LESSON 3: SOCIAL RESPONSIBILITY OF ENTREPRENEURS

Introduction:

The Business community is confronted with a great deal of challenges and

opportunities. Being part of the social order and as society expects, businesses are
prodded, asked or encouraged to improve their business practices in way that respect
ethical values, people, communities, and the environment. In response to these
challenges, businesses recognize that, aside from making profit, they are morally
obliged to become more innovative, competitive, productive, and responsible members
of the society. It is morally obligatory even if not legally required for businesses to
protect and uphold the interests of their stakeholders and meet the tests of good
entrepreneurs.

Objectives:

Upon the completion of this Lesson, you will be able to:

1. Identify responsibilities to the business organization he/she belongs to
2. Explain the different models and frameworks of social responsibility.

THE RESPONSIBILITIES AND ACCOUNTABILITIES OF ENTREPRENEURS

TOWARD THE EMPLOYEES, GOVERNMENT, CREDITORS, SUPPLIERS,
CONSUMERS, GENERAL PUBLIC:

1. Encouragement to Healthy Competition: The entrepreneur

should encourage healthy competition among the local community
and make good quality commodities available to the public at fair
prices

2. To Save Local Environment from Pollution: Risks of pollution of

the environment at the factories sites, due to the smoke of the
coal, polluted water and manufacturing process cannot be ruled
out. So, the responsibility of the entrepreneur is that the factory
may be established at a fair distance from the residential areas
may shift the factories to distant places from the residential areas.
3. To Help in Activities of Public Utility: The entrepreneur should
cooperate in providing facilities for the public utility to the local
community, like, Education, entertainment, medical, housing,
and Libraries, etc. For that may provide help in the establishment
of new schools, parks, hospitals and rest houses, etc.

Business Ethics and Social Responsibility | ABM 2202 1

 4. To Provide Employment to Local Community: The
Entrepreneur should provide more and more employment to the
local people of the place, where he is establishing his business
unit or is performing the business activities. He should invest
capital in such business which may provide employment to a large
number of people. The business has also the responsibility of
providing employment to the members of the community.

5. To Improve Standards of Living: The Entrepreneur should make

all possible efforts to improve the standard of living of the public.
For that, scholarships may be granted to the children of the
employees and other students, employment facilities, suiting
disabled persons and orphans may be provided for. Besides,
encouragement may be provided for various socially useful
programs of the country, like, family welfare and small savings,
etc.

6. To Promote Public Relations: The Entrepreneur should provide

information to the public about the policies and activities of his
business or business organization and should try to understand
the feelings of the common man.

ETHICAL ISSUES IN ENTREPRENEURSHIP:

A. The Problem of Just Wage = Work is said to be for the purpose of obtaining
economic gain for the laborer; most agree that work is directed to the promotion
of life. The duty to preserve one’s life implies the duty of work and that each has
a personal duty to take care of himself and not to be burden to others. Being
compensated for a work done or for services rendered is part of the essence of
“work”. One is willing to work in exchange for remuneration or rewards he will
receive from working. Such remuneration may include both financial and non-
financial compensation. It can be in the form of wages, shares on profit, harvest
or commercial goods, in-kind payments, and other remunerative fringe benefits.

B. Gift-Giving and Bribery = Gift-Giving is merely an act of extending goodwill to

an individual in an effort to share something with them. Giving gifts to customers,
clients, and business partners is a common practice in the business community.
It is normally observed during special occasions like Christmas, New Year and
sometimes even during Birthdays. Bribery is defined as a practice of giving
renumeration for performance of an act that is inconsistent with the work contract
or the nature of the work one has been hired to perform. It is intended to induce
decisions that would not be justifiable according to normal business or other
criteria. It was then identified to be a form of corruption and is generally immoral
and for most is illegal. Renumerations, termed as bribes, can be in the form of
money, gifts, entertainment, or preferential treatment.
 C. Unfair Competition = Is competition good or bad? Competition is healthy and
can be a motivation for Entrepreneurs to produce better products or offer better
services. Without competition, Entrepreneurs can just relax and quality will suffer.
Thus, competition becomes bad only when it eliminates a competitor like in a
cutthroat competition. Some practices include under cost selling or selling their
products below cost just to get rid of their competitors.

Different Kinds of Competition:

1. A monopoly is defined as a market situation where there is only
one provider of a kind of product or service. It is an extreme
type of imperfect competition characterized by a lack of
competition and a lack of viable substitute goods.
2. An oligopoly, on the other hand, denotes a situation where there
are few sellers for a product or service. It is a type of imperfect
competition where they can’t dictate price like a monopoly can
but the members of an oligopoly often turn into friendly
competitors, since it is all in the members’ interest to maintain a
stable market and profitable prices.
3. Perfect competition is a situation in which no firm or consumer is
large enough to dictate prices. The prices are dictated by the
law of supply and demand which states that when the supply is
scarce, the prices go up and when the demand goes down, the
prices will go the same way.

D. Unfair Communication
 Conveying the point without offending the audience = While communicating with
the audience, expressing the desired message to them in a significant manner is of
primary importance. Strong conversation skills can make a big difference in the
workplace. Knowing how to share an attentive, friendly discussion will give you more
confidence and help you build better relationships. As you improve your skills, you’ll
become a more thoughtful listener, give sharper responses, and learn how to handle
common mistakes. For instance, the employees in a company can be asked to
increase their efficiency in a demanding manner whereas managers and executives
will feel offended if the same tone is used on them. There are different ways to explain
the exact things to them in a much smoother manner.

 Maintain a relationship with the audience = Maintaining the same wavelength

with the audience is very important for a communicator to ensure the audiences feel at
home. Experienced communicators immediately build a relationship based on trust
with the audience as soon as they start speaking. As the audience shares, ask
relevant questions to give them further chances to express themselves. Be curious
about the audience! For instance, if they’re talking about a tough presentation they just
gave, ask how they felt when they finished.
> Avoid withholding crucial information = In the modern era, information is vital for all
decision. Hence, it is essential for any organization to be cautious when
communicating with titanic. The related information should be absolute, and all crucial
information must be passed on appropriately. Purposely withholding crucial
information might result in the public conceiving a bad image.

 Well organized value system = In order to ensure that this concept is successfully
practiced and understood in an organization, a well-organized value system must be
established throughout the organization by the top management. If an organization
functions on the base of value systems common to both the top management and the
employees, mutual respect between them will be present. A sound and healthy value
system can make way for ethical communication.

 Accuracy of information is necessary = Any information that is to be passed on

must be true and accurate. Communicating without checking the truth of the
information can be highly dangerous for the organization. Identification of the source
and testing the information is necessary before communicating it.

E. Ethical Agreement = An ethical agreement is usually set to moral guidelines for

conduct within an organization, at an event, or during a transaction. A person
is usually presented with the agreement before they are allowed to join or
continue with the transaction. Organizations often publish their ethical
agreements and standards as means of promoting trust and a declaration of
intent.

F. Environmental Degradation

1. Demographic Displacement = Rising sea levels are one of the top

environmental factors that threaten business as usual. Your marketing
department has the flexibility to follow its target market from north to
south, urban to rural, but vast migrations of people in coastal cities
would be difficult if not impossible to track, especially when they are
fleeing flooding or the threat of severe storms. Natural disasters brought
about by a warming planet could cause the disintegration of your
company’s client base. Similarly, residents of areas experiencing severe
drought will be displaced and forced to relocate, further disrupting your
company’s carefully planned marketing outreach. In addition, the World
Health Organization reports an increase in infectious disease due to
climate change that would certainly affect consumer markets.

2. Shifting Food Supply = Agriculture and fisheries depend upon

specific climatic conditions, according to the EPA. Warming seawater is
bringing about shifts in ocean ecosystems. If you own a restaurant,
provide food service or cater executive events, scarcity of shellfish,
salmon, halibut, tuna and other ocean catches will force menu changes
and ultimately make it more difficult for you to supply your clientele.
 Climate change affects crop yields, too, causing shortages in the food
supply chain as well as losses for farmers. Business Insider reports that
as much as 63 percent of the world’s top wine-growing regions may be
in jeopardy by mid-century because grapes are extremely sensitive to
changes in temperature.

3. Inflation = Direct and indirect increases in the cost of food and goods
typically follow supply shortages, and inflation affects all aspects of the
economy.

4. Uncertainty = Civil unrest will increase with the uncertainty of a

changing climate. Compounded with rising sea levels that cause
displacement and drought that exacerbates famine and disease, civil
unrest disrupts business as usual with looting, theft and destruction of
property. If your establishment is a storefront, it could suffer physical
destruction. If it is online, it could be hacked and your customers’
sensitive personal information stolen. When crisis triggers people’s
survival instincts, fear and uncertainty drives aberrant behavior and
lawlessness.

5. Expense = Depending upon the kind of business you own, you may
need to budget for equipment upgrades or retrofits to make it cleaner
and greener.

Models and Frameworks of Social Responsibility in the practice and sound of

business:

 Traditional Conflict Model = In the traditional conflict model for corporate social
responsibility, social values and benefits are seen as in conflict with shareholder
profits. Under this model, corporations opting to practice forms of social
responsibility are likely to see added costs for doing so. Proponents of this
conceptual model generally argue that the nature of business is one of trade-offs
between economic and moral values, and corporate managers will inevitably be
forced to decide between their social and fiduciary responsibilities or their
commitment to shareholder equity value.

 Added Value Model = A second model for conceptualizing corporate social

responsibility is to see social and environmental commitments as a means to
increase profit. While proponents of this model tend to acknowledge that conflicts
persist in business decisions, they also believe that CSR investments are also
capable of generating new revenues. This model tends to focus on issues like
the value of CSR in attracting socially conscious consumers, finding socially
conscious employees and managing the risks of negative press.