The rationale for assuming social responsibility lies in the following arguments :
- Coalition. A business organisation is a coalition of several interest groups or stakeholders, e.g., shareholders, customers, employees, suppliers, etc. Business should, therefore, work for the interest of all of them rather than for the benefit of shareholders/owners alone.
- Creation of Society. Business is a sub-system of society. It draws support and sustenance from society in the form of inputs. Socially responsible behavior is essential to sustain this relationship between business and society.
- Social Impact. During the course of its functioning, a business enterprise makes several decisions and actions. Its activities exercise a strong influence on the interests and values of society. Business must fulfill social obligations as a compensation for undermining the legitimate interests of society.
- Social power. Large corporations have acquired tremendous social power through their multifarious operations. Social power may be misused in the absence of social responsibility. Social power and social responsibility must be balanced. When an institution’s power grows, its responsibility grows accordingly. According to Keith Davis, “In the long run those who do not use power in a manner that society considers responsible will lose it. This is the iron law of responsibility”.
- Legitimacy. It is in the enlightened self-interest of business to assume social responsibility. Social responsibility legitimises and promotes the economic objectives of business. By improving social life, business can obtain better customers, employees and neighbors. Social responsibility is thus good citizenship as well as good business.
- Competence. Business organizations and their managers have proved their competence and leadership in solving economic problems. Society expects them to use their competence to solve social problems and thereby play a leadership role.
- Free Enterprise. If business does not voluntarily assume social responsibilities, government will force it to do so through regulation and control. Failure to discharge responsibility will eventually result in the death of private enterprise. It is better to behave in a socially responsible manner and thereby avoid government control.
- Professional Conduct. Professional managers are required to display a keen social sensitivity and serve the society as a whole. Social responsibility is one of the professional demands on managers.
- Public Image. Adoption of social responsibility as an. Objective will help to improve the public image of business. A good public image is a valuable asset for business.