Rajasthan Board RBSE Class 12 Business Studies Chapter 14 Social Responsibility of Management and Corporate Social Responsibility
RBSE Class 12 Business Studies Chapter 14 Textbook Exercise
RBSE Class 12 Business Studies Chapter 14 Very Short Answer Type Questions
Question 1.
What is Social Responsibility?
Answer:
There are many expectations of the society from the management. Management works hard to fulfill those expectations. This is called social responsibility. Society provides various inputs to business enterprises, and in return, it expects certain things to be fulfilled by business enterprises. This is the social responsibility of the business enterprise towards the society.
Question 2.
Write down any one definition of social responsibility.
Answer:
H. R. Bowen defines, “Social responsibility refers to the obligations to pursue those policies, those decisions or to follow those lines of actions which are desirable in terms of the objectives and values of our society.”
Question 3.
What is meant by social consciousness?
Answer:
Meaning of social consciousness: Awareness, alertness of the society. The society must be aware of the fact that basic requirements of a business enterprise is fulfilled by the society. Therefore, the business enterprise and management should be responsible to fulfill the expectation of societies. Social welfare refers to the programme to reduce unemployment, poverty, hunger and providing quality products at reasonable cost.
Question 4.
What is meant by corporate body?
Answer:
Corporate body is a system by which a company is directed and controlled.
RBSE Class 12 Business Studies Chapter 14 Short Answer Type Questions
Question 1.
Describe in brief the concept of social responsibility of management.
Answer:
Management is an economic and social motivator of the society. Therefore, management needs to develop social and economic values, securing the benefits of customers, fulfilling the expectations of the different sectors or sections of the society, males and females, youngsters and children, working women, poor, unemployed, etc. Through different programmes and schemes, the management trains the society for its upliftment and welfare. All these activities are included in concept of social responsibilities of management.
Question 2.
Explain the new concept of social responsibility of business.
Answer:
Earlier social responsibility of management was restricted to welfare activities, but since the mid 20th century, concept of social responsibility has totally changed, which is called the new concept of social responsibility. The real nature of management is humane and social because it is the trustee of the society’s resources.
Therefore, management has to behave according to the society’s expectation. From the last few years, the society has new expectations from the management, like providing leadership for fighting against social evils. Today, the main duty of management is to change the behaviour of the society according to the modern world. Therefore, it is clear, that the new social concept is a wider concept which inspires the management to take decisions by keeping society’s benefit in mind. It emphasises on running the business without any unfavourable or negative impact on social beliefs, quality of life, stability, integrity. This motivates the management to make schemes and programmes which can solve the problems of the society and help it to grow and develop.
Question 3.
Explain in brief the social responsibilities of management towards itself.
Answer:
Following are the obligations of management towards own self:
- To take rational decisions, keeping in mind the social interest.
- To respect the profession.
- To get the membership of professional organisations.
- To follow professional code of conduct.
- To show professional courtesy.
- To contribute towards the development of managerial research and knowledge.
Question 4.
Explain in brief the responsibilities of business towards consumers/ customers.
Answer:
Consumer is the king of the market. Consumer’s satisfaction is the key to business success. The government protects the interest of consumers. So any complacence in this regard can be fatal to the business. Under these circumstances the management has to fulfill some responsibilities towards them, which are :
- To study about their needs, wants, tastes, likings, etc.
- To supply right quality and quantity of goods and services to consumers at reasonable prices.
- To offer products of uniform standard.
- To ensure fair distribution of products.
- To refrain from indulging in profiteering, hoarding, creating artificial scarcity of products.
- To provide prompt and quick services to the consumers.
- To handle consumer grievances promptly.
- To refrain from misleading product-promoting practices.
- To do research on markets, consumers and the goods of consumer utility.
- To respect consumer protection laws.
- To inform the consumers about the usage and features of products.
- To follow the code of conduct.
Question 5.
Explain in brief the responsibilities of business towards the government.
Answer:
The government plays a significant role in business operations. Therefore, business has a responsibility towards the government in the following ways :
- To abide by the policies, rules and regulations framed by government.
- To operate the business according to government policies.
- To pay taxes and other duties fully, honestly and truly.
- To refrain from corrupting government machinery.
- To make full use of production capacity and license in the business.
- To use economic resources in national interest.
- To be cooperative in operation of national policies and national programmes, small savings, clean India, family welfare, etc.
RBSE Class 12 Business Studies Chapter 14 Long Answer Type Questions
Question 1.
What do you understand by social responsibility of management. Discuss its concepts.
Answer:
Social responsibility :
The society expects various things from management and the management fulfills those expectations of the society. This is known as the concept of social responsibility. The society provides basic needs of business enterprise in return. It is the duty of business enterprises to fulfill its necessary requirements.
Concept of social responsibility:
There are different views of different thinkers and authors on the concept of social responsibility. Some experts are of the view that a manager can discharge his obligation to the society by creating goods and services in exchange of profit within the limits defined by law. Others think that social responsibility is behaviour in reaction to “currently prevailing social norms, values and performance expectations.” Public welfare and community services that come under the concept of social responsibility are poverty alleviation, rural development, health, pollution control, conservation of environment, education and employment, etc.”
Management, as an economic and catalyst agent of society, is voluntarily responsible for the development of economic and social values to safeguard the interest of consumers and to fulfill the aspirations of different sections of society males, females, youths, senior citizens, rural, urban, professional, working women, and to take initiative in launching programmes or plans or missions to prepare for future challenges.
Following are the four levels of hierarchy developed by R. Joseph Monsen in context to social responsibility concept :
- Obeying the law :
Managers feel they are discharging their social responsibility by merely obeying the law. - Catering to public expectations :
Beyond merely obeying the law, social responsibility also caters to public expectations from the business enterprise. - Speculation of public expectation :
At this level, management speculates about public demands and needs and takes the necessary steps to fulfill those needs and demands. - Creation of public expectations: At the highest level of hierarchy, managers not only cater to public demands, but also set standards of social responsibility and want the society to be benefitted by those standards.
Robert D. Hay and Edmund R. Gray (1980) identified three phases in the development of social responsibility.
(i) Profit maximising management :
In this phase, the only objective of managers was to maximise profits and it was seen as a vehicle for eliminating economic scarcity. This concept is based on Adam Smith’s famous creation ‘Wealth of Nations’. This states that a business unit will produce only when it earns profit from producing the goods. The philosophy behind this concept is, “what is good for me is good for my country”.
(ii) Trusteeship management :
This concept is inspired by the Great Depression. It is accepted that managements objective is not limited to maximising profit, but it also has responsibility towards different stakeholders like employees, customers, suppliers, banks and the community. With this approach management should protect the interest of shareholders as a trustee of the organisation, in this way, it is assumed that what is good for an enterprise is good for the entire nation.
(iii) Quality of life management :
In this phase, companies are expected to solve major social issues according to their knowledge of resources. This approach is based on this notion “what is good for the society is good for our company.” Accepting profit maximisation, believing in quality life, the management will not produce and sell goods that are harmful for society. It works on the basis of public acceptance and wants its work to be evaluated by the society.
New concept of social responsibility :
Earlier concept was restricted to welfare activities, but since the mid 20th century, the concept of social quality of life management, social responsibility has developed as a social obligation, social responsiveness and social performance. The real nature of management is humane and social because it is the trustee of The society’s resources.
According to R. Ackerman :
“In years, society is having new expectations from management. Important among them is to provide leadership in eliminating social evils.” According to Edward Cole, “Today, the biggest challenge before the management is to evaluate the continuously changing social aspirations and to act in socially desirable manner.”
Therefore, it is clear that the concept of social responsibility is a compressive concept, which encourages the managers to make decisions, keeping in view the values of social interest. In short, the social responsibility of management can be studied under three phases, which are as follows :
- Lowest level :
Social responsibility/obligations : At this level, the management has the obligation to work for social betterment according to the prevailing laws and economic system. Managers feel that they are discharging their social responsibility by merely obeying the laws or working for their self interest. - Middle level :
At this level, social responsibility transcends social obligation, being actually of a higher level, where it is congruent with the prevalence of norms, values and expectations in terms of performance. Management, at this stage, does not consider public issues or social issues. - Highest level :
At this level, adaptation of corporate behaviour to the social needs is done. This is a step of anticipation and prevention. At this stage, management gets aware, proactive, sensitive, towards social issues, social problems and important global issues. The management anticipates the social changes and problems with development of approach and effective policies to meet these needs.
Question 2.
Explain in brief the social responsibilities of business.
Answer:
Under management, the scope of social responsibilities is diversified. Management plays a wide role in shouldering social responsibilities. Management’s duties or obligations towards different stakeholders can be understood by the following:
Management’s social responsibility towards important groups are as follows :
(i) Towards ownself and their profession :
- To take rational decisions, keeping in mind social interests.
- To respect the profession.
- To get the membership of professional organisations.
- To follow the professional code of contact.
- To show professional courtesy.
- To contribute towards the development of managerial research and knowledge.
(ii) Responsibility towards their business organisation :
- To operate successfully the business of the organisation.
- To create demand for business unit’s products/services.
- To maintain competitive strength of organisation.
- To promote innovations in business.
- To expand and grow the business.
- To encourage research and development activities/plans.
- To maintain profit earning capacity of the firm.
- To build and enhance the goodwill and public image of the business.
(iii) Towards the owners :
- To work as a custodian of capital contributed by owners, thereby ensuring the safety of capital.
- To share appropriate information with owners.
- To ensure regular payment of return on capital.
- To add value to the capital on a continuous basis to ensure capital appreciation.
- To give equal treatment to all shareholders and work as their trustee.
- Not to make private gains and not to do any fraud/embezzlement.
- To provide regular, accurate, and complete information about the company’s working, as well as schemes of future growth.
(iv) Responsibility towards creditors
- To make productive use of debt money.
- To keep fair conditions of interest and principal amount while taking loans.
- To make regular and timely payment of interest and the principal amount borrowed.
- To keep custody of mortgaged assets.
- To make available the required information to the creditors.
(v) Responsibility towards workers
- To pay fair wages/salaries and deal fairly with employees.
- To implement incentive wage plans.
- To provide safe working conditions.
- To provide healthy working conditions.
- To give them job security.
- To implement labour welfare programmes.
- To give meaningful work to the employees, according to their qualification and skills.
- To organise training and development programmes for the overall development of employees.
- To fulfill statutory requirements for safety of workers.
- To give fair chances of promotion.
- To give fair share of bonus and profits.
- To provide opportunities of career growth and personality development.
- To give workers, than chance to participate in management.
(vi) Responsibility towards consumers
- To study about their needs, wants, tastes, likings, etc.
- To supply the right quality and quantity of goods and services to the consumers at reasonable prices.
- To offer products of uniform standard.
- To ensure fair distribution of products.
- To refrain from indulging in profiteering, hoarding, creating artificial scarcity of products.
- To provide prompt and quick service to consumers.
- To handle consumer grievances promptly.
- To refrain from misleading product-promotion practices.
- To do research on markets, consumers and the goods of consumer utility.
- To respect consumer protection laws.
- To inform the consumers about the usage and features of products.
(vii) Responsibilities towards suppliers
- To provide fair prices for the goods offered.
- To determine/put fair conditions of purchase.
- To make timely payments to creditors.
- To give opportunities to suppliers to offer raw material of new type.
- To provide necessary market information.
(viii) Responsibilities towards other business :
- To maintain healthy competition.
- Not to oppose and criticise other competitive business units.
- To encourage cartels or unions for business efficiency and to promote the society’s interest.
- To refrain from monopoly and unfair trade practices.
- Not to use the trademark, brand, etc. of other business competitors.
(ix) Responsibility towards trade associations and professional organisations
- To get membership of chamber of commerce and other business associations.
- Not to make wrong use of literature published by them.
- To follow their code of conduct made for members.
- To give chance to the member students of these organisations to serve the business units.
- To provide monetary contribution for implementation of programmes started by them.
- To attend and participate in their meetings and to perform important discussions on related topics.
(x) Responsibilities towards the community
- To adopt socially desirable behaviour and standard of living, avoiding ostentation and wasteful expenditure.
- To play a fair role in civic affairs.
- To provide and promote general amenities and help.
- To create better living conditions in general.
- To conserve and preserve the natural wealth.
- To contribute towards development of backward areas.
- To preserve and promote social and cultural values.
- To provide employment opportunities to local people.
- To protect the environment from pollution.
- To establish public welfare institutions like schools, hospitals, night shelters for the poor, etc.
- To provide economic help to females, and the disabled and weaker sections of society.
(xi) Responsibility towards government
- To abide by the policies, rules and regulations framed by government.
- To operate the business according to government policies.
- To pay taxes and other duties fully, honestly and truly.
- To refrain from corrupting government machinary.
- To make full use of production capacity and license in the business.
- To use economic resources in national interest.
- To be cooperative in operation of national policies and national programmes : small savings, clean India, family welfare, etc.
(xii) Responsibility towards the world
- To provide assistance in promoting international trade.
- To refrain from intervening in business policies or internal matters of other nations.
- To adopt international technology and techniques.
- To follow the business ethics and norms of international business.
- To respect the social and cultural values of trading nations. .
- To provide technical and managerial assistance to developing and backward nations.
- To establish business/industries in backward countries.
- To be concerned about healthy competition, just behaviour and cordial relations with other countries.
Question 3.
Explain the provisions for Corporate Social Responsibilities under Companies Act, 2013.
Answer:
Following are the provisions under Companies Act, 2013:
(i) Applicability :
Every company having a net worth of rupees five hundred crore or more, or a turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a corporate social responsibility committee of the board consisting of three or more directors, out of which at least one director shall be an independent director. [Section 135(1)]
(ii) Expression in board report :
The board’s report under sub-section (3) of Section 134 shall disclose the composition of corporate social responsibility committee. [Section 135(2)]
(iii) Functions of corporate social responsibility committee :
- Formulate and recommend to the board, a corporate social responsibility policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII.
- Recommend the amount of expenditure to be incurred on the activities referred to in Clause (a)
- Monitor the corporate social responsibility policy of the company from time to time. [Section 135(3)]
(iv) Action taken by board :
The board of every company referred to in sub – section (1) shall:
- After taking into account the recommendations made by the corporate social responsibility committee, approve the corporate social responsibility policy for the company and disclose the contents of such policy in its report and also place it on company’s website, if any, in such manner as may be prescribed.
- Ensure that the actitivites as are included in corporate social responsibility policy of the company are undertaken by the company. [Section 135(4)]
(v) CRS Expenditure :
The board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent of the average net profit of the company made during the three immediately preceding financial years, in pursuance of its corporate social responsibility policy. [Section 135(5)]
(vi) Preference to local areas :
That the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for corporate social responsibility activities. [Section 135(5)]
(vii) Mention of Failure to Spend :
That if the company fails to spend such amount, the board shall, in its report made under clause (O) of sub-section (3) of Section 134, specify the reasons for not spending the amount. [Section 135(5)]
(viii) Calculation of net profits :
For this purpose, average net profit will be calculated in accordance with the provisions of section 198.
(ix) Other Functions of Social responsibility :
- Every company including its holding or subsidiary and a foreign company defined under Clause (42) of Section 2 of the Act having its branch office or project office in India, which fulfils the criteria specified in sub section (1) of Section 135 of the Act.
- A company may also collobarate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.
- Subject to provision of sub-section (5) of Section 135 of the Act, the CSR projects or programs or activities undertaken in India only shall amount to CSR expenditure.
- The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with Section
135 of the Act. - An unlisted public company or a private company covered under sub section (1) of section 135 which is not required to appoint an independent director pursuant to sub-section (4) of Section 149 of the Act shall have its CSR committee without such director.
- A private company having only two directors on its board shall consitute its CSR committee with two such directors.
- The CSR committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.
- CSR expenditure shall include all expenditure including contribution to corpus for projects or programs relating to CSR activates approved by the board on the recommendations of its CRS committee, but shall not include any expenditure on an item not in line with activities which fall within the purview of Schedule VII of the Act.
- CSR reporting : The board’s report of a company covered under these rules pertaining to a financial year commencing on or after the 1st day of April, 2014, shall include an annual report on CSR containing particulars specified in annexure.
- In case of a foreign company, the balance sheet filled under sub clause (b) of sub section (1) of Section 381 shall contain an annexure regarding report on CSR.
RBSE Class 12 Business Studies Chapter 14 Additional Questions
Question 1.
Define provisions under section 135(1) of Companies Act, 2013.
Answer:
Every Company having a net worth of rupees five hundred crore or a turnover of rupees one thousand crore or more or a net profit of rupees five crore or more, during any financial year, shall constitute a corporate social responsibility committee of the board consisting of three or more directors, out of which at least one director shall be an independent director. [Section 135(1)]
Question 2.
How much expenditure can a company make under corporate social responsibility policy ? How is the profit calculated and under which section?
Answer:
The board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent of the average net profit of the company made during the three immediately preceding financial years, in pursuance of its corporate social responsibility policy. The above provision is under Section 135 and sub section 135 (5) of Companies Act, 2013.
Question 3.
What is said in section 135 (3) of Companies Act, 2013?
Answer:
Following are the points which are said in section 135 (3) of Companies Act, 2013 :
- Formulate and recommended to the board, a corporate social responsibility policy which shall indicate the activities to be undertaken by the company as specified in schedule VII.
- Recommend the amount of expenditure to be incurred on the activities referred to in Clause (a).
- Monitor the corporate social responsibility policy of the company from time to time. [Section 135(3)]
Question 4.
Explain the management’s responsibility towards the creditors in brief.
Answer:
The creditors or investors or lenders play an important role in meeting the financial requirements of business. Therefore, the management has to fulfill the following obligations towards them :
- To make productive use of debt money.
- To keep fair conditions of interest and principal amount while taking loans.
- To make regular and timely payment of interest and the principal amount borrowed.
- To keep custody of mortgaged assets.
- To make available the required information to the creditors.