CHAPTER 7

SOCIAL RESPONSIBILITY OF
ENTREPRENEURS
• As Citizens of the Republic, it is our responsibility to obey the laws of
our country. It is likewise our responsibility to help our neighbors
whenever they need help. As responsible citizens, it is our duty to
vote during election time. We respect human dignity-whether the
person is white or black, whether schooled or unschooled or whether
rich or poor.
• When we become entrepreneurs are we still responsible to our
fellowmen, to our community and to our country? In our desire to
maximize profits, are we going to cheat our customer, exploit our
employees, and dump our wastes into the air, water and land? All of
these are the opposite of social responsibility. As a result, we have
adulterated products, aside from wrong weights and measurements.
Many of our workers are underpaid. Our environment is being
destroyed or polluted.
Social Responsibility Explained
• The concept of social responsibility has various meanings to different
individuals. For instance, to a banker his social responsibility is to lend money
even to the poor producers, and not only to the rich ones. To manufacturers,
their social responsibility is to create quality products, and not to pollute the
environment. To the rich, their social responsibility is to share their excess
wealth with the less fortunate.
• What then is the social responsibility of entrepreneur? Professor Howard
Bowen defines it as “the obligations of business to pursue their policies, to
make those decisions, or to follow those lines of actions which are desirable in
terms of the objectives and values of society. “Such definition is rather broad
and philosophical. Let us define social responsibility in more specific and
practical terms. What exactly is the social responsibility of the entrepreneur or
businessman to his customers, suppliers, stockholders, fellow businessmen,
government, to the community and to his employees? Such business
relationships are measured by fairness, honesty and justice.
• The entrepreneur must sell quality products at fair price. He must also
be fair with his suppliers by paying them on time as agreed upon. He
must give reasonable profits to stockholders for their investment. He
must pay the correct amount of taxes to the government. He must
promote the welfare f his employees. He must observe business ethics
with his fellow businessmen. Equally important is the social
responsibility of the entrepreneur to his community in terms of job
creation and environment conservation.
Theory on Social Responsibility
• Economic Model. This is based on the traditional concept of business. That is, the
primary objective of business is to earn a reasonable profit, as well as to offer quality
goods and services, and to provide employment.
• Socio-economic Model. It believes that businessmen have their responsibility to
stockholders as well as to their employees, customers, suppliers, and the general public.
It stresses not only profit, but also the implications of business decisions on society.
• Classical Model. An enterprise is socially responsible if it stresses to use as efficiently as
possible the resources at its disposal in producing the goods and services that society
needs at a price consumers are willing to pay. Milton Friedman, a noted monetary
economist, is a follower of the classical view. He said that there is only one social
responsibility of business: to use its resources and engage in activities designed for profit
so long as it stays within the rules of the game.
 Social Responsibility
Argument for Social Responsibility Argument against Social responsibility

• Business cannot and should not ignore social • Business managers are primarily responsible to
problems because it is a part of society. stockholders. Thus, their job is to earn profit for
their investors.
• Business has resources, like financial,
technical and managerial, that are required for • The resources of the enterprise: time, money and
solving social problems. talent should be used to maximize profit, not to
solve the problem of society.
• Business can earn more profits in the long run • The effects of social problems on society is very
by helping eliminating or reduce social general. Business should not be expected to solve
problems. such problems.
• Business can expect less government • Social problems are the responsible of the
intervention if it performs its social government officials. They were elected basically
responsibility. to solve social problems. This is their fundamental
responsibility to the voters.
Social Responsibility to consumers

If there are human rights, there are also consumer rights. However, consumers are not strongly
protecting their rights against capitalist exploitations. Although there are now several organizations of
consumers, their power is hardly felt. It was President John Kennedy who introduced the four basic
rights of consumers. These are:
a. The right to safety. This means products are safe for their intended use, contain clear and complete
instructions for their proper use, and have been tasted by the manufacturers for quality and reliability.
b. The right to be informed. This refers to the availability of complete and correct information about
the use of the products. For example, food items must contain detailed information on their
ingredients.
c. The right to choose. It is the policy of the government to encourage competition among sellers or
producers, so that consumers can choose the best products in the market. This is good because
through competition, goods and services have better quality and lower prices.
d. The right to be heard. This is based on the concept “the customer is always right” Sellers should
listen to their buyers and act immediately on their complaints.
Social Responsibility to the Community
• The price of economic growth is destruction of the environment through
pollution of the air, land, water. Such pollution has adversely affected the
lives of both human and animal, lives as well as those of the plant
kingdom. As s result, the incomes of farmers and fishermen have declined.
These are the evils created by industrial enterprise.
• Man-made chemicals and volcanic gases contribute to the rapid
destruction of the ozone layer. Countries mostly affected by the depletion
of the layer are Northern Europe, Russia, Canada, Chile, South Argentina
and the South Pole. Chemicals emitted by air conditioners, refrigeration
and aerosols cause massive destruction of the ozone layer.
Business Ethics

• Ethics is the study of right or wrong. It is a moral choice by an individual. In business, it is the
application of moral standards on business decisions and actions. Business ethics involves
relationships with employees, investors, customers, creditors and competitors. There are many
businessmen who are not fair and honest in dealing with the said groups. For instance, they
exploit their workers. They do not pay their creditors on time. They cheat their buyers by
selling poor quality products or use wrong weights and measures.
• Peter Drucker, internationally famous management consultant said:
• “The first responsibility to society is to operate at a profit …. Business is the wealth-creating
and wealth-producing organ of society… But what is most important is that management
realizes that it must consider the impact of every business policy and business action upon
society. It has to consider whether the action is likely to promote the public good, to advance
the basic beliefs of society, to contribute to its stability, strength and harmony… the ultimate
responsibility of management, to itself, to the enterprise, to our heritage, to our society and
to our way of life.”