Davis’s model is a list of 5 propositions that describe how and why businesses should adhere to the obligation to take action that protects and improves the welfare of society as well as of the organization:
Proposition 1: SOCIAL RESPONSIBILITY ARISES FROM SOCIAL POWER.
This proposition is derived from the understanding that a business has significant amount of influence on and power over various critical issues like Environment, Minority Employment, Neighbourhood Development etc.,
All business in the country primarily determines the various situations like employment,environment and overall atmosphere that the citizens get to live in.
Since business has power and influence over the society, the society can and should hold the businesses responsible for social conditions that result from the exercise of the power.
Proposition 2: BUSINESS SHALL OPERATE AS A 2 WAY OPEN SYSTEM, WITH OPEN RECEIPT OF INPUTS FROM SOCIETY AND OPEN DISCLOSURE OF ITS OPERATIONS TO THE PUBLIC.
Business must be willing to listen to what must be done to sustain or improve social welfare. In turn, the society must be willing to listen to business reports on what is is doing to meet its social responsibilities.
DAVIS suggests that there must be ongoing, honest and open communications between business and society’s representatives if the overall welfare of society’s representatives if the overall welfare of society is to be maintained or improved.
Proposition 3: THE SOCIAL COSTS AND BENEFITS OF AN ACTIVITY, PRODUCT or SERVICE, SHALL BE THOROUGHLY CALCULATED AND CONSIDERED IN DECIDING WHETHER TO PROCEED WITH IT.
The technical feasibility and economic profitability and the shot term and long term consequences of all business activities should be considered before undertaking them.
Proposition 4: THE SOCIAL COSTS RELATED TO EACH ACTIVITY, PRODUCT OR SERVICE SHALL BE PASSED ON TO THE CUSTOMER:
The proposition states that business cannot be expected to completely finance activities that may be socially advantageous but economically disadvantageous. The costs of maintaining socially desirable activities within business should be passed on to consumers through higher prices for the goods or services related to these activities.
Proposition 5: BUSINESS INSTITUTIONS, AS CITIZENS, HAVE THE RESPONSIBILITY TO BECOME INVOLVED IN CERTAIN SOCIAL PROBLEMS THAT ARE OUTSIDE THEIR NORMAL AREAS OF OPERATION: –
If a business possesses the expertise to solve a social problem with which it may not be directly associated, it should be held responsible for helping society solve that problem.
Since the business eventually will reap an increased profit from a generally improved society, businesses should share in the responsibility of all citizenry to generally improve society.