other
companies and industry groups to share best practices and promote social
responsibility standards.
 ENFORCING SOCIAL RESPONSIBILITY

7. Incentives and Recognition – Implement recognition programs for employees or

teams that contribute significantly to social responsibility initiatives. Require
suppliers to adhere to social responsibility standards, offering incentives for
compliance.
8. Monitoring and Evaluation – Establish key performance indicators to measure the
effectiveness of social responsibility initiatives. Conduct audits to assess compliance
with social responsibility policies and make necessary adjustments.
9. Adaptation and Improvement – Regularly review and update policies and
initiatives based on feedback and changing societal expectations. Anticipate
potential social issues and address them before they become significant changes.
 BUSINESS CODE OF ETHICS

A business code of ethics is a formal document that outlines the

principles and standards of behavior expected from employees and
management within an organization. It serves as a guideline for
ethical decision-making and promotes a culture of integrity and
accountability.
 BUSINESS CODE OF ETHICS

1. Introduction and Purpose – This section outlines the primary goal of the code,
which is to promote ethical behavior throughout the organization. It sets the tone for
the document, emphasizing the commitment to integrity and ethical conduct. The
code typically begins with a statement of the organization’s core values, such as
integrity, respect, fairness, transparency, and accountability. These values guide
decision-making and behavior within the company.
2. Compliance with Laws and Regulations – The code stresses the importance of
complying with all applicable laws, regulations, and industry standards. This includes
local, national, and international laws relevant to the business’s operations. It
encourages employees to report any illegal or unethical behavior and outlines the
process for doing so. This can include anonymous reporting channels to protect
whistleblowers.
 BUSINESS CODE OF ETHICS

3. Integrity and Honesty – Employees are expected to be honest in their dealings

with colleagues, customers, suppliers, and stakeholders. Misrepresentation or deceit
is strictly prohibited. The code defines what constitutes a conflict of interest and
provides guidelines on how to avoid them. Employees are encouraged to disclose
any potential conflicts to their supervisors.

4. Fair Treatment – The code commits to providing a work environment free form
discrimination based on race, gender, age, sexual orientation, disability, or other
characteristics. This includes equitable treatment in hiring, promotions, and
disciplinary actions. The organization values diversity and inclusion, recognizing that
varied perspective enhance creativity and decision-making. Employees are
encouraged to foster a culture of respect.
 BUSINESS CODE OF ETHICS

5. Confidentiality – The code specifies the importance of safeguarding confidential

information, including proprietary business data and personal information about
employees and customers. Employees must understand their obligations regarding
data privacy. Guidelines are provided for what information can be shared externally
and what should remain confidential. Employees should seek guidance when in
doubt about sharing information.

6. Responsibility to Stakeholder – The code emphasizes the need for ethical

treatment of customers, including honesty in advertising, quality assurance, and
responsiveness to customer concerns and complaints. It encourages employees to
engage in community service and corporate social responsibility initiatives,
highlighting the company’s commitment to making a positive impact on society.
 BUSINESS CODE OF ETHICS

7. Accountability and Reporting – The code makes it clear that all employees, from top
management to entry-level staff, are accountable for their actions and decisions. Violations
of the code may lead to disciplinary action, including termination. The organization
commits to protecting employees who report unethical behavior from retaliation. This is
crucial for fostering an environment where employees feel safe to speak up.
8. Implementation and Enforcement – The code outlines the organization’s commitment to
providing regular training on ethical standards and practices. This helps employees
understand the code and how to apply it in real-life situations. It specifies the procedures
for investigating reports of unethical behavior, ensuring that all claims are taken seriously
and handled impartially.
9. Review and Update – The code states that it will be reviewed periodically to ensure its
relevance and effectiveness. This may involve soliciting feedback from employees and
adapting the code to reflect changes in laws, regulations, and corporate values.