Q.Discuss the forces which are responsible for increasing concern of business enterprises toward social responsibility.

The forces are: (i) threat of public regulation, (ii) pressure of the labour movement, (iii) impact of consumer consciousness, (iv) development of social standards for business, (v) development of business education, (vi) the complementary relationship between social interest and business interest, and (vii) development of a professional managerial class. Together these have turned business into a socio-economic activity.

Background

• A major recent change in the attitude of business people is the realisation that they have social obligations to fulfil, besides ensuring survival through profit. Part of this is genuine and part is mere lip service, but even the reluctant firm must face the reality that a democratic society demands responsible conduct. Unless business plays its role as an organ of society, it has little chance of success. The following external forces have driven this change:

The seven forces

• (i) Threat of public regulation: Democratically elected governments act as welfare states responsible for all sections of society. Where businesses behave irresponsibly, the government regulates them; this threat of public regulation makes enterprises concerned about social responsibility.
• (ii) Pressure of the labour movement: Over the last century labour has become far more educated and organised, and the labour movement has grown very powerful. This forces enterprises to give due regard to workers' welfare instead of a 'hire and fire' policy.
• (iii) Impact of consumer consciousness: The spread of education, mass media and market competition have made consumers aware of their rights and power. The old principle of caveat emptor ('let the buyer beware') has given way to 'customer is king', so firms follow customer-oriented policies.
• (iv) Development of social standards for business: New social standards accept business as legitimate only on the condition that it also serves social needs. Since society permits business to exist and grow, business is ultimately judged by social standards.
• (v) Development of business education: The growth of business education, rich in the content of social responsibility, has made more people — as consumers, investors, employees or owners — aware of the social purpose of business and sensitive to social issues.
• (vi) Relationship between social interest and business interest: Businesses realise that social interest and business interest are not contradictory but complementary. The old belief that business grows only by exploiting society has given way to the view that long-term benefit lies in serving society well.
• (vii) Development of a professional managerial class: Professional management education has created professional managers who care about satisfying a multiplicity of interest groups, not merely profit goals — a marked change from the earlier owner-manager attitude.

Result

• Together these forces have made business a socio-economic activity — an economic institution that must reconcile its short- and long-term economic interests with the demands of society, justifying its continuance by fulfilling its responsibilities to society.