NCERT Solutions for Class 11 Business Studies Chapter 6 Social Responsibility of Business and Business Ethics

NCERT
SOLUTIONS
CLASS - 11th

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Book : Business Studies Ncert Solutions | Chapter - 6 Business Studies

Class :11th

Subject : Business Studies
Chapter : 6
Chapter Name : Social responsibility of business and business ethics

Q1 Social responsibility is

a. Same as legal responsibility

b. Broader than legal responsibility

c. Narrower than legal responsibility

d. None of them

Answer. b. Broader than legal responsibility

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Q2 If business is to operate in a society which is full of diverse and complicated problems, it
may have

a. Little chance of success

b. Great chance of success

c. Little chance of failure

d. No relation with success or failure.

Answer. a. Little chance of success

Page : 161 , Block Name : Multiple Choice Questions

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Q3 Business people have the skills to solve

a. All social problems

b. Some social problems

b. No social problems

d. All economic problems

Answer. b. No social problems

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Q4 That an enterprise must behave as a good citizen is an example of its responsibility towards

a. Owners

b. Workers

c. Consumers

d. Community

Answer. d. Community

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Q5 Environmental protection can best be done by the efforts of

a. Business people

b. Government

c. Scientists

d. All the people

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Answer. d. All the people

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Q6 Carbon monoxide emitted by automobiles directly contributes to

a. Water pollution

b. Noise pollution

c. Land pollution

d. Air pollution

Answer. d. Air pollution

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Q7 Which of the following can explain the need for pollution control?

a. Cost savings

b. Reduced risk of liability

c. Reduction of health hazards

d. All of them

Answer. d. All of them

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Q8 Which of the following is capable of doing maximum good to society?

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a. Business success

b. Laws and regulations

c. Ethics

d. Professional management

Answer. c. Ethics

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Q9 Ethics is important for

a. Top management

b. Middle-level managers

c. Non-managerial employees

d. All of them

Answer. d. All of them

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Q10 Which of the following alone can ensure effective ethics programme in a business
enterprise?

a. Publication of a code

b. Involvement of employees

c. Establishment of compliance

d. None of them mechanisms

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Answer. a. Publication of a code

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Q1 What do you understand by social responsibility of business? How is it different from legal
responsibility?

Answer. Social responsibility is broader than legal responsibility of business. Legal responsibility
may be fulfilled by mere compliance with the law. Social responsibility is more than that. It is a
firm’s recognition of Social obligations even though not covered an law, along with the
obligations laid down by law. In other words, social responsibility involves an element of
voluntary action on the part of business people for the benefit of society.

Page : 161 , Block Name : Short Answer Questions

Q2 What is environment? What is environmental pollution?

Answer. Protection of the environment is a serious issue that confronts business managers and
decision makers. The environment is defined as the totality of man’s surroundings — both
natural and man-made. These surroundings are also in the nature of resources, that are useful
for human life. The resources may also be called natural resources like land, water, air, fauna
and flora and raw materials; or man- made resources such as cultural heritage, socio-economic
institutions and the people. It is widely recognised that the quality of the environment is fast
deteriorating particularly due to industrial activity.

Pollution changes the physical, chemical and biological characteristics of air, land and water.
Pollution harms human life and the life of other species. It also degrades living conditions while
wasting or depleting raw material resources. The country’s cultural heritage is also affected and
it is becoming increasingly difficult to protect all historical monuments. Pollution exists because
the environment can absorb only a limited amount of pollutants and wastes. Some hazardous
wastes or toxic by-products and chemicals are termed as hazardous pollutants because they
have toxic characteristics that the environment can not assimilate.

Page : 162 , Block Name : Short Answer Questions

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Q3 What is business ethics? Mention the basic elements of business ethics.

Answer. Ethics is concerned with what is right and what is wrong in human behaviour judged on
the basis of a standard form of conduct of individuals, as approved by society in a particular field
of activity. Ethics may be viewed as the entire body of moral values that society attaches to the
actions of human beings Some of the basic elements of business ethics while running a
business enterprise are as follows:

(i) Top management commitment: Top management has a crucial role in guiding the entire
organisation towards ethically upright behaviour. To achieve results, the Chief Executive Officer
(CEO) and other higher level managers need to be openly and committed to ethical conduct.
They must give continuous leadership for developing and upholding the values of the
organisation.

(ii) Publication of a ‘Code’: Enterprises with effective ethics programmes do define the principles
of conduct for the whole organisation in the form of written documents which is referred to as
the “code”. This generally covers areas such as fundamental honesty and adherence to laws;
product safety and quality; health and safety in the workplace; conflicts of interest; employment
practices; fairness in selling/marketing practices; and financial reporting.

(iii) Establishment of compliance mechanisms: In order to ensure that actual decisions and
actions comply with the firm’s ethical standards, suitable mechanisms should be established.
Some examples of such mechanisms are: paying attention to values and ethics in recruiting and
hiring; emphasising corporate ethics in training; auditing performance regularly to analyse the
degree of compliance; and instituting communication systems to help employees report
incidents of unethical behaviour.

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Q4 Briefly explain (a) Air Pollution, (b) Water pollution, and (c) Land pollution.

Answer. (i) Air pollution: Air pollution is the result of a combination of factors which lowers the air
quality. It is mainly due to carbon monoxide emitted by automobiles which contributes to air
pollution. Similarly, smoke and other chemicals from manufacturing plants pollute the air.
Resultant air pollution has created a hole in the ozone layer leading to dangerous warming of
the earth.

(ii) Water pollution: Water becomes polluted primarily from chemical and waste dumping. For
years, business enterprises have been dumping waste into rivers, streams and lakes with little

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regard for the consequences. Water pollution has led to the death of several animals and posed
a serious threat to human life.

(iii) Land pollution: Dumping of toxic wastes on land causes land pollution. This damages the
quality of land making it unfit for agriculture or plantation. Restoring the quality of the land that
has already been damaged is a big problem.

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Q5 What are the major areas of social responsibility of business?

Answer. A business unit has to decide in which areas it should carry out social goals. Some of
the specific responsibilities and enterprise may be outlined as under:

(i) Responsibility towards the shareholders or owners: A business enterprise has the
responsibility to provide a fair return to the shareholders or owners on their capital investment
and to ensure the safety of such investment. The corporate enterprise on a company form of
organisation must also provide the shareholders with regular, accurate and full information
about its working as well as schemes of future growth.

(ii) Responsibility towards the workers: Management of an enterprise is also responsible for
providing opportunities to the workers the meaningful work. It should try to create the right kind
of working conditions so that it can win the cooperation of workers. The enterprise must respect
the democratic rights of the workers to form unions. The worker must also be ensured of a fair
wage and a fair deal from the management.

(iii) Responsibility towards the consumers: Supply of right quality and quantity of goods and
services to consumers at reasonable prices constitutes the responsibility of an enterprise toward
its customers. The enterprise must take proper precaution against adulteration, poor quality,
lack of desired service and courtesy to customers, misleading and dishonest advertising, and so
on.

Page : 162 , Block Name : Short Answer Questions

Q6 State the meaning of Corporate Social Responsibility as per the Companies Act 2013.

Answer. Corporate sustainability refers to the role that companies can play in meeting the
agenda of sustainable development and entails a balanced approach to economic progress,

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social progress and environmental protection. There is no single universally accepted definition
of CSR, each definition that currently exists underpins the impact that businesses have on
society at large and the societal expectations of them.

i. The European Commission defines CSR as “the responsibility of enterprises for their impacts
on society”.

ii. The World Business Council for Sustainable Development defines CSR as “the continuing
commitment by business to contribute to economic development while improving the quality of
life of the workforce and their families, as well as, of the community and society at large”.

In India, the concept of CSR is governed by Clause 135 of the Companies Act, 2013, which was
passed by both the Houses of the Parliament, and had received the assent of the President of
India on 23 August 2013.

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Q1 Build up arguments for and against social responsibilities.

Answer. Arguments for Social Responsibility

(i) Justification for existence and growth: Business exists for providing goods and services to
satisfy human needs. Though, profit motive is an important justification for undertaking business
activity, it should be looked upon as an outcome of service to the people. In fact, the prosperity
and growth of business is possible only through continuous service to society. Thus, assumption
of Social responsibility by business provides justifications for its existence and growth.

(ii) Long-term interest of the firm: A firm and its image stands to gain maximum profits in the
long run when it has its highest goal as ‘service to society’. When increasing number of
members of society — including workers, consumers, shareholders, government officials, feel
that business enterprise is not serving its best interest, they will tend to withdraw their
cooperation to the enterprise concerned.

(iii) Avoidance of government regulation: From the point of view of a business, government
regulations are undesirable because they limit freedom. Therefore, it is believed that
businessmen can avoid the problem of government regulations by voluntarily assuming social
responsibilities, which helps to reduce the need for new laws.

Arguments against Social Responsibility :

(i) Violation of profit maximisation objective: According to this argument, business exists only for
profit maximisation. Therefore, any talk of social responsibility is against this objective. In fact,

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business can best fulfill its social responsibility if it maximises profits through increased
efficiency and reduced costs.

(ii) Burden on consumers: It is argued that social responsibilities like pollution control and
environmental protection are very costly and often require huge financial investments. In such
circumstances, businessmen are likely to simply shift this burden of social responsibility by
charging higher prices from the consumers instead of bearing it themselves. Therefore, it is
unfair to tax the consumers in the name of social responsibility.

(iii) Lack of social skills: All social problems cannot be solved the way business problems are
solved. In fact, businessmen do not have the necessary understanding and training to solve
social problems. Therefore, according to this argument, social problems should be solved by
other specialised agencies.

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Q2 Discuss the forces which are responsible for increasing concern of business enterprises
toward social responsibility.

Answer. The following forces have been responsible for Increasing concern of business
enterprises towards social responsibility.

(i) Threat of public regulation: Democratically elected governments of today are expected to act
as welfare states whereby they have to take care of all sections of society. Thus, where
business institutions operate in a socially irresponsible manner, action is taken to regulate them
for safeguarding people’s interest. This threat of public regulation is one important reason due to
which business enterprise feels concerned with social responsibility.

(ii) Pressure of labour movement: Over the last century or so, labour has become far more
educated and organised. Accordingly, Labour movement for extracting gains for the working
class throughout the world has become very powerful. This has forced business enterprises to
pay due regard to the welfare of workers instead of following a policy of ‘hire and fire’ under
which they could deal with workers at their will.

(iii) Impact of consumer consciousness: Development of education and mass media and
increasing competition in the market have made the consumer conscious of his right and power
in determining market forces. The principle of caveat emptor (or let the buyer beware) has been
substituted by the principle of ‘customer is king’. Business enterprises have started following
customer - oriented policies.

(iv) Development of social standard for business: Businesses are no longer considered merely
money crazy entities, which can be allowed to mint money at any cost and get away with any

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kind of business practices. New social standards consider economic activity of business
enterprises as legitimate but with the condition that they must also serve social needs. No
business can be done in isolation from society. It is the society that permits business to exist
and grow and it is on the basis of social standards that business functioning is to be ultimately
judged.

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Q3 ‘Business is essentially a social institution and not merely a profit making activity’. Explain.

Answer. A business enterprise is permitted by Society to carry on industrial or commercial
activities and earn profits from It Therefore, a business enterprise is expected to do business
and earn money in ways that fulfill the expectations of the society Like every individual living in
society, business too has certain obligations towards society in terms of respect for social
values and norms of behaviour.

Some of the specific responsibilities and enterprise may be outlined as under:

(i) Responsibility towards the shareholders or owners: A business enterprise has the
responsibility to provide a fair return to the shareholders or owners on their capital investment
and to ensure the safety of such investment. The corporate enterprise on a company form of
organisation must also provide the shareholders with regular, accurate and full information
about its working as well as schemes of future growth.

(ii) Responsibility towards the workers: Management of an enterprise is also responsible for
providing opportunities to the workers the meaningful work. It should try to create the right kind
of working conditions so that it can win the cooperation of workers. The enterprise must respect
the democratic rights of the workers to form unions. The worker must also be ensured of a fair
wage and a fair deal from the management.

(iii) Responsibility towards the consumers: Supply of right quality and quantity of goods and
services to consumers at reasonable prices constitutes the responsibility of an enterprise toward
its customers. The enterprise must take proper precaution against adulteration, poor quality,
lack of desired service and courtesy to customers, misleading and dishonest advertising, and so
on.

Page : 162 , Block Name : Long Answer Questions

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Q4 Why do the enterprises need to adopt pollution control measures?

Answer. Some of the important reasons which make a case for pollution control are as follows:

(i) Reduction of health hazards: There is increasing evidence that many diseases like cancer,
heart attacks and lung complications are caused by pollutants in the environment. Pollution
control measures can not only check the seriousness of such diseases but can also be
supportive of a healthy life on earth.

(ii) Reduced risk of liability: It is possible that an enterprise is held liable to pay compensation to
people affected by the toxicity of gaseous, liquid and solid wastes it has released into the
environment. Therefore, it is sound business policy to install pollution control devices in its
premises to reduce the risk of liability.

(iii) Cost savings: An effective pollution control programme is also needed to save costs of
operating business. Cost savings are particularly noticeable when improper production
technology results in greater wastes which leads to higher cost of waste disposal and cost of
cleaning the plants.

(iv) Improved public image: As society becomes increasingly conscious of environmental quality,
a firm’s policies and practices for controlling wastes will increasingly influence people’s attitude
towards its working. A firm that promotes the cause for environment will be able to enjoy a good
reputation and will be perceived as a socially responsible enterprise.

(v) Other social benefits: Pollution control results in many other benefits like clearer visibility,
cleaner buildings, better quality of life, and the availability of natural products in a purer form.

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Q5 What steps can an enterprise take to protect the environment from the dangers of pollution?

Answer. These steps are taken by enterprises :

(i) Top management commitment: Top management has a crucial role in guiding the entire
organisation towards ethically upright behaviour. To achieve results, the Chief Executive Officer
(CEO) and other higher level managers need to be openly and strongly committed to ethical
conduct. They must give continuous leadership for developing and upholding the values of the
organisation.

(ii) legal compliance : A very Important and essential step IS to comply Witt’ the laws and
regulations enacted by the Government for prevention of pollution.

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(iii) Voluntary participation: Participation in government programmes relating to management of
hazardous substances. clearing up of polluted rivers plantation of trees and checking
deforestation is also an important step in environmental protection by business enterprises
(iv) Measuring result: Periodical assessment of pollution control programmes In terms of costs
and benefits is also essential In order to have a steady progress With respect to environmental
protection
(v) Education training: Another step that can be taken for environmental protection is arranging
educational workshops and training materials to share technical information and experience with
suppliers, dealers and customers to get them actively involved In pollution control programmes.

Page : 162 , Block Name : Long Answer Questions

Q6 Explain the various elements of business ethics.

Answer. Some of the basic elements of business ethics while running a business enterprise are
as follows:

(i) Top management commitment: Top management has a crucial role in guiding the entire
organisation towards ethically upright behaviour. To achieve results, the Chief Executive Officer
(CEO) and other higher level managers need to be openly and strongly committed to ethical
conduct. They must give continuous leadership for developing and upholding the values of the
organisation.

(ii) Publication of a ‘Code’: Enterprises with effective ethics programmes do define the principles
of conduct for the whole organisation in the form of written documents which is referred to as
the “code”. This generally covers areas such as fundamental honesty and adherence to laws;
product safety and quality; health and safety in the workplace; conflicts of interest; employment
practices; fairness in selling/marketing practices; and financial reporting.

(iii) Establishment of compliance mechanisms: In order to ensure that actual decisions and
actions comply with the firm’s ethical standards, suitable mechanisms should be established.
Some examples of such mechanisms are: paying attention to values and ethics in recruiting and
hiring; emphasising corporate ethics in training; auditing performance regularly to analyse the
degree of compliance; and instituting communication systems to help employees report
incidents of unethical behaviour.

(iv) Involving employees at all levels: It is the employees at different levels who implement ethics
policies to make ethical business a reality. Therefore, their involvement in ethics programmes
becomes a must. For example, small groups of employees can be formed to discuss the
important ethics policies of firms and examine attitudes of employees towards these policies.

(v) Measuring results: Although it is difficult to accurately measure the end results of ethics
programmes, the firms can certainly audit to monitor compliance with ethical standards. The top

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management team and other employees should then discuss the results for further course of
action.

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Q7 Discuss the guidelines enumerated by the Companies Act 2013 for Corporate Social
Responsibility.

Answer. In India, the concept of CSR is governed by Clause 135 of the Companies Act, 2013,
which was passed by both the Houses of the Parliament, and had received the assent of the
President of India on 23 August 2013. The CSR provisions within the Act is applicable to
companies with an annual turnover of 1,000 crore and more, or a net worth of Rs. 500 crore and
more, or a net profit of Rs. 5 crore and more.

1. The new rules, which are applicable from the fiscal year 2014-15 onwards, also require
companies to setup a CSR committee consisting of their board members, including at least one
independent director.

2. The Act encourages companies to spend at 2% of their average net profit in the previous
three years on CSR activities.

3. The indicative activities, which can be undertaken by a company under CSR, have been
specified under Schedule VII of the Act.

4. Only CSR activities undertaken in India will be taken into consideration.

5. Activities meant exclusively for employees and their families will not qualify under CSR.

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