Part 6

CSR

Introduction & flow of discussion

we will see evidence of why Business Enterprise or a
Corporation should merge with society and other
stakeholders in the community
Then, we will go through some Headlines, highlights,
coffee corner debate, flow of SMSs, on this topic of
the day.
This will include what is going wrong today with India
and the world? And global economy?
Does this prove that we re not learning our lessons?
We will try and answer this question or disprove the
same with our future actions and behavior.

Introduction & flow of discussion

1.
2.
3.
4.
5.
6.
7.

The Global Context of CSR

IF : Business & its Stakeholders
Historical Perspective of SCR
The Business Case for CSR
Developing CSR strategy
Monitoring & Measuring CSR
Implementing CSR / Reporting / Role of
Govt & V. Codes

 Some wise sayings

WHO IS RESPONSIBLE
FOR SOCIAL RESP?

Arthashastra
In the Happiness of his Subjects
lies the Kings Happiness and in their
Welfare, his Welfare.
Kautilyas Arthshastra
Today we have Kings in the garb of
politicians not good old kings like
slowly replaced by business barons?

Who is a Customer Mahatma Gandhi

A customer is the most important visitor on our
premises. He is not dependent on us. We are
dependent on him. He is the purpose of it. He is not
an outsider to our business. He is part of it. We are
not doing him a favor by serving him. He is doing us
a favor by giving us the opportunity to do so
A simple lesson for any Business Enterprise
customer is anyone whom you have to serve.
Quality definition by Philip Crosby:
Quality is respect to humanity

One world, one citizen

In the South American mini-forest,
there is a tribe called the Desana,
who see the world as a fixed quantity
of energy that flows between all
creatures.
Every birth must therefore engender
a death, and every death bring forth
another birth.

The Desana story - Lesson

WHAT WE TAKE, WE MUST

REPLENISH.
IT IS ONLY FAIR that we provide
sustainability The way we live, at least,
must be made available to those who follow
us

Selfishness .. What is the end?

People are only mean when they are
threatened, and thats what our culture
does. That is what our economy does.

Selfishness ..and the end

you are surrounded by people who say
I want mine now. You end up with a
few people with everything and a
military to keep the poor ones from
rising up and stealing it. (any visible
examples?).
If not for the fact RESOURES R
SCARCE, everything will be hunky dory.

Concern for others goodness of

collaboration
YOU CAN STILL MAKE IT A WIN-WIN
SITUATION.
Good Businesses with Long Term Strategies
achieve that -- collaborate

Business & Society

the cyclical phenomenon - WAVES
Waves crash !
You are not a wave, YOU ARE PART
OF THE OCEAN. (little drops of
water), and waves come and go, but
never lose your PEACE
SANTOOLAN mat ko bhaitna

A Story potential class conflict

Recall the coolie story carrying a Fridge 7 floors.
Depicts a picture of uncompassionate society.

James Baldwin on Bus & Society

.. The moment we cease to hold each
other, the sea engulfs us and the
light goes out.

The Debate on US Bailout

Financial market reform

cross benefits, Yes.. but
Financial market reforms, like pension,
insurance, banking etc. has been dragging its
feet.
Example, a boost to the insurance sector will
make -- more funds available for
infrastructure projects, which will benefit
everyone from the tycoon, who implements
the project, to those sections of society
whose lives become easier as a result of
better infrastructure, to daily laborers who get
assured work for longer periods of time.

Is it individuals honesty?
Distinction needs to be made between
institutions and individuals.. Right institutions or
instruments in the hands of wrong individuals
can lead to disastrous consequences. (US

situation partly explained by this... )

We must reform our financial infrastructure so

that the housewife in some small town, the
laborer at a road building site and the vegetable
seller at the street corner can also look forward
for a better tomorrow.

US bailout
No longer the dominant world power?

US melt down
Lehman, AIG, WaMU, Bunty or Bubli (Fenni
& Freddie Mac)
Merryl, European Banks, Japan,
Indonesia, etc.
More corporate on bankruptcies list
come to the fore
A 14$ Tn economy is on its knees for
$700 million
(Senate/Congress debate)

US bail out-- taloa me pani nahi

Tax Payer Money ????

Some saw this as an enormous setaside of Taxpayer money as an
unnecessary intrusion into free
market.
two streams of thought in America now
They say bail out we say get the hell out (worst
than terrorists?) already 1 US + family of 4
suicide).
My interaction with Harshadbhai, Ranina +++

Comment on bailout
Big banks, financial institutions and
lenders who admittedly lent
INDIA SEES THAT NOW !!! Bandra
Kurla

Points lesson from Meltdown

Only a nave like Lehmann would

have fallen on the way out the
process of insolvency would have set
a long before. (or were they nave??)
Was it vested interests, that
prevented bringing this out?

Lessons to learn from US md

olatilitVy of market situation makes it difficult
for truth to come out early
it is a lesson that big is not only always the
best Hypes mis-guide you.
Reliable flow of timely information is the key.
Any investment is only a value held.
(BOOKS)
At the end of the day they are prone to
changes.
CHARGING BULL RED BULL

Govt. not to regulate CEO salary, said Corp. Affairs

Minister: We believe in essential freedom in a
democracy.

What.. (contd.)
Winston Churchill remarked that the
Hun his disparaging term for
Germans) was either at ones throat or
at ones feet, a vicious adversary or a
worshipful devotee.

Women use 500 chemicals on face & body

every day
A Question of product claim
Most of which contain more than 20 ingredients
including additives that could lead to cancer and
various skin problems. A study of deodorant
firm Bionsen.
Beauty regimes have changed fro m wash and
go to daily fake tan applications, manicures, false
lashes and hair extension.
Lipstick, most commonly used, contains an
average of 33 chemicals. Perfumes contain a
cocktail of 200 chemicals with soe containing as
many as 400.

Whats
Jawans spend second night in pavement
Security van driver flew with Rs.40L ATM
HC slams Delhi govt. for giving selective
parole
TN prisoners grow fat on jail food
Ranbaxy recalls Acne drug from US mkt
Class III
India can get Nobel for filth J.Ramesh

Clear the Air editorial ToI 20-11-09

Govt. announced a revised set of emission and pollution
standards applicable across the country. Govt wants us to
breathe easy. But noble intensions alone will not ensure
fresh air. A/g to CPCB almost 80% of 110 cities monitored
in the country do not even meet the existing norms.
Because they do not provide penalties to be imposed on
defaulters. Which is where credible and accurate
monitoring levels comes in unfortunately we are crippled
in this regard. Models in UK and Europe and US (EPA)
works with federal state and tribal governments to ensure
compliance. Where environment agency and dept of env
food and rural affairs issue guidelines and give muscle to
local bodies. So Agencies should spell out specific targets.
Otherwise new norms will only give a feel good factor.

What is
Farmers fake Bt Cotton as organic US, EU see red.
Commerce Ministry tracks fraud in MP,
Maharashtra through new software.
Cases of Bt. Cotton contaminating organic cotton
farms are on the rise.
Adequate testing facilities lacking. We are
working with customers to see tht every
consignment is checked.
Needs coordination between certification bodies,
their inspects, farmers, NGOs, govt.
representatives, monitoring and feeding
information

What is
Mahindra-Satyam gets legal notices
from 37 cos. Mahindra-Satyam says
it is legally untenable.

Greatest mystery of all times and climes :

SCAMS where did the money go??
What has happened to all the money that gets unearthed in
Indian scams? Frauds?
Everytime a new scam is know, the sum of the scam is in
multiples of earlier scams.
Bofors ?? 25 years? ONLY (like you say in ABs
Emami pain relief ad) 60 cr
4000 cr. Harshad
7800 cr. Satyam fraud
Madhu Koda 4000 cr (slight decrease)
20000 cr. Telgi fake stamp.
How nice it would be if at least part of it is unearthed and
some of our deficit financing can be eased out.

Whats
If you want to know what has
happened to these:
Just send 5000 bucks in unmarked
used 100 rupee notes and you will
receive a sneak preview of the
devastating denouncement by return
post:

Consumer Watch
Drive to make detailed servicing report a
must:
An Ahmedabad consumer based CE&RC plans to
launch a campaign to make detailed service reports
compulsory.
Even Whirlpool and Philips said they do provide
repair details on receipts, however, no uniform rules.
There are no mandatory laws governing service
obligations of manufacturers, not just of
electronics, but all products
As a customer I would like to know what was wrong
(with a product), if the same problem recurs after
warrantee
It is therefore necessary to have a report recording a
products history.

Drive to make detailed servicing report

a must
Normally the service centre could blame
the recurring problem on rough handling
of a product or voltage fluctuation.
If a product is repaired by an authorized
service person, the fault should not occur.
If it goes back it amounts to a deficiency in
service and shows there is a problem with
the product. Then the consumer must
take up the issue to a higher level

Let host nation regulate foreign

finance
Indias system of host regulation, which makes
good economic sense has both empowered and
insulated the economy from some of the worst
excesses of current global crisis:
Currently FI lending is partial; It is not on a level
playing field. Developed countries have easy
access, and cost of getting funds is much less
than for developing countries.
The effect on the economy again is therefore has
unequal effects.
Even Base II norms favor this.

Let host nation regulate foreign

finance
A host regulator cn ensure that certain
institutions are not lending recklessly in a manner
that leads to artificial asset booms. Host
regulators can enable counter cyclical charges on
institutions creating such book within a broader
framework of national and macro prudential
regulation. So that they are both empowered and
insulated the economy from some of the worst
excesses of the crisis.
DEvelping economies must make their own
choices in the world economy.
Global warming, WTO, climate change !!! Disparity
Haves and have nots

Some paradoxes in the Corporate World

and their thinking.

Business wants freedom, and less

intervention from Government
They start ventures taking RISK.
NOW ANYBODY CAN START ANY
BUSINESS.
AFTER ALL THEY WILL BE BAILED
OUT.

What is
Global meltdown Bail outs in trillion dollars
AIG, LEHMAN SUDDENLY FIND THAT THEY
ARE BANKRUPT !!!
SATYAM BECOMES JHOOTA (juta nahi)
MADHU KHODA AND HAWALA
LAW MAKERS LAW BREAKERS
3 AUTO GIANTS WALK

Squeeze at Top (headcount & wages)

A clutch of CEOs resorted to pay cuts in a tough year. Not all
head honchos, however, were in such a spartan state of mind.
Rahul Bajaj
To the extent govt finds that CII or any other business
organization does not come out with a satisfactory voluntary
code of conduct for remunerations of CEOs, I believe govt.
could keep in the Companies Act a cap on emoluments of
Promoter CEOs as a percentage of net profit of the co,.
Currently, for an individual CEO the figure is 5% and for the
Board as a whole, 11%. The figure of the individual CEO, if he
is a promoter, may be fixed at 1 percent of the profits of the co.
as calculated at present. However, a promoter CEO may be
allowed a certain minimum emolument per annum in case of
absence of inadequacy of profits in a company.

WhatsBus Opportunity.

Vijay Govindrajan, Prof. of International Business.

Reverse Innovation is the Key: Re-engg. Is passe
Since 50s MNCs have innovated in the US \However, one can
develop over the next 100 years with technology that is available
today. E.g. Cell v landlines today. The trajectory of dev. need not
be the same.
RENEWABLE ENERGY, DECENTRALIZED POWER GENERATION
AND AFFORDABLE HEALTHCARE ARE GOOD EXAMPLES OF
SUCH BUS. OPP.

In the half century after the II world war, the business

corporation has brilliantly proved itself as an economic
organization.. In the Next Society, the biggest challenge
may be its social legitimacy: its values, its mission, its
vision.= Peter Drucker

Whats
Moists liberate people from exploitation and
oppression fight against state terrorism Salwa
Judum legitimate efforts??
Fearing taunts, old dad dumps baby (45 year old)
Sky Walks galore
25% city women have caesarean. / MLA -- RAPE
CASUAL careless calamities collapse
Vegetables injected
Post Office- receives cards with AID virus
Patangrao Kadam Rev Minister, land etc. release to
BVIDYAPEETH.

What is
CII AND INDUSTRY WITH B. BOWLS ONCE
AGAIN
MONSOON FAILURE
SOCIAL CIVIC UNREST AX INDIA WAR
WITH INTERNAL TERROR
EXTERNAL TERRORISM
DEFICIT FINANCING
NOKIA REPLACES CHARGERS (3rd
party!!)

What is
Hadley seen in Lucknow, Trident
Mumbai
SEZs Monsanto & Dupont accused of pressure
tactics
Nano at Gujarat shift from WB .. The NDTV debate
Tata seeks capital to pay off its Corus deal
M&A in some sectors
Globalization end of the road?
PWH SUIT 1 FILED IN USA
Kingfisher flight skids off the tarmac

What is.. Casual and careless

Delhi Metro trembles

Pipeline falls on Train
Milk and Asli Ghee? Quality?
Product claims questioned
Cultural Issues
Hypes Anoraxia Aamir Aids
RANBAXY US FDA questions GMP issues
Banks not lending -- NPA

What is
Farmers suicide Water shortage
Global warming Climate change
Himalays getting taller or over a heap
of plastic piles

What is
Foreigners stake in India more than government holding
Tax exemptions cost govt. Rs.4.2 Lakh crore in 08-09
Overstated revenues in Books to inflate stock prices
(e.g. if Co. says profits are up, but NFMs are down
something is wrong)
So, Answer, evaluate things that are verifiable, if
complex tax systems unables to evaluate to create a
new warning system to track corporate frauds.
WTO US Europe Attitude
Gl Warming war between D & UD economies does
it ring a bell a parallel Haves & Have nots

What is
Pfizer charges SUN with another patent
violation.
Kathakali came to be known in Kerala
after Moscow presented it.
Karela & Neem importance known to us
after some one else gets a patent.
Story of Hospital, Stapler & courier.
AI gets 2K crore lifeline

What is
In 2009, CBI graft cases doubled. LOT OF EMPLOYMENT
OPPORTUNITIES. Trapped govt. officials for corruption
(Railways, IT, FCI, Banks) 17 t 40 (26 from Mumbai)
Rich or poor cit kids malnourished proteins missing
17 year old held for luring girl into .
PM Manmohan Singh --- patient death during security
P.Dinakaran High Court Judge Land at Tiruvalluvar
Good 2 supreme course judges quit Ambani dispute Conflict
of Interest
IT slueths break fellow officers safe to steal files
Drunk flier gets too close to an airhostess.
Teenager steals dads cash to marry
Mira Road sick of garbage, they dump it at the ward office.

What is..
Montac Blank Rs.14 L used a sketch of the
Mahatma. Kerala HC banned
Issue: how free are cos. To use the image or name of a iconic
historical personality.
Legal experts not a problem if due permission is taken. T.Shirts
Cos. Shd check with intellectual property lawyers before such
launches
The subject of Gandhi is an emotional issue. The Judge may no
take a deached view, as a TM will lead to commercial gain.
Tend to attract objections that are gimmicks to gain publicity.
K.Johar .. Kaminey

What is.. Sustainability

UID will not resolve bad delivery of public service,

or alleviate poverty. Of course, will give unique ID

nos. Using UID for fixing governance issues will be up
to the public service providers.
PORTABILITY OF MOBILE NOS. Will push s p to
improve service quality gives freedom to switch
operator
Q 09 indicates a recovery, but is it just a festive flash
in the pan.?
Good signs: Salary hike, uptick in pricing, lateral
hiring.

Why cos fail#

What is S?

Sustainability is the mother lode of innovation that yields both bottom

and top line returns
Sus. Dev. global warming, water shortage, high commodity prices
dont deny the obvious get on with it and innovate.
30 years ago Quality movement That raised a debate will it
increase costs, -- but really it reduced costs, brought products
innovative, used technology
Look at sustainability not from a compliance and regulations objective
consider it as an opportunity and innovate -- TAKE IT TO THE U.S. !
Washing machine when electricity is cut off runs into wash cycle mode.
Inclusive growth and sustainability joined at the hips
How to do more and more for people with less and less.

Why cos fail#

Fannie Mae was good to great it is
under Government conservator ship
which is close to bankruptcy, They may
call it a sectoral catastrophe went
through some of the above waves. As a
lender increased response to sub prime
mortgages which it had rejected earlier
to stay relevant, and serve low income
business.

Why cos fail

Who does great, or not, is not a function of
forces that hit them, but self created and self
inflicted.
Strategy starts with people. Assess, if it is
advantages to themselves, or bigger than
themselves. E.g.:
Casualties causes calamity Delhi Metro,
IOC inferno, Bhopal, Mulund train, Kingfisher,
etc. Carelessness leads to downfall.

New Section
CSR GLOBAL CONTEXT

CSR global context

Carnegie Foundation definition
A process of interaction and integration among the
people, companies, and governments of different
countries, a process driven by international trade and
investment and coded by information technology.
This process affects the environment, culture, political
systems, economic development and prosperity, and
physical human well being in societies around the
world.
Some examples: new products, bpo, wto,
MELTDOWN, DUMPTING, gl WARMING, ETC.

CSR global context

This had both positive & negative impact.
On Investments, governance structure of
global financial Institutions, declined
transport costs, revolution of IT and
communication, Production process set
worldwide, 6500MNCs, 8.5L foreign
attached.
Service sector SW / BPOs, etc

CSR global context

Its social impact:
Small enterprises inability to access capital,
credit, info, extension services, (increased
unemployment)
Resulting loss in jobs, exploitation of workers
rights by various MNCs leading to a reduction
in the CoG, at expense of basic access to
humane conditions of work (ILO) Widening
gap between the rich and the poor.
Quality? -- improved ?? Asli Ghee

CSR global context

Impact:

X border migration, illegal economy, relative poverty increased,

X border tax evasion, money laundering, sex and drug trades,
fall in transportation costs makes smuggling easier
Global Natural environment in addition to poor pollution
control mechanisms, lack of regulation. (Ganga)
Corporate scandals, manipulations, over extension of credit to
unstable local banks.
Disrupted ecological balances
Used unwisely extractive industries non judiciously,
Water scarcity

CSR global context

Sustainable development: Development that
meets the need of the present without
compromising the ability of future generations
to meet their own needs (Brudtland
commission)
We now face the ultimate mgmt. challenge,
that of managing our own future as species.
Social upheavals impact entire society
Any visible signs in India??

CSR global context - MDG

Sept 2000 world leaders, NGOs, UN
adopted eight specific, measurable,
time bound targets called the
Millennium Development Goals (MDGs)
to address issues of inadequate
incomes, widespread hunger, gender
inequalities, environmental
deterioration, lack of education, HC and
water. (see details 1.5 in book p 11)

CSR global context India & MDGs

Monitor able targets under 10th and Eleventh
FY Plans: areas:

Employment,
Primary education
Gender disparity
Population
Infant and maternal mortality rate
HIV / AIDS
Malaria and other diseases
Environmental dustainability

List of Social problems

Poverty, inequality, Data on Wealth, unemployment,
hunger, malnutrition, literacy, population increase,
discrimination, women degradation, child labor, HR,
squalor, water shortage, food shortage, crime,
violence, high cost of Medicare, education, HC, ruralurban divide, minority problems, sectarianism,
business go slow, Global Warming, Eco imbalance,
flora and fauna, deforestation,
Questions on pesticide content of colas, groundwater
depletion, impact on farmers livelihood ....

Bitter pill for Ranbaxy (under scanner)

The US FDA has now found serious

manufacturing deficiencies at two of R plants
in India after an inspection of its facilities.
Ramifications The inspections by regulatory
bodies will become sharper and more intense,
but that shouldnt be a problem as Indian
companies generally meet quality standards
LESSONS?

Mulund shop in soup over juice

Woman falls sick after consuming
expired product FDA raid on retail
outlet. POSSIBILITY CUSTOMER
EXPIRED !
Approached by victim response:
nothing could be done, victim free

to approach authorities

Mumbai e-waste11000 kg of e-waste a day.

Mumbai fails to find a disposal method. (obsolete
computers, PCs fridges WM, CDs, etc)
Cos like Nokia are stepping forward by collecting
mobile phone waste for recycling and repairs.
When Offices and Municipalities migrate, there
would be a complete overhaul of all the IT
equipment. (Toyota -- )
Going by the prevailing market conditions and
poor dismantling methods that discourage
environmentally sound electronic recycling
practices, the problem is not so easy to resolve.

Why they reject an SEZ

of development was being felt most by small
farmers. The Patalganga river had lived up to its
name and farmers and locals used to walk by the
river in the evenings to see what color it would be
dyed in depending on the nature of chemicals that
flowed through. Sometimes it was flaming red, at
others, deep purple, but mostly black. Even then
villagers expressed a lot of uncertainty about the
transformation unfolding in the lush green coastal
district of Maharashtra. If the farmers have rejected
the SEZ, it is time we sit down and reflect why they
have done so.. PAATAL GANGA.. Patal means Hell.

Impact

SEZ
It is vital that the industrial-government lobby takes a
hard look at this reason. Is it based on the same
colonial approach policies followed in the case of
mining activities and plantation in the NE and Bihar
and other tribal belts a lot of which are now marked
out to be politically troubled areas .. Violent
resistance has sown self-destructive seedsThere is
rarely a proper evaluation of the needs of the
industrial lobby v/v those of the farmers themselves.

2 cos. under scanner

UN fears backlash over purchase of land

UN Food agency chief wants Mid East funds to sign JVs.

Oil rich ME states are discussing billions of dollars worth of agricultural

investment in places such as Sudan and Pakistan. The deals are meant to
ease food security concerns in the Gulf (imports > 50% foodstuff). Strategy
guaranteed food supply at guaranteed prices by investing in land and the
production of crops such as wheat and rice.

Director UN FAO said: he is advising the Gulf states against outright land
purchases, which could trigger political backlash in DCs that are struggling
to feed their own populations.

I had suggested Ek goni Chawal .. Ek

barrel crude oil)

UN on Land purchase
UN does not want unintended scandals to cause
this new wave of investment into agriculture to
dry up. FDIs in ag. Is the only way we are going
to eradicate global poverty.. I have no problems
in Arabs doing the investment. However,
Where I start getting worried is (a situation in
which investors) rush and buy land all over the
place land is political hot potato.. my job is to
avoid .. provoking a negative response in the
Developing world.
(See any sour grapes?)

Some headlines:
RAIGAD NO TO SEZ jairam ji!!
Supreme Court judges under scanner
SEZs only on Barren Land is impractical.
(How much % urbanization?
Where Bus. Can improve balance %
productivity US vs India yield 7-8
times more) WTO (whither to ho..)

Sunita Narain on Coke/pepsi

CEO Director Centre for Science and
Environment
It is a misconception that we are against
industry we want India Inc. to grow but
the growth should be inclusive and
benefit all sections of society.. We want
to be impactful, and we want to be angry
and remain angry,

Stocks
Stocks are painful. You need to track a
lot of things. They get affected by
central banks, politics, corporate
governance, balance sheet and
environment issues James B. Rogers, co-founder, Quantum
Fund

The public smoking issue

Pro group on freedom of expression:
Choice goes up in smoke
Once the govt. arrogates to itself the
role of moral arbiter, the right to choose
is lost.
Measures have to come from within the
community

Some other problems

Investment in human capital low,
Huge additional Resources required for
Creating social action and group
interaction.
Enterprises not being subject to
periodic elections, durable solutions are
possible, irrespective of whichever
government rules.. (sustainability)

Problems in India contd

Civic Unrest
Militants, Gujjars, Deras,
fundamentalism, maoism, naxalites,
intolerance, superiority complex,
arrogance, dalits, tribals, SC, tribes
They are all not cattle.. Human beings..
Even cattle needs to be preserved

Problems (news HL) contd.

Mass hysteria business to avoid
Thin skin polity the art of dividing the
electorate without using freebies, but by
hurt sentiments. Identify politics
- to enterprises??

Business &Social causes- China

The current baby milk contamination
scandal confirms both a high level
culture of flouting rules for profit, and
also of official cover up. Collapse of so
many schools in the Sichuan
earthquake in May (again China)
revealed publicly some shocking
compromises in building standards that
may be hidden NEARER HOME !!

China
China monitoring performance
Monitoring email and internet is a way to
understand growing public anxiety about what
is not working and how they have to respond.
The Chinese PM has made a new public
statement of intent to allow media oversight
with greater public power to criticize and
supervise Chinas govt.
MEDIA CONTROLS THE MINDS OF THE
MASSES. (elsewhere Role of Media In CSR)

China govt. remarks

We will create conditions that allow people
to criticize and supervise the work of the govt.
more effectively, and foster a lively political
environment.. we will further deepen and
broaden opening up. Opening up also means
reform.
Is it regular spasms of control and loosening
up with stunts, to exploit media power
asked a critic.

Business & Community a view

Financial inclusiveness is fine in small doses,
but leads to disaster on a large scale. India is
just the start of FI, but as it prospers, political
pressures for cheap loans to the poor will
grow. The lesson from the US is that Inc
loans on sufficiently large scale can sink the
financial system

CSR The ITC way business models

focused on Rural India.
The vocal of the SH of the land and the growing
marginalization of poor rural people (Single) will not be an
isolated incident.
While urban India shines in terms of best amenities.. rural
India is bound to impugn them for a slice of the cake or
some modest improvement in their dreary existence.
Its no wonder therefore that ITC (TO $19 bn. Market
capitalization, and $5 bn. Turnover with a diversified
portfolio ranging from FMCG, hotels, paperboards,
packaging, agri business, has forged unique business
models that focuses on rural India and attracted universal
approval.
Lets see what they are doing.

ITC story (contd)

e-choupal initiative
is designed to enhance farm productivity and provide
market linkages
Social forestry scheme
Has greened over 80000 hectares
R&D projects
Have evolved high-yielding, site specific, disease-resistant
clones
Comprehensive package
of plantation mgmt practices
Watershed development
Projects which benefit 333111 farmers in 24 districts

ITC story continued

Renewable energy
96% energy required by Co. planned out
internally with > 24% generated from
renewable resources.
ITC has been a water positive firm and today
the co. generates three times more
freshwater harvesting potential than it
consumes and sequesters almost twice the
amount of carbon its plants emit.

ITC story (contd)

Recycling solid waste
In 2007-08 the co. also compassed he
100% benchmark in recycling solid waste
in several of its operations.
Also
A total of 2178 water harvesting structures
have been created, providing critical
irrigation to 18,482 hectares of farmland.

ITC story contd.

ITCs Mission Sunehra kal encompassing
its sustainable development initiatives would
continue to provide thrust to identified triple
interventions viz. natural resource
management (wasteland, watershed and agri.
Development), sustainable livelihoods
comprising genetic improvement in livestock
and econ. Empowerment of women and
community development with focus on
primary education, health and sanitation.

ITC story contd.

Social policy analysts contend that if
corporate social responsibility (CSR) is taken
by all companies earnestly with a view to
building PPP for sustainable and inclusive
growth, the simmering tensions and
resistance to industrial development through
setting up economic enclave (SEZ) or big
project would gradually fade as rural people
would hopefully find a decent way out of their
dire predicament of penury.

Hyderabad Metro Rail/Bus project

Gets US authority boost from FTA US Bus Rapid transit

system, and Metro Rail.

Outstanding, especially for the concession

agreement under the PPP. Really the way America
was build over the last 100 years. The US govt.
granted land for taking up infrastructure development
by the private parties and now we see it here. A/g to
him, it was outstanding to have private sectors
dollars to spend for public service without casting any
burden on the tax payers money. The AP govt. would
enter into a MoU with the FTA on public transport,
which would involve strengthening and sharing of
knowledge, science and technology in the sector.

Hyderabad Project
Other opportunities for business:
Head-hardened rails, high speed rails, metro rail
technology, manufacture and supply of coaches,
automatic fare collection points, etc.
Railway stock yards, (market-marketable surplus)
With Good ROADS mfg. location possible
anywhere time and place utility

What we saw?
Complementarity of Business and
community with each other
Maintaining a stable and healthy
community environment
Improve the quality of life
Effectiveness of institutions
Create a fair business environment

A Comprehensive Corporate Reform Agenda

Expose and punish acts of corruption

Hold corporate officers more accountable

Protect small investors and pension holders

Move corporate accounting out of the shadows

Develop a stronger and more independent corporate

audit system

A Comprehensive Corporate Reform Agenda

Corporate officers must face stiffer penalties
when they break the law

Corporate leaders who violate the trust

should never be given that trust again
The administration must use the full
weight of the law to and punish
corruption

A Comprehensive Corporate Reform Agenda

Double the maximum prison term for mail fraud and
wire fraud to ten years, and increase the prison time
served for fraud committed by corporate leaders
Empower the SEC to freeze improper payments to
corporate executives while a company is under
investigation
End the practice of allowing corporate officers to
receive loans from their companies

A Comprehensive Corporate Reform Agenda

Prevent CEOs or other officers from profiting
from erroneous financial statements

Ensure that CEOs or other officers who clearly

abuse their power lose their right to serve in any
corporate leadership positions

Require corporate leaders to tell the public

promptly whenever they buy or sell company
stock for personal gain

A Comprehensive Corporate Reform Agenda

Challenge CEOs in America to fully comply with
the spirit of existing SEC rules by explaining
prominently and in clear English why their
compensation packages are in the best interests
of their companies.
Strengthen the SEC by seeking an additional $100
million in FY 2003 for the SEC to help hire more
enforcement agents and improve other
prosecutorial activities.

Ethical Lapses
Ethical Lapses

Enron
Anderson
Southebys

But not all reforms will follow the US

model now .
Enron and the Arthur Andersen scandals;
Questionable accounting Practices at the dot coms
and the telecoms;
Blue chip companies such as GE and IBM;

These issues have rendered the US

Corporate governance model to be a piece
of Swiss Cheese with loopholes

Where can you learn Ethics?

Not necessarily in B-school, where too many focus too little on
doing the right thing -- despite the rash of corporate scandals .
How should B-Schools contribute?
Sharper focus on teaching the future business leaders to do the
right thing
However,
B-schools have not negated the issue totally
Class Discussions on abuses,

Relating stories in class work

Where can you learn Ethics?

But mere condemnation of the issue does not
contract its recurrences.
Why this glacial pace in the academic pursuance
of this issue?
Thomas Donaldson, Teacher of Business ethics
at Wharton School- Academe is sloth when it
comes to change

Where can you learn Ethics

Virtue Pays
Marc Orlitsky, lecturer at the Australian graduate
school of management has analyzed

30 years worth of corporate data

Affirms a link between the social performance and

the solid financial performance of the company

Cracks in Political & Administrative India

Tehelkas Exposure of Defense Gate
The Bofors Issue
Inefficiency in the Tax Collections System
Poor Ethics amongst Administrators
CORRUPTION
Root Cause - Lack of Corporate Governance

Cracks in Corporate India

All of us know what boards and

managements should do, but are doing

what we should not do. We have done
things that are questionable legal but
questionable. Why must we need a
committee to tell us what to do?
- Rahul Bajaj
The NDTV Pay Commission debate CII
nothing wrong, but accountability The
NANO debate .. Singur

Cracks in Corporate India

But Even Then What Did We Get !!!

Bhopal Gas Tragedy

Harshad Mehta & Ketan Parikh Stock Market Scams

(Highly objectionable became acceptable as they were the
prevailing market practices)

UTI Scam

Root Cause - Lack of Corporate Governance

INFOSYS

Unfortunately, money is the sole factor

on which a premium is laid.without
a certain value system, no corporate
governance system will ever work
--Mr Narayana Murthy

Social responsibility TATA

Right Sizing- Charging to Cost

Industry Outlook
Operations
Cost Control
Ongoing Modernization and Capital Projects
Acquisitions and Divestments
Corporate Citizenship
Corporate Governance
Energy, Technology and Foreign Exchange

Benefits of Efficient CSR

Improved Financial Performance

Reduced Operating Costs
Enhanced Brand Image and Reputation
Increased Sales and Customer Loyalty
Increased Productivity and Quality
Ability to Attract and Retain Employees
Reduced Regulatory Oversight
Access to Capital

Implementation Steps- CSR

Mission, Vision and Value Statements

Culture Values
Corporate Governance
Executive Management Responsibility
Strategic Planning
General Accountability, Reporting, Disclosures
Communications, Education and Training
Employee Recognition and Rewards
Social and Environmental Auditing and Reporting
Use of Influence ..
Let us go to the B Ethics section

Chapter 2

From Philanthropy to CSR:

Historical Perspective

Business & Stakeholders

Introduction
Bus Ent System (BES) it is a mechanism selected by
society to produce G&S. Earlier, BE fulfilled its SR by
surviving and realizing maximum profit, as long as it
complied with a few regulations imposed by Govt to check
abusive practices.
Anyway, it was assumed the market system provided the
regulations to police, and profits provided the necessary
incentive and insured efficiency. Work ethic and

self-interest were the guiding principle.

Historical perspective (contd)

By this, business provided employment, and a
growing healthy economic system. In other
words, CSR was to operate profitably, (W/o which
they would not survive), much less play a social
role.
The practice of BE contribution to SD continued
through ages, and as econ and social conditions
changed, the business response also changed to
social needs. Accordingly, there was a shift from
merchant charity to Corporate citizenship

I Phase
Ethical practices -Merchant Charity
Pre-independent era
Part with ones surplus not a modern or western
imported idea.
Dates back to Vedic times
The merchant class (nourished and ingrained by
social and religious ethics) daan, daanam, madat, sahayat,
etc.

Relief's galore natural disasters, dev. Supportive infrastructure,

dharamshalas, bathing ghats panjrapoles, drinking water stations,
education, health, preservation of art and culture.

I Phase
Ethical practices -Merchant Charity
1850-1914: (Start of
industrialization of India) slight Shift
from ameliorate (alongside, but),
slightly western form of rich
business families setting up trusts,
here too, endowed a host of
modern institutions.

I phase - Ethical practices

Merchant Charity Role of Business Leaders

For this credit to JRD, R Bajaj, A Mafatlal,

Kasturbhai Lalbhai
Do good, and therefore, less encroachment
from Govt. on its behavior
Around this time, Gandhijis mantle of
Trusteeship carried forward by Vinobhaji
his business inspiring Triple Daan model
Gramdaan, Bhoomidan, Sampatdi daan
Nehru and others encouraged this, as a better
way to do social transformation

I phase - Ethical practices

Merchant Charity Role of Business Leaders

Reinforced traditional charity at the

same time, promoted social ideal of
classless agitation in society and was
supported both by capitalists and the
govt.
Was it just a Lip Service? !!

The II/ III Phase - Trusteeship

1914-1960
Philosophy honed by vision of free, progressive,
modern India
Many businessmen Tatas, Birlas, came under the
spell of MG.
Contributed liberally unsociability, womens
emancipation, rural reconstruction. In the
euphoria of Independence, business class
confident of its capabilities, responded both, by
creating more wealth and utilizing it for nonbusiness purposes.

The II/ III Phase - Trusteeship

The Third Phase Declaration of SR of Business
The 60;s saw (in an era of econ. And political troubles)
business operating under several constraints.
JPN carried forward the message of Vinobhaji. Moving
spirit of Delhi (IIC & Institute of Gandhian Studies, Varanasi)
Seminar on SR of B
While relationship of B with Employees, consumers and
SH. was legally spelt out, no such law governed it with
society/community. They felt this should be broader than
usual current charitable dispositions.
66 Calcutta Seminar- Study group hurdles in
implementing law and recommend measures. B shd be
responsible to SH .. (Fall out)
JRD + initiated FTPA codify and implement FTP.

The third Phase

The State took some responsibility levied
taxes at this stage.
This led to dwindling interest of Business,
At the same time, era of Tax Planning /
Evasion by Charitable Trusts were noticed.
Ever heard?? converting black money into
white?

The fourth Phase Managerial

Trusteeship
1970s
Bus renewed interest shift with global trends.
Now, distinctly there were Corporate Family Business
phil.
Mgrs realized their involvement shd be beyond customer
relations, etc. U/s that together with massive investment in
bldg. up countrys infrastructure, equal attention to basic
social amenities like drinking water, dispensaries, schools,
etc. is necessary.
This condition accelerated the growth of NGOs
commitment to work but lacked financial resources.

It exerted pressure on Govt. and business.

The fourth Phase

Managerial Trusteeship
Led govt. give tax concessions to corporate
involved.
1977 Sect.35 CC 100% redn for exp. On approved
programs of Rural Dev. - led to variety of activities.
(schools adoption, etc.)
1980 business fortune increased
- 84 tax incentives withdrawn as it was misused. JRD
+ realized importance of involving in social causes.
He committed all Tata cos. to ethical behavior and
programs of CD.
He wanted Indian Cos. conduct as honest citizens
He advised: next..

JRD Tata 1986 exhortation

Apart from donating for social causes, we can use our financial,
managerial, and human resources to provide task forces for
undertaking direct relief and reconstruction measures. This
form of public community service would be expanded by the
cooperative effort among members of various industries
Create wealth, but also promote ethical and social goals of the
community.
Arvind Mafatlal Bhartiya Agro Industries foundation
Provides both moneary funds and management inputs. He
coined 3 As ANNA, AKSHAR & AROGYA (food, literacy and
health)

This period a swing from charity P to more direct engagement.

5th Phase CORPORATE CITIZENSHIP

1990 Phenomenal growth in Corp Sector size, complex,
sophistcn.
1991 effect of LPG MNCs
Growing importance of Business in community as a SH.
Realized govt. alone cannot tackle social system. SO,
Excel NGos in Rural (drought prone) Gujaratis
sponsored trusts.
The Lalbhais, Shroffs, Maftlal, L&T, HLL, Deepak F.
Many felt, Trusts just played a facilitating role, leaving WB,
IRDP etc. contribution was considered paltry v/v profits.
Mangalore Chem & F L (MCFL) TN, AP (double crop,
better water management, improved farm income)

5th Phase CORPORATE CITIZENSHIP

SPIC Agro Tr. Scientific farming,
Urea Brand image improved.
MNC Coco Cola, Pepsi, Motorola CDA
improved image
P&G cause related marketing and
improved sales
IMRD 93 survey adapting Credo blends
CD report 70% into CD for selfless
reasons, 50% concern for a specific group
20% benefit for organsn.

5th Phase CORPORATE CITIZENSHIP

IMRB findings:
86% agree corporate have a social resp.
Health & education the most chosen
52% - mention employees as targets for SD 71%
comm. Too
19% policy on SD activities written, unwritten
70% - involvement up where written policy
Donation most preferred mode
All agree , does help in image bldg.

Developments in the West

Greece and Rome
Breakup of self supporting kinship groups caused by
urbanization led to state sanctioned measured to aid
infirm, poor and disadvantaged.
Middle Age Europe plethora of alms houses, orphanages,
etc.
Credit to Andrew Carnegie 1989 Gospel of Wealth
No system could maintain complete equality between
drones and bees. Private wealth was necessary, differential
reward was necessary for progress. .. Capitalists reaped far
more than they had sown .. So they owed it to society
what is not their due

Developments in the West

John D Rockfeller, and several others
arms length phil. let professionals
better administer than owners of wealth
Similarly in Britain. No better impact on
society, especially on R&D than the
American foundations. The spirit of
charity and service did not die with the
rise of business Corporation, although
institutionalization and talk of ROI may
have obscured the fact.

Post Liberalization India

& global impact on CD the disparity
Globalization had a worrisome impact
US $700 bn B/out = 155 countries GDP
250 yrs ago Rich countries only 5 times richer than
poorest
76 Switzerland 52 times richer than Mozambique, in 2000
it was 508 times richer.
UN Development Report of 2003:
Indias expenditure on human priority concerns basic,
education, primary health care, child nutrition, is very low
investing far too little, it has to explore other avenues, one
such is Corporate Sector.

Amartya Sen:

The central issue is to expand the social opportunities open to

people. In so far as counter productive regulations and
bureaucratic controls compromise the opportunities, the removal
of these hindrances must be seen to be extremely important. It is
much more than freeing markets. It calls for expansion of
educational and health care facilities, nutritional support and
security. It also demands a general political, economic and social
program for reducing the inequalities that blot out opportunities
from 100 millions of Indian citizens
Though private bus phil. Or social action can never match or
supplant the resources or services provided by the State, its
value lies in providing plurality of funding, and In the quality of its
support innovative, flexible and or direct consequence.

CD NEW RELATIONSHIP.
Globalization entails a new relationship bet Govt business and
society.
World class business recognizes this implicit in the now
universally accepted imperative to make development
SUSTAINABLE.
In Feb 1990 PWBLF (Prince of Wales Bus Leader Forum
-supported by Europe, N & S America & Asia) registered In UK
as an international education charity
INDIA Centre for Corp Phil, Bus Comm Fndn, Action Aid,
Centre for Adv. Of Phil, ND, work in close cooperation with
corporate to make them more socially responsible.

Main reason for recognizing Community

as a SH
It is long term educated self-interest, not altruism.
It has now become a strategy for gaining competitive
adv. And a vehicle that helps it achieve its str. Goals.
- commercial applicability of good reputation
- can reap a reputation al dividend
- proven by consumer experience
- no longer smoke & mirror attitude can succeed.
- can see through perceptions and reality GAP is
visible.
- implies a deeper and wider engagement
.

Main reason for recognizing Community

as a SH
- Cos get new insights ito these societies and
increase u/d of the new environment. will
make them more politically and culturally
sensitive.
Concept of giving enlarged incl. contribution
of fin, managerial, organizational, and
personnel resources to the comm.
BEING A GOOD CORP CITIZEN MEANS,
CONTRIBUTING BACK TO THE SAME
COMMUNITY THAT GENERATED YOUR
PROFIT The Dessana story

CD Difference between Old &New

concepts
First,
While the former result of personal interest
of phil. Of founder / owner, the Latter
considered decision by the Board and part of
Corp policy
Second, latter eschews the older practice of
endowing institutions in favor of direct
involvement in CD
Concept of CSR involving maximization of
profit is modified

CD Difference between Old &New

concepts
Yes, although profits ok, but it has to be
along with social and economic goals to
receive attention.
Increasing pressure on corporate to
play a more explicit role.
Create a dynamic relationship between
C and B. putting back
Yes, of course, it is self-interest

conclusion
Business is steadily being drawn into the new relationship
with community, voluntary organizations, govt, local and
international levels, and economic and social
development.
Chief reason: decline of the role of nation state, the
contracting role of govt, the expanding role of business,
and the emergence of an organized voluntary sector and
a changing intellectual climate within companies.
DO YOU AGREE ???

Generations of CSR
Not in your new book, but u
can go through

Generations of CSR
Introduction:
Need for a stable environment, (not as a result of
1990 mismanagement and guilt), was envisaged
much before
1970 perceptible capacity of business to respond to
social pressures. focus from phil. To managerial
action
Now more mainstream and leadership cos have
become more focus, -- restrictions and contradictions
imposed by a limited approach, has led to more
ambitious in tackling issues.
Simon Zadek (2001) CSR dev in terms of 3 G.

1st Generation of CSR

Showed cos. Can be responsible in ways that do not detract
from, but may contribute to commercial success.- manifested as
traditional and corp. phil.
Many cos. Have played significant role in local communities.
The most prominent changes include:
- adoption of a str. App. To phil. Aligning charity with core bus. Int.
- Expansion of geog. Focus,/ needs & exp. Of global workforce
- Dev. Of measurement tools for evaluating impact
- Innovation in the ways cos. Incorporate greater SH participation,
create long term relationships with non-profit organizations, and
do programs accordingly.

The Second Generation

Cos see CSR as an integral part of their l,ong term business
strategy
Citizen CEOs have been crucial in moving cos. Towards 2 nd G.
The LT BL str. Addresses Q how should a firm compete in a
given business? or tactically behave in order to survive and
prosper in the market that it has chosen to enter.
The natural hierarchy of goals and str. Becomes obvious.
An orgn. Does not set goals in isolation, but thru a process of
careful planning and integration into larger environment and
interactions among subdivisions.
So optimal coordination and integration is needed.

A third generation of CSR a vision??

Is needed to make a significant contribution to
addressing poverty, exclusion and environmental
degradation.
This is beyond voluntary approaches, to cos.
Influencing the market in which they operate and remould them into sustainability.
Involves partnerships with civil society, changes in
public policy, which both rewards CSR and penalize
poor performance. May need changes in tax regime,
mandatory social and env. Reporting and support for
consumer educaton.
Raises Q on parameters of resp. lines where to
draw? Corp, publlic, civil actors to deliver public good.

A third generation of CSR a vision??

What will become of the leading lights?
What pathway to adopt.
What wd be conditions under which
emerging relationships be?
What about critics?
At present, can we say 3G is a vision?
But clearly we are all DELAYED.

Definition of CSR
Buchholz 1921 identified 5 elements
1. Corps hv resp. that go beyond the production of g/s at a profit.
2. These resp. involve helping to solve important social
problems, esp. those they have helped create.
Corps. Have a broader constituency than Stockholders alone
Corps. Have impacts that go beyond simple marketplace
transactions.
Corps. Serve a wider range of human values than can be
captured by sole focus on economic values.
A/g to Wood 1991, the basic idea of csr is that bus and society
are interwoven rather than distinct entities.

Certain principles
Principle of legitimacy - - societys granting of legitimacy and
power to business, and bus. appropriate use of that power &
possibility of losing that power.
Principle of public responsibility - - Bus resources - for
outcome related to areas of its involvement with society.
Principle of managerial discretion moral actors who are
obliged to exercise such discretion as is available to them to
achieve socially responsible outcomes.
The Concept genesis:
businesses exist at the pleasure of society and their behavior
and MoOp must fall within guidelines set by it
Bs act as moral agents within society.

The Business Case for

CSR

The Social Responsibility debate

THE CASE FOR
Existence of Business depends on its acceptance by society.
A social resp. role shd be u/taken in order to prevent some
public criticism and discourage further govt. involvement in reg.
There is a need for social participate in the complex system
Being socially resp. will simply be profitable esp. in the LT
A poor social resp. role means poor mgmt to some investors
Bus to realize that social problems can become opportunities,
and lead to profits

The Social Responsibility debate

THE CASE FOR
With re: to this, Co shd take a LT rather than
a St view
Bus shd concern with public image and the
good will generated
Bus shd be given some opp. To solve social
problems cannot do any worse than govt.
Better take a proactive rather than a reactive
role Prevention v Cure
Bus people are also concerned citizens and
humans & cannot ignore social issues.

The Counter Argument

Friedman 70 Role specialization of
institutions. E.g. econ. Inst. Shd specialize in
econ. Sphere, and socially resp. behavior will
be rectified by market through profits. Only
one resp. i.e. to maximize profits of its owners
(to protect their property rights).
Legal entities incapable of value decisions.
Manager who diverts funds for SC is diverting
econ. Efficiency and levying illegal tax on
orgn.

The Counter Argument

Others
Only profit otherwise distorts allocation of resources.
Only resp. to shareholders, & no authority to operate
socially.
SR is jurisdiction of govt. and not business
Bus. Lacks training in social issues, & skills reqd. not
competent
SR as another excuse to let big business increase
its power
May lead to inappropriate domination contd

The Counter Argument (contd)

Bus. Involvement in social matters only
increases costs, even social costs i/o
decreasing them. May lead to bus. Failures
There is no ack. Source of reliable guidance
or policy for bus in SR questions, and not
easy to make choice bet. Res. & selfish
action. It is an elusive concept for which few
stds. Are a/v

The Counter Argument (contd)

As inst. In society, BC cannot be held a/ble
for their actions In a way sufficient to satisfy
demands for social involvement.
There is divided support in bus. Com. For
social involvement, and hence unlikely to be
a very satisfactory treatment to issue.
E.g. Amoral view, personal view etc.

An alternative approach to CSR

Proposed by Freeman and Liedika 1991.
Claim that conversations about corporations and the
good life have been hampered by the concept, and a
new form of conversation is necessary. They proposed
the flg. conversation.
THREE PROPOSITIONS FOR NEW
CONSEVATIONS.
1. Corp. are connected networks of SH interests. To
include suppliers, employees, consumers among
others making them legitimate partners in the dialogue

An alternative approach to CSR

2. Corp. are places in which both
individual human beings and human
communities engage in caring activities
that are aimed at mutual support and
unparalleled human achievement. This
pushes us beyond the language of R&
R to a focus on the ethic of care, which
recognizes needs and affirms the self
and it linkage with others. Pr. 3

New Propositions contd.

Prop. 3

Corp. are mere means through which human

beings are able to create and recreate,
describe and re-describe, their visions for self
and community.
This urges us to see the projects of self creation and
community creation as two sides of the same coin, and see in
institutions many possibilities for different ways of living together
to pursue the joint ends of individual and collective good.

Related Economic & SR concepts

Other terms and concepts have

emerged.
CORPORATE CITIZENSHIP
Viewed as a citizen, because of its econ.
And social influence.
A way of serving a variety of SH.
Based on nature and quality of various
SH inputs and the practices corporations
use to develop relationships with SH.

Related Economic & SR concepts

Aspects of multi-disciplinary nature of CS include:
1. Basic values, policies & practices e.g. dev of
value statements, CoE, sust. Str. And
governance practices
2. Mgmt. of social, ethical and env. Issues within
Co Value Chain
3. Voluntary contr. Made towards econ. And soc.
Dev. Of comm.
4. The u/s of SH relationships thru soc. And env.
Reporting, social auditing, and SH consultation.

CORPORATE SUSTAINABILITY
This is a bus. Approach that creates LT Sh H
value by embracing opp. And managing
r4isks deriving from econ.env. And soc. Dev.
These leaders achieve long term sh. H. value
creation by gearing their strategies and
management to harness the market potential
for sustainability products and services while
at the same time successfully reducing and
avoiding Sus. Costs and risks.

CORPORATE SUSTAINABILITY
These can be quantified and used to
identify and select leading cos. For
investment purposes. Leading sus. Cos
lead their industries and set industry
wide best practices in the following
areas: straegy, innovation, governance,
shareholders, employees and other SH.

Triple E Bottom Line

Triple E economic,

ethical and environmental BL

evaluates a corp. performance a/g to a summary

of econ. social and env. Value the corp. adds or destroys. The
narrowest meaning of the term is a framework for measuring
and reporting C perf. Against econ. Social and env. Indicators.
A recent broader meaning attributed is used to capture a whole
set of values, issues and processes that corps. Must address in
order to minimize any harm resulting from these value adding
or destroying activities.
This includes clarifying the corp. purpose and taking into
consideration all SH.

Conclusion
CSR is a reflection of the fact that bus. And society are interwoven and can be expressed in terms of 3 principles:
Legitimacy, public resp. and managerial discretion.
The debate on CSR has not been resolved to date1
In recent years, the ethical and phil. resp. have received more
attention.
Soc. Resp. has evolved and today there is other terminology
being used to describe the concept.
This terminology includes C Citizenship, Cor Sustainability and
Triple Botoom Line.

NEW SECTION
DRIVERS AND MODELS OF CSR
(part of it in new book)

DRIVERS AND MODELS OF CSR

Factors driving CSR

Globalization and associated growth in competition

Increased size and influence of companies
Retrenchment or reposition of govt and its role
War for talent; cos. Competing for expertise
Growth of global civil society activism
Increased importance of intangible assets

Zadek S., Puran P and R Evans 97:

Main drivers are Values, Strategy & Public pressure

Lets see what these are:

 Values:
Businesses u/s not only for wealth creation, but also for social
and environmental goods

Strategies:
Being so, they are socially and environmentally responsible for
str. Dev. Of a company.

Public pressure:
Consumers, media, the state, the deprived in the society
become more active.

 The above, may in general be a traditional view, but today,

several factors motivate cos, especially SH management.
Hence CS Performance, Corp env. Mgmt, consumer pressure,
risk management and sustainability, business ethics, attracting
employees and personal values.
Media exposure, env. And health related incidents causing
public anxiety, and local community conflict CSR has risen up
in Cos list of priorities.

Stakeholder Management

Stakeholders have been defined as: (Freeman 2001)

.. Groups and individuals who benefit from or are harmed by,

and whose rights are violated or respected by corporate actions
SH model of the Corporation (Donaldson & Preston 95)
FIRM:
Investors, employees, political group (s), customers,
communities, govt., suppliers, trade associations.
Society? Who? Wide range, expectation & demands. CSR to
address wide ranging, and constantly changing set of demands.
Integrate concerns into business activity Clarkson (95)
Redefining the Corpn project, a ten-year endeavor to set out a
process-and-dialogue-based approach in decision making .

Corporate Social Performance (CSP)

Good relationship between CSP and strong financial perf. That is

strategic CSR, if only it can profit also from its good works.
Today, increasing interest in TBL gain, not just economic value, but
benefit accruing from engaging in env. And socially beneficial practices.
These triple lines represent
THE ECONOMY, THE ENVIRONMENT AND THE SOCIETY,
sustainability and are all dependent on each other. Cos. Are convinced
about this now. For e.g.
CSR is a powerful way of making sustainable competitive profit and
achieving lasting value for the shareholder as well as SH. CSR and
reporting thereof is a win-win opportunity, for everyone
Socially responsible business practices contribute to corporate
productivity and profitability (Business for SR 2002)
See p 49 for survey results on studies.

Corporate Environmental Mgmt (CEM)

Increased focus today. 60s they coped after the crisis by some
damage control, 70-80s they simply tried to minimize costs
associated, 90s more active interest in pro-active strategies,
studying env. Impacts of waste, measures to reduce them.
Initiatives like TQEnv. Mgmt emerged further.

CONSUMERS
Consumer pressure (this is likely to increase in the
future) centered on protection of env. Campaigns to
stop deforestation, protect human and animal rights,
safeguarding jobs, inclusion of minorities, and
behavior of Cos operating in developing world.
P51. Brent Spar affair Shell operations in Nigeria
consumers asking Co to find solutions to local
political and societal problems. (though it is outside
their sphere of influence and indeed outside the
consumers experience.

RISK MANAGEMENT
Different SH different strokes
Cos problems, also working in Dev. Nations or with bad
practices.
Media glare forces Co. to behave transparently increasingly,
and in their disclosures, and a commitment to improve.
Sustainability 1987 Our Common Future report Brundtland R

S meeting the needs of the present without compromising the ability

of future generations to meet their needs . RIP (nk)

s inextricably linked to resource usage. (See Toyota

newscutting)

Business Ethics
Fieser 2001: the field of BE examines moral controversies that

commonly arise in the business world. These include the social

responsibilities of capitalist business practices, the moral status of
corporate entities deceptive advertising, insider trading, basic employee
right, job discrimination, affirmative action, whether drug testing violates
privacy and whistle blowing.
Defining feature: moral standard.
In a global business world, increasingly becoming difficult to define as
varying cultural and legal standards are brought to bear on business
decisions
Corporate: Ethics officers, workplace ethics teams. Articulated thru::
integration of core values, SH interactions, vision statements, social
audits, and other forms of social performance measurement and
reporting.

Employees

Invest return with loyalty & productivity.

How? provision of childcare facilities, flexible work hours, job sharing,
medical care; workplace is from local community. Use them also in
CSR. With CSR Cos are more likely to attract skilled and high quality
labor, with high self-image, (A Study report) e.g. Microsoft, IBM GM,
more closer TATAs, ITC.
PERSONAL VALUES:
People carry out Social work for moral reasons also (dxbd as
discretionary, voluntary or philanthropic. This is beyond the economic
confines of SR in helping common good. This is not restricted to
rectifying Co. created harms, but also outside. Called as Corporqte
Citizenship. Approach (Qd by commentators Milton Friedman) The
social resp. of business is to increase profifts Why involve? Others
argue fundamentally the right thing to do.

MODELS OF CSR

What are the parameters and legitimacy?

Ethical:

Cos responsible to ind. And groups where it might inflict

actual or potential injury, mental, econ. Spiritual, emotional, physical).
Even if 2 parties involved, it may affect other SH.
E.g. when closing or relocate a plant, or low sales, etc. minimize loss,
(obviously if it is a better proposition) solve by severance pay or
advance notification).
Ethics edicts overrides self interest, even if actions are non-profitable.
Trade Offs which SH to maximize or minimize? E.g. money spent on
pollution may reduce dividends. Empirical evidence good ethics is
good business. Attracts attention image enhanced. Also, some
allow O/S or suppliers manage sweatshops.
We do seem to have many ethical controversies / debates these days.

Altruistic CSR

Or Humanitarian caring even with sacrifice. Fourth face of GCS

giving back.
Demands that Corporate alleviate public deficiencies urban blight,
drug alcohol, crime illiteracy, education etc..
DeGeorge 90 no moral obligations only alleged social obl.
Involves incorporating Co core competencies to societal & community
needs
Quality of Life issues incl. job training, rebuilding inner cities, renovate
parks, cleanup, education, healthcare (primary)
Business is a major social institution that shd bear the same kind of
citizenship costs for society that an individual citizen bears Davis 83.
Altruistic or affirmative? (correction of social injury). Best avoid
controversial issues. Friendman 96 settling personal issues arising
out of conflict between managers and shareholders. An agency
problem.

Strategic CSR
Str. Philanthropy (Carroll, 2001) good deeds are good for
business. It is in their best financial interests to give back. ?
Ph.. Aligned with profit motive? Market favor perceived socially
resp. behaviour.
SH outside the stockholder group are viewed as means to the
ends of maximizing shareholders wealth (goodpaster 96)
Short run pains (costs) long run gains).
View it as Goodwill bank (Vaughn 99), an asset, nurture it and
grow.
E.g. Ford gave 1 mn booster seats safe ride for children.
Bldg. a destitute house, garden local park renovation, helps.
NOVAKs Responsibility list outside business (next)

 3 of Novaks extra-legal social resp. wd appear to benefit

society directly.
1. Communicate frequently and fully with investors, share
holders, cust, employees & other const. to gain their support.
2. Establish within firm a sense of community and respect for
the dignity of persons, which shd foster motivation, teamwork,
fulfilment, and hence productivity.
3. Protect the moral ecology by accepting some resp. for TV
programs in which they advertise avoiding shows laced with
sex, violence and denigration of either business or religion

Conclusion
Society has wide range of people who have interests,
expectations, demands as to what Cos ought to provide, and
ways they should behave.
Cos. Embrace this group and also wove them in their decision
making.
The motivation is to u/s wide ranging and changing set of
demands.

Developing a CSR Strategy

Typology of Corp Prog to Promote CSR

Introduction
CSR programs connected to:
- HR / Labor & Human Rights / Corp Structure
& Governance
Business ethics / Env. Mgmt / Community
involvement & Economic Involvement /
Accountability

CSR programs Categories and types

Typology of Corp Prog to Promote CSR

Most of tasks are not industry specific, but
activities by any Co. Hwr, there are a few
consulting (Brokering) firms,- with core
competency - (social inv. Firms and social
entrepreneurship. Work on compliance,
monitoring and reporting standards,
assessment and measurement functions.
Social Entrship Social VC build business
models.

Trends in Program Development

As in any other world, CSR programs trends also develop over
time. These trends include, branding, CC fit, partnerships, O/S
and integration.
Branding signature programs helps positioning & advtg.
E.g. ToI lends its name for NGOs
CC Cos, lend e.g. product, HR and equip.
Paper industry forestry program
An educational product Co. can tie up with some M. Inst.
A base to start with providing material aid to NGOs.

Promotion of CSR
How to do it if there is a commitment and not a fashion fad
1. Promotion a CSR-friendly social dialogue (in-house, access
to info. Be promoted, Dynamic changes / Restructuring,
relocation, M&A, TOvers, (co. boundaries to coincide ) what
does presently MNCs do?
Create a social dialogue (a) binary model, (b) build bridges
between SH. And multiple logics, but risk of one SH many.
Expand multiple w/o weakening the traditional social dialogue.

Promotion of CSR
2. Rethinking the governance design, and
implementation of the rules, processes and
practices applied at Co. or society level.
Take on board a diversity of SH, and hence a
wide range of expectations and t/offs
thereof. Build processes around it.
Mutual enrichment what about mandate?
Global? Or local

Promotion of CSR cond.

Proposal 3
Enabling the actors to play their role
Tools, resources and skills r they sufficient? Solution
prepare framework (institutional)
Proposal 4
Promoting the internal as well as external aspects of CSR.
In an economy of decentralized production and NW cos, issues
around job quality and health and safety provisions and working
conditions of the employees of subcontracting cos. Play a major
role in CSR policies.

Promotion of CSR cond.

Proposal 5
Identifying the dialogue
Just on consumers, but also on other SH? A
new way of doing business can be developed.
Trust, transparency, internal and external
auditing can create and foster successful
dialogue and sustainable CG. Local
municipalities and national governments, for
example, have an important role to play in
facilitating partnerships.

Promotion of CSR cond.

Proposal 6
Fostering CSR among SMEs:
They do not have the human and fin.
Resources. Esp. reporting tools consider it
as an addl. Bur. Expenses.
Cos. With sub-contractors can hv a strong
influence on their suppliers by compelling
them to standardize and label their practices,
q, safety, env. increased dissemination.

Promotion of CSR cond.

Proposal 6:
Promoting CSR as a tool to anticipate change:
Pro-active, preventive approach wd be beneficial to
all SH
Practices positioned in advance of restructuring can
anticipate the effects on employees and prepare
them for coming changes.
Prior consultations and information with parties
involved is necessary, before successfully
restructuring.

Promotion of CSR cond.

CONCLUSION
In the bus. Climate of 21st century some identifiable
factors that make some cos. More responsive to
CSR.
Currently a revolutions in governance characterized
by empowerment and consultative action based on
mutual respect and benefits. More creative,
innovative strategies-methodologies creating winwin situation for all and communicate to others how
consultative and collaborative model of change is
really rofitable to all.

Monitoring & Measuring

the Impact of CSR

Monitoring & Measuring

the Impact of CSR
Simple principles
Measure fewer things better
Measure what matters top 2 or 3 good
metrics (HP energy optimization strategy
penetrated new marks, or gain new customer
segments or won big govt. contracts.
How your CSR strategy can affect overall Bus
strategy

Monitoring & Measuring

the Impact of CSR
Communicate fewer metrics in multiple ways:
Measure the same thing and articulate its value its
dimension:
A/g Based monetary inflow and outflow of cash
Financial in kind contributions covert into monetary
terms
Quantitative - no. of new energy savings products
or sustainable ones added
Qualitative types and descriptions of new energy
saving products (story telling) ;; e.g. Dows, Toyota,
NDTV

Monitoring & Measuring

the Impact of CSR
Quantitative tools

Qualitative tools

Emp. & customer surveys

Public attitude and trust
surveys
Employee health and safety,
reduction of waste,
efficiencies in resource
usage and production
surveys
SRI rankings
Listings and rankings in SEs

Positive & negative media

coverage
Peer and expert evaluation
Shareholder dialogue and
feedback
Image among financial
analysts and regulators
Perception about company
amongst stakeholders.
PRODUCT SALES GROW?

Measuring the impact of CSR

Introduction
One can name as many type of programs & activities, but
difficult to draw quantifiable conclusions.
3 categories:
1. Measuring magnitude of CSR at present time
2. quantifying (Performance) the social and env. Impact of
existing programs.
3. Identifying, measuring and explaining cause and effect
relationship between cos. Csr activities and their financial
performance.

1. Measuring current order of magnitude

There are no aggregate numbers a/v on CSR at
present time.
Global Reporting Initiative a coalition of corp, ngos,
a/cy org, bus asscn, env. Prog, confirmed
there is a need to assess the uptake of CSR
practices and aggregate and disaggregate data from
various sources
Some case studies and quantitative data is a/v. UN
Global Compact website info. On 180 countries

Measuring CS & environmental

performance

A plethora of M&A tools. Specific to a category, with govt. requiring

certain reports of reporting, most voluntary, comparison and
aggregation is difficult.
Caux Round Table (25 countries) published Principles for Business
94.
seeks to express a worldwide std. for ethical and responsible corp.
behavior.
Private sector developing its own stds. Is the a/g profession.
American Inst. Of CPA, ICA Eng Wales, etc.
KMPG 35% of worlds 250 biggest corporations now issue
environmental reports. Good ex. Social investing field.
KLD Res & Analy. FDI screens for alcohol, tobacoo, gambling, nuclear
power, and military contracting involvement, env. Impact, charitable
contribution, women and minority directors and managers and other
issues.

3. Determining linkages between social &

environmental outcomes and financial performance
Many managers & cos. Why should they be involved?
Most believe, only a lproven cause-and-effect R between CSR
activities & fin. Perf. Can dramatically increase CSR activity.
Making the business case The search for a link is not
concluded Despite, during past 25 years dozen studies done.
A plethora of diff. methods quantitative KLD and TRI, Co.
voluntary reporting, co. levels of phil. And manager surveys
such as Fortune magazine Most Admired Lists, are compared to
Financial statements.

Making the Business case

Making the Business case

MAKING THE BUSINESS CASE

A. CRR as a source of competitive advantage:
Not only measure, but how they can be conceived.
How do they contribute to financial bottom line. Benefits, such
as cost reduction, human capital, reduced regulations, access to
capital, consumer demand, improved business conditions, and
new market opportunities are frequently reported.
B. Cost Reduction
Thru cleaner, more efficient technologies, recycling, pollution
prevention, etc. Not only reduces input costs, but compliance
and liability costs in the long run.
E.g, 3M pollution prevention pays, Dow Waste Reduction
always Pays 100 mn $ savings over the past decade.

C. Human Capital considerations imp. Competitive adv.

ability to attract and retain employees, reduce emp. TO, incr. prody
and quality of work.
Greening & Turban prospective job applicants more likely to
pursue socially resp. than others
D. Reduced regulatory oversight
Cos. With track proven record on CSR given less scrutiny and
more free reign by both national & local govt. entities.
US Fed Screening guidelines allows reduced fines for good CSR
And an effective ethics programs in place.

E. Consumer demand
Consumers patronize good CS and boycott cos. With poor reputation.
Webside The Responsible Shopper alters cons. Behavior
Scholars have compared consumer sensitivity to CSR ax cultures.
Studies say women and people with left-leaning political orientations
were more likely to develop sensitivity to Cos.
Cos. Can capitalize this by using social and env. Perf. And build
reputations and brand image.
One way to do is to use cause marketing a strategy designed to
promote the achievement of marketing objectives (e.g. brand sales) via
co. support of social causes.
Telco, Hindalco, Wipro, Indal, Canara Bank, Guj. Ambuja etc.

 F. Improved conditions for doing business.

Str. Community investment can enhance the
capacity of a local env. Over the long term.
Greater a/v of its natural resources, a better
trained workforce, and a consumer market
better able to patronize and sustain the
business.
ITC Rural Area E-Chaupal.

Conclusion
Measurement of CSR helps Bus to better align orgl responses
to the requirements of the SH that they serve.
Certainly useful for the CEOs and employees who devote
precious time and resources in upholding their common
commitment to society.
Measurement in 3 categories
1. Order of magnitude of CSR at present time. How many, on
what scale, and in what specific ways
2. Quantifying the social and env. Impact of existing programs,
CSP that is
3. identifying, measuring and explaining cause and effect
relationships bet. Cos CSR activities & their financial
performance.

New Section

DEVLOPING /
OPERATIONALIZING
CSR STRATEGY

Operationalizing CSR
INTRODUCTION
Framework of Companies (forerunners)
have evolved over a period of time.
Specific approaches / strategies based on
ethical beliefs (of founding fathers,
business areas the cos. Operate, socioecon. Environment, and opportunities over
long periods)
Hence no standard approach for
operationalizing CSR possible.

DEVLOPING /
Basic objective maximize Cos overall
impact on society and SH.
Business see CSR as more than a
collection of discrete practices of
occasional gestures or initiatives
motivated by marketing, PR and other
benefits.
Rather it is viewed as a set of
comprehensive set of policies, practices,
programs thruout bus. Operations and
decision making process.

DEVLOPING /
Growing evidence now that CSR is not
seen as only a cost to the bottom line
amidst fierce competition and survival self
interest.
Seen as critical for protecting reputations,
defending attacks, bldg. edge, as a overall
business strategy, - to protect against
sudden corporate downfalls.
SO, IT IS CLEAR CSR requires
fundamentally new approach and outlook.
WHAT IS THAT? See next pg

DEVLOPING /
CREATING NEW MINDSET
Building self-reliance i/o just charity and welfare
Process & Brand driven than person centric or
opportunistic
Multiple goal paradigm rather than single goal
profit syndrome
TO GOVERNANCE
NOW, CREATING NEW PROGRMG PARADIGMS

Strategies
NOW, CREATING NEW PROGRMG
/PARADIGMS

Enablement (social benefit activity) will

replace human excellence
Involving in bldg. livelihoods rather than just
funding that just creates dependence/loyalty)
A more continuous partnership than
sporadic act.
Long term dev. Growth vs Sh T immediate
results.

STEPS TO OPERATIONALIZE CSR

INDIA PARTNERSHIP FORUM suggests

Step 1
Mainstreaming CSR vision in the Art. Of Asscn.
TATAs:
The Co. shall hv among its objectives the promotion and
growth of the national economy thru increased
productivity, effective utilization of material and manpower
resources & continued application of modern, scientific
and managerial techniques in keeping with the national
aspirations; and the Co. shall be mindful of its social and
moral responsibilities to the consumers, employees,
shareholders, society and the local community. The Co.
may like to further emphasize the values and principles it
stands for to set its own magnetic north

n
Step 2
Develop a Written Policy on CSR & make it available to the
public domain.
A critical step translating goals enshrined in AA.
Building blocks for the same:
A) Identification of drivers & barriers of change
Internal (to change) and views of employees
B) Ident/assessment of the core competencies of the co. in
the broader socio-econ. Context. (e.g. IT Infosys?)
C) Bldg. in the Strategic business case i.e. long term
sustainability of efforts v/v profits object. Strategically B.in
entreprenership.

c
Step 2 (contd)
D) Assessment of external environments (Legal

context) Laws, fin. & trade regulations, Co Act, -- also u/s

incentives available.
- and globalization legal stds in Business ethics, L stds,etc

& Dev. Context reports, speeches, thematic etc. priorities

At National and Intl levels.
Also bring in potential opportunities for bus. & social
entrepship.
IDENTIFY, MAP OUT / PRIOROTIZE FOR CORP.
COLLABORATION WITH SH ANALYSIS AND MATRIX OF
INTERACTION, SC, Serv. providers, then proximate SH
(community), then broader definition of developmental
needs and opportunities. (step 3 next)

Strategies
STEP 3 Translating CSR into action (Critical)
- Appoint resp. sr. exec. Reporting to CEO

- Formulate annual social investment plan

- Allocate specific resources, funding criteria, ensure
stability of funding
- Establish a good Internal Assurance system
credible
- Provide enabling environment emp. volunteering
- Formulate policies to ensure equal access to empl.
And promotion opp. Ax gender and culture, as
employees remain the first charge of social resp.
corp. behaviour.

c
Step 4: Reporting, Experience Sharing,
Mutl Lrng
Institute a monitoring system tracking
implementation, and evaluating impact
eventually in the Annual Report
Encourage exchange programs for professionals.

Step 5: Those at advanced level of compliance,

obtain certification from external
rating/cerification agencies.

ROLE OF GOVT IN CSR

ROLE OF GOVT IN CSR

ROLE OF GOVT IN CSR

CSR is what organizations do of their own volition. Whilst
govt. can provide leadership Promote greater transparency
in the marketplace, creating an effective dialogue with SH.

Pursue policy objectives using different tools.

Introduce regulations, setting min. stds, where
risks of harm or abuse are greatest.
Establish codes of practice to encourage
communities of interest to share information.
Recognize the need to avoid duplicating or
displaying the contribution that public and private
sector is already making. (contd next)

ROLE OF GOVT IN CSR

Debate should not focus only on balance of
arguments between a voluntary and regulatory
approach. Subtlety is needed.
Use intervention where it supports productivity
and competitiveness, ensuring market
mechanisms drive CSR dev. Work effectively.
Focus on key policy concerns. Recognise the
power of voluntary app.
Not on govt. offloading its responsibility to P &
P.
Include SH, NGOs, consumers and investors.

ROLE OF GOVT IN CSR

Govt. acting as a broker or providing funding
to reflect the public policy interest e.g. in
economic regeneration.
Develop guidelines and standards using a
regulatory approach.
Recognize achievements, celebrate
innovations, provide consistent framework,
drive agenda forward, ensure policies are
consistent and makes business sense. (contd

ROLE OF NGOs in CSR

NGO orgn formally independent of State & Private sector.

Its constitutional identity doesnt seek profit for individuals or

shareholders. They u/s intricacies various policies and their
consequences. They can generate a public mandate and so influence
course of action. They can initiate action on irresponsible cos. They
use following, inter alia, strategies:
Research and reporting media exposure
SR dialogue with MNCs
Social accountability standards and audits
Shareholder activism shareholder resolutions
Economic pressure boycotts
Sanctions / divestment selective purchasing
Govt. Regulations supporting them
Litigations bring law suits, and Norm Creation dev. Of Intl law.

Role of NGOs
Uniquely positioned to work at grass root levels, identify needs
and matching response.
They realize great benefits the corporate skills, time and
resources and bring synergistic partnerships.
Partnerships between govt. business and NGOs can accelerate
pace of social development.
CONCLUSION
Basic objective maximize impact on SH development
Govt. action better if centered around productivity,
competitiveness, transparency in the market to promote
effective dialogue. Ngos advise on areas of approach will
only accelerate the process.

 BUSINESS Ethics & A VISION FOR

STAKEHOLDERS

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
HENRY FORD
THE HIGHEST USE OF CAPITAL IS NOT TO MAKE
MORE MONEY BUT TO MAKE MONEY DO MORE
FOR THE BETTERMENT OF LIFE.
PETER DRUCKER
MANAGEMENT IS NOT ALL BUSINESS.
MANAGEMENT EDUCATION MUST DEVELOP TO
TEACH AND EXEMPLIFY THE VALUES, THE
METHODS AND THE TOOLS FOR ALL
LEADERSHIP.

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
WHAT ARE THE BUS. CONSTITUENCIES
WHICH MAKES ETHICS SO DESIRABLE?
Customers
Colleagues
employees
Shareholders Suppliers-Service providers
Business partners
Society

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
THROUGH WHAT NORMALLY A
COMPANY ANNOUNCES ITS
ETHICAL CHARACTER?
Vision Statement
Creed Statement
Style Statement
MIP

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS

WHAT DO EACH ORGANIZATION TRIES TO SAY BY THESE

STATEMENTS
Innovative
creative
high quality products
fast & first to opportunity
Focus on what is important
open & candid
all dealings with integrity
Adhere to the highest standards of ethical and just conduct
Honest and integrity characterize our business activity
Health & well being of all
Provide an environment where all can excel

Q. ARE THEY LIVING UP TO IT?

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
WHAT DOES A V. STATEMENT SIGNIFY FOR EACH
CONSTITUENCY?
Customers:
Anticipating needs, superior products, continued investment

Colleagues:

Attract & retain excellence,

no discrimination,
good work environment,
equal opportunity,
objective evaluation,
fair & objective, etc.

Shareholders:
Fair & attractive returns, prudent risks to get sustainable
growth

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
Business Partners:
Fair, equitable, recognize mutual interests.

Society:
Responsible corporate citizens,
actively initiate & support efforts for keeping
health and environment,
improve vitality of worldwide communities.
All this with utmost integrity, adhering to the
highest standards of ethical & just conduct

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
Style Statement of a Business Enterprise that
sets forth goals, commitments and foundations
for Decision making, and sets forth guidance for
achieving these goals:
Go for global reach, harvest ideas, be first, focus
resources on important challenges etc.
To show restless discontent with the way we are
today and pursue better ways to serve customers.
These are best achieved thru teamwork, sharing
information quickly, widely and candidly.
Open communication, environment where true
success is well rewarded.

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS

MANAGEMENT INTEGRITY POLICY (Expectations from employees)

General Integrity:
Compatible with local laws & regulations, honesty, integrity &
character
Political Contributions:
Not admissible unless satisfied with legality
Proper Accounting
Accepted a/g rules and regulations and controls. Truly reflecting
transactions recorded.
Fees /Commissions
Should represent fair & reasonable consideration for services.
Payment to Govt. Employees or Officials.
To influence decisions of a judgmental nature.
Specific responsibility
Report, Consult, No violation allowed of any rules, no retribution,
environment concerns to be fully complied with.

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
OPERATING SPHERES WHICH CAN IMPACT THE ETHICAL
ASPECTS
GMPs

build quality into products from the start

instead of relying testing finished products.
ANTI TRUST POLICY
Will ensure no restraint on competition, the
formation of monopolies, Unfair business
practices. (fix prices, cartels, boycotts, below
cost prices, buy from a lower priced market
and sell at a higher price market

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
Reciprocity
(buy product B only if they buy product A etc)
INTELLECTUAL PROPERTY POLICY
Patents Laws:
processes, formulas, methods, techniques,
Trade marks:
Logos, words, names, symbols (distinction),
Copyright laws:
original written expression of ideas and reduced to
tangible forms like literature, art, music, computer
programs etc.

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
DISCLOSURE OF CORPORATE
INFORMATION
CONFLICT OF INTEREST
(Loans, fees or services, gifts, co. position for
personal advantage, working for competitors,
influence orders, kickbacks, Investing in
securities of others.

SECURITY LAWS POLICY Elimination of fraud and deceptive practices.

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS

7 SINS IN BUSINESS
BUSINESS WITHOUT MORALITY
POLITICS WITHOUT PRINCIPLES
EDUCATION W/O CHARACTER
WORSHIP W/O SACRIFICE
WEALTH W/O HARD WORK
DEVOTION W/O AUSTERITY
EXISTENCE W/O RE SCRIPTURES

BUSINESS Ethics & A VISION

FOR STAKEHOLDERS
Where noticed:
Wiped out forest lands
Wash out top soils, indiscriminate use of
chemicals
Heavy amount allocated for development do not
reach targeted points
Religion more for aggrandizement and division
Ostentation even incurring with debts is not
considered undesirable.
Business shaped by ethical behavior of individual
characteristics. (BUDDHAs teachings??)

 CORPORATE GOVERNANCE

Corporate Governance
TO ATTAIN HIGHEST STANDARD OF
PROCEDURES AND PRACTICES
FOLLOWED BY THE CORPORATE WORLD
SO AS TO HAVE TRANSPARENCY IN ITS
FUNCTIONING WITH AN ULTIMATE AIM TO
MAXIMISE THE VALUE OF VARIOUS
STAKEHOLDERS.

What is CG?
Corporate governance refers to the set of rules
and incentives by which the management of a
company is directed and controlled.
Corporate Governance involves a set of
relationships between a companys management,
its board, its shareholders and other
stakeholders.
Corporate Governance also provides the
structure through which the objectives of the
company are set, and the means of attaining
those objectives and monitoring performances
are determined

The Set of Relationships that Makeup

Corporate Governance
Primary Stakeholders
Shareholders
Boards of Directors/Managing Boards
Executive Management

Other Stakeholders

Creditors
Managers
Employees
Customers
Community
Suppliers
Financial Markets
Environmentalists

Various models of corporate

governance

Various models of corporate governance

The Anglo Saxon model:

The
social responsibility of business is to
increase its profits".

The German and Japanese

models: Corporations should balance

the interests of all primary stakeholders,

i.e., shareholders , creditors (mostly
banks) and employees.

What is corporate governance?

Key Policy Issues
Accountability of management to shareholders, based on a
balance of power between the Board of directors, management,
shareholders, and the auditor.
Fairness to minority investors (protection against fraud, selfdealing, or insider wrongdoing).
Responsibility of the corporation / joint stock company to
obey the law and to act with regard to the needs of other
corporate stakeholders (workers, State, customers, etc.).
Independence, tenure and age of directors

Best practices are focused on

Independence, tenure and age of directors
Frequent meetings of board and sub committees with
regular attendance
Sufficient sub committees to handle key corporate
issues
Stringency of criteria for CEO to qualify for annual
bonus
Reasonable director compensation
Distributed ownership is viewed as optimal to protect
all shareholder interests
History of equal treatment of shareholders

How to Measure Corporate Governance

1.

On the basis of how effective the systems are in limiting

managers ability to divert firm resources to their own, private
uses (the size of the premium at which voting shares trade in
to relation to non-voting shares)

2.

On the basis of how willing entrepreneurs are to make initial

public offerings of stock.

3.

On the basis of the speed with which management is

replaced for sustained poor performance (the functioning of
internal and external markets for corporate control)

Need for Corporate governance

Ethical conduct in business
Beyond the realm of law.
Growth requires the cooperation of all
the stakeholders
Improving the economic efficiency of a
firm.
Risk premium on non conformance
Confidence of investors

Major provisions of CG in India

New Clause 49 has been incorporated in the listing
agreement that deals with
1.

2.
3.
4.
5.
6.
7.
8.

Board of Directors
Audit Committees
Remuneration Committee of the Board
Board Procedures
Management
Shareholders
Report on Corporate governance
Compliance

Implementation of corporate
governance in India
1998:Desirable Code of Corporate Governance a
voluntary code published by the CII,
May, 1999:Committee under the chairmanship of Shri
Kumarmangalam Birla,to promote and raise the
standards of corporate governance.
February 2000: first formal regulatory framework by
SEBI based on Kumar Mangalam Birla committee
recommendations

Reporting under CG Annual report

Co;s philosophy on Code Governance

BoD name, numbers, etc, meetings
Audit committee terms of ref, nos., meetings
Remuneration C R policy, details
SH C Non-Exec Director, No. of complaints,
no. not solved
GB mtg location, no. of resolutions, who
conducts ballot details
Special resolution through ballot, procedures

Reporting under CG Annual report

Disclosures: on materially significant relatedparty transactions with potential conflict of
interests
Statutory non-compliances SEBI and other
statutory
Whistle blower policy no personnel denied
opp.
means of communicating, qrly results,
newspapers, website, official news results,
presentations made to investors on the
analysis

Reporting under CG Annual report

General SH info: AGM, date, venue, etc. year,
date of book closure, directors payment,
listing in GE, market price vs. crisil, H,
Registrar and Transfer Agents, distribution of
stock holding, delimitation of shares , O/V
GDR, ADR, warrants, Conv. Shares, plant
location, address for correspondence.

Reporting under CG Non-Mandatory

1. The Board composition
2. remuneration committee set up, packages,
pension, compensation structure. All members
3. Chairman at AGM to answer queries
4. Audit questions
5. Training of Board on co. parameters, risk profile,
best ways to discharge them
6. Mechanism for evaluating non-ex. Members
Whistle blower policy safeguards, communication.

CORPORATE GOVERNANCE
WHAT IS CORPORATE GOVERNANCE

PROCESSES AND STRUCTURE BY WHICH BUSINESS AND

AFFAIRS OF CORPORATE SECTOR IS DIRECTED AND
MANAGED
OBJECTIVE OF CORPORATE GOVERNANCE
a) TO BUILD
UP AN ENVIRONMENT OF TRUST AND CONFIDENCE
AMONGST THOSE HAVING COMPETING AND CONFLICTING
INTEREST

b) TO ENHANCE SHAREHOLDERS VALUE AND PROTECT THE

INTEREST OF OTHER STAKEHOLDERS BY ENHANCING THE
CORPORATE PERFORMANCE AND ACCOUNTABILITY

GLOBAL INITIATIVES TO IMPOSE CORPORATE

GOVERNANCE
SIR ADRIAN CADBURY COMMITTEE
ADDRESS THE ISSUES RELATED
GOVERNANCE IN UNITED KINGDOM
CORPORATE GOVERNANCE
GOVERNMENT

REPORT

TO
OF

TO
CORPORATE
SINGAPORE

SARBANES-OXLEY ACT, 2002 BY THE AMERICAN

CONGRESS WHICH CAME INTO EFFECT IN JULY 2002 TO
ADDRESS ALL THE ISSUES ASSOCIATED WITH CORPORATE
FAILURES TO ACHIEVE QUALITY GOVERNANCE AND TO
RESTORE INVESTORS CONFIDENCE

IMPLEMENTATION OF CORPORATE
GOVERNANCE IN INDIA
SHRI KUMAR MANGALAM COMMITTEE

CONSTITUTED IN MAY 1999 TO PROMOTE AND RAISE THE

STANDARD OF CORPORATE GOVERNANCE IN INDIA

MANDATORY
COMMITTEE:

RECOMMENDATIONS

OF

BIRLA

APPLIES TO LISTED COMPANIES WITH PAID UP CAPITAL OF Rs.3

CRORE AND ABOVE
COMPOSITION OF BOARD OF DIRECTORS OPTIMUM
COMBINATION OF EXECUTIVE & NON-EXECUTIVE DIRECTORS
AUDIT COMMITTEE WITH 3 INDEPENDENT DIRECTORS WITH
ONE HAVING FINANCIAL AND ACCOUNTING KNOWLEDGE.

MANDATORY RECOMMENDATIONS
OF BIRLA COMMITTEE
REMUNERATION COMMITTEE
BOARD PROCEDURES ATLEAST 4 MEETINGS OF THE BOARD IN A
YEAR WITH MAXIMUM GAP OF 4 MONTHS BETWEEN 2 MEETINGS.
TO REVIEW OPERATIONAL PLANS, CAPITAL BUDGETS, QUARTERLY
RESULTS, MINUTES OF COMMITTEES MEETING.
DIRECTOR SHALL NOT BE A MEMBER OF MORE THAN 10
COMMITTEE AND SHALL NOT ACT AS CHAIRMAN OF MORE THAN 5
COMMITTEES ACROSS ALL COMPANIES
MANAGEMENT DISCUSSION AND ANALYSIS REPORT COVERING
INDUSTRY STRUCTURE, OPPORTUNITIES, THREATS, RISKS,
OUTLOOK, INTERNAL CONTROL SYSTEM
INFORMATION SHARING WITH SHAREHOLDERS

NON-MANDATORY RECOMMENDATIONS
OF BIRLA COMMITTEE
ROLE OF CHAIRMAN
REMUNERATION COMMITTEE OF BOARD
SHAREHOLDERS RIGHT FOR
FINANCIAL PERFORMANCE

RECEIVING

POSTAL
BALLOT
COVERING
CRITICAL
ALTERATION IN MEMORANDUM ETC

HALF

YEARLY

MATTERS

LIKE

SALE OF WHOLE OR SUBSTANTIAL PART OF THE UNDERTAKING

CORPORATE RESTRUCTURING
FURTHER ISSUE OF CAPITAL
VENTURING INTO NEW BUSINESSES

IMPLEMENTATION OF RECOMMENDATIONS
OF BIRLA COMMITTEE

BY INTRODUCTION OF CLAUSE 49 IN THE LISTING AGREEMENT WITH

STOCK EXCHANGES
PROVISIONS OF CLAUSE 49
COMPOSITION OF BOARD - IN CASE OF FULL TIME CHAIRMAN, 50%
NON-EXECUTIVE DIRECTORS AND 50% EXECUTIVE DIRECTORS
CONSTITUTION OF AUDIT COMMITTEE WITH 3 INDEPENDENT
DIRECTORS WITH CHAIRMAN HAVING SOUND FINANCIAL BACKGROUND.
FINANCE DIRECTOR AND INTERNAL AUDIT HEAD TO BE SPECIAL INVITEES
AND MINIMUM 3 MEETINGS TO BE CONVENED.

RESPONSIBLE FOR REVIEW OF FINANCIAL PERFORMANCE 0N HALF

YEARLY/ANNUALLY BASIS; APPOINTMENT/ REMOVAL/REMUNERATION OF
AUDITORS; REVIEW OF INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

CLAUSE 49 REQUIREMENTS

REMUNERATION OF DIRECTORS REMUNERATION OF NONEXECUTIVE DIRECTORS TO BE DECIDED BY THE BOARD. DETAILS

OF REMUNERATION PACKAGE, STOCK OPTIONS, PERFORMANCE
INCENTIVES OF DIRECTORS TO BE DISCLOSED

BOARD PROCEDURES ATLEAST 4 MEETINGS IN A YEAR. DIRECTOR

NOT TO BE MEMBER OF MORE THAN 10 COMMITTEES AND
CHAIRMAN OF MORE THAN 5 COMMITTEES ACROSS ALL COMPANIES

MANAGEMENT DISCUSSION & ANALYSIS

INCLUDE:

REPORT SHOULD

INDUSTRY STRUCTURE & DEVELOPMENTS

OPPORTUNITIES & THREATS

SEGMENT WISE OR PRODUCT WISE PERFORMANCE

CLAUSE 49 REQUIREMENTS

MANAGEMENT DISCUSSION & ANALYSIS REPORT

INCLUDE:

TO

OUTLOOK

RISKS & CONCERNS

INTERNAL CONTROL SYSTEMS & ITS ADEQUACY

DISCUSSION ON FINANCIAL PERFORMANCE

DISCLOSURE BY DIRECTORS ON MATERIAL FINANCIAL AND

COMMERCIAL TRANSACTIONS WITH THE COMPANY

SHAREHOLDERS INFORMATION - BRIEF RESUME OF NEW/REAPPOINTED DIRECTORS, QUARTERLY RESULTS TO BE SUBMITTED

TO STOCK EXCHANGES AND TO BE PLACED ON WEB-SITE,
PRESENTATION TO ANALYSTS

CLAUSE 49 REQUIREMENTS
SHAREHOLDERS/INVESTORS
GRIEVANCE
COMMITTEE UNDER THE CHAIRMANSHIP OF
INDEPENDENT
DIRECTOR.
MINIMUM
2
MEETINGS IN A YEAR
REPORT ON CORPORATE GOVERNANCE AND
CERTIFICATE
FROM
AUDITORS
ON
COMPLIANCE
OF
PROVISIONS
OF
CORPORATE GOVERNANCE AS PER CLAUSE
49 IN THE LISTING AGREEMENT

RECENT DEVELOPMENTS

COMMITTEE
HEADED
BY
SHRI
NARESH
CHANDRA
CONSTITUTED IN AUGUST 2002 TO EXAMINE CORPORATE
AUDIT, ROLE OF AUDITORS, RELATIONSHIP OF COMPANY &
AUDITOR

RECOMMENDATION OF NARESH CHANDRA COMMITTEE:

RECOMMENDED A LIST OF DISQUALIFICATIONS FOR AUDIT

ASSIGNMENTS LIKE DIRECT RELATIONSHIP WITH COMPANY, ANY
BUSINESS RELATIONSHIP WITH CLIENT, PERSONAL RELATIONSHIP
WITH DIRECTOR

AUDIT FIRMS NOT TO PROVIDE SERVICES SUCH AS ACCOUNTING,

INTERNAL AUDIT ASSIGNMENTS ETC. TO AUDIT CLIENTS

AUDITOR TO DISCLOSE CONTINGENT LIABILITIES & HIGHLIGHT

SIGNIFICANT ACCOUNTING POLICIES

RECENT DEVELOPMENTS

RECOMMENDATION OF NARESH CHANDRA COMMITTEE:

AUDIT COMMITTEE TO BE FIRST POINT OF REFERENCE FOR

APPOINTMENT OF AUDITORS\

CEO & CFO OF LISTED COMPANY TO CERTIFY ON FAIRNESS,

CORRECTNESS OF ANNUAL AUDITED ACCOUNTS

REDEFINITION OF INDEPENDENT DIRECTORS DOES NOT HAVE ANY

MATERIAL, PECUNIARY RELATIONSHIP OR TRANSACTION WITH THE
COMPANY

COMPOSITION OF BOARD OF DIRECTORS

STATUTORY LIMIT ON THE

DIRECTORS TO BE REVIEWED

RECOMMENDATIONS
HAVE
(AMENDMENT) BILL, 2003

SITTING
FORMED

FEE
PART

TO

NON-EXECUTIVE
OF

COMPANIES

RECENT DEVELOPMENTS

SEBI CONSTITUTED A COMMITTEE HEADED BY SHRI N. R.

NARAYANA MURTHY TO REVIEW EXISTING CODE OF CORPORATE
GOVERNANCE

RECOMMENDATIONS:

STRENGHTENING THE RESPONSIBILITIES OF AUDIT COMMITTEE

IMPROVING QUALITY OF FINANCIAL DISCLOSURES

UTILISATION OF PROCEEDS FROM IPO

TO ASSESS & DISCLOSE BUSINESS RISKS

FORMAL CODE OF CONDUCT FOR BOARD

WHISTLE BLOWER POLICY TO BE PALCE IN A COMPANY PROVIDING

FREEDOM TO APPROACH THE AUDIT COMMITTEE

SUBSIDIARIES TO BE REVIEWED BY AUDIT COMMITTEE OF HOLDING

COMPANY

CORPORATE GOVERNANCE ULTIMATE OBJECTIVE

TO ATTAIN HIGHEST STANDARD OF
PROCEDURES AND PRACTICES FOLLOWED
BY THE CORPORATE WORLD SO AS TO
HAVE TRANSPARENCY IN ITS FUNCTIONING
WITH AN ULTIMATE AIM TO MAXIMISE THE
VALUE OF VARIOUS STAKEHOLDERS.

Disney vs C0mcast
Walt Disneys board of directors
unanimously rejected Comcasts $60bn
hostile offer and
backed Michael Eisner, its chairman
and chief executive, after concluding
that the cable operators all-share
offer undervalued the iconic media group.

Disney case
Comcast launched a hostile takeover bid for the
Walt Disney Company. Comcast took
advantage of a particular weak point in
Disney history. Disneys most important
business partner, Pixar, abandoned it. At the
end of last year, two board members, Roy
Disney and Stanley Gold, resigned and
started a campaign to oust Michael Eisner,
Disneys boss.

Bad Corporate Governance?

Disney: Under Disneys current management, the
groups profits are now a third lower than they
were in 1998, and its share price is at the level it
was in 1997. In his first 13 years in charge Mr.
Eisner raised revenues from $1.65bn to $22bn,

and market value from $2bn to $67bn.

Comcast: After buying AT&T Broadband,
Comcast is considered to be Americas largest
and best-run cable operator with 21m cable
subscribers.

Disney
A Perfect, brilliant combination?
The biggest vertically-integrated entertainment giant.
With a market capitalization of over $120bn,
compared with Time Warners current $78bn.
Cost savings could be $300-500m a year, bringing a
total cash-flow boost from the merger of as much as
$1bn annually.
Since Comcast launched its bid, Disney has been
named a possible partner or target for several
groups, including Microsoft, Barry Dillers
InterActiveCorp and Viacom.

CG in Wipro
Board Composition

8 Directors including 6 non-executive Independent Directors

Independent Director criteria
Board Membership criteria
BoD take care of selecting & evaluating CEOs, other
Directors, Auditors and reviewing & monitoring company
plans, actions
Mix and Proportion of Independent Directors
Selection of new Directors
Tenure and Compensation
No limitation on other Board services
New Director orientation

CG in Wipro

Board Meetings
Scheduling and place of Meetings
Agenda for meetings
Advance distribution of materials
Attendance at meetings
Fees and allowance for the meetings
Independent meetings of the Independent Directors

Board Committees
Audit Committee
Compensation & Benefits Committee
Nominating and Corporate Governance Committee
Shareholders/Investors Grievance and Administrative Committee

CG in ONGC

Board Of Directors
16 Directors comprising of 7 EDs including Chairman & MD (with
one vacancy) and 9 Non-EDs (3 Part-time Official Directors, 1
Director representing the subsidiary and 5 others)
Board Procedure
Strategic and business plans & policies
Annual operating and capital budgets
Investment and exposure limits
Compliance with statutory/regulatory and review of major legal and
contractual issues
Adoption of quarterly/half-yearly & annual provisional and audited
financial results
Transaction pertaining to capital purchase/disposal assets, major
provisions and write-off

CG in OnGC
Review of Management
Performance review and succession planning
Board performance review
Performance review of CEOs, Directors

Management Responsibilities

Financial Statements and Disclosures

Strategic planning
Annual Operating Plans and Budgets
Effective Management and Organizational Structure
Internals Controls and Procedures
Disclosure Controls and Procedures

CG in ONGC
Committees Of The Board

AUDIT & ETHICS COMMITTEE

REMUNERATION COMMITTEE
SHAREHOLDERS'/INVESTORS' GRIEVANCE COMMITTEE
HUMAN RESOURCE MANAGEMENT COMMITTEE
PROJECT APPRAISAL COMMITTEE
SHARE TRANSFER COMMITTEE
HEALTH, SAFETY & ENVIRONMENT COMMITTEE
POLICY & PLANNING COMMITTEE

MEDIA AND CSR

HOW MEDIA CAN PLAY A ROLE IN CG

Can drive politicians to introduce corporate law reforms or
enforce corporate laws in the belief that inaction would
hurt their future political careers.
Media attention could affect reputation through the
standard channel that most economic models emphasize.
Media attention affects not only managers and board
members reputations in the eyes of shareholders and
future employers, but media attention affects their
reputation in the eyes of society at large

Standard Framework (e.g. IBM)

Environmental policy and management system
The Environmental Master Plan of IBM
Policies apply across its Suppliers, Contractors and even
many of its Partners

Compliance to quality standards

IBM, first company to get single ISO 14001

Material use and management of wastes

IBM re-uses/recycles or chemically treats hazardous wastes

Energy use and energy management

IBM saved 390 M kwhr of electricity, 2.2 M gallons of Oil and
reduced emission of CO2 by 0.22 M Tons

THANK YOU