Professional Documents
Culture Documents
DOCTOR OF PHILOSOPHY
IN
BUSINESS MANAGEMENT
Submitted by
NALINI KRISHNAN
ENROLLMENT NO. DYP-PhD-09004
RESEARCH GUIDE
DR.R. GOPAL
DIRECTOR, DEAN AND HEAD OF DEPARTMENT
PADMASHREE DR.D.Y. PATIL UNIVERSITY,
DEPARTMENT OF BUSINESS MANAGEMENT
SECTOR 4, PLOT No 10,
CBD BELAPUR, NAVI MUMBAI 400614
OCTOBER 2012
i
IMPACT OF CORPORATE SOCIAL
RESPONSIBILITY ON THE FINANCIAL AND
NON FINANCIAL PERFORMANCE OF SELECT
BSE LISTED COMPANIES
ii
DECLARATION
formed the basis for the award of any degree, associateship, fellowship or
Date:
iii
CERTIFICATE
listed companies’ is the bona fide research work carried out by Mrs. Nalini
has not formed the basis for the award of any degree , associateship,
certified that the thesis represents an independent work on the part of the
candidate.
Date:
iv
ACKNOWLEDGEMENT
I would like to thank all the people who have helped and inspired me during
my doctoral study. First and foremost, I would like thank Padmashree Dr.
Patil University for his expert advice, guidance and unending patience.
study. My sincere thanks to the executives and officers of the companies for
and Shruti, who have been extremely patient with me during this difficult
v
CONTENTS
2. 11 Research Gap 66
vii
4.3 Population and Sample 73
4.4 Questionnaire 75
4.4.1 Questionnaire – Design and content 75
4.4.2 Questionnaire distribution 78
4.4.3 Response rate 79
4.5 Pilot Study 80
4.6 Description of methodology 80
4.6.1 Research design 82
4.6.2 Sampling method 84
4.6.3 Data Collection 84
4.7 Method of data analysis 85
5.0 THEORETICAL AND CONCEPTUAL
FRAMEWORK OF CORPORATE SOCIAL 86
RESPONSIBILITY
5.1 Introduction 87
5.2 Instrumental theories 87
5.3 Political theories 92
5.4 Integrative theories 95
5.5 Ethical theories 98
5.6 The Business case for CSR 111
5.7 Motivations/Drivers of CSR 114
5.7.1 Extrinsic factors 115
5.7.2 Instrumental, Normative or hedonic motivations 115
5.7.3 Global market pressures 117
5.7.4 Internal and competitive pressures of CSR 118
5.7.5 External pressures from investors and consumers 119
5.7.6 Regulatory pressures 120
5.7.7 Pressures from popular mobilizations 120
5.7.8 Access to markets 121
5.8 Managerial perceptions of CSR 121
viii
6.0 CORPORATE SOCIAL RESPONSIBILITY
124
AMONG INDIAN COMPANIES
6.1 Introduction 125
6.2 Phases of CSR 126
6.3 Role of business 127
6.4 Philanthropy vs CSR 129
6.5 CSR and the regulatory framework 132
6.6 Nature of Activities undertaken by Indian
138
companies
6.7 CSR Reporting in India 141
6.8 CSR Initiatives – Some exemplary cases 143
6.9 Conclusion 153
7.0 CORPORATE SOCIAL RESPONSIBILITY AND
158
FINANCIAL PERFORMANCE
7.1 Introduction 159
7.2 Corporate Social Irresponsibility and financial
159
performance
7.3 Socially responsible investing 160
7.4 Legitimacy of corporate response to CSR concerns 161
7.5 Causality 162
7.6 Relationship between CSR and firm performance 163
7.6.1 Increased reputation 163
7.6.2 Customer attraction and loyalty 164
7.6.3 Employee motivation and retention 165
7.6.4 Cost Saving 167
7.7 Conclusion 167
8.0 DATA ANALYSIS AND INTERPRETATION 168
8.1 Validity of the research 169
8.1.1 Content validity of the questionnaire 169
8.1.2 Criterion related validity 169
8.2 Reliability of the research 171
ix
8.3 Data Analysis 172
8.4 Major Findings 204
9.0 CONCLUSIONS 210
9.1 Concluding comments 211
9.2 Limitations of the study and scope for future 212
research
Appendix I - Bibliography
Appendix II – Questionnaire used for the survey
Appendix III- SPSS Output
Appendix IV- List of companies surveyed
x
LIST OF TABLES
S.NO TABLE TABLE NAME PAGE
NO. NO.
1. 4.1 Population and sample of the companies 74
2. 4.2 Measures of CSR 76
3. 4.3 Rationalization of variables 84
Correlation coefficient between each of the
4. 8.1 170
CSR variables
5. 8.2 Cronbach’s coefficient alpha 171
Sample distribution according to number of
6. 8.3 172
employees
7. 8.4 Aggregate level of CSR 176
8. 8.5 Summary of Employee CSR 179
9. 8.6 Employee CSR – validity construct 180
Measures of Goodness of fit – Employee
10 8.7 180
CSR
11. 8.8 Employee CSR – T test 181
Summary of responses- customer and
12. 8.9 182
supplier CSR
13. 8.10 Customer and Supplier CSR- T test 183
Measures of Goodness of fit – Customer and
14. 8.11 183
Supplier CSR
15. 8.12 Measurement of Community CSR 185
16. 8.13 Factor Matrix – Environment CSR 186
17. 8.14 Environment CSR Performance Results 186
Distribution of Responses to Environment
18. 8.15 187
CSR
19. 8.16 Environment CSR – T-Test 187
20. 8.17 Correlation Matrix between Aggregate CSR
188
and FP and NFP
21. 8.18 Correlations among employee CSR, Industry 189
xi
adjusted ROA and NFP
Correlation Matrix between customer and
22. 8.19 190
supplier CSR and FP and NFP
Correlation Matrix between community CSR
23. 8.20 191
and FP and NFP
Correlation Matrix between Environment CSR
24. 8.21 192
and FP and NFP
Regression Analysis of CSR variables and
25. 8.22 194
Financial Performance
Regression Analysis of CSR variables and
26. 8.23 195
NFP
Correlation Matrix between Aggregate CSR
27. 8.24 197
and CSR towards various stakeholders
Correlation Matrix between Aggregate CSR
28. 8.25 198
and Size and Shareholding Pattern
29. 8.25a Employees Distribution Industry-wise 264
30. 8.25b Correlations among employee CSR variables 265
31. 8.25c Correlations among customer CSR variables 266
Correlations among community CSR
32. 8.25d 267
variables
Correlations among environment CSR
33. 8.25e 268
variables
34. 8.25f Correlations among all CSR variables 269
35. 8.25g Ownership of companies 270
36. 8.25h Factor Analysis - Communalities 271
37. 8.25i Principal Component Analysis 272
38. 8.25j Component Matrix - Unrotated 272
39. 8.25k Component Matrix - Rotated 273
40. 8.25l Component Matrix – Unrotated <0.4 273
Principal Component Analysis – Extraction
41. 8.25m 274
Method
xii
LIST OF FIGURES
xiii
LIST OF ABBREVIATIONS
Abbreviation Explanation
FP Financial Performance
UN United Nations
xiv
EXECUTIVE SUMMARY
people, our planet and our ability to sustain the holistic development that
stimulating unparalleled growth. At the same time, this has also resulted in
the lopsided development where the divide between the rich and the poor
richest 20% of the people possess 86% of the gross national product, in
divorced from the rest of the society. Business and society are
xv
pressures to improve the bottom line as well as to be good corporate
citizens, business leaders face tough decisions. They are challenged and
companies are responsible not only for maximizing profits but also for
Coopers). This definition sets out the kinds of stakeholder groups to whom
Business can be seen in the business sector over the years. The Indian
corporate sector is struggling with a new role, which is to meet the needs of
planet and our ability to sustain the levels of holistic development that we
all aspire to. Specifically, this calls for businesses being thoroughly aware
programs that are integrated into business operations, supply chains and
workplace.
depends on factors such as the company size, the industry in which the
important that the CSR principles are part of the corporation’s values and
committed to them. It is also crucial that the CSR strategy is aligned with
There has been some debate about the legitimacy of the use of corporate
is a strong criticism that societal problems are best solved by freely elected
governments. On the other hand, there are many arguments that state that
globalization, the economic powers of corporations are also on the rise and
can further improve the work environment and the quality of living of its
employees.
Adopting CSR principles involves costs and these costs might be short
benefits. But the time frame of costs and benefits can be out of alignment –
the costs are immediate, the benefits are often seen after some time lag.
events which may damage their reputation and cost large amounts in
xviii
companies should have more stable earnings and less downside volatility.
attract and retain employees (Turban and Greening, 1997) which leads to
financial performance.
the few concerning CSR and financial performance in the Indian context , it
xix
findings of the research shall provide insights into the nature and type of
Secondly, it has been noted that research on CSR in India is based mainly
represents the most questioned area of CSR (Angelidis et al, 2008). This
between CSR and financial performance. The study not only looks at CSR
The study relies mainly on the stakeholder theory and basically focuses on
examined. Though there have been many studies on CSR and financial
This research has been conducted to study the CSR practices of listed
companies in India. The focus of this research was to see if there is any
India. The research was conducted with a sample of 104 companies drawn
data in order to meet the defined objectives and examine the hypotheses
that require them to weigh profitable options viz. a viz. their social and
Objective One: Study the relationship between CSR and financial and
The first objective of the study was examined by initially defining the
relations, labour welfare, worker health and safety and working conditions
groups and firm performance. The study uses the following stakeholder
Suar.
Aggregate CSR
Non- Financial Financial
Performance Performance
employees who opt for careers in firms that exhibit socially responsible
xxii
Corporate Social Responsibility activities have the potential to create
several distinct forms of value for customers. CSR also leads to positive
premium prices and lower reputational risks in times of crises. With the
the companies.
development initiatives are important to get the ‘license to operate’ for the
businesses. Corporate world has also realized that the society is not just
another stakeholder, but the prime purpose of its business and that good
nurture each other through good times and bad. This research studied the
Climate change and global warming are the new challenges being faced by
environment protection.
xxiii
The questionnaire survey method was adopted as a form of exploratory
BSE Index. For the purposes of this study, all companies listed under the
CSR activities. The assumption was that larger companies have more
activities among listed Indian companies. The forces driving CSR today are
propelled by shifts in the interaction of the state, the individual and the
expectations, the shrinking role of the state, responsibility for the supply
who are responsible for the implementation of the CSR agenda of the
The research used a sample of 104 companies listed on the Bombay Stock
method. Banking and finance companies were excluded from the scope of
the study as their profitability measures are different. The sample ensured
xxv
The results of the study show that CSR in India has still not developed
fully. Barring a few companies which are doing phenomenal work in the
companies are yet to have a CSR policy in place and the CSR activities
It was also seen that Indian companies have changed from traditional
Listed companies who are under public scrutiny are keen to project a
the company or the shareholding pattern did not have a significant impact
on the CSR activities undertaken by the company. The study also revealed
CSR and Environment CSR. The CSR towards each of the stakeholders
was positive thus ensuring that the aggregate CSR was also favourable.
The study also revealed a positive relationship between all CSR variables
and the firm performance except in case of Environment CSR where there
xxvi
This research would contribute to the extant literature on CSR. It presents
sense. The research has also focused on the ethical aspects of CSR.
since its foundation and includes ethics in business strategy and social
In a country like India, demand for sustainable products and services are
on the rise. Innovative products must be correlated with the price level
firms. It would also reiterate the fact that recognition, acceptance and
xxvii
The argument that the primary goal of business is to make profits and pay
here that the interests of the companies and the society converge. This has
led to the ‘business case’ for CSR gaining ground and many corporate
houses are realizing that ‘what is good for workers – their community,
The proof of the business case for CSR in the Indian context has been
reiterated in the study. The financial benefits outweigh the costs- in the
xxviii
CHAPTER 1
1.1 Introduction
Responsibility
1
CHAPTER 1
1.1 Introduction
The corporate sector across the globe is coming to terms with its new role,
the ability of the next generation. Businesses are slowly but surely
assuming responsibilities for the ways their operations impact society and
the natural environment. The aim of all business is to improve the quality of
life and build leadership that will generate a sense of trust among people.
society’s willingness to accept the significant and sometimes (at least in the
2
Training, the transfer of skills and expertise, new technological solutions,
rights can all demonstrate the will to be a good local citizen and to help
the human face of globalization and reduce fears about the negative
3
theory. It is based on the notion that many people (groups of people) have
a stake in the corporation and that in order for the company to achieve its
objectives effectively, it must consider them all and not only the
shareholders.
and human working life came with the Industrial Revolution, as the poor
from the countryside headed towards the cities in search of work. This
disease. Factories and mines were responsible for large number of injuries
provoked civil unrest. During the late 18th century, there were protests
a massive influx of rural people into urban areas and where economic
4
growth can appear to be at the expense of human and environmental well-
being.
removed limits on company size, for how long they could exist and what
they could own. In 1943, US President Franklin Roosevelt initiated the New
Deal – a series of measures that were, in part, designed to limit the power
of corporations. After World War II, the principles of the New Deal
influenced the type of welfare state that was to define Western European
1.2.3 Globalization
shift in the nature of CSR with the advent of globalization. Writers such as
5
1930
1940
1950
1960
1970
1980
1990
2000
First corporate
Responsibility
texts
New Deal and
Welfare state
Nationalization;
Post-war consensus
Return of business and
society debate
Shift from responsibility
of leaders to
responsibility of
companies
Debate about nature of
responsibilities
Introduction of
stakeholder theory
Corporate responsibility
as a management
practice
Environmental
management
Corporate Social
performance
Stakeholder partnerships
Business and poverty
Sustainability
Figure 1.1 : Timeline of corporate responsibility
Source: Blowfield and Murray
CSR, there is still some confusion as to how CSR should be defined. The
definitions of CSR have evolved over the years. Earlier it was referred to
the responsibilities of businesses over and above the economic and legal
respect people, communities and the natural environment. This implies that
universal definition that has emerged which is acceptable to all. The efforts
failed and there are no agreed upon definition. According to van Marrewijk
(2003), a ‘one solution fits all’ definition of CSR is impossible as CSR will
are:
Communities, 2001).
7
The World Business Council for Sustainable Development reflects the
with employees, their families, the local communities and the society at
environment.
include those activities that are mandated by law or that which are ethical
as environmental issues.
8
The organization Business for Social Responsibility defines CSR as
2001).
Bowen. But, the term CSR became popular only in the 1990s. The term is
The beliefs and attitudes towards CSR have changed over time. Some
scholars think that it is Oliver Sheldon of the US who put the concept forth
placed prior to the profits of a company. This idea has greatly impacted the
9
to make money for stockholders. Since the second half of the twentieth
century, a long debate on CSR has been taking place. In 1953, Bowen
to CSR.
McGuire (1963), was of the view that “ the idea of social responsibility
supposes that the company has not only economic and legal obligations
but also some social obligations towards society which extend beyond
decisions and actions taken for reasons at least partly beyond the firm’s
direct economic or technical interest’. Eells and Walton (1967) argued that
CSR refers to the ‘problems that arise when corporate enterprise casts its
shadow on the social scene, and the ethical principles that ought to govern
and expectations’.
The term Corporate Social Responsibility (CSR) came into vogue in the
Western countries in the late 1960s and early 1970s, after many
10
1.3.2 Recent definitions of CSR
control. Shareholders can ensure that their interests are taken care of by
“There is one and only one social responsibility of business – to use its
as it stays within the rules of the game, which is to say, engages in open
11
The idea that corporations have stakeholders has now become
professional.
This field has now grown considerably and contains a great proliferation of
being compared with the classic notion of CSR. Also, some of the theories
combine different approaches and use the same terminology with different
meanings. It has been said that CSR means something, but not always the
synonym for legitimacy in the context of being proper or valid ; a few see it
than on the citizens at large” ( Votaw, 1972). The situation now is no better.
12
the entire range of business responsibilities are embraced. It is suggested
and make an acceptable profit in the process. At some point in time the
idea of profit motive got transformed into a notion of maximum profits and
13
1.4.2 Legal Responsibilities
Society has not only sanctioned business to operate according to the profit
motive; at the same time business is expected to comply with laws and
14
1.4.3 Ethical Responsibilities
practices that are expected by societal members even though they are not
shareholders and the community regard as fair, just or in keeping with the
their legitimacy.
goodwill.
desires that businesses contribute time, money and resources for the
welfare of the community but they do not regard the firms unethical if they
business’ desire to engage in social activities that are not mandated by law
Be a good corporate
citizen Discretionary
Responsibilities
Be Ethical
Ethical Responsibilities
Legal Responsibilities
Be
Economic Responsibilities
Profitable
At the same time business is expected to obey the law because the law is
However Carroll (1991) has stated that the four categories are not mutually
economic concerns on one end and the social concerns on the other.
Later, Carroll and Schwartz developed a venn diagram which clearly shows
16
The figure below has an interesting difference from the CSR pyramid
Economic /Ethical
Purely Ethical/Legal
Ethical
Purely Purely
Economic Legal
Economic/Ethical /
Legal
Economic / Legal
17
1.5 Approaches to CSR
and report on a fixed annual budget for giving, sometimes tied to revenues
possible, reflecting a perception that this would satisfy the most constituent
groups and create the most visibility for philanthropic efforts. Commitments
were more short-term, allowing the organization to spend the wealth over a
products.
yet the lines between giving and CSR have become hazier. Corporate
philanthropy and CSR are two different things, yet the difference is blurred,
particularly in India. Until the 1990s CSR was dominated by the idea of
philanthropy and business efforts were often limited to one time grants.
Few attempts were made to integrate and coordinate giving programs with
18
establish quantifiable outcomes for the business or the social cause.
Decision making now reflects an increased desire for “doing well and doing
good”. Corporations now pick up a few strategic areas of focus that fit with
times of corporate crisis or national policy making; involving more than one
19
1.6. Managerial perceptions of CSR
managers’ perceptions towards CSR and the actions they may take
regarding socially responsible issues. Keith Davis (1973) has laid the
the case for and against business social responsibility. Wood (1991)
20
plastic throwaway cups in the staff canteens etc., This consciousness has
of the respondents opined that CSR activities increase the brand equity of
environment protection has brought the customers, the industry and the
21
c) Improved customer loyalty
Consumers not only want good and safe products, but would also like to
know that what they buy was produced in a socially and environmentally
friendly way, and are sometimes willing to pay more for products that are
cause.
associated with good corporate citizens. Employers with good CSR records
are better positioned to attract and retain talent. Studies have shown that
employees would rather work for an ethical and reputable company than
22
business using unethical means. CSR also creates a dedicated workforce
among colleagues, and boosts morale, builds self-worth and fosters team
spirit.
by stakeholders
viewed as being less risky than those that do not, as that can translate into
reduced legal and regulatory costs and so on. Some studies carried out in
can reduce portfolio volatility and increase returns. The banking and
sensitive environments
Businesses caring for their community get more cooperation and less
businesses also receive cooperation from the local community while they
set up their factories. Obtaining permits or licenses are also easier for such
23
companies. In India, the Ministry of Labour announced its decision to
Corporate social responsibility has much broader implications for the nation
processes for the best use of resources for social change. Social reforms
driven by the community will bring people together, turn the attention of the
masses to tasks that benefit society, and reinforce peace and harmony.
including Infosys, Wipro, Tatas, TVS, and Dr. Reddy's Laboratory, have
and schools.
24
greater participation from most small, medium, and large businesses. The
goodwill firms can generate from acts of social responsibility may, in fact,
be worth far more to the businesses than the amounts they give.
Corporations collectively can make India a better place for every citizen.
could recognise community work. Community work can take many forms:
CSV are policies and practices that strengthen a community at the same
time that they advance the economic objectives of a company (Porter &
Kramer, 2005). This concept shows how important social factors were to
initiatives that create profit for the company. It is also not the same as CSR
25
and sustainability, even though it overlaps with them. If, for example, a
value. And when companies create new products and new services that
solve social problems that are not problems that they themselves caused,
that are shared value, but are not what is typically seen as sustainability.
Recognising the links between the welfare of society and that of the
company;
26
Proactively examining opportunities designed to benefit the
co-actors of development
general.
Griffin& Mahon 1997) most CSR ratings have combined the various
the KLD's multiple dimensions into a uni-dimensional index may mask the
individual dimensions that are equally important and relevant Johnson and
27
relations and (2) the product quality dimension, a product quality and
India, content analysis based on CSR reports reveals that most existing
survey (UN et.al 2004), 84 percent of the respondents said what CSR
approximately 25 million people (if volunteers are also counted) with deep
focus of CSR activities of Indian companies, there has been a shift in the
focus of CSR in some industries such as the IT and ITES industries which
corporate rationality different from the older brick and mortar industries and
28
therefore have different approaches to CSR. Since the information
global market they are also under great pressure to improve environment
shift in CSR in the new industries and some have already begun efforts to
turn such challenges into opportunities. Ansoff (1980) argues that social
demands could present potential opportunities for the firms like the way
entrepreneurial management.
world, and the exponential growth of the middle class all over the world ,
polluting industries such as oil, chemicals, tobacco and mining. CSR today
29
the conventional view that business is chiefly meant for improving the
business process, wherein the institution and the individuals are sensitive
and careful about the direct and indirect effect of their work on internal and
In this context, there is a need to understand the business case for CSR as
industries, large scale migration of people from rural to urban areas and
the impact of industries on the communities and the environment are set to
This study gains its importance from the increasingly strategic business
societies they are placed in, and make efforts to create social, economical
30
and environmental innovation. Also, this study is one of the few studies on
included in the study represent the top 500 companies of the Indian
economy and the role of these companies in shaping the economic, social
more simply Western jargon. Businesses have realized that consumers are
31
CHAPTER 2
REVIEW OF LITERATURE
32
CHAPTER 2
has been a subject of extensive research and arguments over the last few
(WBCSD 2002).
construct began in the 1950s which marks the modern era of CSR. The
33
nature of the CSR definitions has expanded during the 1960s and
(Cramer et al, 2006). Theodore Levitt (1958) could be credited with setting
the agenda for the debate about the social responsibility of business in his
same sentiment and added that the mere existence of CSR was a signal of
perk, in the sense that managers use CSR to advance their careers or
other less socially responsible firms (Bragdon & Marlin, 1985; Vance,
34
procedures. Additionally, concern for social responsibility may restrict the
relationship exists between the two. The benefits arising from CSR include
may bring economic benefits (Moussavi & Evans , 1986). Banks and other
their investment decisions (Spicer, 1978). High level of CSR may lead to
Davis (1973) describes the iron law of responsibility , as the fact that firms
are under the obligation of not abusing the power invested on them by the
society or they risk losing the society’s implicit endorsement. This is now
35
the moral consequences of the choices they make (Jones, 1991;
the Brundtland Commission (1987) that for the first time systematically
meeting the needs of the present, without compromising the ability of future
well as future generations. Although many CSR authors have taken up the
tensions between the CSR and the sustainable development debate (i.e.
Responsibility
because these stakeholders hold the key to the firm’s survival. The
36
a. We must not leave out any group or individual who can affect or is
over time.
c. We need to worry about the enterprise level strategy for the simple
fit between the value of the corporation and its managers, the
which will determine the ability of the firm to sell its products.
categories:
37
CSR is to be equated with the quality of stakeholder relations then, it
and the environment. Carroll (2000) also identifies these as the main
Employee CSR
There are many aspects where company must pay attention to the
provide facilities and efforts to enhance the quality of life and working
their company’s values, and if they trust that their company genuinely
cares about the same things they care about, then they are more
(CSR) efforts signal what it cares about. Their co-benefit is that they seem
the world ensure that all the employees work under good conditions and
38
earn wages. These practices might be costly but the increased productivity
cash flows that cover the associated costs. Thus, firms may actually benefit
Employee rights should include the rights to enhance skills and capacity
also critical, as are issues of pay equity and fair compensation. Good
working conditions can also help attract and motivate more qualified and
Customer CSR
39
of this value that mediates the relationship between CSR activities and
customer is right in the goods and services they choose to buy from a
term harmful effects of their choices such as in the case of tobacco, milk
products for babies and expensive stereo equipment in the cars when
shaping tastes of consumers to its products. But this power is often buried
about their proper use and disposal and about the environmental impacts
community) who can influence the firm outcomes. With Freeman’s (1984)
seminal book the focus moved from legitimacy and morals towards a new
organization but are part of its purpose of being. CSR thus becomes a
(Mitchell, Agle, & Wood, 1997; Morsing & Beckmann, 2006; Morsing &
Schultz, 2006).
41
“The purpose of stakeholder management was to devise a framework to
Velamuri, 2006) Stakeholder theory implies that it can be beneficial for the
groups might withdraw their support for the firm. Stakeholder theory was
expanded by Donaldson and Preston (1995) who stressed the moral and
such activity.
on the idea that there is a moral imperative for managers “to do the right
have also been applied to CSR in a paper by Jones (1995). The author
honest, ethical and trustworthy because the returns to such behaviours are
that the value of a firm depends on the cost not only of explicit claims but
also of implicit claims. From this viewpoint, it is not sufficient for managers
42
stakeholders like employees who have explicit claims on the firm like wage
contracts and others, with whom the firm has implicit contracts, involving,
for instance, quality service and social responsibility. If the firm fails to act
agreements that would be more costly. For ex, if a firm fails to treat its
firm might spill over to other implicit stakeholders who may doubt whether
the firms would honour their claims. Thus, firms with high social
responsibility may find that they have more low cost implicit claims than
other firms and thus have higher financial performance (Cornell & Shapiro,
1987).
engage in CSR and that these leaders will employ CSR activities
strategically.
identical products, except that one firm adds an additional “social” attribute
43
activities, ie., they assess the demand for CSR and also evaluate the cost
McWilliams, Van Fleet and Cory (2002) developed the Resource based
view where they argued that CSR strategies when supported by political
purpose and role of business in society has been a focus of debate over
the years. Much of the debate has revolved around two hierarchical
et al, 2008). The shareholder theory represents the classical view that the
ie., the business must take such decisions as would increase shareholder
value. On the other hand the stakeholder theory argues that organizations
are not only accountable to their shareholders but also balance the
44
stakeholders lose confidence in a firm’s performance, the firm loses its
sufficient wealth and satisfaction for its primary stakeholders. If any of the
firms must identify key stakeholders, identify their needs, and design
Annual Reports found that both of them target the human resource and the
customer as their audience for CSR communication but the focus differs
and MNCs are more inclined towards communicating the softer and quality
The empirical studies can be mainly categories into two types: event
Worrel, Davidson and Sharma (1991) studied the layoff programs and
when they are due to financial distress. Clinebell and Clinebell (1994)
studied the effect of plan closures and found that longer periods of
shareholder value. But on the other hand, Teoh,Welch and Wazzan (1999),
performance. They created a firm level index of CSR and the results
prior profitability was more closely related to CSR than was subsequent
Graves (1997) used the KLD data and measured the relation between CSR
similar KLD data found that there was a neutral relation between CSR and
profitability. Hillman and Keim (2001) studied the “Social Issues CSR” and
46
that “Stakeholder management CSR” is positively correlated with
Few companies have their CSR reports externally verified. Thus corporate
and subjective bias. Still other use survey instruments (Aupperle, 1991) or
KLD (Kinder, Lydenberg, Domini) Index and the AReSE method (Charles-
Henri and Stephane, 2002). The KLD rating classifies eight CSP
assessment indicators with special attention to the five that provide multi-
47
environmental performance, product features and treatment of women and
responsibility. Three methods that have been most commonly used are :
skills and knowledge of the assessors (Abbott & Monsen, 1979). Previous
studies have used the KLD ratings or the Dow Jones Sustainability
measure reflects only one aspect of social responsibility and is valid for
Hillman and Keim (2001) argue that a detailed approach to studying the
48
focus on the relationship between stakeholder management and financial
supported by many recent theorists that define CSR through the lens of the
1975), others put forth accounting measures (Waddock and Graves 1997;
Cochran and Wood, 1984) and some adopt both of these (Mcguire et al.,
are forward looking and focus on market performance. They are less
49
constituencies (Pfeffer & Salancik, 1978), sole concentration on investors’
A KPMG, 2005 report has found that Asian firms often lag behind their
with rising consumer expectations towards businesses and their role in the
society, the case for CSR has become much stronger in Asian countries,
including India. But, Indian companies mostly focus their CSR activities on
businesses should be more responsible and must play a major role in the
environment friendly manner while at the same time adhering to high labor
considering taking up CSR for improving their brand image and better ties
with the local communities. The stakeholder approach is the most favoured
50
approach to CSR by top level managers in Indian companies (Jorge A.
2004; Business Indiab 2004; Gite 2006; Mathew and Gupta 2006;
development practices, which dominate the field. This is very much unlike
the CSR practices reported in Asian and Western countries where major
the extent to which the CSR concept has become part of corporate
and audit, safety audit, social accountability 8000 standards) and awards
(FICCI Award for Rural Development, Asian CSR Awards in the areas of
Education and Environment) that are used as proxies for assessing the
CSR practices and activities of a firm reflect this skewed pattern (Gite
The relations between CSR and firm performance have been studied
extensively, but the results have proved inconclusive. While some studies
51
have reported a positive relationship (Margolis and Walsh, 2003),
orientation towards CSR suggests an alignment of the social goals with the
the economic objective of the firm. Concern for profits does not exclude
taking into account the interests of all who have a stake in the firm, namely
sake of profits. (McWilliams and Siegel, 2001). The ethical theories focus
1997)
CSR commitment and practice and shareholder value. The problem is the
environment. The business case for CSR has been further strengthened by
global survey of CEOs, drawn from 33 countries said that CSR is critical to
manage material CSR risks fare better than those companies that do not.
The Dow Jones Sustainability Index has outperformed the FTSE World
Index by 17% since its launch in 1994 ( J. Fuller, 2003) . Those sectors
that are less likely to traditionally face CSR risks like the telecom and the
between disclosure and market risk and market valuation (Patel and
Dallas, 2002). A 2003 report by the Institute for Business Ethics in the
price/earnings ratio) between 1997 and 2001. The study concludes that
Studies have also revealed that it is not only the financial measures but
53
similar. The market value of businesses is no longer determined solely by
Further evidence comes from the Work and Enterprise panel of Inquiry, an
extensive study into high performance working and productivity. The Panel
the trade-offs between them. (The Work and Enterprise Panel of Enquiry,
Shareholders;
al (1985), Cochran and Wood (1984) and Ullmann (1985) have found
evaluation of their social responsibility and found that higher ranked firms
showed higher stock market returns. Vance (1975) however found that a
subset of the firms taken from Moskowitz’s sample had lower stock market
returns than a sample of firms listed in the Dow Jones and Standard &
Poor’s Index. Studies that have used risk-adjusted returns stock market
measures have shown positive results. This has been seen in various
studies (Bragdon and Marlin, (1972); Bowman and Haire (1975); and
Parket and Eibert(1975). However these studies did not control for possible
effects of other variables. Later studies that have attempted to control for
differences in risk have offered more cautious support for the relationship
and accounting performance after controlling for the age of the assets.
CSR and a firm’s adjusted ROA by its ranking in the Value Line Safety
They rated the firms on the basis of their social responsibility and they
found that higher rated firms had higher accounting based measures than
other firms.
performance comprise essentially of two types. The first uses the event
acts. The results of these studies have been mixed. Wright and Ferris
have also yielded mixed results. Cochran and Wood (1984) located a
performance after controlling for the age of the assets. Aupperle, Carroll
56
and Graves (1997) found significant positive relationships between an
index of CSP and financial measures such as ROA in the following year.
Studies that have also used the market based measures have also
months and the results indicated that there existed a negative relationship
extended the period of study from six months to three years and found a
suggests that an alignment of the social goal with the business goal where
the firm. There are perceived value additions in firm performance due to
57
signalling theory c) social identity theory. The consumer inference theory
and Dacin, 1997). The signalling theory (Boulding and Kirmani , 1993)
buyers and sellers, any signals originating from the company is keenly
which an individual works (Ashforth and Mael, 1989, Dutton et al, 1994).
studies related to CSR motivations behind CSR activities have been done
in the past few years (e.g. Gaafland, 2002). Some argue that companies
norms.
have also produced mixed results. Spicer (1978) found that firms rated
lower total and systematic risk than less socially responsible firms.
corporate social responsibility, shows that though all CSR activities are not
58
profit maximizing, some may be , and so the careful use of CSR can fulfil
Pinnacchio 2005). This means that on the one hand CSR decisions may
result in immediate higher cost of labour, it would also on the other hand
relationship between CSR and financial performance have been carried out
et al, 2010) , Taiwan (Fu-Ju Yang, Ching-Wen Lin, and Yung –Ning
Chang), New Zealand (Lyon, David 2007) , Malaysia (Yam Lee Hong) and
groups (Cochran and Wood , 1984). Studies have been also conducted
(ROA), return on equity (ROE), assets size, return on sales (Griffin and
Mahon ,1997), average age of assets (Cochran and Wood , 1984). Some
investing has also been conducted in recent years ( Ioannis Ioannau &
59
magazine’s ratings of corporate reputations (McGuire 1988), criteria used
respect of their CSR performance (Timperley 2008) have been used to test
used for testing the relationship have also been varied ranging from a
lawsuits which may threaten the very existence of the companies. On the
other hand, a firm with high social responsibility may have a relatively low
financial risk as the result of more stable relations with the government and
responsibility may also have a low debt-equity ratio, which would lead to
The fact that CSR is influenced by the size of the firm has been found true
60
2007) Europe (Lammertjan Dam et al, (2012) and Nigeria (Uwalomwa
Uwuigbe 2011)
as good social citizens (Barnea and Rubin, 2006); (ii) the strategic-choice
2007); (iii) the product signalling hypothesis – firms use CSR activities to
signal their product quality (Fisman, Heal and Nair, 2005); and (iv) the
2001; Calton and Payne, 2003; Scherer, Palazzo and Baumann, 2006).
distinguish three CSR types based on the motivation of the firm. They
61
contrast, ethical concerns correspond to altruistic motives. Corporate
lever. Motivations for CSR have also been studied on qualitative empirical
responsibilities (1991 and 1996). The bottom two stages of the pyramid
The CSR concept literature studies not only seek to define CSR in these
vague terms but also stretch to develop the framework to understand more
strategies in the present day social and political business climate (Lantos
62
constituencies as employees, consumers, communities and environment(
ensuring that the business operations do not threaten the safety of local
usually exercise their CSR demands using voice and social movement
the anti-genetically engineered food and crops campaigns in the E.U, the
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Smith(2002) observed that these organisations are sceptical on the
significant negative stock market reaction, and this affect investors belief
on sales both directly and indirectly, through harm to the firm and brands
reputation.
Empirical studies fall into two groups. The first group uses event study
and most common group of studies looks at the longer run relationship
the studies in India use content analysis, ie., analyzing data from published
sources such as Annual reports and CSR reports (Kapoor and Sandhu ,
2010; Richa Gautam, Anju Singh (2010). One distinctive study was carried
out using perceptual data on CSR and NFP were collected from 150
64
senior-level Indian managers including CEOs through questionnaire survey
strategies and actions are its top managers (Sims & Brinkmann 2003).
Other studies have posited that managerial decisions on CSR issues are
set of shared, taken for granted, implicit assumptions that a group holds
65
and determines how it perceives, thinks about and reacts to its various
environment”.
While there have been numerous studies in the west on the relationship
between CSR and financial performance, there have been few studies in
the Indian context. The existing studies in India are mostly limited to self-
Many studies have mainly relied on secondary data using content analysis.
Most of the studies that have examined the relationship between CSR and
which are also important for the growth of a company. Certain studies have
examined the CSR and Firm performance using primary data, but the
66
CHAPTER 3
3.3 Hypotheses
67
CHAPTER 3
The BSE 500 Index constitutes the top 500 companies in India in terms of
environment.
68
The objectives of the study are:
parameters.
primary stakeholders.
3.3.Hypotheses
69
HO3 : Favorable CSR towards customers and
suppliers will not have any impact on the firm’s
financial and non-financial performance
70
CHAPTER 4
RESEARCH METHODOLOGY
4.1 Introduction
4.4 Questionnaire
71
CHAPTER 4
4.1 Introduction
distribution, response rate, pilot study and the validity and reliability of the
questionnaire. Research Methodology lists the basic plan of the study and
and process of data and finally the interpretation of data. The research had
especially for the study. Any data source other than the survey returned
studies, books and journals, Annual Reports, CSR reports and published
articles related to the subject. The secondary data used in this study
from the Prowess CMIE database. Also, CSR reports obtained from the
companies were used to supplement the data obtained from the survey.
Financial data used in this study was mainly from published data available
72
4.3 Population and Sample
The subjects of this study were companies operating in India and were
listed in the BSE. The BSE (formerly known as Bombay Stock Exchange
Ltd.) is Asia’s first stock exchange and one of India’s leading exchange
groups. Around 5000 companies are listed on BSE making it world’s No. 1
The population for this study comprises of the top 500 companies listed in
the BSE. The listed companies comprise of companies where the majority
majority shareholders. The BSE 500 index was chosen as this comprised
contributed immensely to the India growth story since they have been
Indian economy.
The study was focused on the top 500 companies listed in the Bombay
Stock Exchange (BSE), the total population was 500. Since banking and
excluded from the population, implying that 422 companies constituted the
groups. Table 4.1 below gives the sample size from each industry/sector.
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Calculation of the defined sample showed that the minimum sample size to
be 96.
S. Sample
Industry/Sector Population
No. Selected
1. Agriculture 20 2
2. Capital Goods 53 19
4. Consumer durables 11 4
5. Diversified 6 2
6. FMCG 29 2
7. Healthcare 35 12
8 Housing related 42 4
9. Information Technology 33 9
12. Miscellaneous 25 5
14 Power 21 4
15. Telecom 11 3
16. Textile 11 2
19. Tourism 6 1
20. Others 4 -
A major objective of this study was to study the relationships between CSR
and financial performance. The CSR was related to internal and external
the study, the method of responding , the aim of the research and the
security of information.
The questionnaire was divided into six major parts. The first part related to
firm related questions such as the industry/sector that the firm belongs to,
the age of the company and the number of employees. The second part
related to the CSR policies and practices with respect to the various
the environment.
The following table shows in details the items used to measure CSR
CSR Items
Employees:
1. Extent of training and development in the organization
2. Extent of consultation/ workers’ participation in decision making
3. Extent of commitment to health and safety of the workers
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Customers and Suppliers:
Community:
1. Donate to charity
2. Projects with local community (sports, education, health)
3. Employee volunteering
Environment:
1. To what extent is your firm involved in the following?
Waste reduction
Recycling
Energy consumption
Reduction of air pollution
2. To what extent does your organization /replace hazardous
materials
perceptions of CSR. The fifth part had questions pertaining to the impact of
and the sixth part had questions relating to the non-financial performance
76
5 items of Customer and Supplier CSR was measured through questions
on a five point scale – ‘ No policy exists’ (=1); policy exists but not
implemented (=2); policy exits and partially implemented (=3); policy exists
and substantially implemented (=4) and policy exists and fully implemented
disagree’ (=3); ‘Agree’ (=4); and ‘Strongly Agree’ (=5). For the responses
regarding the non financial measures, respondents were asked to rate their
company in relation to the industry norms for the years 2006-07 to 2010-11
‘Above average’ (=4); ‘Well above average’ (=5). The 12 item scale
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considered to assess the non-financial parameters. The 12 items which
were tested were: (1) sales growth rate, (2) market share, (3) operating
profits, (4) workplace relations, (5) cash flow from operations, (6) return on
There has been very little research done in India in exploring the
towards CSR.
statements were mixed up in order to find out how managers interpret CSR
corporate offices were based across the country. Primary data was used in
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the study with respect to CSR policies and practices. Data was directly
Out of total 500 companies listed in the BSE, 78 companies which were
banking and finance companies were excluded from the study as the
companies were excluded as they did not have any CSR activity. 27
companies were unwilling to be part of the study. This meant that out of the
total 500 companies in the BSE 500 Index, only 262 companies were
eligible /willing for the study. Questionnaires were sent to 245 companies
questionnaire with them after explaining the objective of the study. Since
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4.5 Pilot Study
actual survey and it is carried out before the actual survey. In order to
develop and test the adequacy of the research instruments, a pilot study
sufficient to include any major variations in the population that are likely to
affect responses.
The current pilot study was undertaken and the questionnaire was
strategies and policies. In this study 104 listed companies were included to
one where the definitions of a sample survey are limited in order to test
stakeholders’ CSR based on the current condition at one time (snap shot).
The results of the study are intended to describe empirically the CSR
was used. The model developed covered three activities a) finding the
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between Aggregate CSR and financial performance; c) finding the
on the companies policies and strategies with respect to the CSR towards
stability.
The main independent variables of the study are the CSR towards various
data, whereas the financial data were obtained from secondary sources,
namely the published Annual reports of the company and the CMIE-
Prowess database.
83
E3: Policy of recycling/treatment of waste pollution control
systems.
E4: Provision of environment pollution
E6:Substitution of polluting/hazardous
materials
is given in Appendix.
performance was also obtained from the HR/CSR personnel who consulted
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the respective departments before filling in the responses. In some cases,
The first step of data analysis is to check the validity and reliability of the
data. The reliability and validity tests were conducted using SPSS 20.0.
index (GFI), comparative fit index (CFI) and root mean square of
were causal indicators and not affect indicators (Bollen and Lennox, 1991)
few items had non-significant loadings. Despite this, these questions were
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CHAPTER 5
5.1 Introduction
86
CHAPTER 5
5.1 Introduction
There are several theories that explain why CSR occurs in a firm and a
close scrutiny of these reveals the similarities and differences between the
theories that explain the existence of CSR. The most relevant theories and
and ethics. Based on this, the CSR theories can be broadly classified into
four categories:
instrument for wealth creation and that its sole responsibility is to increase
CSR to be a mere means to the ends ie., profits. CSR is thus seen only as
the ethical custom of the country” (1970). But concern for profits does not
mean excluding the interests of all who have a stake in the firm. Among
long run. In both the cases, CSR is a mere instrument of profits. The third
A well known approach is that any corporate action taken which results in
investment in the local community: “It will be in the long run interest of a
reduce the wage bill or lessen losses from pilferage and sabotage or have
theory (Jensen and Meckling, 1976; Ross, 1973) is the most popular way
firm (stakeholders).
88
Competitive advantage strategies
the firm and its dynamic capabilities and c) strategies for the bottom of the
pyramid.
They argue that investing in philanthropic activities may be the only way to
behind this approach is that the firm has both the knowledge and the
related to its mission. As Burke and Lodgson (1996) pointed out, when
business strategies are targeted at the upper and middle class of society.
But most of the world’s population is poor or lower middle class. Prahlad
(2002), analyzing the India experience has suggested some mind set
changes for converting poor into active consumers. The first step towards it
products or services that do not have the same capabilities and conditions
cellular system with lower cost but also less service features. Therefore,
disruptive innovations not only bring in new innovative products but also
help in improving the social and economic conditions of the people at the
American Express’ initiative to link card sales and card related spending to
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support the restoration of the Statue of Liberty. In CRM, the goal of the
1986). The support of cause related marketing creates a reputation that the
and Siegel, 2001). Some of the activities that typically exploit cause
and a win-win situation for both the company and the charitable cause.
based on product sales. This is often for a specific product and a specific
goal that the program will raise funds for the charity and has the potential
to increase sales for the corporation. One of the most important features of
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require more formal agreements and coordination with the charity;
and its inherent social responsibility. Two major theories which use this
Corporate Constitutionalism
Davis (1960) was one of the first to explore the role of power that the
business has in the society and the social impact of this power. According
to him business is a social institution and must use its power responsibly.
He held that the business derives its social power both from internal and
external sources. Their locus is instable and constantly shifting, from the
economic to the social forum and from there to the political forum and vice
versa. Davis formulated two principles that explain how social power has to
the absence of use of power. In his own words: ‘‘Whoever does not use his
social power responsibly will lose it. In the long run those who do not use
responsibilities’’ (1960). So if a firm does not use its social power, it will
lose its position in society because other groups will occupy it, especially
Donaldson (1982) considered that the business and society had an implicit
context is taken into account and also to integrate empirical and normative
to these authors, this theory offers a process in which the contracts among
process the participants will agree upon the ground rules defining the
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Corporate citizenship
Although the idea of the firm as citizen is not new (Davis, 1973) a renewed
certain factors that have had an impact on the business and society
relationship. Among these factors, especially worthy of note are the crisis
governments. Altman and Cohen (2000) were the first to introduce the term
“Corporate Citizenship” in the early 1980s. Since the late 1990s and the
early 21st century, this term has become more popular in business and
increasing academic work has been carried out in this area. The idea of
this could be the reason that it is popular among both managers and
CSR and 3) an extended view. In the limited view the term “corporate
a larger role of businesses in the society in the sense that in the event of
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failure by the government, corporations will tend to replace the most
powerful institution, namely the government. There have been many views
researchers. But the converging points are that it indicates a strong sense
to improve the local community and consideration for the environment. The
concern for local community has seen an extension to the larger global
demands arguing that the business depends on the society for its
take into account social demands, and integrate them in such a way that
Issues management
95
zone that Ackerman (1973) calls the ‘‘zone of discretion’’ (neither regulated
nor illegal nor sanctioned) where the company receives some unclear
signals from the environment. The firm should perceive the gap and
the appropriate approach to CSR issues. Jones emphasizes that the CSR
process should be a fair process where all interested parties have the
and feels that the CSR implementation process is more important than the
process of conceptualization.
Wartick and Rude ( 1986) as the “ processes by which the corporation can
identify, evaluate and respond to those social and political issues which
may impact significantly upon it”. Some of the aspects which have been
96
group pressures and business crises as well as organization size, top
(1975, 1981), where they stressed the importance of the public process
advancement of employees.
Stakeholder management
between the entire system of stakeholder groups and the objectives of the
corporation. The second principle states that the issues regarding multiple
97
stakeholders require efforts which simultaneously deal with various issues
good society.
become an ethically based theory mainly since 1984 when Freeman wrote
98
investors, suppliers, customers and communities). Secondary stakeholders
are those that influence the company or are affected by it, but who are not
essential to its survival, although they may be able to help or harm the
ensure that they remain part of the stakeholder system. He may pay
common distinction made is that between those who are influenced by the
company’s actions and those who have an interest in what the company
Company’s Influence
Low High
Insignificant
attention
attention
Significant
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In order to assess to which stakeholder priority should be accorded,
Stakeholder Attributes
they develop what they refer to as “the principle of what and who really
counts”.
Dangerous
POWER Dominant
Definitive
LEGITIMACY
URGENCY
Discretionary
Demanding
Dependent
of the three attributes, they are termed as latent stakeholders and have low
100
ppriority to competing stakeholder claims. Stakeholder salience would be
moderate if two of the three attributes are held by a stakeholder and such
possess all the three attributes, salience will be high where management
perceive that all the three are present. Stakeholders may shift from one
individuals who benefit from or are harmed by, and whose rights are
a general concept of those groups who have a stake in or claim on the firm
In a more precise way, Donaldson and Preston (1995) held that the
stakeholder theory has a normative core based on two major ideas (1)
by their interests in the corporation, whether or not the corporation has any
merits consideration for its own sake and not merely because of its ability
to balance such a multiplicity of interests and not only the interests of the
101
sufficient. In order to point out how corporations have to be governed and
conduct – into the company’s business policies and actions. CSR focuses
triple bottom line approach – with the goal being to positively impact
processes (inner circle) and the nature of and quantity of their impact on
society in various areas (outer circle). Most of the stakeholders look at the
outside circle as to what the company has actually done , good or bad, in
workforce.
age of transparency.
can now choose one brand over another based upon those
103
companies' respective environmental records. Likewise, investors
In the last thirty years alone, one-third of the planet's resources - the
104
broader public interests. Global corporations are under constant
policies, companies are being held accountable for their actions and their
impact.
that are responsive to the demands of all of their stakeholders are arguably
105
corporate citizen when it demonstrates a commitment to its stakeholders
operations.
Sustainable development
Sustainable development has been defined in many ways, but the most
frequently quoted definition is from Our Common Future, also known as the
Brundtland Report:
future needs."
time.
understand that air pollution from North America affects air quality in Asia,
and that pesticides sprayed in Argentina could harm fish stocks off the
coast of Australia. And when we think of the world as a system over time,
106
we start to realize that the decisions our grandparents made about how to
farm the land continue to affect agricultural practice today; and the
The quality of life is a system, too. It's good to be physically healthy, but
what if you are poor and don't have access to education? It's good to have
a secure income, but what if the air in your part of the world is unclean?
And it's good to have freedom of religious expression, but what if you can't
connected manner and the ability to sustain a high quality of life for current
A report from global accounting and consulting firm Grant Thornton that
used data collected in late 2010 and early 2011 noted that CSR activities
"businesses realize their value not only commercially, but also in terms of
"Saving the planet" came in sixth in the survey of drivers of CSR. The
107
Despite this seemingly irreconcilable divergence, some management
Review article titled, "The Link between Competitive Advantage and CSR,"
authors Michael E. Porter and Mark R. Kramer argue that creating shared
value (CSV) should take precedence over CSR. "CSV should supersede
wrote. "CSR programs focus mostly on reputation and have only a limited
connection to the business, making them hard to justify and maintain over
an indirect value that comes from the benefits to the communities which
108
companies operate within. Involvement in local programs improves the
the global supply chain or the value chain. Working with suppliers to
sustainability programs.
gained universal acceptance. The business case for CSR has been gaining
ground, revolving around the idea that what is good for the environment,
the workers and the community is also good for the financial performance
and other consequences of their activities. The Triple Bottom line (TBL)
performance, ie.,
a) Economic;
b) Environmental; and
c) Social factors.
Bottom Line’ focuses corporations not just on economic value they add, but
109
also on the environmental and social value they add and destroy. At its
whole set of values, issues and processes that companies must address in
order to minimise any harm resulting from the activities and to create
economic, social and environmental value. This involves being clear about
the company’s purpose and taking into consideration the needs of all the
During the past six decades, the interest in the social responsibility of
110
organizations has increased, especially more recently ( Albinger &
Freeman, 2000; Angeldis & Ibrahim, 2004; Backhaus, Stone & Heiner,
Greening & Turban, 2000; Higgins, 2001; Wood, 1991). This interest has
1991).
CSR is larger than philanthropy; it is not about just giving. CSR implies that
you factor the cost of doing philanthropy, good works, engaging with the
view that business is chiefly a means for improving the economic condition
on making a business case for CSR. The simple reason for this:
business. In this way it increases the likelihood that CSR practices would
be adopted.
111
Making the business case has grown in importance as the focus of CSR
back to the society , to the function of CSR in core business activities. CSR
homeless shelters, hospitals and the like. Second, companies can focus
companies practise at least the first two forms of CSR to some degree, and
The bar for strategic CSR is now higher than ever. There are increasing
cost pressures on the companies selling products and even in trying times
every company must practice good corporate citizenship , but the reality is
that first companies must make money before they can give it away.
Preston and O’Bannon (1997) divide the business case into three types of
relationship:
performance;
112
2. that within which financial performance relates to corporate
responsibility;
is synergistic.
In all the three types the relationship can be positive, neutral or negative
performance. Case studies and other analyses exists for each type of
The business case for CSR differs from firm to firm, depending on a
the sector within which the firm operates). Another factor is the approach a
firm takes to CSR, which can vary from being strategic and incremental on
The business case for CSR also revolves around the fact that firms that fail
create wealth for themselves and society. Taking into account the interests
113
and contributions of those with whom one interacts is the basis for ethical
for firms to anticipate and address issues associated with their interactions
endeavours.
social responsibility and business success. The World Business Council for
surprising that many analysts and investors are paying closer attention to a
level of analysis two kinds of motivation can affect human behaviour – the
extrinsic one, aimed at achieving external rewards, and the intrinsic one,
latter into two: normative intrinsic motivation and hedonic (or enjoyment –
engaging in CSR are a firm’s key decision makers – like the CEO or the
authors argue that “the motivation for engaging in CSR is always driven by
The rationale is that when motivations for CSR are instrumental CSR can
116
Furthermore, CSR is arguably rooted in firm resources and competences,
stakeholders needs, firm key decision makers are expected to exploit all
the long period. Corporate strategy becomes ‘sense making’ and a source
117
objectives and values of individual and corporate investors, with demands
In Indian companies, the primary motivations for CSR are internal. The
owner/promoter has a major role to play in shaping the CSR agenda of the
118
firm. Indian public sector units (PSUs) were set up by the state to ensure
the public sector was effective only to a certain limited extent. This led to
shift of expectation from the public to the private sector and their active
catch steam.
of their CSR policies not only to their overseas subsidiaries but also to
suppliers over which they have varying degrees of operational control. The
along their supply chains is illustrated by the fact that there are over 63,000
is how to use CSR to competitive advantage, avoiding the risk that weak
change behaviour. The pressures arise mostly from regulatory efforts that
affect a business even before the first product is produced or sold. These
US$1 trillion-plus industry (Salamon et al., 1999, p.8). More than 30,000
easier than changing public policy (Vogel, 2005). NGOs have succeeded in
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5.7.8 Access to markets
are able to connect with their target consumer and establish relationships
with key business partners in the local market. These CSR programs help
public expectations. The insight gained helps ensure that the company is
media coverage, and increases access to markets for their products and
services.
The role of the manager and other key decision makers is a central
concern of much CSR literature. Key staff members are understood to face
potentially to lack the skills to do so. Much of the literature suggests that
121
However, it is suggested that one obstacle to the implementation of CSR is
Pogutz 2004; Holmes 1976) is driven by its top management and the
122
include laws and regulations and the social and commercial setting within
Individual Factors
Institutional factors
123
CHAPTER 6
INDIAN COMPANIES
6.1 Introduction
companies
6.9 Conclusion
124
CHAPTER 6
6.1 Introduction
and can be seen in the form of magnificent temples, rest houses and great
development has been a tradition in India and its evolution from individuals'
over the years. The concept of parting with a portion of one's surplus
wealth for the good of society is neither modern nor a Western import into
society and was treated with respect and civility as is recorded in the
Mahabharata and the Arthashastra. Over the centuries, this strong tradition
secular character.
The Indian approach to CSR is closely linked its political and economic
history.
125
6.2 Phases of CSR:
and changed CSR from the 1850s onwards. The pioneers of Indian
industry like the Tatas, Birlas, Bajaj, Lalbhai, Godrej, Mahindra and many
during the freedom struggle saw Indian businesses actively engaged in the
justice.
126
Fourth phase (1980 till date) is characterized by traditional philanthropic
engagement and partly by steps taken to integrate CSR into the business
strategy.Till the late twentieth century, the mission of business firms was
by and large becoming conscious of their rights, which has led to a rise in
the expectations of society from business. Over the years, the nature of
labour, raw material and natural resources and in turn, offers goods and
on people, our planet and our ability to sustain the levels of holistic
127
development that we all aspire to. This realization has also brought an
businesses of all types and sizes need to function with fairness and
profits on CSR. Facing strong criticism, it gave up the idea and made the
Over the past several decades, the Tatas have established Trusts, which
and the Tata Institute for Fundamental Research (TIFR). Wipro Chairman
Azim Premji has pledged to donate nearly Rs 10,000 crores for improving
school education in the country. Infosys commits one per cent of its profits
every year to social causes through the Infosys Foundation. The Birlas, the
Mahindras, the Kalyanis and several other large corporations have been
Jamshedpur include the provision of full health and education facilities for
However, CSR in the Indian context is still one of the least understood
the reputed MNCs and a handful of large Indian companies, most others
great extent, companies see CSR as an add-on function and not core to
their business. Hence, the approach has largely remained parental and
coming out of the purview of doing social good and is fast becoming a
business necessity.
somewhere along the way, the lines between giving and CSR have grown
hazier. Corporate philanthropy and CSR are really two different things, but
get blurred, particularly in India. CSR should actually relate to the way you
conduct your business, whereas it gets confused with giving to the local
129
The government has also sought to include vocational training for
employees as part of CSR. But there has been no clear definition of the
term. There have been indications from the government to include health,
culture, social welfare and education under the CSR agenda. CSR could
There have been attempts made by professional bodies like the Institute of
should come under the CSR umbrella and what should not. But not much
Summit on CSR held in New Delhi in 2008 put it: "CSR is comprehended
Sustainable Future" -- noted that until the 1990s, CSR was dominated by
the idea of philanthropy and that business efforts were often limited to one-
mind while planning such initiatives, thereby reducing the efficacy and
past few years, the concept of CSR has been changing. There has been
strategy or responsibility."
130
CSR extends beyond philanthropy
The guidelines on CSR for Central Public Sector Enterprises (CPSE) state
and reaches out to the integration of social and business goals. These
activities need to be seen as those which would, in the long run, help
lobbied hard against the move to make CSR mandatory. Those who are
opposed to the proposal argue that the very concept of CSR is built on the
point. The environment in which the companies operate today has changed
Civil Society Organizations (NGOs), which support the cause of the under-
131
becoming an outcome of a variety of social, environmental and economic
pressures.
The CSR measures are actually part of a new Companies Bill that has
been in the works for several years. The new Companies Bill contains
many provisions regarding CSR. CSR will soon therefore be codified and
corporate laggards. However the India industry has been almost totally
Commerce & Industry (FICCI) has suggested tax breaks instead for those
who meet the voluntary targets. Rival chamber the Confederation of Indian
that it must be dealt with at the shareholder level rather than at the
company level.
Industrialists and social activities are unanimous in their opinion when they
say that once CSR is made mandatory, people will find ways and means to
get out of it. The rules will be so vague that the reporting will be even
132
vaguer. While they all maintain that CSR is desirable, some of them feel
that it should not lead to the outsourcing of governance. This would merely
imply taking the failure of the states and corporate and creating a model
out of it is. Therefore, the underlying sentiment is that you can’t dictate
CSR.
elaborate charade of “doing good” is often more than not routine corporate
Unlike in the US, where most Fortune 500 firms have aggressive
largest companies. Proposals have been mooted—and for the most part
133
National Voluntary Guidelines on Social, Environmental and
Government alone would secure our future and ensure that wholesome
make surpluses that can be re-invested for the growth of the economy.
and understanding of the term CSR. The Guidelines take into account the
take cognizance of the fact that all agencies need to collaborate together,
meet its ambitious goal of inclusive and sustainable all round development,
The establishment of the National CSR Hub at the Tata Institute of Social
in the country. TISS will act as a think-tank, undertake research for the
Public Enterprises, the National CSR Hub will also undertake nation-wide
Reporting. The new Guidelines on CSR lay stress on shift from casual
135
organizations, academic institutes, trusts and missions, Self-Help Groups,
Mahila Mandals etc. MCA’s draft voluntary guidelines on CSR are along
Noted CSR expert Prof. Leo Burke says India needs to adopt ‘national-
local’ approach. “National in the sense that there will be need for
share innovations, and ‘scale-up’ pilot programmes ,local in the sense that
communities.”
the world to catalyze the support of the UN MD goals. The ten principles
136
stakeholder perspective and seeks to integrate the following ten principles
compulsory labour.
environmental challenges.
environment responsibility.
10. Businesses should work against corruption in all its forms, including
137
Some public sector companies and a few private sector companies
surveyed are members of the UNGC, though not all stakeholders groups
are represented
their communities. But with a few exceptions such as the Tata Foundation,
the giving has been more as acts of personal generosity and patronage
the other hand, family foundations have been professionalized and pursue
and so on. The role of the funder now extends to monitoring the giving. It
will involve some hand holding and networking help that could be quite
social order and an urge to improve it. More often than not, CSR programs
and practices are shaped by the ideals of the top leadership and
138
orientation of the top management (Sood and Arora , 2006).Responding to
other social problems such as urban chaos and poor urban infrastructure,
garbage disposal, power and open spaces are provided in planned cities.
less noticeable.
private sector and the sharing of responsibility among the private and
public sector in the delivery of public goods and services. With the ills of
country, the private sector has taken steps to address these issues and
bring about some qualitative change in the lives of the people. The IT
education to suit the needs of the industry as part of their Corporate Social
management and business planning and could easily provide the missing
139
ingredients of leadership and organization and establish the ‘ last mile
connectivity’ to take the benefits to the people (CII 2007). Similarly in case
institutes and self-help groups for them. The work force diversity in terms of
Alternative Communities
self sufficient with amenities such as hospitals, schools, gardens and other
civic facilities.
Alternative markets
is to develop a business model with the profits shared among all the
CSR is a much wider concept than before. Today it is associated with the
benefits to the environment (at least not harming it) and benefits to the
140
practice in India, though some of it has been influenced by the West, yet
India Inc is less transparent than its peers in Brazil, China and South Africa
Among the lead adopters of this practice in India are Larsen & Toubro,
JSW Steel and the Mahindra Group. Sustainability reporting is a vital step
with social justice and environmental care. Fewer than one-third of India’s
top firms file reports on their corporate responsibilities and only 16%
their CSR.
A KPMG survey found that companies in the construction, oil and gas,
disclosed their green house gases emissions and 13% identified and
141
disclosed the business risk of corporate responsibility issues in their supply
chain.
These kinds of reporting are highly prevalent in the developed nations and
include Reliance Industries Ltd, Tata Power Ltd, Tata Chemicals Ltd,
Grasim Industries Ltd, Infosys Ltd and Oil and Natural Gas Corp. Ltd.
activities of 300 corporate houses, corporate India has spread its CSR
the most from them. About 36 per cent of the CSR activities are
cent in Delhi and 9 per cent in Tamil Nadu. The companies had on an
The survey reveals that, not surprisingly, the corporates targeted most of
their activities around the areas they operate. This trend is likely to
continue. But the flip side is that, it is generally the more developed states
142
that have been the beneficiaries of CSRs, rather than the ones languishing
of 0-5, showed that none of the Indian companies got placed in the highest
level. Only 16 % of the 500 companies surveyed had well defined CSR
activities. The concept was yet to catch up with the remaining 86% of the
2011 looked at common threads running through the top 250 companies as
standard, the drive for consistency and accessibility to quality data was
The survey revealed that CR reporting is now routine for 95 per cent of the
top 250 companies and that developing nation companies are also opting
143
Tata Steel’s policy of inclusive development is not just a policy in paper,
programme covers 600 villages in and around its manufacturing and raw
and medical care, education, sports among others. Tata Steel is a founder
HIV/AIDS awareness.
helped improve the health of thousands of women and children each year.
Education
Tata Steel believes that education is a basic human right that must be
Community Development
Ensuring inclusive growth for all its stakeholders is one of the key
144
focus on providing rural services in the hinterland in and around the
Self help groups formed by rural women have been effective agents of
change in rural areas. Empowerment initiatives have raised the skill levels
Employability training
Apart from the above mentioned community initiatives, Tata Steel has an
driving sustainable growth. Tata Steel has been conferred with many
145
6.8.2 Ambuja Cement
Prior to kthe people. Once community needs are identified, they are
programme not only addresses the issue of water in agriculture, but also its
livelihood security
allied activities like dairy production, bee keeping and animal husbandry to
employment
146
health workers, who conduct sessions on health with women and youth,
Women Empowerment
ACF promotes the formation of Self help groups (SHGs). SHGs are not just
tools for saving or lending; they are a space to share and discuss concerns
conducts health camps for rural women. The Foundation also provides
funds for curative medical assistance for deserving cases for emergency
147
posters. As part of its employee volunteering program, blood donation
KPIT has always believed in giving back to the society. The Company
renders this contribution in areas where the Company’s core strengths are,
in order to add maximum possible value. Therefore, the company uses its
Environment
founded on the belief that the interest of the future generations and society
Education
KPIT supports both formal and non formal education programs. It is directly
Transportation
148
Employee Initiatives
Consumer goods major Hindustan Unilever (HUL) has tied up with the Tata
underprivileged children. HUL and Star Bazaar had conducted the India’s
blind children and supporting orphans. The initiative will offer consumers
Kissan, Knorr, Kwality Wall’s, Clear, Dove, Vaseline, Axe, Surf and Vim.
the Smile Foundation, Parikarma and Thozhamai, which work in the area
Bharti Airtel, India’s largest telecom service provider, has been testing and
implementing various options for the last two-three years. The e-bill
newsletter). Bharti Airtel sends around two million bills by email every
month, avoiding paper. Bharti Infratel, also of the Bharti group and one of
around 1,250 tower sites leading to annual savings of 6.9 million litres of
diesel and around Rs 28 crore. Infratel also has installed free cooling units,
crore.
6.8.7.ITC
Green Building Council. It has been able to reduce energy costs by 16-
19% in the last eight to 10 years. Apart from taking to measures such as
using LEDs (light emitting diodes) rather than CFLs (compact fluorescent
analyse the areas where the energy consumption is more. Close to 29.5%
JSPL has spent Rs. 146 crore in Angul, Odisha since 2005 on peripheral
150
believes that it is not only concerned about “what we are doing, but how we
are doing it and what impact it will have on people’s lives.” CSR covers a
Essar has designed a bullock cart frame fashioned from steel so villagers
Steel Authority of India Ltd (Sail) spent Rs. 64 crore in 2010-11 on diverse
scarcity and increasing awareness of the need to cut their carbon footprint
151
6.8.11 JSW Steel
quarters and even produces power from wind mills. The Company uses the
Titan Industries has been the recipient of social responsibility awards for
with audio-visual and locomotors disabilities. More than 5% of the total blue
group. Under its CSR programme, the company undertakes projects and
152
6.8.14 Hindustan Petrochemical Corporation Limited (HPCL)
Fortune Global 500 company which follows a Triple Bottom line approach
ghar (Community kitchen) where people can get access to a ready kitchen
6.9 Conclusion
CSR activities and are also useful in identifying the benefits that flow back
to business and society for their fulfillment. The four main motivational
aspect of CSR for Indian companies are reduction in cost and risk
and legitimacy for the company that is the license to operate and to most
fulfill broader social goals' (Davies, 2003; Freeman, Pica, & Camponovo,
2001).
There are different ways through which a firm can exert positive social
change in society and collaborate with partners who have the explicit
the circumstances that lead to the pursue of various CSR activities and
firm’s economic objectives and the social objectives of society. Only when
firms are able to embed strategic CSR activities with the whole hearted
In India besides the Tata Group, there are other companies which have
of these companies are BHEL, Wipro, Bajaj Auto Ltd., Larsen & Toubro,
ACC, Birla’s, Asian Paints, Escorts, SAIL, ITC etc. The contribution of
154
the primary level and other community development activities . As a part of
their CSR programme they provide medical care, recreational facilities for
the cherished values and teachings of our ancestors and our religious
chests to provide the required assistance and help to the needy. Mahatma
its brand image. This realization has made Indian companies to undertake
change.
The people centric approach in CSR makes the CSR practices of Indian
companies unique, while India shares with other developing nations in its
CSR experiences and practices certain attributes that come with the
155
and the deployment of CSR as an alternative to the government. (Matten
and Moon 2008; Blowfield and Frynas 2005). Such an approach has led
promoting work force diversity, fostering inclusive growth and training and
development. Indian CSR initiatives are also deep rooted in religion and
talk about the good things that they are doing echoing the thoughts of
India’s foremost industrialist, Mr. Ratan Tata who says that, “We do not do
This is not to suggest that CSR has no business case and is limited to
CSR efforts the concept is so well integrated into the key business
activities of the company that the CSR values are operationalised through
156
Business is often intrigued with the question of business case for CSR and
Indian companies are no exception. Their primary concern has been ‘what
do the business community and organizations get out of CSR and how do
practices?’ Indian companies like many of its counterparts in the west are
stakeholders and society (social) are captured along with the categories of
Shabana, 2009).
157
CHAPTER 7
FINANCIAL PERFORMANCE
7.1 Introduction
performance
7.5 Causality
7.7 Conclusion
158
CHAPTER 7
7.1 Introduction
Many CSR activities can create firm value without the intervening step of
performance and shareholder value. This chapter will detail the causality
companies.
(Thorne et al, 1993). A study carried out by Davidson and Worrell (1988)
companies. This is due to the fact that markets react negatively to the
159
market’s reaction to incidences of socially irresponsible behaviour and
size. Wokutch and Spencer(1987) studied 130 firms and the financial
The firms were divided into four groups based on their relative social
group of socially irresponsible firms than the other groups. Stoh and
Brannick (1999) argue that those who ignore their social responsibilities
may suffer from boycotts, ruined reputations which then lead to a decline in
behaviour. In the past too, there have been instances of boycott of reputed
behaviour.
academics who have been struggling for years to find reliable and objective
investing pays off. The relationship is the strongest for the social dimension
160
Diltz (1995) and Sauer (1997) concluded that there were no statistically
societal problems are best left to the freely elected governments to solve.
The resources of the corporation are poorly suited for addressing those
one and only social responsibility of business- to use its resources and
within the rules of the game, which is to say, engages in open and free
will of the minority, fails to serve the interest of his or her principal.
A firm cannot ignore the problems of the work environment and the quality
161
Adopting CSR principles involves costs. These costs might involve the
sustainable.
7.5 Causality
Too much emphasis has been placed on the relationship of CSR and
financial performance does not imply that a firm conducting CSR activities
reduce costs and improve efficiency. The slack resource theory argues that
162
7.6 Relationship between CSR and firm performance
Carroll (1991) argues that the benefits of CSR are so embedded in various
more fruitful way of thinking may be to look at the impact of CSR on both
products and services and acts as a magnet that attracts further scorn.
The resource based view of the firm (Barney, 1991; Wernerfelt, 1984) felt
that the competitive advantage of a firm depends upon the interplay of its
authors have identified social and ethical resources and capabilities which
Dacin, 1997; Sen & Bhattacharya, 2001; Berens, 2004). In their germinal
“generic label for all the information about a company that a person holds”.
164
Corporate associations include perceptions, inferences or beliefs about a
the company; information about the company’s prior actions; moods and
present and again separates the stronger company from the weak
(Kirmani, 1990) and retailer choice (Davis, 1991) through quality signals
like brand names. Using these as signals for a product's position can
increase perceived quality, and decrease information cost and the risks
Employees are vital asset in any company (Young and Thyril, 2009) and a
work (Waddock et al, 2002). The signalling theory states that there is
information asymmetry between the buyers and sellers and in this situation
consumers look at signals that distinguish the companies. This is true for
positive light, this reflects favorably on the individuals within it, who receive
165
positive outcomes such as approval from others (Barber, 1998; Ehrhart &
Ziegert, 2005). Turban and Greening (1997) demonstrated this when they
Firms may also signal to current and future employees. McNall (2010)
information and negatively related variables that are signalled to the future
employee. The Social identity theory suggests that job applicants have
higher self-images when working for socially responsive firms over their
Turban ,in which they manipulated CSP and found that prospective job
applicants are more likely to pursue jobs from socially responsible firms
166
against the company and negative word-of-mouth publicity for the
company.
7.7 Conclusion
It is clear from the above that social responsibility pays off in the long run
167
CHAPTER 8
168
CHAPTER 8
CSR were decided after consultation with experts and the findings of the
pilot study.
Table 8.1 shows the correlation coefficient and p-value for each measure
of CSR. As shown, the p-values are less than 0.05 and the correlation
169
No. Items Correlation p-
value
I. Employee CSR
Health care and assistance to employees .486** 0.000
Subsidized lunch/refreshments to employees .580** 0.000
Credit for education/housing .585** 0.000
Bonus/ ESOPs .657** 0.000
Finance for higher education .658** 0.000
Training and development .679** 0.000
Recreational facilities .592** 0.000
Collective bargaining .733** 0.000
Work-life balance policies .566** 0.000
Formal worker representation in decision .636** 0.000
making
II. Customer and Supplier CSR
Consumer education and product labelling .791** 0.000
Restrictions on use of child labour at supplier’s .748** 0.000
facilities
Tenders and standards for suppliers 720** 0.000
Grievance handling mechanism for consumer 895** 0.000
complaints
Voluntary standards for advertising .603** 0.000
III. Community CSR
Contribution to religious charities .380** 0.000
**
Partnership with NGOs 526 0.000
**
Sponsorship of sports activities .518 0.000
Employee volunteering .615** 0.000
**
Education initiatives .622 0.000
Contribution to Disaster relief funds .636** 0.000
**
Community health initiatives .710 0.000
Promotion of art and culture .578** 0.000
**
Contribution to rural development .679 0.000
IV. Environment CSR
Explicit environment policy .831** 0.000
Use renewable sources of energy .669** 0.000
Recycling and treatment of waste .729** 0.000
Environment/pollution protection systems .786** 0.000
Environmental awareness through messages .745** 0.000
Policy of substitution of hazardous material .855** 0.000
Voluntary information about environmental .777** 0.000
management
Environmental emergency plan .819** 0.000
Table 8.1 : Correlation coefficient between each of the CSR variables
170
8.2 Reliability of the research
attribute, the higher is its reliability. The Cronbach’s Coefficient alpha can
used to measure the reliability of the questionnaire between each field and
the mean of the whole fields of the questionnaire. The normal range of
Cronbach’s Coefficient alpha is between 0.00 and +1. The higher the value
, the greater the consistency among the measures. The table 8.2 below
shows the Cronbach alpha of the CSR measures. The results show that
Once the questionnaire was finalized, the soft copy of the questionnaire
171
was provided to the respondent on the purpose of the survey and the
targeted respondents.
This section describes the analysis of the empirical data collected through
the questionnaire. The sections in the chapter will cover the objective-wise
Company information
Number of employees
Table 8.3 shows that only 8.66% of the companies surveyed had less than
from 2001 to 5000. 19.23% of the companies had employees in the range
172
The impact of CSR activities of the firms on its financial and non-financial
Aggregate CSR
Since all the variables of CSR were uniformly measured on a 5 point Likert
scale, it was decided to average the scores of the four measures of CSR
into an aggregate score, namely the Aggregate CSR. This was considered
community and CSR. Aggregation of all the CSR measures were made on
the basis of the confirmatory factor analysis (CFA) carried out on the four
Firm Performance
(ROA), return on equity (ROE), assets size, return on sales are some of
Financial performance measures are mainly lag indicators and capture the
tangible assets.
Assets is:
the Industry Adjusted ROA was obtained by subtracting the Industry ROA
from the firm ROA. The industry averages were calculated on the basis of
all firms in the same industry sector as specified in the BSE index.
satisfaction, quality, market share, and the number of new products. Non-
174
performance measures such as earnings or return on assets are commonly
the short run but the benefits of such investments can be seen only in the
sales. Improved productivity and quality have been shown to flow directly
help both retain and attract good staff, reducing training and recruitment
costs.
objectives.
The study uses the scale developed by Govindrajan (1984) and then
175
which covered functional areas of operations, marketing, research and
parameters.
Descriptive statistics shows that the mean Aggregate CSR for Companies
under study was 3.27, the minimum aggregate CSR score was 1.90, the
Table 8.4 shows the t-value for all the variables measuring the Aggregate
CSR. The means show that there is a fairly high level of Aggregate CSR
The value of critical t value at df= 103 and significant level 0.05 equal 2.0
and conducive work environment where the employees can realize their
176
potential. Some of the practices include empowerment of employees,
life balance, opportunities for leisure, training and development and also
job security. There is increasing evidence that these practices have a great
insurance and medical benefits such as maternity leave for women. Other
177
The table 8.5 shows that nearly 78% of the companies surveyed provided
families. It can be seen that employees’ health and well being is one of the
top priorities of the companies and the HR policies of the companies reflect
this attitude.
Financial aids such as provision of easy loans or credit for housing and
education are also an important aspect of HR policies and it was seen that
full support for employees to pursue their higher education. Around 63% of
employees. It was also seen that club memberships were usually provided
surveyed also allowed the right of the employees to form unions and had
policies for collective bargaining. In fact there was not a single company
which did not provide that right to their employees. Around 42% of the
companies had explicit policies for promotion of women and minorities. The
companies did not have any specific promotion policies for women or
minorities.
2 2.8 15.4 22.1 13.5 13.5 6.7 14.4 8.7 11.5 12.5 4.8
3 20.2 24.0 34.6 41.3 43.3 29.8 44.2 27.9 28.8 38.5 1.0
4 45.2 47.1 32.7 36.5 31.7 37.5 22.1 38.5 28.8 26.9 1.0
5 31.7 10.6 6.7 8.7 6.7 26.0 16.3 25.0 14.4 16.3 1.0
Total 100 100 100 100 100 100 100 100 100 100 100
Note: B1: Medical assistance; B2: Free lunch and refreshments; B3:
Housing, car and education loans; B4: Bonus/ESOPs; B5: Finance higher
education; B6: Training and development; B7: Recreational facilities ; B8:
Collective bargaining; B9: Promotion policies for women; B10: Formal
worker representation in decision making; B11: Women representation in
the Board of Directors.
A most interesting fact that emerged out of the study was that nearly none
of the companies had any specific policy for induction of women in the
conducted which showed that all variables correlate well. The KMO result
Factor % of variance
An analysis of the Employee CSR activities shows the validity of the scales
and the construct. This was tested by Confirmatory Factor Analysis (CFA).
of Fit Index (GFI), and Root Mean square of approximation (RMSEA) of the
to a very small extent to other variables (all below .139). Therefore this
content of the sentences are positive (p values less than 0.05), or the
Selection of suppliers and vendors are not made only on the basis of
integral part of the supply chain and are sometimes an extension of the
suppliers is human rights. It has been seen that many suppliers violate
fundamental rights of the workers and in some cases also use child labour
in their facilities.
181
Scale C1 C2 C3 C4 C5
1 0 0 0 15 9
2 10 13 15 34 27
3 29 21 32 39 30
4 45 44 31 12 27
5 16 22 22 0 7
Total 100 100 100 100 100
Table 8.9 : Summary of the Customer and Supplier CSR responses (in %)
focusing on their needs and providing them with superior products and
command leadership in their markets (Treacy & Wiersma, 1997). The first
best products. The third is customer intimacy where the firm identifies its
182
Voluntary standards for advertising 2.97 18.175 0.000
The value of critical t value at df= 103 and significant level 0.05 equal 2.0
A total of five variables were used to test the Customer and Supplier CSR
the total variance. Principal Component Analysis was used to extract the
factors. The KMO result for this data was 0.678. Barlett’s test was
significant.
The tests for scale and validity and goodness of fit were conducted and the
183
Nearly 61% of the respondent companies had partially or fully implemented
place regarding the use of child labour at the suppliers’ facilities. Only 15%
of the respondents were of the opinion that there were no policies in place
and sports initiatives in the community can go a long way in building strong
people.
184
health initiatives, education initiatives, promotion of art and culture. The
The value of critical t value at df= 103 and significant level 0.05 equal 2.0
explained nearly 61% of the variance. The KMO result of this data was
0.708 and the Barlett’s test was significant. The results of the one sample
that all variables correlate well . The determinant of the correlation matrix is
multicollinearity is not a problem in this data set. The KMO result for this
data set was 0.918. Barlett’s test was significant. Thus, tests indicate that
185
Table 8.13 contains component loadings which are the correlations
between the variables and the component. The variables with low reliability
will have low loadings, thus highest scoring variables are of most
importance.
Factor % of variance
All the variables have a high scoring variables . Table 8.12 details the
186
Descriptive statistics for the responses to the Environment level CSR is
given below:
Scale E1 E2 E3 E4 E5 E6 E7 E8
1 1 1 4 1 0 2 0 0
2 12 15 14 11 16 13 26 15
3 28 37 36 44 43 43 32 32
4 38 44 39 37 32 38 33 44
5 25 7 11 11 13 8 13 13
Total 104 104 104 104 104 104 104 104
Table 8.15 : Distribution of responses to Environment CSR
Hypothesis Testing
The correlations between the Aggregate CSR and the firm’s financial
carried out.
Correlations
Aggregate Industry Non
CSR adjusted Financial
ROA performance
Pearson Correlation 1 .676** .452**
Aggregate CSR Sig. (1-tailed) .000 .000 .000
N 104 104 104
**. Correlation is significant at the 0.01 level (1-tailed).
Table 8.17 : Correlation matrix between Aggregate CSR and financial
and non-financial performance
better productivity, reduced attrition and lesser training costs. Satisfied and
This in turn would reduce the public relations cost. Environmental initiatives
lead to better corporate image and better suppliers lead to better quality of
raw materials and better products. The discussion of the results indicates
188
that the alternative hypothesis that a favourable Aggregate CSR has a
Correlations
Employee Industry Non
CSR adjusted Financial
ROA performance
Pearson Correlation 1 .561** .524**
Employee CSR Sig. (1-tailed) .000 .000 .000
N 104 104 104
*p<0.05; **p<.01
Table 8.18 : Correlations among Employee CSR, Industry adjusted ROA,
and Non-financial performance
A direct link between CSR towards employees and firm performance
CSR activities in its human resource policies such as worker safety and
189
procedures reduces the attrition rate, increases employee productivity and
suppliers and vendors has also assumed importance. Any laxity in the
norms might result in companies losing major orders. The findings of the
supplier CSR.
Correlations
Customer & Industry Non
Supplier adjusted Financial
CSR ROA performance
Pearson Correlation 1 .410** .283**
Customer &
Sig. (1-tailed) .000 .000 .002
Supplier CSR
N 104 104 104
*p<0.05; **p<.01
Table 8.19 : Correlation matrix between Customer and Supplier CSR
190
The correlations among the variables were also significant. A company’s
support from local and state governments for establishing businesses. The
Correlations
Community Industry Non
CSR adjusted Financial
ROA performance
Pearson Correlation 1 .337** .334**
Community
Sig. (1-tailed) .000 .000 .000
CSR
N 104 104 104
*p<0.05; **p<.01
Table 8.20 : Correlation matrix between Community CSR and firm
financial and non-financial performance
financial performance (Ahmed et al, 1998). The findings of the study (Table
Indian companies is still very low and with a few exceptions, companies
each other.
191
Correlations
Environment Industry Non
CSR adjusted Financial
ROA performance
Pearson Correlation 1 .036 .163
Environment
Sig. (1-tailed) .000 .358 .049
CSR
N 104 104 104
*p<0.05; **p<.01
Table 8.21 : Correlation matrix between Environment CSR and firm
financial and non-financial performance
Regression Analysis
variables are given below in Table 8.22. The above results support the
main hypothesis (H1) and its components (H1.1 to H1.4) except for H1.4
where the correlation has not been seen. In the hierarchical regression
(Table 8.23)
193
holding
Aggregate CSR
Industry-Adjusted Sales FP = - 14.094 +
ROA No. Of 4.750(Empl. CSR)
employees
Promoter
holding
Employee CSR
Industry adjusted 2 Sales
ROA No. Of
employees
Promoter FP= - 7.940 +
holding 2.916(Customer CSR)
Customer &
Supplier CSR
Industry adjusted 2 Sales
ROA No. Of
employees FP=-6.443+
Promoter 2.457(Community CSR)
holding
Community CSR
Industry adjusted 2 Sales No independent variable
ROA No. Of is significant
employees
Promoter
holding
Environment
CSR
Table 8.22 : Regression analysis of CSR variables and Industry adjusted
ROA
194
Non - Financial Sales NFP = 0.830 +
Performance No. Of 0.673x(Empl CSR)
employees
Promoter holding
Employee CSR
Non - Financial 2 Sales NFP = 1.231 +
Performance No. Of 0.012x(Promo Holding) +
employees 0.347x(Cust CSR)
Promoter holding
Customer &
Supplier CSR
Non - Financial 2 Sales
Performance No. Of NFP = 1.165 +
employees 0.012x(Promo Holding) +
Promoter holding 0.369x(Commu CSR)
Community CSR
performance
stakeholders are those that are influenced by the company’s actions and
those who have an interest in what the company does, but are not
195
essential to its survival, although they may be able to help or harm the
company (eg, media, NGOs). The primary duty of the managers of the
standards etc,.
The objective of the study was to also understand whether the CSR
other. In that sense, the CSR activities are all complementary and are not
196
Hypothesis testing
Correlations
Employee Customer & Community Environment
CSR Supplier CSR CSR
CSR
Pearson
.723** .623** .646** .719**
Aggregate Correlation
CSR Sig. (1-tailed) .000 .000 .000 .000
N 104 104 104 104
*p<0.05; **p<.01
Table 8.24: Correlation matrix between aggregate CSR and CSR towards
various stakeholders
The correlation between CSR and firm performance indicated that a more
Aggregate CSR.
197
Size of the firm is also considered one of the important variables that
determine the level of CSR activities. A large sized firm would have more
resources to spare for CSR activities than a small-sized firm. Larger firms
tend to have CSR budgets, a separate department for CSR and dedicated
terms of sales.
Size Shareholding
pattern
Pearson Correlation -.030 .152
Aggregate
Sig. (1-tailed) .380 .062
CSR
N 104 104
Table 8.25 : Correlation matrix between Aggregate CSR and size and
shareholding pattern
The results show that there is a negative but insignificant relationship
shareholding pattern. Therefore our hypothesis that larger firms have more
CSR activities is rejected. In fact the results show that there is a negative
relationship between the two. The hypothesis that companies that have
Promoter share-holding and firm size was the control variables. Data on
promoter shareholding pattern and firm size were obtained from the
respondents from the CMIE- Prowess database. Two indicators of the firm
main promoters.
The data consisted of closely held public limited companies, widely held
companies are more profitable, and they tend to lag behind the PSUs in
sector companies.
engage in CSR
199
i. Nearly 55% of the respondents felt that Pressure from
ii. Nearly 88% of the respondents felt that personal values of owners
and managers were the main motivating factor for undertaking CSR.
iii. Nearly 63% of the respondents felt that religious sentiments of the
iv. Nearly 45% of the respondents felt that improving the image of the
vi. Nearly 81% of the respondents felt that giving back something to the
a motivating factor.
viii. Only 33% of the respondents felt that CSR was being carried out to
was the main motivating factor for companies to undertake CSR activities.
Another factor which scored high was ‘giving something back to the
community’.
Managers were asked to address their attitudes for or against CSR. The
11. Enterprises can commit to CSR only if they get resource assistance
from the government.
12. CSR needs to be made mandatory by law
13. CSR is more relevant for manufacturing industries rather than the
service sector.
14. Engaging in CSR does not compromise the pursuit of profit
15. Socially responsible activities improves the firm’s standing with its
investors
16. CSR activities could improve a firm’s standing with banks and help
them gain access to finance.
(loadings >= 0.4) for factors having Eigen values greater than 1 were
retained. The six factors that emerged explained 65% of the variance
Factor 1: Image building and publicity: This factor emphasises the reality of
attitude towards CSR in India where, barring a few companies, CSR is only
department.
Factor 2: Legal Compliance : This factor stresses the fact that companies
are satisfied with complying to the legal requirements rather than doing
banks in India have started factoring the CSR component to arrive at the
part and parcel of good governance and also feel that partnerships with
202
taking employee welfare measures. This in turn would result in increase in
shareholder wealth.
Factor 6: Business interests: Managers are also keenly aware of the fact
profitable. They feel that unless mandated by law, businesses must focus
Hypothesis Result
203
8.4 Major Findings
equivalent.
primary education and health care etc. On the other hand, the
those who may not be connected to the business in any way but are
204
The CSR towards each of the stakeholders was positive thus
ensuring that the aggregate CSR was also favourable. This implies
The CSR activities in the supply chain are still very low and are
workplace.
The annual CSR spending in Rs. crores for some of the companies
are: Tata Steel (Rs. 126.28); JSPL (Rs. 72.27); SAIL ( Rs. 64);
activities.
205
Many companies have a skeletal staff for CSR related activities or in
most cases the HR manager also manages the CSR activities. This
companies.
not very active and the government too has not taken stringent
was examined. It was observed that the size of the firm did not
matter to determine the extent of CSR carried out by the firm. In fact
main motivating factor for undertaking CSR. This implies that the
206
where the CSR initiative has been extremely successful, especially
for the differently able persons etc., the government has provided all
CSR.
A very interesting fact that came across was that though some
207
variance explained the 17 statements in 6 factors. After evaluating
would help in image building and publicity. The managers also felt
that complying with the laws of the land constitutes CSR. The
respondents also felt that CSR was a major tool for good
hand, the ‘business case’ was one of the relevant motives for a
department.
There are very few interactions with the companies and the civil
208
society and almost no labour unions are actively engaged in shaping
undertake CSR.
good governance and also feel that partnerships with NGOs and
shareholder wealth.
209
CHAPTER 9
CONCLUSIONS
210
CHAPTER 9
benefits to the firm. This study has focused on the stakeholder approach to
the business approach by linking CSR and firm performance. The first
objective of the firm was to examine the relationship between CSR and
study found that CSR activities have a positive impact on a firm’s financial
was significant for the CSR activities related to employee, community and
Environment CSR.
The proof of the business case for CSR has been reiterated in the study.
The financial benefits outweigh the costs- in the long run at least- to ensure
at a faster pace. It has been seen that though listed companies have to
communicate the CSR activities not only in terms of the themes covered
211
but also the extent of impact. The overall level of CSR evaluation among
companies is low.
many companies have not been able to get any resultant benefits. This is
because their CSR spending was not directly linked to driving community
support for their business plan. A vast majority of the companies’ have an
companies.
fragmented and interaction between the business and the civil society is
rare.
such as civil society groups, other companies are also not part of the study.
212
This study has focused on the relationship between CSR and listed
companies under the BSE 500 index using accounting based measures
only. Future research may investigate whether similar results are obtained
using market based financial measures. Also, studies could be carried out
Studies may also look at the influence of age of companies and the level of
which integrates the personal values and societal concerns into investment
decision making.
213
APPENDICES
APPENDIX I – Bibliography
214
APPENDIX I
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252
APPENDIX – II
Dear Respondent,
Greetings!
I request you to kindly spare a few minutes of your valuable time to fill up the
questionnaire. Your responses would be used only for research purposes and
complete confidentiality would be maintained.
Nalini Krishnan
Email: naliniymt@gmail.com
253
A. Basic enterprise information ( PLEASE HIGHLIGHT THE APPROPRIATE
BOX, WHEREVER APPLICABLE)
A1. Name of the
enterprise
A2. Address of
the enterprise
A3. Which Chem
Shippin
industry icals
Pharmace Engine Construct g and
sector does & Paints
uticals ering ion Logistic
your company Fertili
s
belong to? zers
Consu
IT & mer Petroche Any
Cement FMCG
ITES Durable micals Other
s
A4. Year in which
business was
established
A5. Form of Private Limited Public Limited Government
organization Company Company Company
A6. How many Less 1000- 5000- 10000- More than
employees than 5000 10000 20000 20000
does your 1000
enterprise
employ
A7. Has your
organization/gr
oup instituted
YES NO
a foundation
for CSR
activities
A8. Do you have a
budget for YES NO
CSR activities
A9. If yes, please 2007 2008 2009 2010 2011
mention the
amount spent
on CSR over
the past 5
years (in Rs.
Lakhs)
A10. Name of the
respondent
A11. Age of the < 35 36-45 46-55 >55
respondent years years
A12. Educational Graduate Post Graduate Doctorate
Qualification
A13. Respondent’s
position
A14. Years in <5 years 5-10 years 10-15 years > 15 years
254
service
B EMPLOYEE RELATED
B1. Does your 1 2 3 4 5
organization No Some Partially More than Fully covered
provide cover cover covered partial
health care cover
for the
employees
including
health
assistance,
maternity
leave?
B2. Does your 1 2 3 4 5
organization None Some Quite a An Fully given
offer bit extreme
subsidized/fr amount
ee lunch or
refreshment
s to its
employees?
B3. Does your 1 2 3 4 5
organization None Some Quite a An Fully given
provide bit extreme
credit for amount
housing/car/
education
B4. Does your 1 2 3 4 5
organization Never Rarely Someti Most of Always
provide mes the time
bonus/rewar
ds or
ESOPs to
employees
B5. Does your 1 2 3 4 5
organization Never Rarely Someti Most of Always
sponsor// mes the time
finance
employees
for higher
education
B6. Does your 1 2 3 4 5
organization No Policy Policy Policy Policy exists
have policy exists but exists exists and and fully
policies for exists not and substantia implemented
the training implement partially lly
and ed impleme implement
development nted ed
of
employees
B7. Does your 1 2 3 4 5
255
organization Never Rarely Someti Most of Always
provide mes the time
recreational
facilities
provided for
the
employees
(gym, club
membership
s)
B8. Does your 1 2 3 4 5
organization Never Rarely Someti Most of Always
have the mes the time
right to
freedom of
association,
collective
bargaining
and
complaint
procedure
B9. Does your 1 2 3 4 5
organization No Policy Policy Policy Policy exists
have policy exists but exists exists and and fully
promotion exists not and substantia implemented
policies for implement partially lly
women and ed impleme implement
minorities nted ed
B10. Does your 1 2 3 4 5
organization No Policy Policy Policy Policy exists
have policy exists but exists exists and and fully
policies for exists not and substantia implemented
formal implement partially lly
worker ed impleme implement
representati nted ed
on in
decision
making
B11. Does your 1 2 3 4 5
organization No Policy Policy Policy Policy exists
have policy exists but exists exists and and fully
policies to exists not and substantia implemented
ensure implement partially lly
representati ed impleme implement
on of women nted ed
and
minorities on
the Board of
Directors
C. CUSTOMER & SUPPLIERS
C1. How many 1 2 3 4 5
complaints do High Normal Low
256
you receive Very Very low
related to high
products/service
s
C2. How does your 1 2 3 4 5
organization Very Bad Average Good Very
respond to bad good
customer
complaints
C3. Does your 1 2 3 4 5
organization No Policy Policy Policy Policy
have policies on policy exists but exists exists exists
requirement of exists not and and and fully
tenders and implement partially substanti impleme
lowest price ed impleme ally nted
standards while nted impleme
appointing nted
suppliers
C4. Is your 1 2 3 4 5
organization Not at Very little Some To a Complete
directly involved all extent extent large ly
in providing extent
products to the
economically
disadvantaged
C5. Does your 1 2 3 4 5
organization Not at Very little Some To a Complete
have standards all extent extent large ly
and voluntary extent
codes for
advertising
D. COMMUNITY
D1. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of the Always
contribute to es time
religious charities
D2. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of the Always
donate to NGOs es time
for social
activities.
D3. Does your 1 2 3 4 5
company Never Rarely Sometim Most of the Always
sponsor sports es time
tournaments
D4. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of the Always
encourage es time
volunteering of
employees’ for
257
community
development
activities
D5. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of the Always
contribute to es time
education
initiatives
D6. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of the Always
contribute to es time
disaster relief
funds
D7 Does your 1 2 3 4 5
organization Never Rarely Sometim Most of the Always
contribute to es time
community
health initiatives
D8. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of the Always
contribute es time
towards
promotion of
art/culture
D9. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of the Always
contribute to es time
rural
development
E. ENVIRONMENT
E1. Does your 1 2 3 4 5
organization No Policy Policy Policy Policy
have an explicit policy exists but exists exists exists
environment exists not and and and fully
policy implement partially substanti impleme
ed impleme ally nted
nted impleme
nted
E2. Does your 1 2 3 4 5
organization use Never Rarely Sometim Most of Always
renewable es the time
sources of
energy
E3. Does your 0 1 2 3 4 5
organization N No Policy Policy Policy Policy
have a policy of / poli exists but exists exists exists
Recycling and A cy not and and and fully
treatment of exis implement partially substanti impleme
waste ts ed impleme ally nted
nted impleme
nted
258
E4. Does your 0 1 2 3 4 5
organization N No Very little Some Substant Full
have provision of / pro provision provisio ial provision
environment A visi n provisio
pollution on n
protection/preven
tion systems
E5. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of Always
spread es the time
environmental
awareness
through
messages and
campaigns
E6. Does your 1 2 3 4 5
organization No Policy Policy Policy Policy
have a policy of policy exists but exists exists exists
substitution of exists not and and and fully
polluting and implement partially substanti impleme
hazardous ed impleme ally nted
materials/parts nted impleme
nted
E7. Does your 1 2 3 4 5
organization Never Rarely Sometim Most of Always
provide regular es the time
voluntary
information about
environmental
management to
customers and
institutions
E8. Does your 1 2 3 4 5
organization Not at Very little Some To a Complete
have an all extent extent large ly
Environmental extent
emergency plan.
F. SOCIAL RESPONSIBILITY- Which of the following statements define CSR
best in your opinion? ( PLEASE HIGHLIGHT THE APPROPRIATE BOX,
WHEREVER APPLICABLE
Strongly Disagree (SD); 2- Disagree (D); 3- Neutral (N); 4- Agree (A); 5-
Srongly Agree (SA)
F1 CSR is the commitment of an enterprise
SD D N A SA
to strictly abide by the labour and
1 2 3 4 5
environmental laws.
F2 CSR is a set of charity activities carried SD D N A SA
out by the enterprise. 1 2 3 4 5
F3 CSR is a resource intensive and costly SD D N A SA
affair 1 2 3 4 5
F4 CSR is primarily a public relations or a SD D N A SA
marketing exercise 1 2 3 4 5
F5 CSR needs to be strongly promoted by SD D N A SA
259
government 1 2 3 4 5
F6 Responsible businesses go beyond
what is required by law to make a SD D N A SA
positive impact on the society and 1 2 3 4 5
environment
F7 CSR can be implemented only with the SD D N A SA
assistance of experts 1 2 3 4 5
F8 CSR can lead to increase in profits SD D N A SA
1 2 3 4 5
F9 CSR is a useful guideline for responsible SD D N A SA
governance. 1 2 3 4 5
F10 CSR is a concept aimed at achieving
commercial success in a way that does SD D N A SA
not compromise the well being of its 1 2 3 4 5
employees or the local community.
F11 CSR is a requirement for working with SD D N A SA
global clients 1 2 3 4 5
F12 Enterprises can commit to CSR only if
SD D N A SA
they get resource assistance from the
1 2 3 4 5
government.
F13 CSR needs to be made mandatory by SD D N A SA
law 1 2 3 4 5
F14 CSR is more relevant for manufacturing SD D N A SA
industries rather than the service sector. 1 2 3 4 5
F15 Engaging in CSR does not compromise SD D N A SA
the pursuit of profit 1 2 3 4 5
F16 Socially responsible activities improves SD D N A SA
the firm’s standing with its investors 1 2 3 4 5
F17 CSR activities could improve a firm’s
SD D N A SA
standing with banks and help them gain
1 2 3 4 5
access to finance.
G Please indicate the extent to which each of the following factors motivated
your firm to undertake CSR.
G1. Suggestions from 3 4
2 5
third parties 1 To To a
Very little Complet
(Buyers/Competitors Not at all some great
extent ely
) extent extent
G2. Personal values 3 4
2 5
(Owners/Managers) 1 To To a
Very little Complet
Not at all some great
extent ely
extent extent
G3. Religious 3 4
2 5
sentiments(Owners/ 1 To To a
Very little Complet
Managers) Not at all some great
extent ely
extent extent
G4. Improving the image 3 4
2 5
of the company 1 To To a
Very little Complet
Not at all some great
extent ely
extent extent
G5. To give publicity to 1 2 3 4 5
260
the company Not at all Very little To To a Complet
extent some great ely
extent extent
G6. To give something 3 4
2 5
back to the 1 To To a
Very little Complet
community Not at all some great
extent ely
extent extent
G7. Access to capital or 3 4
2 5
increased 1 To To a
Very little Complet
shareholder value Not at all some great
extent ely
extent extent
G8. To improve 3 4
2 5
business interests 1 To To a
Very little Complet
Not at all some great
extent ely
extent extent
H. IMPACT OF CORPORATE SOCIAL RESPONSIBILITY - Kindly indicate the
extent of your agreement with the following statements:
Strongly Disagree (SD); 2- Disagree (D); 3- Neutral (N); 4- Agree (A); 5-
Strongly Agree (SA)
H1. CSR has resulted in the reduction of SD D N A SA
operational costs of the company 1 2 3 4 5
H2. CSR has resulted in the improvement SD D N A SA
in exports of the company 1 2 3 4 5
262
APPENDIX III
SPSS OUTPUT
Capital Goods 4 3 6 6 19
Chemicals and
3 4 2 2 11
Petrochemicals
Consumer
2 2 4
durables
Diversified 2 2
FMCG 2 2
Healthcare 4 3 2 3 12
Housing related 1 1 1 1 4
Information
1 1 3 4 9
Technology
Media and
1 1
Publishing
Metal, metal
products and 2 2 2 6
mining
Miscellaneous 3 2 5
Power 1 1 1 1 4
Telecom 1 2 3
Textile 2 2
Transport
2 4 4 10
equipment
Transport
1 2 3
services
Tourism 1 1
Total 9 32 23 20 20 104
263
Correlations
264
Correlations
C1 C2 C3 C4 C5 Customer
** ** ** **
Pearson Correlation 1 .994 .988 .895 .960 .791**
C1 Sig. (2-tailed) .000 .000 .000 .000 .000
N 116 116 116 116 116 104
** ** ** **
Pearson Correlation .994 1 .985 .882 .955 .748**
C2 Sig. (2-tailed) .000 .000 .000 .000 .000
N 116 116 116 116 116 104
** ** ** **
Pearson Correlation .988 .985 1 .928 .974 .720**
C3 Sig. (2-tailed) .000 .000 .000 .000 .000
N 116 116 116 116 116 104
** ** ** **
Pearson Correlation .895 .882 .928 1 .976 .154
C4 Sig. (2-tailed) .000 .000 .000 .000 .119
N 116 116 116 116 116 104
** ** ** **
Pearson Correlation .960 .955 .974 .976 1 .603**
C5 Sig. (2-tailed) .000 .000 .000 .000 .000
N 116 116 116 116 116 104
** ** ** **
Pearson Correlation .791 .748 .720 .154 .603 1
Customer Sig. (2-tailed) .000 .000 .000 .119 .000
N 104 104 104 104 104 104
**. Correlation is significant at the 0.01 level (2-tailed).
265
Correlations
D1 D2 D3 D4 D5 D6 D7 D8 D9 Communit
y
* * * * * * * *
Pearson .959 .966 .966 .951 .966 .955 .966 .948 **
1 * * * * * * * * .380
Correlation
D1 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * *
Pearson .959 .984 .986 .990 .992 .986 .991 .970 **
* 1 * * * * * * * .526
Correlation
D2 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * *
Pearson .966 .984 .975 .963 .981 .959 .991 .948 **
* * 1 * * * * * * .518
Correlation
D3 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * *
Pearson .966 .986 .975 .989 .995 .992 .985 .977 **
* * * 1 * * * * * .615
Correlation
D4 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * *
Pearson .951 .990 .963 .989 .993 .996 .977 .985 **
* * * * 1 * * * * .622
Correlation
D5 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * *
Pearson .966 .992 .981 .995 .993 .992 .990 .980 **
* * * * * 1 * * * .636
Correlation
D6 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * *
Pearson .955 .986 .959 .992 .996 .992 .975 .986 **
* * * * * * 1 * * .710
Correlation
D7 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * *
Pearson .966 .991 .991 .985 .977 .990 .975 .952 **
* * * * * * * 1 * .578
Correlation
D8 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * *
Pearson .948 .970 .948 .977 .985 .980 .986 .952 **
* * * * * * * * 1 .679
Correlation
D9 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 116 104
* * * * * * * * *
Pearson .380 .526 .518 .615 .622 .636 .710 .578 .679
* * * * * * * * * 1
Correlation
Communit
Sig. (2-
y .000 .000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 104 104 104 104 104 104 104 104 104 104
**. Correlation is significant at the 0.01 level (2-tailed).
Table 8.25 (d) : Correlations among Community CSR variables
266
Correlations
E1 E2 E3 E4 E5 E6 E7 E8 Environment
Pearson ** ** ** ** ** ** ** **
1 .980 .987 .980 .980 .978 .982 .990 .831
Correlation
E1 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 104
Pearson ** ** ** ** ** ** ** **
.980 1 .996 .993 .989 .995 .985 .996 .669
Correlation
E2 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 104
Pearson ** ** ** ** ** ** ** **
.987 .996 1 .995 .993 .996 .988 .996 .729
Correlation
E3 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 104
Pearson ** ** ** ** ** ** ** **
.980 .993 .995 1 .996 .998 .982 .990 .786
Correlation
E4 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 104
Pearson ** ** ** ** ** ** ** **
.980 .989 .993 .996 1 .996 .990 .988 .745
Correlation
E5 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 104
Pearson ** ** ** ** ** ** ** **
.978 .995 .996 .998 .996 1 .985 .991 .855
Correlation
E6 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 104
Pearson ** ** ** ** ** ** ** **
.982 .985 .988 .982 .990 .985 1 .989 .777
Correlation
E7 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 104
Pearson ** ** ** ** ** ** ** **
.990 .996 .996 .990 .988 .991 .989 1 .819
Correlation
E8 Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 116 116 116 116 116 116 116 116 104
Pearson ** ** ** ** ** ** ** **
.831 .669 .729 .786 .745 .855 .777 .819 1
Correlation
Environment Sig. (2-
.000 .000 .000 .000 .000 .000 .000 .000
tailed)
N 104 104 104 104 104 104 104 104 104
**. Correlation is significant at the 0.01 level (2-tailed).
Table 8.25 (e) : Correlations among Environment CSR variables
267
Finan
cial
Perfor
manc
Non- e
Finan No. Av (Indus
cial of era try Prom
Perfo Emp ge Adjust oter Aggreg Emplo Custo Commu Environ
rman loye Sal ed Holdin ate yee mer nity ment
ce es es ROA) g CSR CSR CSR CSR CSR
Non- Pearso
-
Financial n - .733(* .230(* .452(** .524(** .283(**
1 .14 .337(**) .163(*)
Performa Correla .143 *) *) ) ) )
3
nce tion
Sig. (1- .07
. .122 .000 .009 .000 .000 .002 .000 .049
tailed) 4
N 10
104 68 104 104 104 104 104 104 104
4
No. of Pearso
Employe n .18 -
-.143 1 -.011 -.198 .015 -.004 .039 -.505(**)
es Correla 9 .266(*)
tion
Sig. (1- .06
.122 . .464 .053 .014 .451 .487 .377 .000
tailed) 1
N 68 68 68 68 68 68 68 68 68 68
Average Pearso
Sales n
-.143 .189 1 -.061 -.051 -.030 -.035 -.125 .126 -.064
Correla
tion
Sig. (1-
.074 .061 . .269 .304 .380 .361 .104 .101 .258
tailed)
N 10
104 68 104 104 104 104 104 104 104
4
Financial Pearso
Performa n
-
nce Correla .733( - .408(** .561(** .410(**
.06 1 .056 .304(**) .036
(Industry tion **) .011 ) ) )
1
Adjusted
ROA)
Sig. (1- .26
.000 .464 . .285 .000 .000 .000 .001 .358
tailed) 9
N 10
104 68 104 104 104 104 104 104 104
4
Promoter Pearso
-
Holding n .230( -
.05 .056 1 .152 .190(*) .104 .147 .022
Correla **) .198
1
tion
Sig. (1- .30
.009 .053 .285 . .062 .027 .147 .068 .414
tailed) 4
N 10
104 68 104 104 104 104 104 104 104
4
Aggregat Pearso
- -
e CSR n .452( .408(* .723(** .623(**
.266 .03 .152 1 .646(**) .719(**)
Correla **) *) ) )
(*) 0
tion
Sig. (1- .38
.000 .014 .000 .062 . .000 .000 .000 .000
tailed) 0
N 10
104 68 104 104 104 104 104 104 104
4
Employe Pearso
-
e CSR n .524( .561(* .190(* .723(** .547(**
.015 .03 1 .413(**) .191(*)
Correla **) *) ) ) )
5
tion
Sig. (1- .36
.000 .451 .000 .027 .000 . .000 .000 .026
tailed) 1
N 10
104 68 104 104 104 104 104 104 104
4
Customer Pearso
-
CSR n .283( - .410(* .623(** .547(**
.12 .104 1 .370(**) .200(*)
Correla **) .004 *) ) )
5
tion
268
Sig. (1- .10
.002 .487 .000 .147 .000 .000 . .000 .021
tailed) 4
N 10
104 68 104 104 104 104 104 104 104
4
Communi Pearso
ty CSR n .337( .12 .304(* .646(** .413(** .370(**
.039 .147 1 .168(*)
Correla **) 6 *) ) ) )
tion
Sig. (1- .10
.000 .377 .001 .068 .000 .000 .000 . .044
tailed) 1
N 10
104 68 104 104 104 104 104 104 104
4
Environm Pearso
- -
ent CSR n .163( .719(**
.505 .06 .036 .022 .191(*) .200(*) .168(*) 1
Correla *) )
(**) 4
tion
Sig. (1- .25
.049 .000 .358 .414 .000 .026 .021 .044 .
tailed) 8
N 10
104 68 104 104 104 104 104 104 104
4
** Correlation is significant at the 0.01 level (1-tailed).
* Correlation is significant at the 0.05 level (1-tailed).
Government Owned 32
Private Sector 72
Total 104
269
Factor Analysis
Communalities
Initial Extraction
F1 1.000 .705
F2 1.000 .851
F3 1.000 .590
F4 1.000 .679
F5 1.000 .676
F6 1.000 .629
F7 1.000 .665
F8 1.000 .575
F9 1.000 .602
F10 1.000 .722
F11 1.000 .594
F12 1.000 .729
F13 1.000 .668
F14 1.000 .401
F15 1.000 .601
F16 1.000 .720
F17 1.000 .672
Extraction Method: Principal Component Analysis.
270
Rotated Component Matrix (a)
Component
1 2 3 4 5 6
F1 -.028 .744 .194 -.181 -.050 .278
F2 .173 -.060 -.101 -.893 .098 .023
F3 .656 .175 -.235 .188 .028 .194
F4 .783 .065 .171 -.124 .081 -.100
F5 .185 .782 .055 .144 -.080 .001
F6 .011 .078 -.499 .447 .413 -.062
F7 .436 .378 -.160 .452 .114 .299
F8 -.052 .720 .174 .110 -.014 -.106
F9 -.511 .280 -.125 -.348 .331 .131
F10 -.048 .272 .364 .145 .436 -.550
F11 -.045 .403 .635 .012 .090 .134
F12 .741 -.156 .152 -.141 -.068 .330
F13 .091 .181 .302 .049 .083 .726
F14 .478 .263 -.123 .085 -.263 -.107
F15 -.736 .027 .007 .128 .204 -.025
F16 -.175 -.164 .004 -.075 .811 .007
F17 .077 .126 .801 .071 -.005 .053
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser
Normalization.
a Rotation converged in 13 iterations.
Table 8.25 (i) Rotated Component matrix
Initial Extraction
F1 1.000 .705
F2 1.000 .851
F3 1.000 .590
F4 1.000 .679
F5 1.000 .676
F6 1.000 .629
F7 1.000 .665
F8 1.000 .575
F9 1.000 .602
F10 1.000 .722
F11 1.000 .594
F12 1.000 .729
F13 1.000 .668
F14 1.000 .401
F15 1.000 .601
F16 1.000 .720
F17 1.000 .672
Table 8.25(j): Communalities Extraction Method: Principal Component Analysis.
271
Total Variance Explained
Comp
on Extraction Sums of Squared Rotation Sums of Squared
ent Initial Eigenvalues Loadings Loadings
% of
% of Cumulativ Varian Cumulativ % of Cumulativ
Total Variance e% Total ce e% Total Variance e%
1 3.362 19.775 19.775 3.362 19.775 19.775 2.931 17.239 17.239
2 2.640 15.532 35.307 2.640 15.532 35.307 2.356 13.859 31.098
3 1.758 10.343 45.650 1.758 10.343 45.650 1.762 10.364 41.463
4 1.178 6.930 52.580 1.178 6.930 52.580 1.516 8.917 50.379
5 1.126 6.622 59.202 1.126 6.622 59.202 1.297 7.632 58.011
6 1.015 5.970 65.172 1.015 5.970 65.172 1.217 7.160 65.172
7 .867 5.098 70.270
8 .826 4.857 75.126
9 .736 4.332 79.458
10 .673 3.958 83.416
11 .621 3.653 87.070
12 .579 3.404 90.474
13 .448 2.638 93.111
14 .407 2.392 95.503
15 .337 1.983 97.486
16 .235 1.382 98.868
17 .192 1.132 100.000
Table 8.25 (k) Extraction Method: Principal Component Analysis.
Component
1 2 3 4 5 6
F1 .605
F2 -.598 .476
F3 .622
F4 .642
F5 .540 .498
F6 .718
F7 .587 .480
F8 .628
F9 .410 .504
F10 .479 .482
F11 .619
F12 .635 -.421
F13 -.582
F14 .517
F15 -.615 .430
F16 .707
F17 .425 -.406 -.424
Table 8.25 (l) Extraction Method: Principal Component Analysis. 6 components
extracted.
272
Rotated Component Matrix (a)
Component
1 2 3 4 5 6
F1 .744
F2 -.893
F3 .656
F4 .783
F5 .782
F6 -.499 .447 .413
F7 .436 .452
F8 .720
F9 -.511
F10 .436 -.550
F11 .403 .635
F12 .741
F13 .726
F14 .478
F15 -.736
F16 .811
F17 .801
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser
Normalization.
a Rotation converged in 13 iterations.
Table 8.25 (m) : Principal component analysis – Extraction method
APPENDIX IV
273
LIST OF COMPANIES SURVEYED
S.No. Name of the Company
1. Abbott India Ltd.
3. Akzonobel Ltd
4. Allcargologistics Ltd
274
24. CMC Ltd.
275
49. Hindustan Copper Ltd.
67. LUPIN
276
75. Nerolac Paints Ltd.
277
100. Thermax Ltd.
102. Welspun
103. WIPRO
278