Corporates And Social Responsibility - K N Ajith

Corporates & Social Responsibility

Corporates & Social Responsibility

K.N.Ajith

Corporates and Social Responsibility ISBN 978-81-8465-225-3 Copyright © K.N.Ajith Author’s email:[email protected] Published by: eeswaar books Plot 26, 2nd Cross Street (Appar Street), Kamakodi Nagar, Valasarawakkam, Chennai 600087. email: [email protected] Tel: 044-2486 6163 First published in 2011 All rights reserved. No part of this book shall be used in any form without the written permission of the publisher. Cover design: K.Visesh Printed at: Sterling Prints & Conversions 710, Anna Salai, Nandanam, Chennai – 600 035 Price : ` 150 $ 20 iv

FOREWORD Corporate dominance of global trade is neither new nor recent. Students of India’s history know that the East India Company was indeed a global trading corporation, chartered in December 1600 by Queen Elizabeth I to expand colonial markets. The Company quickly established military and administrative control over territories in India to dominate trade, especially in opium, tea, cotton, silk, and spices. In fact, English imperialism in India began as a form of corporate colonialism that lasted for 100 years following the East India Company’s victory in the Battle of Plassey in 1757. The Government of India Act of 1858 established the British Raj as the English monarchy’s surrogate to control colonial trade across the Indian subcontinent. The Dutch East India Company was another megacorporation that traded in spices with Asia and colonized Indonesia and parts of Africa. In fact, it established the Cape Colony in South Africa as early as 1652. To be sure, these mega-corporations were the architects of colonialism and all the v

suffering that accompanied it in occupied countries. Parallels exist with US corporations in Central America in the 19th century, in examples such as the United Fruit Company in Guatemala, where repressive military dictatorships emerged and partnered with the US military to serve corporate interests. The South Manchurian Railway Company did the same for Japanese imperialism in China. As the great Chilean Poet Pablo Neruda wrote: United Fruit Co. When the trumpet sounded everything was prepared on earth, and Jehovah gave the world to Coca-Cola Inc., Anaconda, Ford Motors, and other corporations. The United Fruit Company reserved for itself the most juicy piece, the central coast of my world, the delicate waist of America. It rebaptized these countries Banana Republics …

General Smedley Butler (1881-1940) of the US Marines, a two-time winner of the Congressional Medal of Honor, and author of the famous book vi

War is Racket (1935), in a speech in 1933, described himself as a... high-class muscle man for big business, for Wall Street and the bankers. … I helped make Mexico safe for American oil interests in 1914 and Haiti and Cuba decent places for the National City Bank boys. I helped purify Nicaragua for the International banking house of Brown Brothers in 1909-1012. In China I helped Standard Oil operate unmolested.

Sadly, very little has changed to this day. In recent years John Perkins, a global corporate insider and an economist by training, wrote two confessional autobiographies to assuage his guilt. In The Confessions of an Economic Hit Man (2005) and The Secret History of the American Empire: The Truth about Economic Hit Men, Jackals, and How to Change the World (2008) Perkins shows how billions of dollars of wealth is transferred from poor countries using deceptive tools of economic forecasting, predatory lending and unending debt obligations, bloated corporate contracts, bribery, pimping, assassinations, and when those fail, even military interventions. vii

Corporations were also charted by states, for a limited time to serve the common good for a specific purpose, such as building a rail road or a bridge, and once this was done, those corporations were dissolved. In the US the Santa Clara County v. Southern Pacific Railroad decision bestowed on corporations rights of persons (life, liberty, property, and speedy trial by jury, among others) and freedoms (speech, press, assembly, religion and others) guaranteed in the first ten amendments (known as the Bill of Rights) to the US Constitution. Those permitted corporations to enjoy all the rights of persons without either the responsibilities or the consequences expected of actual persons. When you apply standards of human behavior to corporations, as the award-winning documentary, The Corporation, does through case analysis of criminally pathological corporate behavior and applying the criteria, as psychologists and psychiatrists do, from Diagnostic and Statistical Manual of Mental Disorders (DSM), conclude that corporations would be unquestionably diagnosed as psychopaths, if they were persons. viii

Corporations are amoral legal entities. Their primary function is not to produce goods or services for consumers. Most importantly, they are legally obligated to maximize returns for their shareholders. In fact, the notion of social responsibility is not a part of the DNA of corporate structures. Occasionally, programs of social responsibility are put forth as a public relation ploy to deal with growing public resentment. From time to time, people had to intervene to rein in the corporations in from their exploitative practices through legislation to control their powers, such as the break-up of Standard Oil following passage of the Sherman Anti-trust Act in the US. There is a movement to abolish corporate personhood and return to a time when they were mere legal instruments to serve the public good. Yet, if we look back at history, the notion of corporate social responsibility appears to be an oxymoron. In this book, Ajith , after conducting a survey of corporate executives in Chennai, gives a glimpse into how these functionaries view CSR. His findings make clear that there is very little understanding of CSR and imply that CSR is still ix

viewed in traditional terms of providing education and health care. While those services may earn the goodwill of people in their communities, they are also largely self-serving. Although such CSR programs may provide companies with a healthy and educated workforce, they also serve as a public relations strategy to bolster the companies’ image. Capitalists like Warren Buffett realize the imminent political, economic, and ecological dangers of accumulating unlimited wealth in few hands. They have much to lose when there is an apocalyptic collapse. The recent global economic meltdown, barely rescued by the U.S. tax-payer bailout of giant corporations like AIG , Solomon Brothers, Citibank, Bank of America and huge mortgage companies like Freddie Mac and Fannie Mae, was a clear indication of the extent of economic risk. Capitalism is unsustainable economically if it impoverishes the working class that forms the bulk of its consumers. When it impoverishes large sections of the population, as Ajith observes about India, capitalism inevitably leads to political turmoil. x

The rise of politically destabilizing Naxals in rural areas of 22 states in India, and the recent electoral victory of the Maoists in the adjoining country of Nepal after a protracted armed struggle, have not escaped the attention of some shrewd capitalists and perceptive politicians . The question is whether 0.2 to 2 per cent of money that is recommended by Karmayog for CSR is adequate. I am afraid that the answer is definitely no. Nation states do redistribute wealth, often to those who control it. In India, corruption has been a longlasting practice of controlling the nation state. Obviously, the poor who form the majority do not have the means either to control the nation state or to use it as a means of redistributing wealth in its favor. Finally, can mother Earth—Bhoodevi Laxmi—bear an unrelenting assault on her capacity for capitalist accumulation that knows no limits? The severe sickness and fever—global warming, that the Earth Goddess is suffering is alarming, and she begs us to heal it. The CSR initiative in India is certainly a response that parallels Kyoto and other feeble protocols by the nations of the world. We, indeed, xi

are consuming ourselves out of existence, a paradox that calls to mind a Zen Buddhist meditation imagery of a snake coiled in a circle beginning to eat its tail in four quadrants of a window; in the second, it had eaten a fourth of its length, in the third, three fourths, and the last quadrant, was blank—there was no snake. That picture did not make any sense to me until I read about how we are destroying the planet in pursuit of insatiable profits and consumption. Certainly, there is much wisdom in the nursery story I remember about the greedy farmer who killed the goose that laid golden eggs. Given the environmental degradation and enormous poverty that still victimizes the majority of the population in India, as author Ajith urges, CSR has to emerge beyond its current charitable framework and look toward how corporations can change their structure to reduce environmental degradation, growing inequalities, poverty, and hunger. Paradoxical as this task is given the logic of capitalist accumulation, there is no escaping it. We will need to set up corporations that are legally bound to improve the quality of air, water, food, xii

shelter and quality of life for all or else we will be speeding toward an apocalyptic doom—a shamefully short evolutionary life for a species that makes scriptural claims to be the crown of creation or— as in the ancient Hindu Advaita tradition— Aham Brahmasmi.

Dr.Henry J. D’Souza, Professor Grace Abbott School of Social Work University of Nebraska at Omaha Omaha, Nebraska, 68182 USA

xiii

AUTHOR’S NOTE Ethics in corporate governance; corruption, scams and black money which plunder public resources; and deficit in governance by the central and state governments were in the centre stage of public scrutiny in 2010. Vigilant press and electronic media have incessantly been bringing into public domain vital issues, and campaigning vigorously for justice and equity despite being criticized often for “trial by media”. Many business leaders and persons of eminence have expressed their apprehension about the possible negative impact on India’s growth story leaving behind millions of Indians at the bottom of the economic pyramid. For instance, child mortality in India due to malnutrition is greater than in sub-saharan Africa. Two key entitlements of the people are education and health care, both of which are not within the reach of the large proportion of the population. The State appears to prefer the privatization and PPP (public private partnership) modes. Prof.Amartya Sen cautions that “premature privatization of the education and health sectors xiv

has the effect of generating both inefficiency and inequality”. Corporate social responsibility initiatives , therefore, are crucial for sustainable social development. As the great scientist Albert Einstein observed, “it is everyman’s obligation to put back into the world at least the equivalent of what he takes out of it”. Corporate social responsibility has become an integral element of the business lingua. In a short span of one decade, CSR has become high on the agenda of any assessment of corporate performance. The evolution of sustainable corporate social responsibility from unstructured corporate philanthropy has been demonstrated by the contribution of many Indian companies embracing the well-being of a wide spectrum of stakeholders. At the same time, many companies are indifferent to their mandatory and moral responsibilities towards society and the environment. As part of my professional education, I was placed in a child care institution for practical training which is normally unconventional for a management oriented education. This phase of my training xv

helped me acquire values, skills and attitude towards working with the disadvantaged. Subsequently, I joined a corporate group with a strong social orientation as a management trainee. As I grew up in the profession, the various experiences motivated me to undertake a research study on CSR. On the advice of my HR colleagues, I am bringing this out as a book, which, I am aware, is only a small addition to the field of CSR research. During the various stages of my research study and bringing out this book, there were well wishers who helped and encouraged me. I am grateful to Dr.K.Balasankaran Nair, Professor of Sociology, Madurai-Kamaraj University, for his guidance during this research. The executives, who were selected for the study and the companies were very co-operative. I express my deep sense of gratitude to them. It is a privilege that Prof. Henry D’Souza has written the Foreword. A well-known social analyst and academic, Prof.D’Souza spared time to read the text of my beginning attempt and to offer useful comments. He has always been my well-wisher xvi

and I am deeply touched by his support. My father Dr.T.K.Nair has been my continuous source of strength and motivation that enabled me to complete the research project and this book. My sister Minii worked hard in collecting substantial information for writing this book. She also did the strenuous type-setting of the manuscript. I am indebted to her. I owe a great deal to my wife Deepti and our son Aditya who have been bearing the brunt of my long hours of work patiently. My mother Thankam has always been a gentle motivator and I am beholden to her.

Chennai February, 2011

K.N.Ajith

xvii

xviii

CONTENTS Foreword

v

Author’s Note

xiv

Corporate Social Responsibility

1

The Setting and the Methodology

24

Corporate Executives and

42

Their Perceptions CSR and A Just Social Order

83

Bibliography

117

xix

1 CORPORATE SOCIAL RESPONSIBILITY

SOCIETY AND BUSINESS A growing global population needs to be fed, clothed, housed, educated, protected against diseases and otherwise supported. It is difficult for the affluent to imagine the widespread poverty and squalor found in numerous countries. Life span is short, diseases rampant and malnutrition a constant threat for millions of people in many countries. The majority of the people in the world live much closer to the margin of existence than those in the advanced nations. These people look to business for help in boosting their living standards. Involvement by business would help solve difficult social problems, thus creating a better quality of life. Business provides equal opportunity through jobs and as a result a multiplier effect may occur to improve other areas of life also. Business also benefits from a better social environment. The firm that is most responsive to

2 / Corporates & Social Responsibility

improvement of a community’s quality of life will as a result have a better community in which to conduct its business. This multiplier effect is illustrated below (Davis and Frederick, 1984). Social Needs

Business Response

Social Benefits

Secondary Benefits

Better Quality of Life

Business and society, taken together, consist of an interactive system. Each needs the other. Each can influence the other. They are intertwined so completely that an action taken by one will inevitably affect the other. The boundary line between the two is blurred and indistinct. Business is part of society, and society penetrates far and

Corporates & Social Responsibility / 3

often into business. Business is involved with society in two basic ways. Its primary relationship is economic and arises out of producing goods and services. A secondary relationship with society occurs when these economic activities create social impacts such as pollution or industrial accidents. These primary and secondary relationships make up an interactive model of business and society (Davis and Frederick, 1984). ORIGIN OF CORPORATE SOCIAL RESPONSIBILITY (CSR) Charity has been an integral part of the Indian social tradition motivated by both religious and altruistic considerations. Hindus worship Goddess Lakshmi, the Goddess of Fortune, who is also believed to be the Mother of the Universe. The wealthy, who are blessed with wealth by the Goddess Lakshmi, are expected to share their wealth with the needy. This is the path of dharma. The trading communities in India have been traditionally charitably disposed. Rich business families built temples, dharmasalas with food and shelter for pilgrims in many religious sites, and

4 / Corporates & Social Responsibility

orphanages for the indigent. The Birlas, for example, are known for their temples in many cities. The richest deity Lord Venkateswara in Tirupathi receives offerings every day in the form of gold, jewellery, diamonds, platinum and huge sums of cash from business groups and individuals. The offerings are utilized for a variety of educational, social and other humanitarian causes. Charitable contributions with religious motive by business families, however, cannot be considered corporate social responsibility. Sundar (2000), philanthropy researcher, traces the historical evolution of corporate citizenship from merchant charity. Merchant charity has been in existence in India even before the advent of industrial revolution and it has been largely a story of family business groups. CSR, as is understood now, was pioneered by the Tatas. Jamsetji Nusserwanji Tata not only founded the Tata Steel, but also created the city of Jamshedpur that created a niche for itself as a model township. Established in 1907, Tata Steel introduced the eight - hour work day in 1912, and a provident fund in 1920 for employees’ social security. Prestigious

Corporates & Social Responsibility / 5

academic institutions like the Indian Institute of Social Sciences and the Tata Institute of Social Sciences are the creations of the Tatas. During the Independence movement, Mahatma Gandhi’s philosophy on trusteeship became popular: Supposing I have come by a fair amount of wealth - either by way of legacy, or by means of trade and industry - I must know that all the wealth does not belong to me; what belongs to me is the right to an honourable livelihood, no better than that enjoyed by millions of others. The rest of my wealth belongs to the community and must be used for the welfare of the community.

Gandhiji’s influence prompted various Indian companies to play active roles in nation building and promoting socio-economic development during the twentieth century through donations, community investments in trusts, and provision of essential services such as schools, infirmaries, etc. Robert Owen (1771-1858), most probably, is the pioneer of CSR as it is understood now. Born in Wales, Owen demonstrated at New Lanark Cotton Spinning Mills (Scotland) management policies

6 / Corporates & Social Responsibility

that are recognized as precursors of the modern theories of human resources management and ethical business practices. Under the leadership of Robert Owen, one of the founders of socialism and co-operative movement, the cotton mills and the village of New Lanark became a model community. Creation of a better society for all was the driving ambition of Robert Owen. In the United States, the idea of corporate social responsibility appeared around the turn of the twentieth century. Corporations came under attack for being too big, too powerful, and guilty of antisocial and anticompetitive practices. But some of the wealthier business leaders like steelmaker Andrew Carnegie became great philanthropists who gave much of their wealth to educational and charitable institutions. The king of steel Andrew Carnegie (1835-1919), one of the richest entrepreneurs of his time, sold his assets and gave away his enormous fortune to educational, scientific and cultural institutions. The famous Carnegie Foundation was founded in 1905. Automaker Henry Ford (1863-1947) developed paternalistic programmes to support the recreational and health needs of the employees of

Corporates & Social Responsibility / 7

Ford Company. Henry Ford and his son established in 1936 the Ford Foundation, which is a philanthropic institution for advancing human welfare in the world. As a result of the early ideas and action, two broad principles emerged. These principles have shaped business thinking about social responsibility during the twentieth century and are the foundation stones for the modern idea of corporate social responsibility (Post, et al, 1994). The first is the charity principle, the idea that the wealthier members of society should be charitable towards those less fortunate. It is a very ancient notion. Royalty through the ages has been expected to provide for the poor. The same is true of those with vast holdings of property from feudal times to the present. When wealthy industrialists reached out to help others, they were accepting some measure of responsibility for improving the conditions of life in their communities. Before long, the community needs outspaced the riches of even the wealthiest persons and families. When that happened, beginning in the 1920s, much of the charitable load was taken on by business firms

8 / Corporates & Social Responsibility

themselves rather than by the owners alone. The symbol of this shift from individual philanthropy to corporate philanthropy was the community chest movement in the 1920s in the United States. The co-operative organization of citizens and social welfare agencies, also known as the United Fund, took the name community chests and councils in 1927 and the present name is United Way. The stewardship principle is the second principle. Many corporate executives see themselves as stewards, who act in the interests of the general public. Although their companies are privately owned and they try to make profits for the stockholders, business leaders who follow the stewardship principle believe that they have an obligation to see that those who are in need benefit from the company’s actions. According to this view, corporate executives have been placed in a position of public trust. They control vast resources whose use can affect people in fundamental ways. Because they exercise this kind of crucial influence, they have a responsibility to use those resources in ways that are good not just

Corporates & Social Responsibility / 9

for the stockholders alone, but also for the society in general. In this way, they have become stewards for society. As such, they are expected to act with a special degree of social responsibility in making business decisions. DEFINITIONS Social orientation of corporate organizations is an evolving ideology. It is also known as corporate citizenship. Three concepts arose about the social performance of companies since the beginning of the twentieth century. During the 1950s and 1960s, the concept of corporate social responsibility became popular. The concept of corporate social responsiveness emerged during the early 1970s followed by the concept of social rectitude during the mid-1970s (Frederick, 1987). All these concepts now exist side by side. Corporate social responsibility (CSR) is the widely popular concept globally. Corporate social responsibility defies an objective definition. Definition of CSR is based on the general social expectations and the ideological stance of those who define. Carroll (1991) explains

10 / Corporates & Social Responsibility

CSR through the “pyramid of social responsibility” with four stages: economic, legal, ethical and philanthropic. Economic responsibility expects business to perform in such a manner that it maximizes earning per share and remains as profitable as possible. The legal responsibility demands that the conduct of business should be in conformity with the laws, and the national, state and local regulations as a law abiding corporate citizen. The ethical responsibility is adherence to normative rules, justice and fairness, which may not have been codified as law, but are expected by society. The philanthropic responsibility includes being a good corporate citizen such that the business gives back to society and the various stakeholders by undertaking activities and programmes that lead to human welfare. But philanthropy is the discretionary function of business. Holme and Watts define corporate social responsibility as the “continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well

Corporates & Social Responsibility / 11

as of the local community and society at large”. CSR to Ward and Fox (2002) is environmental, social and human rights based impacts and initiatives of companies. Researchers have found that companies respond to external social change in different ways. Post (1980) categorizes these ways into three approaches: (a) an adaptive strategy, (b) a proactive strategy, and (c) an interactive strategy. The first strategy is usually adopted after some significant social change is already under way. The firm then tries to adapt to a change in its environment that it may not have anticipated. Often, company practices will be modified only after strong pressures are applied. Proactive companies are a step ahead of those that merely adapt in a reactive way, because they understand the need to “get on top” of the changes that are occurring in their environment. Such companies try to manipulate the environment in ways that will be to their own advantage; and these steps may or may not be in the broader public interest. When a company is able to anticipate environmental change and blend its own goals with those of the

12 / Corporates & Social Responsibility

public, it has adopted an interactive strategy. An interactive strategy promotes harmonious relations between a firm and the public by reducing the gap between public expectations and business performance. Post concludes that in the long run an interactive strategy will bring greater, more lasting benefits for both business and society. Any organization and executive must seek to juggle multiple responsibilities as shown in the figure below (Post, et al, 1994). Business has challenges in managing its economic responsibilities to its stockholders, its legal requirements to societal laws and regulations, and its social responsibilities to various stakeholders. Although these obligations may conflict at times, a successful firm is one for which management finds ways to meet each of its critical responsibilities and develops strategies to enable these obligations to help each other. Legal Responsibility

Economic Responsibility

Social Responsibility

Corporates & Social Responsibility / 13

CSR: PROS AND CONS Though social responsibility of business can benefit both the business and stakeholders of the firm, there are arguments against corporate social responsibility. The views against corporate social responsibility are that it lowers profit, imposes unequal costs among competitors, introduces hidden costs passed on to stakeholders, and requires social skills which business may lack. Perhaps the most powerful argument against social involvement is the classical economic doctrine of profit maximization presented by Adam Smith in 1776, which has influenced economic thought since that time (Davis and Frederick, 1984). Adam Smith in his book “An Enquiry into the Nature and Causes of the Wealth of Nations” launched the economic doctrine of free enterprise. He is considered the father of economic liberalism. The publication of his book in 1776 coincided with the Declaration of Independence of America. The book provided the theoretical framework of free market. Accordingly, business is most socially responsible when it attends strictly to its economic interests and leaves other activities to other

14 / Corporates & Social Responsibility

institutions*. Nobel laureate Milton Friedman (1971), an outstanding economist and a major proponent of this point of view, asserts as follows. A corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society…. Insofar as his actions in accord with his “social responsibility” reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers’ money. Insofar as his actions lower the wages of some employees, he is spending their money.

The unbridled market forces of the capitalist economy do not deliver the goods in a fair manner according to John Maynard Keynes (1883 1946),considered the father of modern economics. He was critical of capitalism: “It is not intelligent. It is not beautiful. It is not virtuous”. ________________________ *A less known fact is that Adam Smith devoted a considerable part of his income to charitable activities.

Corporates & Social Responsibility / 15

Keynesian economics influenced the fiscal policies of many capitalist governments for the cause of social liberalism. According to Friedman’s line of reasoning, if executives use resources for social purpose, they are in effect spending other people’s money without those people having a voice in the decisions made. The strong counter argument is that business should be socially responsible because responsible actions are right for their own sake. As stated by Goodpaster and Mathews (1982), “A corporation can and should have a conscience. The language of ethics does have a place in the vocabulary of an organization”. It follows that if business insists on avoiding social responsibility, then other groups gradually may take its social power away. This idea may be expressed as the Iron Law of Responsibility. In algebraic terms the law states that for a long period of time, if Power/Responsibility is greater than one, social forces eventually will arise to reduce power until there is an approximation of Power/Responsibility = 1 (Davis and Blomstrom,1966). Economic profit is basic to business success.

16 / Corporates & Social Responsibility

Business uses economic resources, and if these resources are wasted, both society and business are adversely affected. In business, economic outputs have to exceed inputs. If they do not, business cannot make profit and society’s resources will be wasted. Business has to be both economically and socially productive. The business that achieves both the objectives is the one that will be immensely stronger and better accepted by society. The difficult task of business is to balance economic and social outputs in accordance with the priorities of each society in which it operates. The public expects business to be part of the community and to act responsibly therein. But this does not change the basic economic mission of business, because society still expects business to provide economic goods and services efficiently. What is happening is that new social constraints are being placed on business to assure that it responds to the needs and social goals of a changing society. Business is expected to respond to both market forces and social (non - market) forces because both of these affect business costs, revenues, profits, and long-run success (Weidenbaum, 1981). To summarize, there

Corporates & Social Responsibility / 17

is an increasing recognition that the bottom - line is no longer “Profits only”. People, Planet and Profit form the triple bottom-line which stresses the following: • The stakeholders in a business are not just the company’s shareholders • Sustainable development and economic sustainability • Analysis of corporate profile in conjunction with social prosperity. However, a company that undertakes activities aimed at communities whether they are philanthropic or social investment initiatives, but does not comply with business basics cannot be termed socially responsible (Srivastava and Venkateswaran, 2000). REVIEW OF STUDIES For a long time, the role of business in society has been debated in economic literature. But the origin of the modern debate on social responsibility was a book written by Howard Bowen and published in 1953. The book, entitled

18 / Corporates & Social Responsibility

“Social Responsibility of the Businessman”, was devoted fully to the theme of social responsibility and how it might apply to business. Bowen discussed the general economic and social benefits that might result from the recognition of broader social goals in business decisions. This book provided an excellent coverage of a subject that was very much undeveloped at that time. As the concept of corporate social responsibility is still at the initial stage, Indian studies on corporate social responsibility are limited in number and significantly, all the studies are conducted after 2000. The first major survey on CSR in India was carried out in 2001 by TERI Europe, the London affiliate of the Tata Energy Research Institute in New Delhi, covering 1212 individuals in five Indian cities – Chennai, Kolkata, Mumbai, New Delhi and Tiruppur (in Tamilnadu). The study is on the perceptions and expectations of workers, corporate executives and the general public towards business in India. The survey was the first of its kind to include workers in a survey on corporate responsibility, thereby providing a

Corporates & Social Responsibility / 19

broader cross-section of opinion. Five major findings emerged from this survey: • The information technology (IT) sector is regarded as the most responsible, and the alcohol and the tobacco industries as the least. • Public expectations of corporations on social and environmental matters are high and rising. • More trust is placed in the media and nongovernmental organizations (NGOs) than in business or trade unions, and global companies operating in India are rated low in terms of their trustworthiness. • Gender discrimination is a prominent issue in the workplace. • Workers and management have sharply diverging perceptions of labour conditions including child labour issues (Kumar, et al, 2001). Another survey was conducted in 2001 by the Centre for Social Markets (CSM), a UK and Indiabased non-profit organization dedicated to promoting the triple bottom-line. The survey report presents a broad brush picture of modern

20 / Corporates & Social Responsibility

Indian business’ perceptions of, and attitude towards corporate social and environmental responsibility. Data was collected online from a cross section of Indian industry. Companies were selected from the database of CSM and partner organizations, and an Indian business directory website (Indiamart.com). But the report does not indicate the sample size. The survey report states that when asked to rank the main factors driving the changing attitude towards CSR, the executives named increasing awareness and reputation. Also, over 80 per cent of the respondents feel that CSR is an important characteristic of business success. All respondents say that there is a definite link between corporate citizenship and corporate might. The government has been mentioned as a key barrier with unclear policies, bureaucracy, lack of proper monitoring, complicated tax system and poor infrastructure. The National Stock Exchange, in 2003, conducted a survey of 50 companies, out of which only 19 companies responded. Including the information from published sources of 11 companies, the survey report presents the findings of a total of

Corporates & Social Responsibility / 21

30 companies. Areas in which large proportions of the sample companies are active are education and training (80 per cent), healthcare (66 per cent), environment (60 per cent), welfare of the underprivileged sections of the society (57 per cent) and rural development (23 per cent). There are two surprising results, which emerge out of the above analysis, according to the authors of the report. • None of the companies have said that they are doing anything actively in the area of religion and spiritual development, while it is well known that many companies are doing a lot in this area. One probable reason for this could be that these activities are being undertaken by trusts formed specifically for the purpose, though under the umbrella of the group. • Only less than a half (46 per cent) of the companies in the sample have mentioned natural and other calamities as part of the area in which they are active. One would have probably expected all companies to be doing their bit in this area. The National Stock Exchange survey report cites

22 / Corporates & Social Responsibility

another survey of CSR practices in India conducted by CII, UNDP, British Council and Price Water Coopers in September-October 2002. Though the ambitious survey included 1000 small, medium and large companies, only 102 responded. The main findings are as follows. Passing philanthropy is no longer sufficient and many recognize that CSR would enhance long-term stakeholder value. Most companies do not have a systematic approach to CSR as well as implementation of CSR. Most companies lack comprehension of CSR and capacity to implement corporate social responsibility. The popular website Indian NGOs.com conducted a survey of 196 companies in 2003, and 58 per cent of the companies surveyed are involved in CSR initiatives. An increasing number of executives, particularly in the IT sector, have expressed the desire to “give back” something to the society, according to the survey. The survey has indicated that Indian companies are “aware and sensitive” of corporate social responsibility, but quite a few executives say that they do not know what it means. Also, some executives

Corporates & Social Responsibility / 23

express their reservations about the need for CSR. The issue that draws most support from Indian companies is health with 52 per cent of the companies surveyed saying that they support health related issues. Education follows next with 50 per cent, while 30 per cent of the companies support causes relating to the environment. The survey reveals that many companies have internal CSR policies for issues like disaster management, environment, disability and sexual harassment. The survey concludes that the major obstacles to the implementation of CSR in India are lack of awareness and conviction among the corporate managers. Studies on corporate social responsibility are at a nascent stage in India. This is a reflection of the state of CSR among the companies in India as cited in the TERI survey report. The report states that a 20-country public opinion survey carried out by the Toronto-based Environics International in 2001 has concluded that India ranks last in terms of the level of social responsibility demanded from companies.

24 / Corporates & Social Responsibility

2 THE SETTING AND THE METHODOLOGY CHENNAI AND CSR INITIATIVES Chennai, the first city of South India and capital of the state of Tamilnadu, owes its genesis to Andrew Cogan and Francis Day of John Company or the East India Company. They received a grant of 3 square miles of land, about 2 miles north of Santhome, from Venkatadri Nayak in August 1639 and established on it a “factory”, which was a trading post that grew into the seat of British power on the Coromandel Coast. The settlement founded over three and a half centuries ago was known by different names. In 1653, the settlement was named Madras, which was renamed Chennai in 1996. According to the 2001 census, the population of Chennai was 4.34 million and the area was 174 square kilometres. In December 2009, the government of Tamilnadu extended the boundaries of the city by annexing 42 local bodies (9 municipalities, 8 town panchayats and 25 village panchayats) with an estimated area of 430 square kilometres.

Corporates & Social Responsibility / 25

Chennai, the fourth largest city in India, has been growing as one of the most important industrial centres. It is called the Indian Detroit. Chennai is emerging as Asia’s automobile capital as it is the home for seven automajors out of the top twenty global automobile manufacturers. It also aims at becoming a global health hub. Chettiars and Brahmins are two communities that have contributed significantly for the economic development of Tamilnadu. Chettiar is a title, commonly used by people of south Indian origin. The linguistic origin of the word is derived from Dravidian usage. One theory is that the root word is etti that means “look up, jump up, or forward jerk and around simultaneously calling out to sell”. Chettiars are known for business acumen and benevolence to people in need. The community is also known cuisine. Many castes of different ethnic origins use the title chettiar today. The foremost in Tamilnadu are the Nattukottai chettiars or Nagarathars, who are ethnically Tamil and originated from the Nattukottai region. The Nagarathar community has nine clan temples. The Nagarathars first settled around the Ilayathankudi

26 / Corporates & Social Responsibility

clan temple after migrating from Cholanadu to Pandyanadu in the thirteenth century. AMM Murugappa Chettiar, the eldest son of Diwan Bahadur AM Murugappa Chettiar, is considered to be a leader among the industrialists who enabled the industrial advancement in South India after Independence. Prominent among the business groups in Tamilnadu are the Murugappa group and the TVS group. The Murugappa group has its origin in 1900, when Dewan Bahadur AM Murugappa Chettiar established a money-lending and banking business in Burma (now Myanmar) which then spread to Malaysia, Sri Lanka, Indonesia and Vietnam. In these 100-plus years, it has withstood enormous vicissitudes, including strategically moving its assets back to India and restarting from the scratch in the 1930s, before the Japanese invasion of Burma in World War II. The Murugappa group, headquartered in Chennai, is a major business conglomerate with interests in engineering, abrasives, sanitary ware, fertilizers, finance, insurance, cycles, sugar, farm inputs, plantations, bio-products, and nutraceuticals. It has

Corporates & Social Responsibility / 27

manufacturing units spread across many states in India. Started more than one hundred years ago as a small family-run business in indigenous financing, the Murugappa group is the first business group in Asia to have been awarded the “IMD Distinguished Family Business Award” by the Management Development Institute (IMD), Switzerland. East India Distilleries Parry (India) Limited, known as Parry’s, is the oldest British mercantile name surviving in Chennai and the second oldest in India. EID Parry traces its history to Thomas Parry, who established it in 1788. The junction where the business is located came to be known as Parry’s Corner, an important landmark of the geography of Chennai for more than three centuries. Dare House, the headquarters of the company at Parry’s Corner, was built in the late 1930s and named after a dynamic partner J.W. Dare. The company has survived many challenges and it has written a glorious chapter in Indian commercial history. In 1981, the Murugappa group acquired EID Parry. But the company retains its separate identity.

28 / Corporates & Social Responsibility

TVS group is another prominent business enterprise of Tamilnadu. T.V.Sundaram Iyengar, the founder of TV Sundaram Iyengar and Sons group of companies, was born in Thirukkurungudi, Tirunelveli district . He started his career as a lawyer, then moved to work for the Indian railways and later in a bank. He later quit his job and laid the foundation for the motor transport industry in south India when he first started a bus service in the city of Madurai in the year 1912. During the second World War, when Madras Presidency faced petrol scarcity, Sundaram Iyengar designed and produced the TVS gas plant. What started as a single man’s passion soon became the business of a family. TVS group is currently the largest automobile distribution company in India. The group operates in diverse fields like automotive component manufacturing, automotive dealership, electronics and finance. Sundaram Iyengar was also a staunch supporter of social reform movement. He got his daughter T.S. Soundaram, then a teenage widow, remarried under the auspices of Mahatma Gandhi. She became active in the Indian Independence movement. She, along with her husband, was the

Corporates & Social Responsibility / 29

force behind the Gandhigram Rural Institute, which is now a rural university. She was honoured with a postal stamp by the government of India. Many Tamilnadu-based companies are engaged in CSR activities. Health, education, vocational training and rural community development are the major areas of CSR. The community development projects generally promote self-help groups of women as key change agents. Srinivasan Services Trust and AMM Foundation are two prominent CSR models. Some companies are active in the welfare of the differently abled. Sakthi Masala and Cavinkare are two such companies. Sakthi Devi Charitable Trust, the social welfare arm of Sakthi Masala, runs a well-equipped medical centre for therapy and rehabilitation of special children. Sakthi Masala is a progressive employer of differently abled persons. AMM Foundation The Murugappa group of companies has been promoting social development in Tamilnadu by setting aside a portion of its annual profits. Nagarathar Chettiars have a tradition called mahemai, which is a practice of earmarking a

30 / Corporates & Social Responsibility

portion of the profits each year by families for the clan temple. The founder of the company set aside a large fund for charity to launch the AMM Charities Trust in 1953, which was later renamed AMM Foundation. The thrust areas of the Foundation are education, health and rural development. The Foundation runs four schools in and around Chennai, where about 9,000 boys and girls are given education till the senior secondary level. These schools are equipped with good libraries, advanced laboratories and play grounds. Meritorious students are given scholarships from primary school to postgraduate levels. The Foundation started the Murugappa Polytechnic in 1957. It is a government –aided polytechnic. The institution has a state- of- the art robotics and mechotronics laboratory. The government of India, the World Bank and the Swedish government assist the polytechnic. The polytechnic, under the project of Canada - India Institutional Co-operation, trains teachers in diverse areas like management principles, team building and human relations. The polytechnic collaborates

Corporates & Social Responsibility / 31

with two polytechnics in Singapore for a series of exchange programmes. The polytechnic is an ISO certified educational institution training around 1,000 students annually. The Foundation has set up four hospitals, one near Chennai and three outside the city. One of them, the Sir Ivan Stedford Hospital, situated in the industrial belt of Ambattur near Chennai, houses excellent facilities in specialized areas of medical care. Shri AMM Murugappa Chettiar Research Centre (MCRC) at Tharamani was founded in 1977. It is recognized by the Council for Scientific and Industrial Research, government of India. The centre comprises specialists from multidisciplinary backgrounds ranging from social sciences to molecular biology. The centre has given training to people including the nomads of the Kumaon Hills in Uttaranchal and the fishermen on the Coromandel coast in the fields of fodder, forestry and agriculture. The Foundation has adopted a number of villages where villagers have been encouraged to take up self-help schemes. The MCRC has developed high quality rafts for

32 / Corporates & Social Responsibility

de-weeding and insect control in the waterways of Chennai. The centre has also reclaimed agricultural land and used it for high density cultivation of casuarinas*, which is a source of livelihood for many people. The centre has trained rural women in the state to grow the spirulina algae, a good source of essential amino acid, vitamins, nutrients and other minerals in their own backyards on a commercial scale. The centre is also promoting solar energy, vermin composting, organic farming and the use of micro-organisms in paper making and natural dye extraction. All these measures have enabled the organization to earn the prestigious Jamnalal Bajaj Award for rural development. Tube Investments of India, the nucleus of the Murugappa group, identified as a trumpcard making the poor man’s vehicle, the bicycle, for a nascent nation in 1949. Another significant social contributon of Tube Investments of India is the promotion of traditional arts. Its subsidiary TI Cycles and India Foundation for the Arts jointly _______________________ * Casuarina is an Australian tree.

Corporates & Social Responsibility / 33

organize festivals to bring alive traditional forms of dance .The festivals “travel” to different states. Srinivasan Services Trust The Srinivasan Services Trust (SST) is an organization founded by Sundaram Clayton Ltd and TVS Motor Company. SST has been promoting community development programmes in Tamilnadu and Karnataka. Working through grass- root organizations, SST has active presence in 703 villages(as in May 2010). The specific activities are as follows: •

Self-help groups of women and income generation

•

Health: primary health care and promotion of sanitation

•

Education: 100 per cent enrolment in schools

•

Adult education of women

•

Environment: garbage collection from houses by SHGs. Degradable waste is converted into vermin –compost.

•

Infrastructure development such as roads,

34 / Corporates & Social Responsibility

drinking water facilities, sewage and sanitation, pre-school centres, schools, health centres and community buildings in partnership with government bodies and local communities. •

Motivating farmers to adopt modern agriculture practices.

•

Regular veterinary camps and awareness programmes to introduce modern livestock management practices

•

Rehabilitation in tsunami affected villages

•

Watershed development: micro-watershed programmees.

•

Culture and heritage: restoring 109 temples in Tamilnadu, Karnataka and Kerala.

Chennai Willingdon Corporate Foundation (CWCF), founded in 1990, is a body comprising many corporate groups.The Foundation came into being with the proceeds of the sale of the Lady Willingdon Nursing home to Sankara Nethralaya. CWCF has been funding many voluntary organizations engaged in health care, health research and education.

Corporates & Social Responsibility / 35

The Tamil Nadu government instituted in 2007 the CSR award under the auspices of the department of rural development and panchayati raj. Private companies, public sector undertakings and NGOs with a good record in the past five years would be eligible for the award. It is a “first of its kind initiative” among Indian states. The CSR award carries a cash award of Rs five lakh and a certificate to each company commending the CSR activities in different spheres including agriculture, education, women’s empowerment and renewable energy. RATIONALE OF THE STUDY Society counts on business for employment generation, much of the well-being of the community, the standard of living people enjoy, the tax base for municipal, state and national services, and many other needs. Business is one of the most powerful institutions in society. Its influence is felt throughout society in education, in government, in the market place, and even in the home. It moulds many social values. All these are shaped and guided by corporate executives and corporate leaders. A society’s well - being

36 / Corporates & Social Responsibility

depends largely on having a high and rising level of productivity. A society’s productivity depends on how efficiently it uses its resources. If the natural, human and capital resources are combined and managed effectively by business firms and executives, then society’s productivity is high. Corporate executives perform multiple functions. They direct an open system and operate in the boundary between an organization and its environment receiving inputs from both and, in turn, receiving outputs as change agent, facilitator and leader (Davis and Frederick, 1984). Input

Output O R G A N I Z A T I O N

E N V I R O N M E N T

Corporate Executives

Input

Output

One study in the United States concluded that only a relatively small number of top managers determine major social policies and practices of

Corporates & Social Responsibility / 37

corporations. These managers may be narrow and rigid in their views, with the result that their firms respond less creatively to social change. Or they may be insightful and sensitive to social needs, so that creative, constructive policies are developed (Sturdivant and Ginter, 1977). Socially responsive executives are more likely to modify their business policies and practices than those who discharge their responsibilities only in an economic context. Executives in socially responsible companies consider not only the interests of their core stakeholders but also the interests of all the stakeholders. Hence studies on the social orientation of corporate executives are a necessity. That is the rationale of the present study. RESEARCH METHODOLOGY Objectives of the Study •

To study the perceptions of corporate executives on corporate social responsibility and related issues.

•

To examine the major developmental issues

38 / Corporates & Social Responsibility

and their implications for corporate social responsibility initiatives. Sampling Design A two-stage sampling design was used for the study. At the first stage, companies were selected and at the second stage, corporate executives were selected from the sampled companies. Business World, a leading business magazine, conducts annual financial analysis of companies and ranks 500 biggest public limited companies, both listed and unlisted, in India. The Business World ranking published in the magazine dated 28th February 2005 was the source for preparation of the first stage sampling frame. Business World, in collaboration with the Centre for Monitoring Indian Economy, covered all public limited companies, which were statutorily required to file their annual returns with the Registrar of Companies. Out of the 500 companies, 26 were registered at Chennai, which constituted the sampling frame at the first stage. Out of the 26 companies, five were selected purposively for the study; three with a long

Corporates & Social Responsibility / 39

tradition belonging primarily to the manufacturing sector and two recently established belonging to the information technology sector. One of the two companies in the information technology sector expressed its inability, while the study was in progress, to spare the time of their executives. Thus the final sample had four companies. The sampling frame at the second stage comprised 902 executives in the four companies having designations from Assistant Manager to VicePresident, and a sample of around 100 executives was considered statistically sufficient and efficient. Hence it was decided to select around 11 per cent of the universe for the final sample. The human resource (HR) departments of the four companies advised against the selection of random samples because of the likelihood of no-response cases. Therefore the quota sampling method was preferred. Accordingly, around 11 per cent quotas were fixed for each of the companies and the persons for administering the questionnaires were identified by the HR departments. The total number identified by the HR departments was 102, out of which one did not respond due to heavy

40 / Corporates & Social Responsibility

professional commitments. Thus the final sample was 101. Table 1 Universe and Sample Designation

Universe Sample

Percentage of Representation

Assistant manager(AM)

406

44

10.8

Manager(M)

247

29

11.7

Senior manager(SM)

107

13

12.1

Deputy general manager (DGM)

63

7

11.1

General manager (GM)/ Vice- president (VP)

79

8

10.1

Total

902

101

11.2

Research Instruments Data for the study was collected from both primary and secondary sources. The primary data was collected from the sampled corporate executives using a structured questionnaire, which was mailed to them. The draft questionnaire was pre-tested on eight executives; two from each company and all of them strongly preferred a brief questionnaire because of their heavy workload. The HR departments also wanted a short questionnaire. The secondary data was collected from the annual reports and information from the websites of the companies.

Corporates & Social Responsibility / 41

Limitations Collection of data was a very time consuming task. Many reminders were needed to get the filled-in questionnaires from the corporate executives. Though a random sample of corporate executives was not possible because of valid circumstances, it is a limitation. However, that weakness was compensated to a great extent by the selection of an effective quota sample.

42 / Corporates & Social Responsibility

3 CORPORATE EXECUTIVES AND THEIR PERCEPTIONS The profile of the corporate executives selected for the study, and their perceptions of corporate social responsibility and related aspects are presented in detail in this chapter. PROFILE OF THE EXECUTIVES Recruitment and other human resource management practices in industrial and business establishments have been undergoing drastic changes and improvisations. In a highly competitive market economy, shortage of competent personnel and increasing attrition of human resources make it imperative for business organizations to recruit young graduates with attractive salary and perquisites, preferably through campus recruitment. Well-planned training programmes and challenging career growth opportunities are offered to the young entrants. Attracting talented young persons, identifying leadership potentials and developing future corporate leaders are visible in many companies.

Corporates & Social Responsibility / 43

Even family business houses have been becoming increasingly professionalized in their management styles. Therefore, the demographic profile of the executives in the corporate organizations is undergoing transition. In the sample selected for the study, slightly more than 50 per cent are below 35. Nearly one – third of the executives are in the age group 35-39, while less than one – fifth of the executives are in the older age group of 40 and above. As young executives are in a larger proportion in the companies than those in the higher age groups, the analysis of data has been attempted by dividing the executives into two Table 2 Executives by Age and Designation Age group

Designation

(Years)

AM

M

SM/DGM

GM/VP

Below 35

42 (95.5%)

5 (17.2%)

3 (15.0%)

1 (12.5%)

35-39

2 (4.5%)

21 (72.4%)

8 (40.0%)

2 (25.0%)

-

3 (10.3%)

9 (45.0%)

5 (62.5%)

44 (100%)

29 (100%)

20 (100%)

8 (100%)

40 and above N

strata: below 35, and 35 and above. In the analysis of data, executives in the 35 and above age group

44 / Corporates & Social Responsibility

are referred to as older instead of the term senior. The sociological definition of organization as group effort is most suited for a company. This group effort has been undergoing significant changes in structure and functions. The career growth opportunities in companies have been on the increase. The relationship patterns have been changing from “boss- subordinate” to a warm lateral relationship, often addressing each other by first name. The decision making process is being facilitated by shared inputs instead of mere vertical commands from top to bottom. Senior mangers today are mentors of younger executives. Some companies have introduced reverse mentoring programmes whereby younger employees teach older employees. Normally young recruits join as management trainees before being inducted as officers and then promoted as assistant managers. Assistant manager is the first level on the management ladder. Assistant managers and managers form the middle management, senior managers and deputy general managers are categorized as higher level management, and general managers and vice-

Corporates & Social Responsibility / 45

presidents are among the top management. In the earlier period, becoming a general manager was possible only after many years of service and most likely when the person is around fifty. But now, becoming a general manager is common in the thirties. The decision making process today, therefore, is influenced by younger management personnel. Almost all the assistant managers are below 35, while nine out of ten managers are below 40. Among the senior managers and deputy general managers, more than a half are less than 40. The top management categories of general managers and vice-presidents have nearly 40 per cent in the younger age cohort. OPINION ON FOCUS AREAS The major focus areas of the four companies are presented below: Company Focus Area

I

II

III

IV

Education/Vocational training









Health





-

-

Environment

-



-

-

Rural development







-

46 / Corporates & Social Responsibility

The executives were asked to mention the CSR focus areas of their companies. There are three significant features of the responses of the executives. a) There is confusion among many executives with regard to the focus areas of social orientation activities undertaken by their companies. All the four companies promote education and /or vocational training, while only about 75 per cent of the executives report correctly. All the executives of company I are aware of this, whereas the corresponding percentages of the executives in the other companies range from 65 to 69. Health is a focus area of companies I and II. At the same time, only 35 per cent of the executives in company II have knowledge of this fact. Significantly, all the executives in company I have information on this area of their company activity. Environment protection is a major concern of companies II and III. But only slightly more than 50 per cent of the executives are aware of this focus area. Rural development is a key focus area of three companies. But the responses of the executives are at variance. Only 17 per cent of the executives

Corporates & Social Responsibility / 47

in company III and 30 per cent of the executives in company II are aware of this. However, nearly two - thirds of the executives in company I are informed of their company’s rural development work. b) Often the executives refer to occasional financial or other support given by their companies for different causes, when they mention the different areas as focus areas, which actually they are not. c) Quite surprisingly, a significant number of executives in all the four companies ranging from 13 to 22 per cent report that their companies have “no specific” CSR programme, which indeed is a dark area of ignorance. KNOWLEDGE OF POLICY It is desirable that corporate social responsibility is part of the stated policies of corporate organizations to guide their business and social commitments. It is also equally desirable that these policies are made known to all the employees, particularly to the executives. Among the four

48 / Corporates & Social Responsibility

companies studied, Company IV does not have a well-specified CSR policy, probably due to the fact that the company has been striving hard to make profit and to establish itself as a viable corporate unit. But the other three companies have clear CSR policies. However, two out of every five executives interviewed do not know whether their organizations have CSR policies or not, while nearly one - third of the executives assert that their companies do not have such policies. It is surprising that in company III, more than 50 per cent of the executives fall in the “do not know” category. These do not appear to be encouraging findings. KNOWLEDGE OF DEPARTMENT At present there does not appear to have a separate department of corporate social responsibility in the companies in Chennai. Normally, the human resources department directly or otherwise coordinates the CSR programme. It is significant that one - fifth of the executives say that they do not have any knowledge of the department responsible for promoting CSR activities.

Corporates & Social Responsibility / 49

PERCEPTION OF CSR The common understanding of corporate social responsibility among the majority of the executives is “any socially useful activity”; 60 per cent have this opinion. A substantial proportion of the executives (22 per cent) report that ethical practices should be the prime focus of corporate social responsibility. Nearly a fifth of the executives (18 per cent) stress protection of environment as the key element of CSR. Socially useful services reported by the executives include the following: • Helping the needy sections to have a better standard of living • Providing basic underprivileged

necessities

to

the

• Contributions to social causes • Taking up challenging national service issues • Doing service, which would be of real value to the society • Participating in activities positively impacting the society

50 / Corporates & Social Responsibility

• Upliftment of society by responding to the needs of the communities in a systematic manner Executives, who advocate ethical practices, say that the companies should formulate and practise a code of conduct, and aim at achieving a vision for society. Ethical corporate governance is necessary to be responsible organizations. Looking after the welfare of stakeholders should only be through ethical means. By adhering to values and ethics, the companies would be able to make a difference to the quality of life of the people through their products and services. Executives, who want corporate social responsibility to focus on protection of the environment, express the following views. An industry should not cause damage to the environment and as a conscientious company, it should protect the immediate surroundings. It should contribute towards neighborhood and environment development. Companies, being an integral part of society, should accept the responsibility in creating a cleaner environment and in protecting heritage, culture and nature. There

Corporates & Social Responsibility / 51

should be a mutually symbiotic relationship between industry and environment, and causing damage to the environment intentionally or unintentionally is a violation of human rights. Though in a minority, the views of the executives on the environmental thrust are commendable. The reasons attributed by the executives to the need for corporate social responsibility are worth mentioning. Companies derive benefits from society in many ways. So accountability of a business organization is towards the society at large. Awareness and acceptance of this accountability should be the basis of corporate decision-making process. Many corporate decisions have a direct impact on the immediate as well as the larger interests of society. Business interests need to be combined with community welfare. Doing something for people around may help add to the bottom line of a company, but would not contribute to sustainable benefits to the community. GROWING AWARENESS OF CSR Corporate social responsibility has been gaining

52 / Corporates & Social Responsibility

wider acceptance among the companies in India. Even though the concept is understood in different ways, the corporate executives are aware of the growing awareness of CSR. Most of the executives (86 per cent) say that there is a growing awareness of corporate social responsibility. Opinion of 14 per cent of the executives that corporate social responsibility is not gaining increased recognition should be taken note of seriously as this group of executives is either ignorant of or indifferent to social realities. The major factors that are contributing to the greater awareness of CSR among the companies are as follows : a)

Competition in the market

b)

Rising domestic standards

c)

Growing international standards

d)

Public opinion

e)

Corporate reputation

f)

Group pressure

The executives selected for the study were asked to rank the factors in order of importance ranging

Corporates & Social Responsibility / 53

from a score of 1 for the least important to a score of 9 for the most important. The scores are grouped into three categories: low, moderate and high. Scores 1 to 3 fall in the low category, 4 to 6 fall under moderate category and 7 to 9 in the high category. The same method of rating and categorization is followed in the subsequent sections also. a)

Competition in the Market Table 3 Executives by Ranking of Competition in the Market

Age group

Ranking Low

Moderate

High

N

Below 35

20 (45.5%)

13 (29.5%)

11 (25.0%)

44

35 & above

22 (51.2%)

11 (25.6%)

10 (23.3%)

43

Total

42 (48.3%)

24 (27.6%)

21 (24.1%)

87

Fierce competition is the order of the day in the present market economy backed by imaginative advertisement campaigns, particularly in the electronic media, as part of the efforts to boost the sales of products and services. Companies sponsor sports, reality shows and various other competitions spending a substantial part of their

54 / Corporates & Social Responsibility

income to create a sustainable brand image in a highly competitive market. Yet nearly a half of the executives give a low rating to market competition as a factor driving to the increased awareness of corporate social responsibility. This factor is ranked high only by about a quarter of the executives, while slightly more than a fourth of the executives give moderate rating. This may be because of the assumption that competition is a natural feature of free market economy. The opinion pattern is almost similar among the younger and the older executives. b)

Domestic Standards Table 4 Executives by Ranking of Domestic Standards

Age group

Ranking Low

Moderate

High

N

Below 35

8 (18.2%)

21 (47.7%)

15 (34.1%)

44

35 & above

14 (32.6%)

18 (41.9%)

11 (25.6%)

43

Total

22 (25.3%)

39 (44.8%)

26 (29.9%)

87

Volume of sales of any product or service is directly related to the quality of the product or service. As the buyers have many options in the

Corporates & Social Responsibility / 55

market, domestic standards of products have been on the increase. The market of today has shifted from the sellers’ market to the buyers’ market. This shift has propelled the companies to give great attention to the constant improvement in the standards of products and services. Three out of every four corporate executives rate increase in domestic standards as a factor of greater awareness of corporate social responsibility, which includes thirty per cent giving high rating. There is a substantial difference between the two groups of younger and older executives in the rating. While 82 per cent of the younger executives give moderate or high rating, only about 68 per cent among the older executives give such a rating. c)

International Standards

Globalization of capital necessitates continuous upgradation in the standards of products and services. International Standards Organization and the Indian affiliate determine globally acceptable standards securing of which has almost become a necessity to gain acceptance of the quality of the products of companies. Not only the companies, but also hospitals, schools, and even police stations value certification of standards as

56 / Corporates & Social Responsibility

a mark of respectability. Most of the corporate executives (82 per cent) give moderate or high Table 5 Executives by Ranking of International Standards Age group

Ranking Low

Moderate

High

N

Below 35

7 (15.9%)

21 (47.7%)

16 (36.4%)

44

35 & above

9 (20.9%)

16 (37.2%)

18 (41.9%)

43

Total

16 (18.4%)

37 (42.5%)

34 (39.1%)

87

ranking to rising international standards as a factor of awareness of corporate social responsibility. The assessment is not at much variance between the younger and the older executives giving higher ranking to international standards. d)

Public Opinion

Public opinion influences all aspects and facets of society. Public opinion can make or mar the fortunes of companies. The recently witnessed protests throughout the country against GM seeds (Bt brinjal) demonstrate the power of public opinion. More than a half of the corporate executives quite naturally rate this factor of corporate social responsibility awareness high.

Corporates & Social Responsibility / 57

Table 6 Executives by Ranking of Public Opinion Age group

Ranking Low

Moderate

High

N

Below 35

1 (2.3%)

14 (31.8%)

29 (65.9%)

44

35 & above

4 (9.3%)

20 (46.5%)

19 (44.2%)

43

Total

5 (5.7%)

34 (39.1%)

48 (55.2%)

87

Age-wise, the difference in proportions between the younger and the older executives is as high as 22 per cent with about two - thirds of the younger executives giving high ranking. Nearly 40 per cent of the executives give moderate ranking to public opinion and the proportion of older executives rating so is substantially in excess of the proportion of younger executives. The percentage difference in ranking between those in the two age groups is significantly perceptible. A company’s reputation is vital for its existence. All levels of management as well as all employees are likely to be sensitive to the reputation of their company. Associating oneself with a reputed company is a matter of great prestige. A good company, which is also socially oriented, has

58 / Corporates & Social Responsibility

greater reputation and hence it is natural that most of the executives give high rating to this factor. e)

Company’s Reputation Table 7 Executives by Ranking of Company’s Reputation

Age group

Ranking Low

Moderate

High

N

Below 35

3 (6.8%)

9 (20 .5%)

32 (72.7%)

44

35 & above

-

5 (11.6%)

38 (88.4%)

43

Total

3 (3.4%)

14 (16.1%)

70 (80.5%)

87

The difference in percentages between the younger and the older executives is substantial. While 73 per cent of the executives in the below 35 age group give company’s reputation high ranking, 88 per cent of the executives above 35 are more sensitive to the reputation of the organization. This probably is because of the longer experience of the older executives. f)

Group Pressure

The Confederation of Indian Industry (CII) is an influential national level organization of Indian companies. In addition, there are chambers of

Corporates & Social Responsibility / 59

commerce in the states and they are combined into Associated Chambers of Commerce and Industry of India (ASSOCHAM) as well as the Federation of Indian Chambers of Commerce and Industry (FICCI) as national federations. These bodies give guidance and professional support on Table 8 Executives by Ranking of Group Pressure Age group

Ranking Low

Moderate

High

N

Below 35

12 (27.3%)

14 (31.8%)

18 (41.0%)

44

35 & above

8 (18.6%)

21 (48.8%)

14 (32.6%)

43

Total

20 (23.0%)

35 (40.2%)

32 (36.8%)

87

government policies, economic issues, corporate social responsibility and other matters, which are of concern to industrial and business organizations. The corporate group pressure, thus, is an important factor influencing increased awareness of corporate social responsibility. More than one- third of the corporate executives give high rating to this factor, and more of them are younger executives. A slightly greater proportion of executives consider group

60 / Corporates & Social Responsibility

pressure as a moderately influencing factor of greater awareness and the older executives rating so exceed the younger executives by 17 per cent. Parameters of Increasing CSR Awareness The executives, as stated earlier, have identified six drivers that propel increased awareness of corporate social responsibility. The ratings of each factor by the younger and the older executives have also been discussed. This section examines the comparative ratings of the six factors based on mean scores. The reputation of a company stands out as the most prominent factor causing greater awareness Mean Scores of Factors of Awareness

M e a n S c o r e

8 7 6 5 4 3 2

7.5 6.5 5.2

5.7

5.3

4.2

1 0 Market competition

Domestic standards

International standards

Public opinion

Corporate reputation

Group pressure

of corporate social responsibility. Closely associated with this factor is public opinion, which is the second - ranked factor. Rising international

Corporates & Social Responsibility / 61

standards is rated third. Group pressure and rising domestic standards are the next two factors in order of importance with a very small difference in mean scores. Competition in the market is ranked last as an awareness - enhancing factor. STAKEHOLDERS The interests of many sections of society are at stake when a company comes into existence and starts growing. Seven main stakeholders are identified for assessment of the opinions of the corporate executives. a)

Providers of funds

b)

Shareholders

c)

Employees

d)

Unions

e)

Regulatory bodies

f)

Customers

g)

Community

It is significant to understand the perceptions of the corporate executives regarding the importance they attach to the seven corporate stakeholders.

62 / Corporates & Social Responsibility

a)

Providers of Funds

It is common knowledge that capital is the most important component to establish a business organization. Promoters, banks, financial institutions and institutional investors are the Table 9 Executives by Ranking of Providers of Funds Age group

Ranking Low

Moderate

High

N

Below

1 (2.0%)

17 (33.3%)

33 (64.7%)

51

35&above

2 (4.0%)

12 (24.0%)

36 (72.0%)

50

Total

3 (3.0%)

29 (28.7%)

69 (68.3%)

101

sources of capital inflow. Naturally, more than two - thirds of the executives give high rating to the providers of funds. This rating is almost independent of age difference. However, nearly thirty per cent of the executives give only moderate ranking possibly because there are other equally important stakeholders in their perception. b)

Shareholders

Shareholders are crucial sources of funds like others who provide funds as discussed earlier. Shareholders range from individuals who are small

Corporates & Social Responsibility / 63

investors to major institutions holding a large number of shares in a company. The fluctuations Table 10 Executives by Ranking of Shareholders Age group

Ranking Low

Moderate

High

N

Below 35

1 (2.0%)

14 (27.5%)

36 (70.6%)

51

35 & above

2 (4.0%)

7 (14.0%)

41 (82.0%)

50

Total

3 (3.0%)

21 (20.8%)

77 (76.2%)

101

in the share market, which are monitored and analyzed regularly by the media and other specialized agencies, make many ordinary investors millionaires and reduce dramatically the fortunes of many others. More than three - fourths of the executives consider shareholders the highranking stakeholders of the company. Shareholders and providers of funds as sources of capital do overlap, though there is a difference between the two. Age-wise, older executives rating shareholders high exceed the younger executives by 11 per cent. c)

Employees

Human resources constitute the backbone of any

64 / Corporates & Social Responsibility

Table 11 Executives by Ranking of Employees Age group

Ranking Low

Moderate

High

N

Below 35

3 (5.9%)

20 (39.2%)

28 (54.9%)

51

35 & above

4 (8.0%)

24 (48.0%)

22 (44.0%)

50

Total

7 (6.9%)

44 (43.6%)

50 (49.5%)

101

performing company. Motivating and retaining employees are challenging tasks facing the human resource managers of the companies. More than 90 per cent of the executives consider employees as important stakeholders of a company with moderate or high ranking. However, only a half of the executives give high rating to employees as stakeholders. An important point in this context is that younger executives exceed the older executives by 11 per cent as regards their perception of the employees as high ranking stakeholders. d)

Unions

The perception of employees as individuals is very different from that of employees as members of trade unions, which are power organizations. But quite surprisingly two out of every three executives

Corporates & Social Responsibility / 65

Table 12 Executives by Ranking of Unions Age group

Ranking Low

Moderate

High

N

Below 35

42 (82.4%)

4 (7.8%)

5 (9.8%)

51

35 & above

28 (56.0%)

10 (20.0%)

12 (24.0%)

50

Total

70 (69.3%)

14 (13.9%)

17 (16.8%)

101

do not consider unions as important stakeholders. The younger executives giving low rating to the unions constitute a strikingly high percentage of 82. There are two significant explanations for this opinion. One, managing employees has shifted in emphasis from the traditional fire fighting industrial relations to the employee - centered human resource management. The younger executives with their exposure to the modern management methods are justified in not holding unions as important stakeholders. Further trade unions have lost much of their sharpness of teeth after the introduction of economic reforms in India. e)

Regulatory Bodies

Regulatory bodies like the government agencies may not appear to be stakeholders of companies.

66 / Corporates & Social Responsibility

Table 13 Executives by Ranking of Regulatory Bodies Age group

Ranking Low

Moderate

High

N

Below 35

16 (31.4%)

22 (43.1%)

13 (25.5%)

51

35 & above

15 (30.0%)

19 (38.0%)

16 (32.0%)

50

Total

31 (30.7%)

41 (40.6%)

29 (28.7%)

101

But they are indeed crucial stakeholders because the way the companies function is a very important parameter of the economic health of the country. The volatile share market affects the well - being of investors. More or less equal proportions of executives assign high and low ratings respectively to regulatory bodies in their importance as stakeholders. The remaining two- fifths give moderate ranking to regulatory agencies. These ratings are shared almost equally by the younger as well as the older executives. f)

Customers

The mantra of the market economy is that customer is the king. There is a well- enforced law to protect the interests of the customers from deficiency of services and defective products. The

Corporates & Social Responsibility / 67

Table 14 Executives by Ranking of Customers Age group

Ranking Low

Moderate

High

N

Below 35

2 (3.9%)

8 (15.7%)

41 (80.4%)

51

35 & above

4 (8.0%)

9 (18.0%)

37 (74.0%)

50

Total

6 (5.9%)

17 (16.8%)

78 (77.2%)

101

companies compete with each other to influence the customers as well as to retain customer loyalty. The executives naturally recognize this reality and more than three- fourths of the executives give high rating to customers as stakeholders. The younger executives reporting so are only slightly in excess of the older executives making high assessment of the customers as stakeholders. Thus the importance given to customers cuts across age groups. g)

Community

Customers are a part of the community. But all members of the community are not customers of the products and services of a company. Hence the executives of companies may view the customers as differently from the community

68 / Corporates & Social Responsibility

Table 15 Executives by Ranking of Community Age group

Ranking Low

Moderate

High

N

Below 35

15 (29.4%)

27 (52.9%)

9 (17.6%)

51

35 & above

22 (44.0%)

15 (30.0%)

13 (26.0%)

50

Total

37 (36.6%)

42 (41.6%)

22 (21.8%)

101

because of the selective perception of the customers and the community. Consequently, only one – fifth of the executives give high rating to the community as stakeholders. However two out of every five executives give moderate ranking to the community as stakeholders of companies. Age appears to be associated with these opinions. Interestingly, more older than younger executives give low as well as high ranking to the community as stakeholders. Comparative Ratings of Stakeholders Customers top the list of stakeholders as rated by the executives and indicated by the mean scores. Shareholders and providers of funds are the next two major stakeholders according to the ratings of the executives. These three are almost equally

Corporates & Social Responsibility / 69

ranked stakeholders by the executives. Employees get a close fourth rank in the order of importance of stakeholders, while the unions are the lowest Mean Scores of Stakeholders 8 M e a n S c o r e

7.1

7.4

7.2

7.4

6.5

7 6

4.6

5 4

3

3 2 1 0 Providers of funds

Share holders

Employees

Unions

Regulatory Customers Community bodies

ranked among the stakeholders. Regulatory bodies and the community are ranked fifth and sixth respectively. The highest rating to the customers is understandable. But the lowest ranking of unions is a significant pointer of the changing climate of union - management relations, and the declining strength of unions as power organizations. ADVANTAGES OF CSR When a company undertakes socially useful programmes, the resultant benefits to the company are many. Image, customer satisfaction, employee loyalty, capital flow, support of government agencies, and increased profit are the major

70 / Corporates & Social Responsibility

benefits, each of which is ranked by the executives in the succeeding sections. a)

Social Image Table 16 Executives by Ranking of Social Image

Age group

Ranking Low

Moderate

High

N

Below 35

1 (2.0%)

12 (23.5%)

38 (74.5%)

51

35 & above

1 (2.0%)

13 (26.0%)

36 (72.0%)

50

Total

2 (2.0%)

25 (24.8%)

74 (73.3%)

101

Industry is a social system. Companies are, therefore, conscious of their social image. The perceptions of the various organs of the society towards a company influence the volume of business very significantly. The executives would be keen to create a good social image of their companies. Consequently, three - quarters rate the advantage of a positive image high. The rating is shared equally by the younger and the older executives. b)

Customer Loyalty

Customer loyalty is a direct function of customer satisfaction of the products and services of a

Corporates & Social Responsibility / 71

Table 17 Executives by Ranking of Customer Loyalty Age group

Ranking Low

Moderate

High

N

Below 35

4 (7.8%)

21 (41.2%)

26 (51.0%)

51

35 & above

11 (22.0%)

14 (28.0%)

25 (50.0%)

50

Total

15 (14.9%)

35 (34.7%)

51 (50.5%)

101

company. The social orientation of a company need not imply that the products and services of the company are of good quality. That may explain why only 50 per cent of the younger and the older executives give high rank to customer loyalty as a benefit. A substantial 22 per cent of the older executives consider customer loyalty as a lowranked benefit of socially oriented efforts of the companies. While 41 per cent of the younger executives feel that customer loyalty is a moderate benefit, only 28 per cent of the older executives share this opinion. c)

Retention of Employees

Employee turnover is a serious stress-causing problem to the companies. So it may be presumed that a company, which is socially committed, is

72 / Corporates & Social Responsibility

Table 18 Executives by Ranking of Retention of Employees Age group

Ranking Low

Moderate

High

N

Below 35

10 (19.6%)

22 (43.1%)

19 (37.3%)

51

35 & above

7 (14.0%)

16 (32.0%)

27 (54.0%)

50

Total

17 (16.8%)

38 (37.6%)

46 (45.6%)

101

also likely to be concerned more about the welfare of its employees. However, only less than a half of the executives give high ranking to retention of employees as a benefit of CSR initiatives. Significantly, the older executives giving high rating to retention of employees are in a majority. They consider retention of employees as an important benefit of socially meaningful activities by the companies in contrast to the younger executives who may view employee attrition as quite natural. However, nearly two out of every five executives state that retention of employees is a moderate benefit of CSR activities. d)

Reduced Regulatory Control

Regulatory control is a statutory responsibility of the government. It may not be diluted by mere

Corporates & Social Responsibility / 73

Table 19 Executives by Ranking of Regulatory Control Age group

Ranking Low

Moderate

High

N

Below 35

21 (41.2%)

25 (49.0%)

5 (9.8%)

51

35 & above

16 (32.0%)

25 (50.0%)

9 (18.0%)

50

Total

37 (36.6%)

50 (49.6%)

14 (13.9%)

101

involvement in social orientation activities by the companies. That may be the reason for a substantial proportion of executives (37 per cent) giving low rank to reduced regulatory control as a possible benefit of corporate social responsibility. At the same time, a half of the younger and the older executives are of the view that organizing socially useful projects may have a moderate influence on regulatory control. The executives assigning high rank to reduced regulatory control constitute only 14 per cent. e)

Financial Performance

Companies are expected to make profit and social development activities by companies would mean regular outflow of financial resources. The low ranking to improvement in financial performance

74 / Corporates & Social Responsibility

Table 20 Executives by Ranking of Financial Performance Age group

Ranking Low

Moderate

High

N

Below 35

30 (58.8%)

18 (35.3%)

3 (5.9%)

51

35 & above

23 (46.0%)

20 (40.0%)

7 (14.0%)

50

Total

53 (52.5%)

38 (37.6%)

10 (9.9%)

101

as a benefit of corporate social responsibility efforts by the majority of the executives may be because of this apprehension. Quite unexpectedly, the younger executives giving low rank are in excess of the older executives by a substantial difference of 13 per cent. Only 10 per cent of the executives give high rank to the possibility of improvement in financial performance when companies engage themselves in socially beneficial tasks. f)

Access to Capital

It is presumed that corporate social responsibility activities undertaken by a company would positively influence investors resulting in greater capital inflow. But a large number of executives do not share this optimism as 45 per cent of the

Corporates & Social Responsibility / 75

Table 21 Executives by Ranking of Access to Capital Age group

Ranking Low

Moderate

High

N

Below 35

20 (39.2%)

22 (43.1%)

9 (17.6%)

51

35 & above

25 (50.0%)

21 (42.0%)

4 (8.0%)

50

Total

45 (44.6%)

43 (42.6%)

13 (12.9%)

101

executives give low ranking to easier access to capital as a likely benefit of corporate social responsibility. More older than younger executives give low rating. Only 13 per cent of the executives view that increased availability of capital is highly possible because of CSR activities and more of them are younger executives. A substantial number of younger as well as older executives (43 per cent) give moderate ranking to higher capital inflow. Comparative Analysis of CSR Advantages Executives are highly sensitive to the social image of their companies and obviously that is ranked first among the advantages of corporate social responsibility. Customer loyalty and employee loyalty are ranked second and third respectively

76 / Corporates & Social Responsibility

with only a minor difference. The executives give low ranks of four and five respectively to reduction in control by the regulatory bodies as well as to easier access to capital because of CSR. The executives do not consider the possibility of improvement in financial performance seriously, which is given the lowest rank. Mean Scores of Advantages of CSR

8 M e 7 a 6 n 5 4 S 3 c o 2 r 1 e 0

7.3 6.1

5.9 4.3

Social image

Customer loyalty

Retention of employees

Reduced regulatory control

3.7

4

Financial performance

Capital inflow

CORPORATE MODELS AND ICONS The companies and the business leaders, the executives admire, are important indicators of the way the executives view corporate social responsibility. Three out of every four executives admire other companies, which is a staggering proportion indicating higher levels of expectations. The executives, who admire their group most, mention the employee - oriented caring policies

Corporates & Social Responsibility / 77

and the socially inclined practices of their companies or groups as reasons for their choice. Of the 75 executives, who admire other business organizations, 41 mention the Tata group, while 22 mention the IT giant Infosys Technologies. The reasons for the high admiration of the Tata group are many. Tata companies are leaders in diverse industrial fields and their initiatives have made lasting impact on the lives of millions of Indians. They created the famous city of Jamshedpur and administered it admirably. The best business and ethical practices of the Tata group are widely acclaimed. Beyond business, they have established educational, research, health and other institutions of national importance and excellence. They have grown with the nation and they have also made the nation grow. The commitment and concern for social development of the Tata group is unimpeachable. The Tata Iron and Steel Company (TISCO), the flagship company of the Tata group, is the pioneer of corporate social responsibility in India. Long before other companies started thinking of corporate social responsibility, the TISCO had

78 / Corporates & Social Responsibility

the vision to initiate such an innovative step, which has cut across several aspects of society. Without doubt the Tata group is a very highly respected Indian industrial house. In the recent industrial history of India, no company has stirred the imagination of people like the Bangalore - based IT company Infosys Technologies. Founded in 1981 by N.R.Narayana Murthy with a small personal investment in partnership with a small group of persons, Infosys has become a famous IT company in the world in a short span of twenty five years. The Infosys leadership believes that wealth created must be equitably distributed. They have strong faith in the philosophy that by putting public good ahead of private good in every decision the company makes will, in fact, result in enhancing the private good. The executives interviewed admire Infosys for bringing about a revolution in the IT industry along with WIPRO and TCS, by firmly entrenching India in the global IT market. By setting up a corporate foundation for the upliftment of society, the company is a front-runner in corporate social responsibility.

Corporates & Social Responsibility / 79

The business icon ranked first by the corporate executives surveyed is N.R.Narayana Murthy, the founder and chief mentor of Infosys Technologies. The qualities of Narayana Murthy described by the respondents are many. He has created a world class organization, which is a pride of the country. He has made ordinary people amazingly extraordinary and with them created enormous wealth for Infosys, which was shared in an admirably equitable manner. He is a socially committed person and has built an equally socially oriented organization. Simple living, humility, uprightness and integrity are his well-known traits. Being a great humanitarian with a vision for India, Narayana Murthy is a dream personality and a role model for every Indian, which epitomizes the choice of Murthy as the number one business icon. J.R.D.Tata is the second ranked business icon. All the respondents say that he laid the foundation for the modern industrial development of India and pioneered the concept of corporate social responsibility, not by preaching but by practising in a manner, which has no parallel in India’s corporate history. A great visionary and a true

80 / Corporates & Social Responsibility

leader, he gave primacy to the progress of the country internally and the glory of India externally. The Tata group is synonymous with patriotism and high ethical standards, and J.R.D.Tata is mainly responsible for this reputation of the industrial group. The man, who piloted planes to daring heights, was immensely proud of being an Indian. Ratan Tata is ranked third among the business icons. Ratan Tata is rated as the worthy successor to J.R.D. Tata. A highly respected business leader, Ratan Tata is heading the largest industrial house in India. Azim Premji and Dhirubai Ambani are the two other icons. The business icons chosen by the executives are prominent leaders of the recent entrepreneurial movement in the country, which is driving India to be an economic superpower in the twentyfirst century. SUMMARY While the main thrust areas of corporate social responsibility undertaken by the four companies selected for the study are education/vocational training, health, environment and rural

Corporates & Social Responsibility / 81

development, it is significant that 13 to 22 per cent of the executives in the four companies say that no specific CSR programme is carried out by their organizations. A large proportion of executives report that they do not know whether their companies have any policy on corporate social responsibility. At the same time, nearly a third say that their companies do not have any CSR policy. A good number of executives have no knowledge as to whether a separate department is functioning for carrying out CSR projects. Surprisingly, 14 per cent of the executives even think that awareness of CSR is not on the increase contrary to the facts. Thus significant levels of lack of knowledge as well as confusion prevail among the executives. There is a substantial extent of vagueness among the executives regarding the concept of corporate social responsibility and its dimensions. Systematic training modules on corporate social responsibility may be developed by CII and other apex bodies for the benefit of the member organizations. The member companies may arrange training programmes for the executives on a continuing basis. Company’s reputation and

82 / Corporates & Social Responsibility

public opinion are the two major factors for the growing awareness of CSR according to the executives. Among the seven stakeholders, they rank customers, shareholders and providers of funds higher than others. Social image is rated the most significant advantage of CSR. On the whole, the executives are sensitive to the image and reputation of their companies.

Corporates & Social Responsibility / 83

4 CSR FOR A JUST SOCIAL ORDER Wealth creation is the primary responsibility of business organizations, and it is their responsibility to create wealth through ethical means. Corporate social responsibility is an inalienable part of the process of creation of wealth. CSR is closely linked to sensitive development issues such as displacement of people, rehabilitation of the displaced, protection of environment and reduction of inequality in society. CSR AND DISPLACEMENT A daunting task facing the corporate groups and the government is the conflict between developmental priorities, and deprivation of people’s land and livelihood because of land acquisition. Mass protests and violent demonstrations have forced even the best face of corporate India to retreat from a nationally prestigious project despite strong state support. Estimates of people displaced by development

84 / Corporates & Social Responsibility

projects since Independence using the “doctrine of pre-eminence” for public interest especially for power, mining, heavy industry and irrigation projects are staggering. More than 50 million persons have been displaced and only abut a quarter of them are “resettled” in some way or the other. But the real magnitude of displacement and the actual position of resettlement could be very grim. India’s rehabilitation and resettlement (R and R) record is poor, if not horrific. The Rehabilitation and Resettlement Bill, 2007 is yet to become a law. The Supreme Court, expressing concern over the plight of farmers and others whose vital rights are affected when their land is acquired for development, suggested in May 2010 that the more than a century old, Land Acquisition Act, 1894 should be revisited by the Parliament. The Supreme Court pointed out the serious flaws in the acquisition of land such as absence of proper survey and planning before acquisition, indiscrimate use of emergency provisions, notification of areas far larger than what is actually required for acquisition, and then making arbitrary

Corporates & Social Responsibility / 85

deletions from the acquisition, offer of a very low amount as compensation and delay in payment necessitating litigation in almost all cases, and the absence of rehabilitation. In another case, the Supreme Court observed in July 2010 that “to millions of Indians, development is a dreadful and hateful word that is aimed at denying them even the source of their sustenance”. Some enlightened companies in the public and private sectors have executed fair R and R programmes. The irresponsible behaviour of business organizations has created scepticism among the people and there is a need to address this issue while setting up large projects, according to N.M.Nerurker of Tata Steel (The Hindu, May 23, 2010). Tata Steel’s “Parivar” project for those displaced by its development initiatives merits attention. The displaced families are given identity cards. Promises to each beneficiary are documented and monitored. One member of every displaced extended family is given employment or one-time assistance in lieu of employment. The company offers a tenth of an acre of homestead land to each family in its resettlement colonies; and the

86 / Corporates & Social Responsibility

plots are developed ones with civic amenities like roads, water, electricity and drainage, and also medical facilities. A house assistance of Rs.1 lakh is given over and above the Rs.1.5 lakh mentioned in the R and R policy. The families are given a monthly maintenance allowance till they are employed. Training for skill upgradation, educational scholarships to children and women’s self-help groups are other supports which the displaced families get. The per family expenditure on the rehabilitation package works out to Rs.16.91 lakh (Sanjay Nag, Tata International). Forcible acquisition of forest land, encroachment of forests by powerful vested interests, denial of land and forest rights, and glaring development deficit have pushed tribals into insurgency and political extremism. It is reported that about onethird of the 626 districts in the country have extremist presence. Started as a movement centred around Bihar in the 1970s and 1980s, the naxalite movement now virtually controls 83 districts in the country. Noted journalist Aroon Purie writes that the country’s own citizens have taken up arms against the state which is reflective of the lack of

Corporates & Social Responsibility / 87

development in remote parts of the country, where the most impoverished live. He adds that in these areas,there are “no roads, schools or hospitals or even attention” (India Today, April 19,2010). Union Home Minister, P.Chidambaram admitted that people in naxal-dominated areas do not have good faith in the good sense of corporate India and also lack faith in government. He exhorted the corporate leaders at the national conference of the CII to set up industries to drive development in these areas. The response from the CII was quick and it announced that certain pilot districts in the disturbed areas would be chosen to invest and create an alternative mechanism to deliver development, jobs, goods and services as pilot projects (The New Indian Express, May,13 &14,2010). Serious result-oriented action is awaited. CSR AND ENVIRONMENT The theory of trade off between growth and environmental protection is unsound. India’s development approach, according to environmentalists, lacks environmental sensitivity.

88 / Corporates & Social Responsibility

The mining policy is cited as an example. Felix Padel,London – born social anthropologist, is a crusader against India’s mining policy. Padel has been working among Orissa’s adivasis. He is critical of bauxite mining. The function of bauxite in conserving water and maintaining perennial streams in mountains is established by research. Bauxite mines are in the mountains maintaining an ecological balance with bio - diversity. Mining would mean its destruction. On the one side there is ecocide and on the other, displacement and dispossession of adivasis which is cultural genocide (Felix Padel, The New Indian Express, April 17,2010).

At the same time, there is a need for mining bauxite. The close proximity of aluminium and coal would help produce cheap aluminium so that India will have a commanding position in the global nonferrous market. On environment, there are two divergent views. One is that protection of environment cannot be by perpetuation of poverty; and there must be a right balance between environmental concerns and industrial needs. Development should not be a victim of ecofundamentalism. The other view is that

Corporates & Social Responsibility / 89

sustainable development is not possible without protecting the environment. For instance, while ordering the closure of a company in Tamilnadu, the Madras High Court stated in its order that “Those who discharge noxious polluting effluents into water bodies and the atmosphere harming public health at large should be dealt with strictly”(September,2010). Carbon dioxide emission into the atmosphere not only by industries, but also by even non-industrial activities makes up nearly 75 per cent of the greenhouse gases causing catastrophic global warming. Consequently, extreme climatic events are causing destruction of lives and livelihoods. The abnormal increase in floods causes extensive damage to agriculture. These disasters are hydrometeorological phenomena. The Climate Vulnerable Forum in its report titled “Climate Vulnerability Monitor” of 2010 noted as follows: In absolute terms India will face the highest number of excessive deaths due to health impacts of climate change. India will alone carry more than a third of total global health burden.

The UN Framework Convention on climate

90 / Corporates & Social Responsibility

change, Kyoto Protocol, is not legally binding on India, but global pressure and national interest pose a great challenge to business and government in dealing with carbon emission and climate change issues without compromising the pace of development. While many industries are polluting the environment with impunity, many companies are responding to the challenge in a positive manner. Companies, media and other civil society groups are promoting green consciousness in the country. Many Indian companies are keenly trying to develop green technology which also has big business prospects. One carbon credit is given for every tonne of carbon dioxide reduced and the carbon credit mechanism helps reduce the carbon dioxide emission. All activities that utilize energy ranging from manufacturing to municipalities and to forestry are eligible to earn carbon credits for the green initiatives. The framework to measure the quantum of carbon dioxide emission has been developed by the UN and credit certificates are issued only after UN monitoring and verification by third parties. Trading can be done through

Corporates & Social Responsibility / 91

exchanges like the Chicago Climate Exchange, European Climate Exchange and European Energy Exchange to name a few. Companies, particularly those in the developed countries, which have caused most of the environmental damage, are keen to buy carbon credits from clean technology companies which are registered under the Clean Development Mechanism (CDM). Tata Motors earned 3.6 million dollars in 2010 from the sale of carbon credits. Trading in carbon credits is not a license to pollute the environment. But trading in carbon credits can adversely affect the profitability of the companies which may compel them to look for low-carbon emitting processes. India is still in the early stage of the development trajectory and can afford to adopt a low-carbon economy, and prevent the ill-effects of extreme climate change which poses the greatest threat to sustaining high level of growth. CSR AND INEQUALITY Indian economy has been growing at a fast pace because of deregulation and economic liberalization policies pursued since 1991. India’s

92 / Corporates & Social Responsibility

1.31 trillion-dollar economy (2009-2010) is projected to approach 5 trillion dollars by 2022(Prime Minister’s Economic Advisory Council).The gross domestic product (GDP), the indicator of economic growth, does not indicate the real well-being of societies. Capitalism, no doubt, creates wealth, but it also results in high inequity. The recent global financial crisis triggered by the meltdown of the American economy, and the crash of the Irish economy projected as the show – piece of free market success have exploded the myths of capitalism. Deveshwar (2010), chairman of a leading corporate behemoth, wrote in a recent article that in the last five decades, world GDP multiplied 60 times to reach more than 60 trillion dollars. At the same time, two-thirds of the world population live in poverty, “with more than a billion people in acute deprivation and hunger”. Economist Utsa Patnaik asserts that capitalism can never ameliorate the condition of the masses but will only result in declining food security and nutritional standards, and rising unemployment. Many countries with high GDPs have high Gini

Corporates & Social Responsibility / 93

coefficients, which measure the inequality of income and wealth. The Gini coefficient of India rose from 0.32 to 0.37 on a scale of 0 (complete equality) to 1 (complete inequality) during the peak period of high GDP growth. In India, high GDP, without inclusive growth and with a dismal record on the distribution of wealth, has failed to reach the poorest of the poor.The benefits of economic development have not been witnessed in real terms among the vast majority indicating unsatisfactory human development index (HDI) which is a measure of life expectancy, adult literacy and standard of living. The UNDP’s Human Development Report of 2010 puts India at the 119th place among 182 countries. India is categorized under “Medium Human Development”. The unprecedented economic boom between 2004 and 2008 with an average growth rate of over 8 per cent has been overshadowed by the pervasive income inequality levels. The egregious record of many government agencies in implementing well-intentioned programmes has been adding misery to the masses. Oxford Poverty and Human Development Initiative

94 / Corporates & Social Responsibility

(OPHI) directed by Sabina Alkire has recently developed a Multi-dimensional Poverty Index (MPI) taking into into account ten variables for measuring poverty. MPI starts with each person in a household and the index is based on multiple deprivations. MPI is not an alternative to the conventional definition of poverty based on household income and consumption data. It only complements the commonly adopted definition. For instance, if a household has a disabled person it may not be income poor, though it may experience multiple deprivations. The Oxford study covered 104 countries with MPIs ranging from 0 to 0.64. India ranks 63 in contrast to China which ranks 46. The study team concludes that poverty in 8 Indian states (Bihar, Uttar Pradesh, Rajasthan, West Bengal, Orissa, Madhya Pradesh, Chhattisgarh and Jarkhand) is worse than in 26 poorest countries of sub-saharan Africa. Their MPIs were equal or greater than 0.32. In terms of number the MPI poor in the 8 Indian states were 421 million whereas the MPI poor in the 26 African countries were 410 million. A recent World Bank report states that out of the estimated population of 1,080 million in 2005 in India, 455.8 million

Corporates & Social Responsibility / 95

lived on less than 1.25 dollars a day. Another poverty estimate was by the Arjun Sengupta Commission (National Commission for Enterprises in the Unorganized Sector) which estimated that 836 million people (77 per cent) lived on Rs.20 a day or less in 2004-05. Hunger is a routine experience for millions of Indians. “India is home to the world’s largest food insecure population, with more than 200 million people who are hungry”, observes US-based International Food Policy Research Institute’s report of 2008. The report adds that India which secured 66th place in the 2008 global hunger list of 88 countries does not have a single state in the “low hunger” or “moderate hunger” categories. Being in 88 itself is shameful. Among the Indian states, 12 are in the “alarming category” and one state (Madhya Pradesh) is in the “extremely alarming category”. Assam, Haryana, Kerala and Punjab are in the “serious category”. Hindustan Times reported on April 4,2010 poor hungry children eating mud and silica in Ganne village in Allahabad district. When millions starve, thousands of tonnes of food grain get rotten on open yards. Finally, the Supreme Court had to

96 / Corporates & Social Responsibility

intervene and tell the government in August 2010 to consider distributing food grain to the deserving population at a very low cost or no cost. At the present rate of progress, the Millennium Development Goal 1 target of eradicating extreme hunger may remain a distant dream. Bihar’s success story of an average growth rate of 11.3 per cent for the period between 2004 and 2009 is a striking example of the mismatch between growth and societal good. Bihar has one of the highest rates of child mortality in India according to the third National Family Health Survey of India during 2003-06. This anomaly is not confined to Bihar alone as the country as a whole suffers from such an anomalous pattern. An important barometer of social and economic progress is child mortality. In 2008, 5.3 lakh children under 5 died in the lowest income quintile in contrast to 1.78 lakh among the wealthy quintile (Save the Children Fund,2010). Around a quarter of the world’s population who are deprived of food live in India and 43 per cent of all children in the country under the age of five are malnourished claims a recent report of the

Corporates & Social Responsibility / 97

Actionaid International in 2010 called “Hungerfree Score Card”. While India’s per capita income tripled between 1990 and 2005, the number of hungry people also increased by 53 million bringing the total number of chronically hungry people in India to a staggering 270 million. Out of 28 nations ranked in the report, India got a dismal rank of 21 while Brazil and China are ranked 1 and 2, respectively. The report says that India cannot halve its number of people starving until 2083 nearly 70 years after the MDG target date of 2015. India is not the only country where mass poverty and marginalization of the poor co-exist with high economic growth. Even the affluent countries have poverty and deprivation in the midst of prosperity. In the United States, the poverty rate in 2009 rose to 14.3 per cent from 13.2 per cent in 2008. In terms of number, 43.6 million people were in poverty in 2009 up from 39.8 million in 2008 according to the US Census Bureau. The US department of agriculture, in its report, stated that 14.7 per cent of American households faced food insecurity in 2009. Nobel laureate and economist Stiglitz (2010), in his book on the sinking of the

98 / Corporates & Social Responsibility

global economy, comments as follows: We have gone down the path creating a society in which materialism dominates moral commitment, in which the rapid growth that we have achieved is not sustainable environmentally or socially, in which we do not act together as a community to address our common need, partly because rugged individualism and market fundamentalism have eroded any sense of a community.

The Indian economy after the economic reforms has created a middle class comprising more than 200 million, growing in number and wealth. In 2008-09, India had 84,000 high networth individuals (HNI) with a combined wealth of 310 billion US dollars according to the World Wealth Report. The HNI population is expected to triple by 2016 to 2.5 lakh. The recent scams in the country in which mindboggling sums of public money were siphoned off affect the growth and development of the country. These scams are symptomatic of crony capitalism which benefits a small number of companies and individuals by bending established rules and procedures.

Corporates & Social Responsibility / 99

Corruption and black money are closely interlinked. The Washington – based think-tank Global Financial Integrity (GFI), in the report on illicit fund flow from 1948-2008 authored by Dev Kar (2010), states that India’s underground economy is half the size of its GDP. At the end of 2008, the black money stashed abroad at current rate amounted to 462 billion dollars. The GFI study is limited only to illicit flow of money which the World Bank could monitor. The report asserts that “It should make the world re-look at India not only as a rising economy but as a gigantic supplier of black money to be parked wherever possible”. Private companies and High Networth Individuals (HNIs) are the largest drivers of black money in Offshore Financial Centres (OFCs) according to the report. Arun Kumar (2011), author of “The Black Economy in India”, claims emphatically that “Underlying this vast illegality is a “Triad” involving the corrupt business class, the political class and the executive”. He adds that the criminal has also entered the “Triad” since the mid-1980s. He attributes the high food inflation (17.05 per cent in January 2011) and rising prices of food articles in the country to these scams which are

100 / Corporates & Social Responsibility

causing even policy failure. Inauguarating the national conference of the top administrators of the states in February 2011, Prime Minister Manmohan Singh cautioned them that “Corruption strikes at the root of good governance. It is an impediment to faster growth. It dilutes, if not negates, our efforts at social inclusion”. As corruption dents India’s “international image and it demeans us before our own people”, the Prime Minister wanted the challenge of corruption “to be faced frontally, boldly and quickly”. The rampant corruption that has been plaguing the country compelled a group of eminent persons, including influential captains of Indian industry, to issue an open letter to the government in January 2011. The signatories expressed concern about the possibility of India’s huge growth potential getting diluted, “which would be a great loss, especially to the poor and the dispossessed”. They wrote that they were “alarmed at the widespread governance deficit almost in every sphere of national activity covering government and institutions”. The mismatch between economic development

Corporates & Social Responsibility / 101

and social development has unsettling effects on society. Large sections of the population are disconnected from the socio-economic mainstream. There is a growing disaffection with the newly affluent minority cornering the fruits of high growth. Simmering social violence is an ever-present reality as has been witnessed in many parts of India. Mahatma Gandhi, while explaining the trusteeship philosophy warned that “a violent and bloody revolution is a certainty one day unless there is a voluntary abdication of riches and the power that the riches give and sharing them for the common good”. Nobel laureate Amartya Sen says that “If we generate more public resources and use them with a better identification of the prevailing injustices, we could make a big change” (An Unequal Country, India Today, August 24, 2010). PHILANTHROCAPITALISM Mathew Bishop and Michael Green coined the concept of philanthrocapitalism. They, in their book by the same title, recommend it as the remedy for the many social problems that face even the rich societies. They comment that the

102 / Corporates & Social Responsibility

track record of the governments in tackling these problems has been, at best, mixed. Because of the fiscal fall out of the financial crisis of 2008 in the United States, the book calls for a new approach to solving social problems, based on “innovative partnerships between business, nonprofits and government”. A group of wealthy business leaders is active in creating these innovative new solutions. These philanthropists think that the winners from the economic system should give back and that business can “do well by doing good”. Bishop and Green assert that philanthrocapitalism revolution will have huge implications: “As governments cut back their spending on social causes, giving may be the greatest force for societal change in our world”. The philanthrocapitalist movement is on the move led by Warren Buffett, Bill Gates and a web of motivated givers. Buffett has pledged to donate 99 per cent of his wealth, and Bill and Milinda Gates have already donated half of theirs to charity for improving the health of humanity. Bill Gates and Warren Buffett have called on American billionaires to pledge at least half of their wealth, and it is reported that as in December 2010, 57

Corporates & Social Responsibility / 103

wealthy individuals and families in the United States have signed the “Giving Pledge”. Buffett and Gates are also expecting the super-rich in India , China and other countries to pledge half of their wealth to social causes. President Bill Clinton, one of the prime movers of the philanthrocapitalist movement, exhorts the business leaders to be partners in the new movement: Our interdependent word is too unequal, too unstable, and because of climatic change, unsustainable. We have to transform it into one of shared responsibilities, shared opportunities, and a shared sense of community.

Azim Premji is the first Indian billionaire to give away a huge amount of personal wealth for social causes. He announced the transfer of 213 million equity shares of Wipro controlled by him worth 2 billion dollars (about Rs 8,846 crores) at current market rates in December, 2010 to an irrevocable trust. The trust, in addition to supporting education, will fund five areas of development: child and maternal health, ecological sustenance, livelihood, nutrition and governance at panchayat level. Business groups in India have been forming trusts and foundations like the business organizations in

104 / Corporates & Social Responsibility

Western countries. Tatas, Wipro and Infosys are examples. The Tata Council for Community Initiatives has crafted the Tata Industry for Sustainable Human Development in collaboration with UNDP (India) to provide guidelines to Tata companies to fulfil their social responsibilities. Infosys founded the Infosys Foundation in March 1997 which receives one per cent of the total posttax profit of the company. The foundation supports the disadvantaged sections directly or through non-governmental organizations. The foundation is committed to giving 30 per cent of its funds to the elderly, the differently abled and the destitutes, 30 per cent for education of talented poor children, 15 per cent for rural development, 15 per cent for cultural activities, and 10 per cent for health care in villages as well as in urban areas. Infosys Science Foundation is a landmark contribution of the company. In 2009, the first Infoys Science Prize for physical sciences, mathematical sciences, engineering sciences, and social sciences and economics was awarded. The prize money for each of the five categories is Rs.50 lakh. HRD Minister Kapil Sibal hailed the prize as India’s Nobel Prize. In Tamilnadu, the TVS group

Corporates & Social Responsibility / 105

has not only been in the forefront of CSR, but also has collaborated with the CII in setting up the CII-TVS Centre of Excellence for Responsive Corporate Citizenship in 2007. The successful PPP(Public Private Partnership) model in developing physical infrastructure like the modernization of the Delhi international airport has been advocated for the delivery of social development programmes, particularly in the health and education sectors. Azim Premji Foundation’s teacher development programmes for government schools mainly in rural India have helped improve the quality of education imparted to over 2.5 million children from standards 1 to 10 in over 25,000 schools in partnership with 16 state governments. Bharti Foundation’s Adarsh schools in Rajasthan and Punjab run in buildings allotted or leased by the government are an encouraging example. The Karuna Trust manages 46 public health centres in five states with 1300 medical and paramedical staff. The PPP model needs systematic monitoring as it involves utilization of the assets of the government by the private sector for providing social infrastructure as some early experiences were not satisfactory.

106 / Corporates & Social Responsibility

CSR projects are promoted only by well regulated companies. Many companies carry on with their business without bothering about their societal obligations. The living manifestation of corporate negligence in the world was the Bhopal gas tragedy caused by Union Carbide’s pesticide plant. At midnight of December 2, 1984 tonnes of lethal methyl isocyanate gas spewed out of the plant killing over 15,000 people, and causing illnesses, injuries and disabilities to over 5,00,000. It is the worst industrial disaster in human history. But the verdict pronounced 26 years after the disaster by a Bhopal court on June 7, 2010 has created huge public outcry in India and abroad as “ too little and too late.” Frank Pallone Jr, US congressman, criticized the grossly small quantum of punishment - two years’ imprisonment - as “outrageous for the worst chemical disaster”. The deafening criticism of the soft verdict made the government of India to constitute a Group of Ministers (GOM) to look into relief, rehabilitation and other measures. However, there is widespread dissatisfaction over the inadequacy of the government’s response.

Corporates & Social Responsibility / 107

American law provides for provisions for enforcing corporate responsibility. An instance is a law suit by a consumer group, Centre for Science in the Public Interest, against the global fast food giant McDonald’s over its “Happy Meals” campaign. California has passed a law against offering free toys with any meal that does not satisfy a nutritional standard. McDonald’s hands out candy to children. The law suit states that its “creepy and predatory practice …. warrants injunction as McDonald’s marketing has the effects of conscripting America’s children into an unpaid drone army of word – of – mouth marketers”(Zoe Williams, Enforcing Corporate Responsibility, The Hindu, July 25,2010). In India ,such laws to enforce accountability are necessary. CSR RATING The first systematic CSR rating in India has been pioneered by Karmayog, an organization that connects citizens, civil society groups, business organizations, academicians, media, and government through online and offline methods for social and civic issues. Founded in June 2004,

108 / Corporates & Social Responsibility

it is an initiative of the Shri R.O.Somani Charitable Trust. Karmayog’s concept of CSR stems from the assumption that “every company harms the environment and people”. CSR, therefore, has two dimensions according to Karmayog. a. The steps taken by a company to neutralize, minimize, or offset the harmful effects caused by its processes and products. b. The additional steps a company takes using its resources, core competence, skills, location and funds for the benefit of the community and the environment. Karmayog rating (0 to 5) is based on the company’s main products and services. The rating criteria are categorized into necessary ,sufficient and negative. Necessary Criteria Level 1: CSR activities that cover any developmental or community work. Level 2: CSR activities that aim at improving the processes and products of the company and to

Corporates & Social Responsibility / 109

reducing the negative impact of the company’s own products or processes. Level 3: CSR activities that are focussed on those who are affected directly by the company. Level 4: CSR activities that form a part of the daily business activities of the company operations. Level 5: CSR activities that enable sustainable and replicable solutions to problems faced by society. Sufficient Criteria Companies doing the following automatically get rating 1 or 2. Company fulfilling the basis needs of society through its products or services such as manufacture of food. (1) Unique CSR activity being undertaken by the company which is not being done by government, non-governmental organizations, etc. such as a software Teleopthalmology developed by an Indian company to help eye patients any time anywhere in the world .(1) Company’s products or services provide solutions to mitigate the harm or negative impact caused by

110 / Corporates & Social Responsibility

actions of companies, their products, such as making water purification and waste recycling systems.(1) Company is committed to measuring and reporting its CSR initiatives as per a voluntary globally accepted GRI framework. (1) Company’s annual expenditure on CSR is at least 0.2 per cent of sales which means that the company is committed to a minimum expenditure on CSR annually and thus considering CSR as an integral part of its business.(2) Negative Criteria Companies in this category will not normally get a higher rating than shown. Companies that make liquor, tobacco, genetically modified crops, etc.: these products are not needed by society, and cause harm to people. The CSR to do is to stop making these products. (0) Companies that violate laws, rules and regulations: CSR is not limited to just how a company spends its money, but also to how it makes that money in the first place.(1)

Corporates & Social Responsibility / 111

Companies engaged in high impact processes: processes that severely damage the environment require extraordinary efforts by the company to reduce and repair the damage and require greater contributions to benefit society.(1) Environment is always damaged by individuals and industries. Hence to get a rating of even 1, a company is expected to engage in reducing the environmental degradation and restoring the environmental damage done. When the processes and products of companies lead to harmful effects such as pollution, waste generation and environmental degradation, the CSR rating is normally low. Companies engaged in mining, aviation, cement production, thermal power generation, manufacture of automobiles, iron and steel production, and manufacture of paper and forestry - based products cause serious damage to the environment. These companies, therefore, are not given high rating. The Karmayog rating of the largest 500 companies in India for 2009 shows that 26 per cent have the lowest rating of 0, while no company has secured the highest rating of 5. Twenty nine per cent have

112 / Corporates & Social Responsibility

scored 2. Only 13 per cent of the companies have secured 3, while only 3 per cent could score 4. CSR rating by Karmayog is an innovative initiative. But it is ideologically loaded. For instance, cement, steel and automobiles have become essential elements for families and communities, but the companies manufacturing these would not get high rating even if they are engaged in very good CSR activity. Social development needs rapid economic growth, which definitely will have negative impact on the environment and people. The harmful sideeffects of development projects should be minimized and mitigated in a humane manner. Without undermining the significance of the CSR rating by Karmayog, there is further research needed to develop a comprehensive rating framework to measure the sustainable impact of CSR initiatives. CSR credits, akin to carbon credits, are suggested by Union Minister Salman Khursheed. The proposed system comprises certification of companies for their CSR activities by a government agency, earning CSR credits, and trading credits in a CSR credit exchange. A

Corporates & Social Responsibility / 113

company which does not want to do any CSR activity will have to purchase CSR credit from companies that have already earned them. Salman Khursheed’s proposal has merit, but it is not fully feasible. CSR is a combination of corporate obligation and corporate discretion. Protection of environment, prevention of pollution, safe processes and ethical practices are obligatory on the part of the corporates. But CSR activities for the well- being of communities are voluntary and are left to the corporate conscience. This component of CSR may be traded through CSR credits. Anyhow, CSR has to be brought under the domain of social scrutiny. The government of India has made CSR mandatory for public sector oil companies ONGC, IOC, BPCL and HPCL. These companies are to utilize 2 per cent of their net profit for CSR. The Department of Public Enterprises(DPE) has prepared guidelines for central public sector companies to undertake important CSR projects by spending 2 to 5 per cent of the net profits of the companies depending on the quantum of the net profit. A proposal submitted recently by the Corporate Affairs Ministry to the standing parliamentary committee

114 / Corporates & Social Responsibility

preferred provisions to be included in the Companies Bill, 2009 making CSR spending in the private sector on the lines of the public sector companies. Companies having a net worth over Rs 500 crores or a turnover of 1000 crores or a net profit of over Rs.5 crores in a year are expected to conform to the CSR spending norms. The private sector is justifiably opposed to the proposal of making CSR spending mandatory. The government may facilitate CSR spending to a desirable level by the companies instead of resorting to coercion like a predatory state. The government, however, is likely to make CSR spending mandatory when the Bill is to be presented in the Parliament in the budget session of 2011. EPILOGUE Corporate affluence can be sustained only when social development takes place along with economic development. Corporate social responsibility activities are not merely acts of benevolence to the deprived, the disadvantaged and the disabled. These are not to be viewed as

Corporates & Social Responsibility / 115

acts of charity. Society has the right in the fruits of business. CSR is an investment, which would yield multiple returns to business and society. Prime Minister Manmohan Singh, while inaugurating the India Corporate Week in December, 2010 said as follows: Sustainability of business includes not merely economic sustainability in the narrow sense of the term, but social and environmental sustainability as well. Market activity that concentrates wealth without empowering the poor and the deprived is also unacceptable ethically.

Business is expected to exist in equilibrium with the social and ecological environment. Corporate planning, therefore, needs to integrate social development planning also. The term corporate social responsibility was considered an oxymoron till the middle of the twentieth century. But now sustainable CSR activity is considered an affirmation of the commitment of the business organizations towards society. Industrialist Deveshwar (2010) recommends encouraging business models that would “enable companies to co-create, with local communities, opportunities for sustainable livelihoods as well as enrichment

116 / Corporates & Social Responsibility

of national capital”. He wants the “civil society to be made more aware of the tremendous change they can bring about by encouraging a preference for responsible companies”. Joholin (2004) predicts that in the times to come companies will be “judged more by their social policies than on their delivery of products and services”. A new paradigm of corporate social responsibility is needed. People expect a just social order, and it is the responsibility of the government, corporate organizations, and civil society to work jointly towards that goal. CSR policy and projects should be transparent and subject to social audit. The concept of CSR needs to be widened as corporate sustainable social responsibility (CSSR).

Corporates & Social Responsibility / 117

BIBLIOGRAPHY Ackerman, Robert W. (1975). The Social Challenge to Business. Cambridge, Mass: Harvard University Press. Bowen, Howard R. (1953). Social Responsibilities of the Businessman. New York: Harper. Carolyn,Kay Brancab.(1995).New Corporate Performance Measures. Report 1118-95 RR. New York: The Conference Board. Carrol, A. (1991).” The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders”. Business Horizons, July-August, 42. Centre for Social Markets. (2001). Corporate Social Responsibility Perceptions of Indian Business. London / Calcutta. Davis, Keith., & Blomstrom, Robert L. (1966). Business and Its Environment. New York: McGraw-Hill. Davis, Keith., & Frederick, William C. (1984).

118 / Corporates & Social Responsibility

Business and Society: Management, Public Policy, Ethics. New York: McGraw-Hill. Deveshwar, Y.C. (2010).”It Can’t be Business as Usual”. Hindustan Times. November, 13. Frederick, William C.(1987). “Theories of Corporate Social Performance”. In Sethi, S Prakash., & Folbe, Cecilia M.(eds.).Business and Society: Dimensions of Conflict and Cooperation . Lexington, MA: Lexington Books. Friedman, Milton. (1971). “Does Business Have a Social Responsibility?”. Bank Administration, April 1971, pp .13-14. Gandhi:http://www.gandhi-manibhavan.org. http://www.historyguide.org./intellect. Goodpaster, Kenneth E. & Mathews Jr., John B.(1982). “Can a Corporation Have a Conscience?”. Harvard Business Review, January-February, 1982. Holme, L., & Watts, R.”Making Good Business Sense” At World Business Council for Sustainable Development.www.wbcsd.org. Juholin,E.(2004).”For Business or For the Good

Corporates & Social Responsibility / 119

of All?. A Finish Approach to Corporate Social Responsibility”. Corporate Governance, 4 (3), 20-32. Kar,Dev.(2010).The Drivers and Dynamics of Illicit Fund Flow from India: 1948-2008. Washington, DC : Global Financial Integrity, Center for International Policy. Karmayog: http://www.karmayog.org. Kumar, Arun. (2011). “ Honesty is Indivisible”. The Hindu. January 29. Muthiah, S.(2004). Madras Rediscovered. Chennai, New Delhi: East West Books. Novak, Michael.(1996). Business as a Calling: Work and the Examined Life. New York: Free Press NSE. Corporate Social Responsibility Initiatives of NSE NIFTY: Content Implementation Strategies and Impact. nse India.com/content/research/paper 84. Philanthrocapitalism : http://www.philanthrocapitalism.net/ about synopsis. Post, James E., Lawrence, Annie T., & Weber,

120 / Corporates & Social Responsibility

James. (1999). Business and Society: Corporate Strategy, Public Policy and Ethics. New Delhi: McGraw-Hill. Post, James E., & Mahon, John.(1980). “Articulated Turbulence: The Effect of Regulatory Agencies on Corporate Responses to Social Change”. Academy of Management Review, July 1980, pp.399-407. Ritukumar., Murphy, David F., & Balsari, Viraal.(eds.).(2001). Altered Images : State of Corporate Responsibility in India Poll 2001. Sundar,P.(2000).Beyond Business: From Merchant Charity to Corporate Citizenship Indian Business Philanthropy through Ages. New Delhi: Tata McGraw-Hill. Srivastava, Harish., & Venkateswaran, Shankar.(2000). The Business of Social Responsibility . Bangalore: Books for Change. Sturdivant, Frederick D.,&Ginter, James. (1977). “Corporate Social Responsiveness: Management Attitudes and Economic Performance”. California Management Review, Spring 1977, pp.30-39.

Corporates & Social Responsibility / 121

Stiglitz, Joseph E.(2010). Free Fall :Free Markets, and the Sinking of the Global Economy. New Delhi : Penguin Books. Ward,H., & Fox, T. (2002).Moving the Corporate Citizenship Agenda to South. London : International Institute for Environment and Development (IIED). Weidenbaum, Murray. (1981).”The True Obligation of the Business Firm to Society”. Management Review, September 1981, pp.2122.