NCERT Solutions for Class 11 Business Studies – Chapter 6 – Social Responsibilities of Business and Business Ethics

Q.1 Social responsibility is

1. same as legal responsibility.
2. broader than legal responsibility.
3. narrower than legal responsibility.
4. none of these.

Ans.

b) broader than legal responsibility.

Explanation:

Social responsibility of business means obligation to act in a manner which will serve in the best interest of the society.

Q.2 If business is to operate in a society which is full of diverse and complicated problems, it may have

1. little chance of success.
2. great chance of success.
3. little chance of failure.
4. no relation with success or failure.

Ans.

a) little chance of success.

Explanation:

If business is to operate in a society which is full of diverse and complicated problems, it may have little chance of success as all the energy will be diverted toward solving the problems with little effort towards success.

Q.3 Business people have the skills to solve

1. all social problems.
2. some social problems.
3. no social problems.
4. all economic problems.

Ans.

b) some social problems.

Explanation:

Environmental pollution, unsafe workplace, corruption in public institutions and discriminatory practices in employment are some of the social problems which can be solved with the help of business people.

Q.4 Than an enterprises must behave as a good citizen is an example of its responsibility towards

1. Owners.
2. Workers.
3. Consumers.
4. Community.

Ans.

d) community.

Explanation:

Enterprises must behave as a good citizen is an example of its responsibility towards Community. As a good citizen, an enterprise must work towards protecting the natural environment, respect laws of the community and help solving problems of poverty and unemployment.

Q.5 Environment protection can best be done by the efforts of

1. Business people.
2. Government.
3. Scientists.
4. All the people

Ans.

d) All the people.

Explanation:

The quality of the environment is fast deteriorating particularly due to industrial activity and it should be the responsibility of all the sections of the people in the society to protect the environment.

Q.6 Carbon monoxide emitted by automobiles directly contributes to

1. Water pollution.
2. Noise pollution.
3. Land pollution.
4. Air Pollution

Ans.

d) Air Pollution.

Explanation:

Air pollution is caused due to carbon monoxide emitted by automobiles and this lowers the air quality.

Q.7 Which of the following can explain the need for pollution control?

1. Cost savings.
2. Reduced risk of liability.
3. Reduction of health hazards.
4. All of them.

Ans.

d) All of them.

Explanation:

All the above mentioned explain the need for pollution control. Pollution control is necessary in the interest of bringing about cost savings, reducing the risk of liability and reducing the health hazards.

Q.8 Which of the following is capable of doing maximum good to society?

1. Business Success.
2. Laws and regulations.
3. Ethics.
4. Professional management

Ans.

c) Ethics.

Explanation:

The subject matter of ethics is concerned with establishing linkages between individual good and social good.

Q.9 Ethics is important for

1. Top management.
2. Middle level managers.
3. Non- managerial employees.
4. All of them.

Ans.

d) All of them.

Explanation:

The main purpose of ethics is to guide managers and other employees in performing their jobs in a manner that they contribute towards social welfare.

Q.10 Which of the following alone can ensure effective ethics programme in a business enterprise?

1. Publication of code.
2. Involvement of employees.
3. Establishment of compliance mechanism.
4. None of them.

Ans.

a. publication of code

Explanation:

Successful implementation of business ethics requires publication of code of conduct for the whole organisation.

Q.11 What do you understand by social responsibility of business? How is it different from legal responsibility?

Ans.

Social responsibility of a business means an element of voluntary action on the part of business people for the benefit of society.

Social responsibility is broader than legal responsibility of business. The legal responsibility can be fulfilled by mere compliance with the provisions of law while social responsibility is more than that. It is firm’s recognition of social obligations even though not covered by law along with the obligations laid down.

Q.12 What is environment? What is environment pollution?

Ans.

Environment can be defined as the totality of man’s surroundings, both natural and man-made resources. Natural resources are land, water, air, flora and fauna and all other raw material. Man-made resources include cultural heritage, socio-economic institutions and people.

Environmental pollution refers to injection of harmful substances into the environment which cause change in the physical, chemical, biological characteristics of air, land and water. Industrialisation is badly affecting the environment. It is widely recognised that the quality of the environment is fast deteriorating particularly due to industrial activities. Pollution in the form of air, water, land and noise is causing degradation of the environment.

Q.13 What is business ethics? Mention the basic elements of business ethics.

Ans.

Business ethics is an act, decision or behavior that is in agreement with the prevailing norms of the society. Every business is expected to carry its operations in an ethical manner. It is different from law. Ethics means the business practices which are desirable from the point of view of the society. Examples of business ethics will be: charging fair prices from customers, giving fair treatment to workers, earning reasonable profits etc.

On the other hand, malpractices such as adulteration, hoarding, black-marketing etc. are not desirable from the point of view of the society and so are termed as unethical.

The basic elements of business ethics are as follows:

• Role of Top Management: To achieve good results in terms of business ethics, the top management of the firm needs to be openly and strongly committed to ethical conduct of the business. The top management must give continuous leadership for developing and upholding the values of the organisation.
• Involvement of Employees: Whatever the policies are framed for ethical conduct of the business, are implemented by the employees working at different levels of the organisation. Therefore, it is necessary that all employees of the firm should be involved in ethical conduct of the business.
• Publication of a ‘Code’: Business organisations publish a written document containing the principles of conduct for the whole organisation, called ‘Code’. This code covers the areas of honesty, product safety, fairness of selling practices etc.
• Compliance Mechanisms: To ensure that the conduction of business and actions comply with the ethical standards set up by the firm, it is necessary to establish appropriate mechanisms.
• Measuring Results: It is difficult to accurately measure the results of ethical programmes. However, the firms can certainly audit to monitor compliance with ethical standards.

Q.14 Briefly explain (a) Air Pollution, (b) Water pollution, and (c) Land pollution.

Ans.

a) Air Pollution- Air pollution is the result of multiple factors which lower the quality of air. It is mainly due to carbon monoxide emitted by automobiles and smoke and other chemicals emitted from manufacturing plants. It has created a hole in the ozone layer leading to dangerous warming of the earth, known as global warming.

b) Water pollution- Discharge of industrial and household wastes into rivers, streams or lakes causes degradation of water quality.

c) Land Pollution- Land pollution is the pollution caused by dumping toxic wastes on land. This damages the quality of land making it unfit for agriculture or plantation. It creates a big problem in restoring the quality of the land to make it fertile.

Q.15 What are the major areas of social responsibility of business?

Ans.

The following are the major areas of social responsibilities:

• Economic responsibility: A business enterprise’s economic primary social responsibility is economic i.e., produce goods and services that society wants and sell them at a profit.
• Legal responsibility: Every business has a responsibility to operate within the laws of the land. Since these laws are meant for the good of the society, a law abiding enterprise is a socially responsible enterprise as well.
• Ethical responsibility: This includes the behaviour of the firm that is expected by society but not codified in law. For example, respecting the religious sentiments and dignity of people while advertising for a product. There is an element of voluntary action in performing this responsibility.
• Discretionary responsibility: There is a purely voluntary obligation of an enterprise to provide charitable contributions to educational institutions or help the affected people during floods or earthquakes.

Q.16 State the meaning of Corporate Social Responsibility as per the Companies Act 2013.

Ans.

Corporate social responsibility refers to the role that companies can play in meeting the agenda of sustainable development and entails a balanced approach to economic progress, social progress and environmental protection.

Q.17 Build up arguments for and against social responsibilities.

Ans.

Social responsibility means the obligation of business to act in a manner, which will serve the best interests of the society. Social obligation of a business relates to the voluntary efforts on the part of businessmen to contribute to the social well-being that goes beyond the production of goods and services at a profit.

Following are the arguments for social responsibility:

• Justification for existence and growth – Apart from profit motive, business exists for providing goods and services to satisfy human needs. In fact, the prosperity and growth of business is possible only through continuous service to society. Thus, assumption of social responsibility by business provides justifications for its existence and growth.
• Long term interest of the firm – Social responsibility enhances the image and goodwill of the firm and results in maximum profits in the long run. When increasing number of members of society, including workers, consumers, shareholders, government officials, feel that business enterprise is not serving its best interest, they will tend to withdraw their cooperation to the enterprise concerned. Hence it is in the interest of the firm that it fulfills its social responsibility.
• Avoidance of government regulation – Government regulation limits the freedom of business. It is believed that businessmen can avoid the problem of government regulations by voluntary assuming social responsibilities.
• Maintenance of society- Business enterprise should assume the social responsibilities as people who are dissatisfied with their dues may resort to anti social activities which will not be in the interest of the people.
• Availability of resources with business – Business enterprises can help society to tackle problems in a better way due to availability of resources.
• Converting threats into opportunities – Business enterprises can solve social problems and can covert threats into opportunities.
• Better environment for doing business- With social responsibility, a business enterprise can solve social problems and create better environment for survival.
• Holding business responsible for social problems – Some of the social problems like environmental pollution, unsafe workplace, corruption in public institutions etc have come into existence due to business enterprises themselves. Hence it is the moral duty of the business to help in solving these problems.

Arguments against social responsibility:

• Violation of profit maximisation objective – According to this, profit maximisation is the sole objective of any business. Hence social responsibility does not play any role in it.
• Burden on consumers – It is argued that it is unfair to tax the consumers in the name of social responsibility as pollution control and environmental protection are very costly and often require huge financial investments and this burden can be shifted to consumers by charging higher prices.
• Lack of social skills – According to this argument, social problems should be solved by specialists as businessmen do not have the skills to solve these.
• Lack of broad public support- It is argued here that public does not like business involvement or interference in social programmes. Hence business cannot operate successfully due to lack of public support.

Q.18 Discuss the forces which are responsible for increasing concern of business enterprises towards social responsibility.

Ans.

Forces which are responsible for increasing concern of business enterprises towards social responsibility are

• Threat of public regulation– This threat of public regulation is one important reason due to which business enterprise feels concerned with social responsibility. Where business institutions operate in a socially irresponsible manner, action is taken to regulate them for safeguarding people’s interest.
• Pressure of labour movement– Accordingly, labour movement for extracting gains for the working class throughout the world has become very powerful. This has forced business enterprises to pay due regard to the welfare of workers instead of following a policy of ‘hire and fire’ under which they could deal with workers at their will.
• Impact of consumer consciousness– Business enterprises have started following customer oriented policies. Development of education and mass media and increasing competition in the market have made the consumer conscious of his right and power in determining market forces.
• Development of social standard for business – No business can be done in isolation from society. It is the society that permits business to exist and grow and it is on the basis of social standards that business. Thus new social standards consider that businesses must also serve social needs.
• Development of business education– Development of business education has made more and more people aware of the social purpose of business.
• Relationship between social interest and business interest: Business enterprises have realised that social interest and business interest are complementary to each other. The feeling that business can grow only with full exploitation of society has given way to the belief that long-term benefit of business lies in serving the society well.
• Development of professional– managerial class – Business professionals aim at profit maximisation but professional managers pay more attention towards social responsibilities.

Q.19 ‘Business is essentially a social institution and not merely a profit making activity’. Explain.

Ans.

The statement – ‘A business is essentially a social institution and not merely a profit making activity’ is correct and can be justified with following arguments:

• Existence and Growth of Business: The prosperity and growth is possible only through continuous service to society. Profit motive is an important justification for a business and it is an outcome of satisfactory services to people. Therefore, satisfying the customers through social responsibility is necessary for the existence and growth of business.
• Avoidance of Government Intervention: Governmental intervention is undesirable for smooth running of a business as it limits the freedom of activities. If the firms voluntarily adopt social responsibility programmes, they can avoid this problem.
• Creating Opportunities: The business institutions have valuable financial and human resources which can be effectively used for solving problems. In this way they can convert risky situations into profitable deals, create new opportunities as well as solve social problems.
• Long Term Interest of Business: It is in the long term interest of the business to fulfill its social responsibility. The public image of the firm would improve when it supports social goals. If the firm fails to do so, the members of the society feel that business is not serving its best interest and they tend to withdraw their cooperation to the enterprise.
• Creating Better Business Environment: A firm cannot do better in a society which is full of complicated problems. If the society has fewer problems, it will provide better environment for a firm to conduct its business. Therefore, it is in the interest of the business firms to take steps to minimise the problems of the society by acknowledging their responsibility towards them.
• Moral Obligation of Business: Most of the social problems have either been created or perpetuated by business enterprises themselves such as environmental pollution, unsafe workplaces, corruption in public institutions and discriminatory practices in employment. Hence, it becomes the moral obligation of business firms to get involved in solving these problems.

Q.20 Why do the enterprises need to adopt pollution control measures?

Ans.

Enterprises need to adopt pollution control measures due to the following reasons:

• Reduction of health hazards – Pollutants in the environment causes many diseases like cancer, heart attacks and lung complications. Pollution control measures cannot only check the seriousness of such diseases but can also be supportive of a healthy life on earth.
• Reduced risk of liability– It is possible that an enterprise is held liable to pay compensation to people affected by the toxicity of gaseous, liquid and solid wastes it has released into the environment.
• Cost savings – It is very important to have an effective pollution control programme to save costs of operating business as greater wastes leads to higher cost of waste disposal and cost of cleaning the plants.
• Improved public image – As society becomes increasingly conscious of environmental quality, a firm’s policies and practices for controlling wastes will increasingly influence people’s attitude towards its working.
• Other social benefits – Pollution control results in many other benefits like clearer visibility, cleaner building, better quality of life and availability of natural products in a purer form.

Q.21 What steps can an enterprise take to protect the environment from the dangers of pollution?

Ans.

Some of the specific steps taken by the business enterprise for environment protection are:

1. Commitment by Management: Top management should take the commitment to create, maintain and develop work culture to enhance environment protection. All measures should be taken to prevent any type of pollution.
2. Involvement of All: All departments and employees should be involved in environment protection programmes. It would be helpful to achieve the desired result, if efforts are made jointly.
3. Developing Policies: Business firms should make policies for purchasing good quality raw materials using superior technology and scientific techniques of disposal and treatment of wastes. Efforts should be made to develop employee skills for the purpose of pollution control.
4. Complying with Laws: The business organisations must comply with the laws, acts and regulations enacted by the government for prevention of pollution. It should be the duty of all business firms to participate in government programmes relating to management of hazardous substances, clearing up of polluted rivers etc.
5. Periodical Assessment: Regular assessment of pollution control programmes in terms of cost benefit analysis should be done to ensure that they progress in the right direction.
6. Arranging Workshops: To involve all stakeholders such as suppliers, consumers, employees etc., workshops or seminars should be organised. Through these workshops or seminars, education and training related to environment protection can be provided easily.

Q.22 Explain the various elements of business ethics.

Ans.

The basic elements of business ethics which should be taken care of while running an enterprise are as follows:

i) Role of Top Management: To achieve good results in terms of business ethics, the top management of the firm needs to be openly and strongly committed to ethical conduct of the business. The top management must give continuous leadership for developing and upholding the values of the organisation.

ii) Involvement of Employees: Whatever the policies are framed for ethical conduct of the business, are implemented by the employees working at different levels of the organisation. Therefore, it is necessary that all employees of the firm should be involved in ethical conduct of the business.

iii) Publication of a ‘Code’: Business organisations publish a written document containing the principles of conduct for the whole organisation, called ‘Code’. This code covers the areas of honesty, product safety, fairness of selling practices etc.

iv) Compliance Mechanisms: To ensure that the conduction of business and actions comply with the ethical standards set up by the firm, it is necessary to establish appropriate mechanisms.

v) Measuring Results: It is difficult to accurately measure the results of ethical programmes. However, the firms can certainly audit to monitor compliance with ethical standards.

Q.23 Discuss the guidelines enumerated by the Companies Act 2013 for Corporate Social Responsibility.

Ans.

In India, the concept of corporate social responsibility is governed by the Clause 135 of the Companies Act, 2013, which was passed by both the House of the Parliament, and had received the assent of the President of India on 23 August 2013.

The CSR provisions within the Act is applicable to companies with an annual turnover of 1,000 crore and more, or a net worth of 500 crore and more or a net profit of 5 crore and more.

As per the rules,

Companies to set up a CSR committee consisting of their board members, including at least one independent director.

The act encourages companies to spend at 2% of their average net profit in the previous three years on CSR activities.

The indicative activities, which can be undertaken by a company under CSR have been specified under Schedule VII of the Act.

Only CSR activities undertaken in India will be taken into consideration.