Social Responsibility of Business: Exercise Solutions
How to Use This Page
1. Read the textbook chapter first — these solutions are for revision, not first-time learning. 2. Try each question on your own before checking the answer. 3. Use the Key Concepts table for a quick recap before exams. 4. Review Common Mistakes carefully — many students lose marks confusing ethical vs discretionary responsibility.
Key Concepts (Quick Recap)
| Term | Definition |
|---|---|
| Social Responsibility | Voluntary obligation of business to give back benefits to society from its prosperity |
| Social Power | Decisions and actions of businessmen that affect the lives and fortunes of society |
| Stakeholders | All interest groups in a business: shareholders, customers, employees, suppliers, government, community |
| Economic Responsibility | Business's primary social responsibility — to be economically viable |
| Legal Responsibility | Obligation to operate within the laws of the land |
| Ethical Responsibility | Behaviour expected by society but not codified in law (e.g., respecting religious sentiments) |
| Discretionary Responsibility | Purely voluntary obligations (e.g., charitable contributions, disaster relief) |
| Free Enterprise | Business that accepts social obligations enjoys greater freedom from government intervention |
| Ethics | Derived from Greek 'ethos'; governs behaviour based on moral standards |
| CSR in India | Tata Group is the best example — community improvement, poverty alleviation, women empowerment |
I. Choose the Correct Answer (MCQ)
Q1. Which type of Responsibility gives the benefit to the Society out of its profits earned? (a) Legal (b) Economic (c) Moral ✓ (d) Ethical
Q2. The Stakeholders of Socially Responsible business units are except (a) Shareholders (b) Employees (c) Customers (d) Company ✓
Q3. Assuming Social Responsibility of business helps the enterprise in (a) Profit maximisation (b) Sales maximisation (c) Sustainability ✓ (d) Market share
Q4. Socially Responsible business provides goods at (a) high price (b) low price (c) reasonable price ✓ (d) premium price
Q5. Social Responsibility towards employees represents the following except (a) Timely wages (b) Proper working conditions (c) Job security (d) exploitation ✓
Q6 (Additional). Management of business enterprises is being (a) Professionalism ✓ (b) Socialism (c) Capitalism (d) None of these
Q7 (Additional). Ethics are moral principles and values which (a) guide the actions of an enterprise (b) govern the actions of an individual ✓ (c) govern the actions of a society (d) none of these
Q8 (Additional). The management today is usually sensitive to issues of social responsibility and ethical behaviour because of (a) Consumer pressure (b) Legal and governmental concerns ✓ (c) Trade unions (d) None of these
Q9 (Additional). Business ethics deals primarily with (a) profit maximisation (b) customer satisfaction (c) moral obligation ✓ (d) employee welfare
Q10 (Additional). The factors causing ethical behaviour in business are (a) Personal (b) Organisational (c) Government (d) All of the above ✓
Q11 (Additional). The word Ethics is derived from the Greek word (a) ethos ✓ (b) pathos (c) logos (d) mythos
II. Fill in the Blanks
1. The type of responsibility that gives benefit to society out of profits earned is moral responsibility. 2. Company is NOT a stakeholder — stakeholders include shareholders, employees, customers, suppliers, government, and community. 3. Assuming social responsibility helps an enterprise achieve sustainability. 4. Socially responsible businesses provide goods at a reasonable price. 5. Exploitation is NOT a responsibility toward employees — it is the opposite. 6. Ethics is derived from the Greek word ethos. 7. Business ethics deals primarily with moral obligation. 8. The four kinds of social responsibility are economic, legal, ethical, and discretionary. 9. Peter F. Drucker defined social responsibility as requiring managers to consider whether their action promotes public good. 10. The Tata Group is the best example of CSR in India.
III. True or False (with corrections)
IV. Match the Following
| Column A | Column B |
|---|---|
| 1. Economic Responsibility | (d) Primary responsibility to be economically viable |
| 2. Legal Responsibility | (e) Operating within the laws of the land |
| 3. Ethical Responsibility | (a) Behaviour expected by society but not codified in law |
| 4. Discretionary Responsibility | (b) Purely voluntary (charitable contributions, disaster relief) |
| 5. Stakeholders | (c) Shareholders, employees, customers, suppliers, government, community |
Important Definitions
| Term | Definition |
|---|---|
| Social Responsibility | Voluntary obligation of business to give back benefits to society from its prosperity |
| Social Power | Decisions and actions of businessmen that affect the lives and fortunes of society |
| Stakeholders | All interest groups: shareholders, customers, employees, suppliers, government, community |
| Economic Responsibility | Business's primary social responsibility — to be economically viable |
| Legal Responsibility | Obligation to operate within the laws of the land |
| Ethical Responsibility | Behaviour expected by society but not codified in law |
| Discretionary Responsibility | Purely voluntary obligations (charity, disaster relief) |
| Free Enterprise | Business that accepts social obligations enjoys greater freedom from government intervention |
| Ethics | Derived from Greek 'ethos'; governs behaviour based on moral standards |
| CSR in India | Tata Group is the best example — community improvement, poverty alleviation, women empowerment |
| Moral Responsibility | Voluntary giving back to society from business profits |
V. Answer Briefly (2-Mark Answers)
Q1. What do you mean by Social Responsibility? Every businessman earns prosperity from business and should give back the benefit of this prosperity to society.
Q2. Give the meaning of Social Power: The decisions and actions taken by businessmen affect the lives and fortunes of society. Matters such as level of employment, rate of economic progress, and distribution of income among various groups are determined by business people. This constitutes social power.
Q3. What is a free enterprise? A business enterprise that accepts and discharges social obligations enjoys greater freedom. Social responsibilities are essential for avoiding governmental action against business, which would reduce freedom of decision making.
Q4. Who are called Stakeholders? A business organization is a combination of several interest groups. Shareholders, customers, employees, suppliers, government and its agencies, unions, and the community from which business draws its resources are all called stakeholders.
Q5. What is ethical Responsibility? This includes behaviour of the firm that is expected by society but not codified in law. An example is respecting religious sentiments and dignity of people while advertising. There is a voluntary element in performing this responsibility.
Q6 (Additional). What is Legal responsibility? Every business has a responsibility to operate within the laws of the land. Since these laws are meant for the good of society, a law-abiding enterprise is also a socially responsible enterprise.
Q1. Define the Concept of Social Responsibility: Every businessman earns prosperity from business and should give back the benefit to society. This is voluntary and constitutes a moral responsibility. Since the benefit is meant to be passed on to society, it becomes the social responsibility of business.
Q2. Why do you think the Social Responsibility of business is needed? (i) Self-Interest: A business can sustain itself in the market for a longer period only by assuming some social obligations. (ii) Creation of Society: Business is a creation of society and uses society's resources, therefore it should fulfill its obligations to society.
Q3. What are the benefits derived by employees of a Socially Responsible business enterprise? Timely and regular payment of wages and salaries; Proper working conditions and welfare amenities; Opportunity for better career prospects; Job security and social security (provident fund, group insurance, pension, retirement benefits); Better living conditions (housing, transport, canteen, etc.); Timely training and development.
Q4. Enumerate the points relating to why business units are Socially Responsible: 1. Protection of Stakeholders Interest 2. Promotion of Society 3. Assessment of Social Impact
Q5. List the kinds of Social Responsibility: 1. Economic Responsibility 2. Legal Responsibility 3. Ethical Responsibility 4. Discretionary Responsibility
Q6 (Additional). Define Social Responsibility: Peter F. Drucker defined it: "Social Responsibility requires managers to consider whether their action is likely to promote the public good, to advance the basic beliefs of our society, to contribute to its stability, strength, and harmony."
Q7 (Additional). What are all the facilities that should be provided to the customers? Products and services must take care of customers' needs; Products and services must be qualitative; There must be regularity in the supply of goods and services.
VI. Answer in Detail (5-Mark Answers)
Q1. Explain in detail the concept and need for Social Responsibility: Concept: Every businessman earns prosperity from business and should give back the benefit to society voluntarily. This moral responsibility constitutes the social responsibility of business. Need: 1. Self-Interest: A business can sustain itself longer by assuming social obligations. 2. Creation of Society: Business is a creation of society and must fulfill its obligations. 3. Social Power: Businessmen have considerable social power; their decisions and actions affect society. 4. Image in the Society: A business can improve its public image by assuming social obligations.
Q2. Illustrate with examples the arguments for Social Responsibility: 1. Protection of Stakeholders Interest: A business is a coalition of interest groups. It should work for the interest of all, not just owners. 2. Promotion of Society: Business draws support from society as inputs. Socially responsible behavior sustains the relationship between business and society. 3. Organized Social Power: Large corporations have tremendous social power. There should be equilibrium between social power and social responsibility. 4. Legitimacy: Social responsibility legitimizes and promotes the economic objectives of business. 5. Competence: Business managers have proved competence in solving economic problems; society expects them to use this competence for social problems. 6. Professional Conduct: Professional managers must display social sensitivity. 7. Public Opinion: Adoption of social responsibility improves public opinion. Examples include maintaining parks, traffic islands, and organizing awareness camps.
Q3. What are the arguments against Social Responsibility? 1. Lack of Conceptual Clarity: The concept is vague and amenable to different interpretations. 2. Dilution of Economic Goals: Accepting social responsibility compromises economic goals. 3. Lack of Social Skill: Business managers are not familiar with social affairs. 4. Burden on Consumers: Dealing with social problems increases costs, which are passed to consumers. 5. Responsibility without Power: Businesses possess only economic power, not social power. 6. Misuse of Responsibilities: Acceptance diverts precious managerial time and talent. 7. Lack of Yardstick: Profitability is the common criteria for business decisions; adding social responsibility makes decision-making complex. 8. Improper Role: Business should use resources efficiently to earn the best return on investment. 9. Over Loading Responsibility: Businesses already serve society through goods, services, employment, technology, and tax payments.
Q4. Discuss the different groups that benefited from the Social Responsibility of business: (i) Shareholders/Owners — fair return on investment (ii) Employees — job security, welfare, fair wages (iii) Consumers — quality goods at reasonable prices (iv) Government — tax compliance and lawful operations (v) Community — employment, infrastructure, social welfare programs (vi) Suppliers — fair dealings and timely payments
Q5. How do you classify Social Responsibility? Four categories: 1. Economic Responsibility: Business is basically an economic entity; its primary social responsibility is economic. 2. Legal Responsibility: Every business must operate within the laws of the land. 3. Ethical Responsibility: Behaviour expected by society but not codified in law, e.g., respecting religious sentiments and dignity in advertising. 4. Discretionary Responsibility: Purely voluntary obligations, e.g., charitable contributions to educational institutions or helping during floods or earthquakes.
Q6 (Additional). Explain Corporate Social Responsibility in India with an example: Tata Group is the best example of CSR in India. The conglomerate carries out various CSR projects, mostly community improvement and poverty alleviation programs. Through self-help groups, it engages in women empowerment activities, income generation, rural community development, and other social welfare programs. In education, the Tata Group provides scholarships and endowments for numerous institutions.
Additional Fill in the Blanks
11. Peter F. Drucker defined social responsibility as requiring managers to consider whether their action promotes public good. 12. The four kinds of social responsibility are economic, legal, ethical, and discretionary. 13. Discretionary responsibility is purely voluntary, such as charitable contributions during floods or earthquakes. 14. A free enterprise accepts social obligations to avoid governmental action against business. 15. The factors causing ethical behaviour in business are personal, organisational, and governmental (all of the above). 16. Social power refers to the decisions and actions of businessmen that affect the lives and fortunes of society. 17. Tata Group is the best example of CSR in India.
Additional True or False
Common Mistakes to Avoid
1. Moral responsibility gives benefit to society from profits — Not economic or legal. Economic is business's primary responsibility; moral is voluntary giving back. 2. "Company" is NOT a stakeholder — Stakeholders are shareholders, employees, customers, suppliers, government, and community. The company itself is the business entity. 3. Social responsibility leads to SUSTAINABILITY — Not profit maximization, sales maximization, or market share. 4. Socially responsible businesses provide goods at REASONABLE price — Not high, low, or premium price. 5. "Exploitation" is NOT a responsibility toward employees — It's the opposite. The MCQ asks what does NOT represent responsibility. 6. Ethics derived from Greek word 'ethos' — Not pathos, logos, or mythos. 7. Business ethics deals primarily with moral obligation — Not profit, customer satisfaction, or employee welfare. 8. Ethical vs Discretionary responsibility — Ethical is expected by society but not codified in law; discretionary is purely voluntary (charity, disaster relief). 9. Social power creates social responsibility — Businessmen's decisions affect society (employment, economic progress, income distribution), which creates a duty to be responsible. 10. Management sensitivity is due to legal and governmental concerns — Not consumer pressure or trade unions.
Exam Checklist
- [ ] Can define social responsibility and explain the concept
- [ ] Know 4 kinds of social responsibility (economic, legal, ethical, discretionary)
- [ ] Can list arguments FOR social responsibility (7 points)
- [ ] Can list arguments AGAINST social responsibility (9 points)
- [ ] Know stakeholder groups and their benefits
- [ ] Can explain ethical vs legal vs discretionary responsibility
- [ ] Know the Tata Group as a CSR example in India
- [ ] Understand that social power creates social responsibility
- [ ] Know Peter F. Drucker's definition of social responsibility
- [ ] Can explain why social responsibility is needed (self-interest, creation of society, social power, image)
- [ ] Know the benefits derived by employees from socially responsible businesses
- [ ] Can distinguish between ethical and discretionary responsibility
- [ ] Know that free enterprise enjoys greater freedom by accepting social obligations