L.11 - Social Obligation

Those who are truthful entrepreneurs, Know them as 'Gurus' divine, Learn from them pragmatic experience, As if it is knowledge divine.

Udyam Shastra- Chapter 10, Verse 3

Key Objectives:

The students explore the importance of ethical behavior in their own lives and consider a business's responsibility to its employees, customers, stockholders/shareholders, and the community. They discuss the extent and limits of those responsibilities by acting as members of a corporate board of directors facing a variety of business and ethical dilemmas. Reading this module and doing the students activities will enable the students to:

List examples of ethical business that impact community.

Describe the basic responsibilities a business has eg. its employees, customers, shareholders, and the local community.

Use brainstorming techniques to suggest solutions to management problems.

Enterprise Concepts:

Business ethics.: The sense of conscience i.e. inward monitor that a business/enterprise uses ,is generally referred to as Business Ethics. An entrepreneur has responsibility to:

- his equity holders to be profitable - employees to provide satisfactory working conditions - customers to provide agreed product/service performance. - Community for the effects of his/her business actions and decisions.

Social obligation/responsibility.: The sense of conscience and morality regarding social and community issues may be referred to as the Business Social Obligation/Responsibility.

Opportunity costs. : The cost of something, for instance ‘A’, expressed in terms of what had to be given up ,for instance ‘B’, in order to obtain ‘A’. For e.g. You might give up going to a movie (B) in order to go to a place to finalize a business deal (A) , because the opportunity cost of foregoing the business deal is very high as compared to foregoing the movie.

Enterprise Skills:

The student 'Activities' in each lesson are designed to clarify the ENTERPRISE CONCEPTS of the lesson and develop some ENTERPRISE SKILLS (E.SKILLS). The E.SKILLS included in a lesson may not be exhaustive, but are indicative.

E.SKILLS stated in a lesson elsewhere may also get addressed through the activities of a particular lesson.

Some useful E.SKILLS are dealt with below:

Honesty.: A commitment to refrain from lying to be truthful and sincere in dealings with other people.

Abstract thinking.: Abstract thought are usually in inner working of the mind and may deal with aspects like truth, ethics etc. The latter aspect may not be measurable in concrete terms that we otherwise use for physical objects.Hence abstract thinking usually involves contemplating, introspection and such methods of thinking.



Instruction To Students

  • The students should read each case study thoroughly and then debate the pros and cons of each case. They should answer the questions at the end of each case, based on the views of the group members.

  • After completing the activity, each group should present and share its main discussion points with the rest of the class.

Case Study:

1. A manager of your snacks counter has been able to save money & increase profits by using lesser slices of tomatoes in the sandwiches than what you had designed for the price you have set. Should the manager be allowed to continue this?

2. Your Company manufactures tin toys for older children. However, several toddlers also start playing with the same toys when these are lying around in the house. Recently several infants have been cut or bruised by the sharp edges of some of these toys.

Should you recall the toys, advertise warning about it on the toy packaging, quietly develop a different product that will be safe for children of all age groups, or stop making altogether? What is your responsibility to customer who buys? What is your responsibility to the children who play with the toys? What is your responsibility to your equity holders?

3. Your production supervisor advises you that your factory can double the number of domestic appliances it makes & save money by replacing 3 workers with a new automatic computerized machine. How do you decide whom to lay off? What is your responsibility to these workers? To your shareholders?

4. In a profit making time, your ‘Ready-made-Garments’ company established a scholarship programme for your employees. Now with market down, your accounts department recommends you to end the programme. What is your responsibility to your employees? To your partners?

5. Like most restaurants, yours restaurant too produces waste materials. You contracted with a private garbage collector to dispose off the materials. But recently you learned that he is not putting the garbage into the municipal garbage collection centers, but throwing it into the corner of a school’s play-field when no one is watching. So far there has been no complaint, and the school authorities are unaware of the problem. What are your responsibilities to the community?

6. Your electrical appliances repairing unit uses a single phase low wattage electric connection. The operations are going on satisfactorily. A electricity department inspector has just concluded that from safety point of view , you should go in for higher wattage three phase connection. This will involve installation costs and higher power tariffs. What is your responsibility to the government department? To your employees? To your Equity holders?

7. You have a two-wheeler repair garage, which is known, in the town for high quality of repair. Recently you came to know that in the repairs done last month, a mechanic has used sub-standard spare parts against the genuine high quality, costlier spare parts. But the customers were anyway charged for the costlier parts. The customers are not likely to find out the difference in the spare parts just now. But the sub-standard parts will wear out faster than the genuine parts. What will you do as entrepreneur? What is your responsibility to your customer? Will you explain the matter to the customer and return the extra amount billed to them? Will you call back the two wheelers and replace with genuine spare parts at your own cost? What is your responsibility to partners who have put money into your business to get better profits? What will you do about the employee who wanted to improve the profitability by using substandard spares?

Work Sheet:

Students may use this space for writing answers to the case-study.