Q16. Explain the meaning of “Iron Law of Responsibility? State the resulting benefits which may be acquired by achieving long-term objectives through business activities?
Ans. The institution of business exists only because it performs invaluable services for society. Society gives business license to exist and this can be amended or revoked at any time if it fails to live up to society’s expectations. Therefore, if business intends to retain its existing social role and power, it must respond to society needs constructively. This is known as “Iron law of Responsibility”.
In the long-term those who do not use power in a manner that society considers responsible. will tend to lose it.
Businesses have been delegated economic power and have access to productive resources of a community. They are obliged to use these resources for the common good of society so that more wealth for its betterment may be generated. Technical and creative resources are also helpful to it.
A business organization sensitive to community needs would in its own self interest like to have a better community within which the business may be conducted. This way, the resulting benefits would be:
- Decrease in crime
- Easy labor recruitment
- Reduced employee absenteeism
- Easier access to international capital, money markets.
- Dependable and preferred as supplier, importer, exporter, etc.