Course Title: Business and Society

Class: BBA-I
Course Instructor: Binish Nida Afaque

CHAPTER - 1

CORPORATE SOCIAL POLICY: THE ISSUES AND CHALLENGES

Business “success” is judged, not simply by a company’s technological or

financial performance, but by how well that company interacts with and serves
social, legal, political, governmental, and broad human interests.

1. BUSINESS’S COMPLEX SOCIAL ENVIRONMENT

i) The International Dimension

• Geopolitical maneuvering: Business interests are vitally

affected by geopolitical strategies of great nations and by
relationships among them. E.g. arms manufacturers and
military contractors profits from geopolitical tensions.

• Global competitive pressures: such pressures may make or

break companies or industries. E.g. Pakistan’s textile
industry suffered huge loss as it faced intense competition
from global competitors after WTO regime.

• Contradictory cultural standards: They may pose serious

questions of morality for business. Revolutionary changes of
government may lead to loss of company’s facilities.

• Terrorism: To promote certain political view, terrorist may

target companies.

• Warfare: This may interfere supply lines, destroy installations

and infrastructures or may wipe out markets.

• Indigenous religions: May oppose modernism introduced by

business products and technology.

• Tensions between rich and poor countries: These tensions

may lead some citizen action groups and international
organizations to condemn United States and other
developed countries for exploiting the poor countries and
enriching themselves.

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ii) The Regulatory Dimension

Govt. regulations add to the costs of doing business. The most

effective companies must learn to cope with governmental
regulations; they understand that the regulations frequently
represent social goals and priorities considered to be important by
a society.

iii) The Political Dimension

Politicians are important participants in debates about business and

economic policies. Sometimes politicians produce results e.g. Tax
laws or import protections.

iv) The Technological Dimension

• Innovations that give competitive advantage to a firm are

welcome
• Technological surprises by competitors and technological
crisis are not so welcome
• Technology may improve productivity but at the expense of
employees’ jobs and security.

• One industry’s technological improvement may be another’s

bad news

v) The Value Dimension

• Ethics and values have significant impact on business activities.

• Rising interest in health, nutrition, and wellness has created new
markets.
• Minorities and women have brought new values to the workplace.
They insisted on larger measures of social justice in the work place.
• Religious groups and social activist often reflect and anticipate
society’s shifting value priorities and ethical orientations.

vi) The Knowledge Dimension

• Converting information into useful knowledge is a big task for

today’s business firms.
• Corporations are more vulnerable to being attacked and criticized
by outside groups because of easy access to information

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 2. MANAGEMENT’S NEED FOR ENVIRONMENTAL KNOWLEDGE

i) Corporate Strategic Planning

Strategic management is a field that deals with the major intended and
emergent initiatives taken by top managers on behalf of owners, involving
utilization of resources, to enhance the performance of firms in their external
environments. It entails specifying the organization's mission, vision and
objectives, developing policies and plans, often in terms of projects and
programs, which are designed to achieve these objectives, and then allocating
resources to implement the policies and plans, projects and programs. A
balanced scorecard is often used to evaluate the overall performance of the
business and its progress towards objectives. Recent studies and leading
management theorists have advocated that strategy needs to start with
stakeholders expectations and use a modified balanced scorecard which
includes all stakeholders.

Strategic management provides overall direction to the enterprise. In the field of

business administration it is useful to talk about "strategic alignment" between
the organization and its environment or "strategic consistency." There is strategic
consistency when the actions of an organization are consistent with the
expectations of management, and these in turn are with the market and the
context." Strategic management includes not only the management team but can
also include the Board of Directors and other stakeholders of the organization. It
depends on the organizational structure.

“Strategic management is an ongoing process that evaluates and controls the

business and the industries in which the company is involved; assesses its
competitors and sets goals and strategies to meet all existing and potential
competitors; and then reassesses each strategy annually or quarterly [i.e.
regularly] to determine how it has been implemented and whether it has
succeeded or needs replacement by a new strategy to meet changed
circumstances, new technology, new competitors, a new economic environment.,
or a new social, financial, or political environment.”

ii) Public Policy toward Business

Public policy refers to governmental actions taken to promote the general public
interest. Many public policies ranging from taxes to national defense to protecting
the environment affect business directly. These policies often make the
difference between profits and failure.

E.g. U.S. auto manufacturers gained relief from Japanese competition when the
two governments agreed on a plan, a public policy, to limit imports of Japanese

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cars into United States. Earlier Chrysler was saved from bankruptcy by a bailout
plan enacted by Congress.

A company needs to know how to communicate the company’s needs to the

proper authorities at the right time and in appropriate language, and how and
when to take legal action in its own interest.

iii) Ethical Standards and Social Values

Ethics and values are standards of right and wrong. They keep human behavior
going in right direction. They enable everyone –both individuals and
organizations- to have a general idea of what is acceptable. Company that
matches its own actions to society’s ethical standards is richly rewarded by public
acceptance and approval.

e.g. Jhonson & Jhonson recalled back all of its Tylenol batch, when the product
was decomposed and became toxic for customers.

3. A FRAMEWORK FOR IDENTIFYING ENVIRONMENTAL PROBLEM

i) Fundamental Social Challenges to Business

a. Achieving Ecological Balance: The social challenge to business in

an industrial society, is not to stop all pollution and waste but to reduce
its volume, lessen its burden on society, and help to clean it up once it
occurs.

b. Improving Business and Social Productivity: A society’s

productivity depends on how efficiently it uses its resources. If natural,
human and capital resources are combined and managed effectively
by business firms, then the productively of both business and society
can be high. Productivity is an input-output relationship, where the goal
is to increase the productive output faster than the resource inputs.

New or improved technology, better-educated employees, less red

tape, and higher morale among workers are some key factors that
improve productivity. Sometime when economic costs may be lowered
for the company, social cost may be simultaneously increased for the
community.

Government, too, bears responsibility for society’s productivity,

especially when it imposes rules and regulations on businesses which

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 increase costs without stimulating production or when these added
cost outweigh the social benefits.

c. Acknowledging the Human Element in Work: A third social

challenge is harnessing human skills and talents for productive work
while, at the same time, protecting human dignity and health.

Employees need acknowledgement as the unique individuals.

Employee’s privacy has become more important in recent year

because of computerized data bank, which stored almost all the
relevant information about the employee.

Degree of employee participation in business decision making has

increased. They demanded to end workplace discrimination. Equal
opportunity becomes a social demand that businesses could not
ignore.

Safe and healthy job environment is another requirement that

businesses now have to fulfill. Job security in one’s present job and in
one’s retirement years has high priority for today’s employee.

People attitude toward work has been changed and they give more
time to leisure and non work activities. For this matter business should
adjust its policies and practices.

d. Balancing Ethics and Economics

Ethical problem in business occur when business practices deviate

from society’s notions of what is right and moral. The challenge to
business is to find a balance between these two social demands high
economic performance and high ethical standards.

e. Responding to Global Pressures, Demands, and Needs

The world’s people have become accustomed to business and are

dependent on it for many of their needs. They want what business can
produce.

Business plays its role in boosting economic growth of the world’s poor
nations by making investments in those countries.

Doing business in global scale is far more complex than doing it

domestically, because companies must operate in societies with
differing cultural traditions, laws, values, and public attitudes.

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 The social challenge to business in a global economy is to conduct
operations in ways that acknowledge the world’s economic needs, the
changing competitive scene, and varying cultural patterns.

f. Designing Social Partnerships: Social partnerships bring together

groups that normally compete with and criticize one another, such as
government and business, or management and labor, or
environmentalists and power plant operators, who then work together
to find solutions to common problems.

Social problems are too big and complex, for that, business and
government must come together and work closely to find the solutions.

The core principles that allow the social partnership to operate

successfully are

• All interested groups participate in formulating plans

• Decentralized decision making replaces concentrated power in
business and government
• Cooperation among potential adversaries is used to find a way
out of present difficulties
• A practical- minded “whatever it takes” attitude is adopted by
the social partners
• Voluntary self help is the rule, rather than reliance on
paternalistic government program.
• Government or business acting alone is used only as a last
resort in a critical emergency situation

Social partnerships are useful to business because they are a practical

way to link social needs with business purposes and business talents.