'Business is essentially a social institution and not merely a profit making activity'. Explain.
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.
It is obligatory on part of the business enterprise not to do anything that is undesirable from society's point of view. Manufacture and sale of adulterated goods, making deceptive advertisements, evading taxes, polluting the environment and exploiting workers are some examples of socially undesirable practices which may increase the profit of enterprises but which have adverse social effects. On the other hand, supplying good quality goods, creating healthy working conditions, honestly paying taxes, prevention of pollution and resolving customer complaints are examples of socially desirable practices which improve the image of enterprises leading to higher profits in the long run.
The major areas of social responsibility of business which explain that business is essentially a social institution and not merely a profit-making activity include the following
(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.
(ii) Responsibility towards the Workers: Management of an enterprise is also responsible for providing opportunities to the workers for meaningful work and ensures a fair wage for their work.
(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.
(iv) Responsibility towards the Government and Community: An enterprise must respect the laws of the country and pay taxes regularly and honestly. It must behave as a good citizen and act according to the well-accepted values of the society and protect the natural environment.