corporates and social responsibility - k n ajith

Corporates & Social Responsibility

Corporates&

Social Responsibility

K.N.Ajith

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Corporates and Social ResponsibilityISBN 978-81-8465-225-3

Copyright K.N.AjithAuthors email:[email protected]

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vFOREWORD

Corporate dominance of global trade is neithernew nor recent. Students of Indias history knowthat the East India Company was indeed a globaltrading corporation, chartered in December 1600by Queen Elizabeth I to expand colonial markets.The Company quickly established military andadministrative control over territories in India todominate trade, especially in opium, tea, cotton,silk, and spices. In fact, English imperialism inIndia began as a form of corporate colonialismthat lasted for 100 years following the East IndiaCompanys victory in the Battle of Plassey in 1757.The Government of India Act of 1858 establishedthe British Raj as the English monarchys surrogateto control colonial trade across the Indiansubcontinent.The Dutch East India Company was another mega-corporation that traded in spices with Asia andcolonized Indonesia and parts of Africa. In fact,it established the Cape Colony in South Africa asearly as 1652. To be sure, these mega-corporationswere the architects of colonialism and all the

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suffering that accompanied it in occupiedcountries. Parallels exist with US corporations inCentral America in the 19th century, in examplessuch as the United Fruit Company in Guatemala,where repressive military dictatorships emergedand partnered with the US military to servecorporate interests. The South ManchurianRailway Company did the same for Japaneseimperialism in China. As the great Chilean PoetPablo Neruda wrote:

United Fruit Co.

When the trumpet soundedeverything was prepared on earth,and Jehovah gave the worldto Coca-Cola Inc., Anaconda,Ford Motors, and other corporations.The United Fruit Companyreserved for itself the most juicypiece, the central coast of my world,the delicate waist of America.It rebaptized these countriesBanana Republics

General Smedley Butler (1881-1940) of the USMarines, a two-time winner of the CongressionalMedal of Honor, and author of the famous book

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War is Racket (1935), in a speech in 1933,described himself as a...

high-class muscle man for big business, for WallStreet and the bankers. I helped make Mexicosafe for American oil interests in 1914 and Haitiand Cuba decent places for the National CityBank boys. I helped purify Nicaragua for theInternational banking house of Brown Brothersin 1909-1012. In China I helped Standard Oiloperate unmolested.

Sadly, very little has changed to this day. In recentyears John Perkins, a global corporate insider andan economist by training, wrote two confessionalautobiographies to assuage his guilt. In TheConfessions of an Economic Hit Man (2005) andThe Secret History of the American Empire: TheTruth about Economic Hit Men, Jackals, andHow to Change the World (2008) Perkins showshow billions of dollars of wealth is transferred frompoor countries using deceptive tools of economicforecasting, predatory lending and unending debtobligations, bloated corporate contracts, bribery,pimping, assassinations, and when those fail, evenmilitary interventions.

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Corporations were also charted by states, for alimited time to serve the common good for aspecific purpose, such as building a rail road or abridge, and once this was done, thosecorporations were dissolved. In the US the SantaClara County v. Southern Pacific Railroaddecision bestowed on corporations rights ofpersons (life, liberty, property, and speedytrial by jury, among others) and freedoms (speech,press, assembly, religion and others) guaranteedin the first ten amendments (known as the Billof Rights) to the US Constitution. Thosepermitted corporations to enjoy all the rightsof persons without either the responsibilities orthe consequences expected of actualpersons. When you apply standards of humanbehavior to corporations, as the award-winningdocumentary, The Corporation, does throughcase analysis of criminally pathological corporatebehavior and applying the criteria, as psychologistsand psychiatrists do, from Diagnostic andStatistical Manual of Mental Disorders (DSM),conclude that corporations would beunquestionably diagnosed as psychopaths, if theywere persons.

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Corporations are amoral legal entities. Theirprimary function is not to produce goods orservices for consumers. Most importantly, theyare legally obligated to maximize returns for theirshareholders. In fact, the notion of socialresponsibility is not a part of the DNA of corporatestructures. Occasionally, programs of socialresponsibility are put forth as a public relation ployto deal with growing public resentment. Fromtime to time, people had to intervene to rein inthe corporations in from their exploitative practicesthrough legislation to control their powers, suchas the break-up of Standard Oil followingpassage of the Sherman Anti-trust Act in the US.There is a movement to abolish corporatepersonhood and return to a time when they weremere legal instruments to serve the public good.Yet, if we look back at history, the notion ofcorporate social responsibility appears to be anoxymoron.In this book, Ajith , after conducting a survey ofcorporate executives in Chennai, gives a glimpseinto how these functionaries view CSR. Hisfindings make clear that there is very littleunderstanding of CSR and imply that CSR is still

xviewed in traditional terms of providing educationand health care. While those services may earnthe goodwill of people in their communities, theyare also largely self-serving. Although such CSRprograms may provide companies with a healthyand educated workforce, they also serve as apublic relations strategy to bolster the companiesimage.

Capitalists like Warren Buffett realize the imminentpolitical, economic, and ecological dangers ofaccumulating unlimited wealth in few hands. Theyhave much to lose when there is an apocalypticcollapse. The recent global economic meltdown,barely rescued by the U.S. tax-payer bailout ofgiant corporations like AIG , Solomon Brothers,Citibank, Bank of America and huge mortgagecompanies like Freddie Mac and Fannie Mae, wasa clear indication of the extent of economic risk.Capitalism is unsustainable economically if itimpoverishes the working class that forms the bulkof its consumers. When it impoverishes largesections of the population, as Ajith observes aboutIndia, capitalism inevitably leads to politicalturmoil.

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The rise of politically destabilizing Naxals in ruralareas of 22 states in India, and the recent electoralvictory of the Maoists in the adjoining country ofNepal after a protracted armed struggle, have notescaped the attention of some shrewd capitalistsand perceptive politicians . The question iswhether 0.2 to 2 per cent of money that isrecommended by Karmayog for CSR is adequate.I am afraid that the answer is definitely no. Nationstates do redistribute wealth, often to those whocontrol it. In India, corruption has been a long-lasting practice of controlling the nation state.Obviously, the poor who form the majority donot have the means either to control the nationstate or to use it as a means of redistributing wealthin its favor.Finally, can mother EarthBhoodevi Laxmibearan unrelenting assault on her capacity for capitalistaccumulation that knows no limits? The severesickness and feverglobal warming, that the EarthGoddess is suffering is alarming, and she begs usto heal it. The CSR initiative in India is certainly aresponse that parallels Kyoto and other feebleprotocols by the nations of the world. We, indeed,

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are consuming ourselves out of existence, aparadox that calls to mind a Zen Buddhistmeditation imagery of a snake coiled in a circlebeginning to eat its tail in four quadrants of awindow; in the second, it had eaten a fourth of itslength, in the third, three fourths, and the lastquadrant, was blankthere was no snake. Thatpicture did not make any sense to me until I readabout how we are destroying the planet in pursuitof insatiable profits and consumption. Certainly,there is much wisdom in the nursery story Iremember about the greedy farmer who killed thegoose that laid golden eggs.Given the environmental degradation andenormous poverty that still victimizes the majorityof the population in India, as author Ajith urges,CSR has to emerge beyond its current charitableframework and look toward how corporations canchange their structure to reduce environmentaldegradation, growing inequalities, poverty, andhunger. Paradoxical as this task is given the logicof capitalist accumulation, there is no escaping it.We will need to set up corporations that are legallybound to improve the quality of air, water, food,

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shelter and quality of life for all or else we will bespeeding toward an apocalyptic doomashamefully short evolutionary life for a speciesthat makes scriptural claims to be the crown ofcreation or as in the ancient Hindu Advaitatradition Aham Brahmasmi.

Dr.Henry J. DSouza,ProfessorGrace Abbott School of Social WorkUniversity of Nebraska at OmahaOmaha, Nebraska, 68182 USA

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AUTHORS NOTE

Ethics in corporate governance; corruption, scamsand black money which plunder public resources;and deficit in governance by the central and stategovernments were in the centre stage of publicscrutiny in 2010. Vigilant press and electronicmedia have incessantly been bringing into publicdomain vital issues, and campaigning vigorouslyfor justice and equity despite being criticized oftenfor trial by media. Many business leaders andpersons of eminence have expressed theirapprehension about the possible negative impacton Indias growth story leaving behind millions ofIndians at the bottom of the economic pyramid.For instance, child mortality in India due tomalnutrition is greater than in sub-saharan Africa.Two key entitlements of the people are educationand health care, both of which are not within thereach of the large proportion of the population.The State appears to prefer the privatization andPPP (public private partnership) modes.Prof.Amartya Sen cautions that prematureprivatization of the education and health sectors

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has the effect of generating both inefficiency andinequality. Corporate social responsibilityinitiatives , therefore, are crucial for sustainablesocial development. As the great scientist AlbertEinstein observed, it is everymans obligation toput back into the world at least the equivalent ofwhat he takes out of it.Corporate social responsibility has become anintegral element of the business lingua. In a shortspan of one decade, CSR has become high onthe agenda of any assessment of corporateperformance. The evolution of sustainablecorporate social responsibility from unstructuredcorporate philanthropy has been demonstrated bythe contribution of many Indian companiesembracing the well-being of a wide spectrum ofstakeholders. At the same time, many companiesare indifferent to their mandatory and moralresponsibilities towards society and theenvironment.As part of my professional education, I was placedin a child care institution for practical training whichis normally unconventional for a managementoriented education. This phase of my training

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helped me acquire values, skills and attitudetowards working with the disadvantaged.Subsequently, I joined a corporate group with astrong social orientation as a management trainee.As I grew up in the profession, the variousexperiences motivated me to undertake a researchstudy on CSR. On the advice of my HRcolleagues, I am bringing this out as a book, which,I am aware, is only a small addition to the field ofCSR research.During the various stages of my research studyand bringing out this book, there were well wisherswho helped and encouraged me. I am grateful toDr.K.Balasankaran Nair, Professor of Sociology,Madurai-Kamaraj University, for his guidanceduring this research. The executives, who wereselected for the study and the companies werevery co-operative. I express my deep sense ofgratitude to them.It is a privilege that Prof. Henry DSouza haswritten the Foreword. A well-known social analystand academic, Prof.DSouza spared time to readthe text of my beginning attempt and to offer usefulcomments. He has always been my well-wisher

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and I am deeply touched by his support.My father Dr.T.K.Nair has been my continuoussource of strength and motivation that enabled meto complete the research project and this book.My sister Minii worked hard in collectingsubstantial information for writing this book. Shealso did the strenuous type-setting of themanuscript. I am indebted to her. I owe a greatdeal to my wife Deepti and our son Aditya whohave been bearing the brunt of my long hours ofwork patiently. My mother Thankam has alwaysbeen a gentle motivator and I am beholden to her.

Chennai K.N.AjithFebruary, 2011

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CONTENTS

Foreword v

Authors Note xiv

Corporate Social Responsibility 1

The Setting and the Methodology 24

Corporate Executives and 42Their Perceptions

CSR and A Just Social Order 83

Bibliography 117

1CORPORATE SOCIAL RESPONSIBILITY

SOCIETY AND BUSINESSA growing global population needs to be fed,clothed, housed, educated, protected againstdiseases and otherwise supported. It is difficultfor the affluent to imagine the widespread povertyand squalor found in numerous countries. Lifespan is short, diseases rampant and malnutrition aconstant threat for millions of people in manycountries. The majority of the people in the worldlive much closer to the margin of existence thanthose in the advanced nations. These people lookto business for help in boosting their livingstandards. Involvement by business would helpsolve difficult social problems, thus creating abetter quality of life. Business provides equalopportunity through jobs and as a result a multipliereffect may occur to improve other areas of lifealso. Business also benefits from a better socialenvironment. The firm that is most responsive to

2 / Corporates & Social Responsibility

improvement of a communitys quality of life willas a result have a better community in which toconduct its business. This multiplier effect isillustrated below (Davis and Frederick, 1984).

Business and society, taken together, consist ofan interactive system. Each needs the other. Eachcan influence the other. They are intertwined socompletely that an action taken by one willinevitably affect the other. The boundary linebetween the two is blurred and indistinct. Businessis part of society, and society penetrates far and

Social Needs

Business Response

Social Benefits

Secondary Benefits

Better Quality of Life

Corporates & Social Responsibility / 3

often into business. Business is involved withsociety in two basic ways. Its primary relationshipis economic and arises out of producing goodsand services. A secondary relationship withsociety occurs when these economic activitiescreate social impacts such as pollution or industrialaccidents. These primary and secondaryrelationships make up an interactive modelof business and society (Davis and Frederick,1984).

ORIGIN OF CORPORATE SOCIAL RESPONSIBILITY(CSR)Charity has been an integral part of the Indiansocial tradition motivated by both religious andaltruistic considerations. Hindus worship GoddessLakshmi, the Goddess of Fortune, who is alsobelieved to be the Mother of the Universe. Thewealthy, who are blessed with wealth by theGoddess Lakshmi, are expected to share theirwealth with the needy. This is the path of dharma.The trading communities in India have beentraditionally charitably disposed. Rich businessfamilies built temples, dharmasalas with food andshelter for pilgrims in many religious sites, and


orphanages for the indigent. The Birlas, forexample, are known for their temples in many cities.The richest deity Lord Venkateswara in Tirupathireceives offerings every day in the form of gold,jewellery, diamonds, platinum and huge sums ofcash from business groups and individuals. Theofferings are utilized for a variety of educational,social and other humanitarian causes. Charitablecontributions with religious motive by businessfamilies, however, cannot be considered corporatesocial responsibility.Sundar (2000), philanthropy researcher, traces thehistorical evolution of corporate citizenship frommerchant charity. Merchant charity has been inexistence in India even before the advent ofindustrial revolution and it has been largely a storyof family business groups. CSR, as is understoodnow, was pioneered by the Tatas. JamsetjiNusserwanji Tata not only founded the Tata Steel,but also created the city of Jamshedpur thatcreated 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 in1920 for employees social security. Prestigious


academic institutions like the Indian Institute ofSocial Sciences and the Tata Institute of SocialSciences are the creations of the Tatas.During the Independence movement, MahatmaGandhis philosophy on trusteeship becamepopular:

Supposing I have come by a fair amount of wealth- either by way of legacy, or by means of tradeand industry - I must know that all the wealthdoes not belong to me; what belongs to me isthe right to an honourable livelihood, no betterthan that enjoyed by millions of others. The restof my wealth belongs to the community and mustbe used for the welfare of the community.

Gandhijis influence prompted various Indiancompanies to play active roles in nation buildingand promoting socio-economic developmentduring the twentieth century through donations,community investments in trusts, and provisionof essential services such as schools, infirmaries,etc.

Robert Owen (1771-1858), most probably, is thepioneer of CSR as it is understood now. Born inWales, Owen demonstrated at New Lanark CottonSpinning Mills (Scotland) management policies


that are recognized as precursors of the moderntheories of human resources management andethical business practices. Under the leadershipof Robert Owen, one of the founders of socialismand co-operative movement, the cotton mills andthe village of New Lanark became a modelcommunity. Creation of a better society for allwas the driving ambition of Robert Owen. In theUnited States, the idea of corporate socialresponsibility appeared around the turn of thetwentieth century. Corporations came under attackfor being too big, too powerful, and guilty ofantisocial and anticompetitive practices. But someof the wealthier business leaders like steelmakerAndrew Carnegie became great philanthropistswho gave much of their wealth to educational andcharitable institutions. The king of steel AndrewCarnegie (1835-1919), one of the richestentrepreneurs of his time, sold his assets and gaveaway his enormous fortune to educational,scientific and cultural institutions. The famousCarnegie Foundation was founded in 1905.Automaker Henry Ford (1863-1947) developedpaternalistic programmes to support therecreational and health needs of the employees of


Ford Company. Henry Ford and his sonestablished in 1936 the Ford Foundation, whichis a philanthropic institution for advancing humanwelfare in the world.As a result of the early ideas and action, two broadprinciples emerged. These principles have shapedbusiness thinking about social responsibility duringthe twentieth century and are the foundation stonesfor the modern idea of corporate socialresponsibility (Post, et al, 1994). The first is thecharity principle, the idea that the wealthiermembers of society should be charitable towardsthose less fortunate. It is a very ancient notion.Royalty through the ages has been expected toprovide for the poor. The same is true of thosewith vast holdings of property from feudal timesto the present. When wealthy industrialists reachedout to help others, they were accepting somemeasure of responsibility for improving theconditions of life in their communities. Before long,the community needs outspaced the riches of eventhe wealthiest persons and families. When thathappened, beginning in the 1920s, much of thecharitable load was taken on by business firms


themselves rather than by the owners alone. Thesymbol of this shift from individual philanthropyto corporate philanthropy was the communitychest movement in the 1920s in the United States.The co-operative organization of citizens andsocial welfare agencies, also known as the UnitedFund, took the name community chests andcouncils in 1927 and the present name is UnitedWay.

The stewardship principle is the secondprinciple. Many corporate executives seethemselves as stewards, who act in the interestsof the general public. Although their companiesare privately owned and they try to make profitsfor the stockholders, business leaders who followthe stewardship principle believe that they havean obligation to see that those who are in needbenefit from the companys actions. Accordingto this view, corporate executives have been placedin a position of public trust. They control vastresources whose use can affect people infundamental ways. Because they exercise this kindof crucial influence, they have a responsibility touse those resources in ways that are good not just


for the stockholders alone, but also for the societyin general. In this way, they have become stewardsfor society. As such, they are expected to act witha special degree of social responsibility in makingbusiness decisions.

DEFINITIONSSocial orientation of corporate organizations is anevolving ideology. It is also known as corporatecitizenship. Three concepts arose about the socialperformance of companies since the beginning ofthe twentieth century. During the 1950s and 1960s,the concept of corporate social responsibilitybecame popular. The concept of corporate socialresponsiveness emerged during the early 1970sfollowed by the concept of social rectitude duringthe mid-1970s (Frederick, 1987). All theseconcepts now exist side by side. Corporate socialresponsibility (CSR) is the widely popular conceptglobally.Corporate social responsibility defies an objectivedefinition. Definition of CSR is based on thegeneral social expectations and the ideologicalstance of those who define. Carroll (1991) explains


CSR through the pyramid of social responsibilitywith four stages: economic, legal, ethical andphilanthropic. Economic responsibility expectsbusiness to perform in such a manner that itmaximizes earning per share and remains asprofitable as possible. The legal responsibilitydemands that the conduct of business should bein conformity with the laws, and the national, stateand local regulations as a law abiding corporatecitizen. The ethical responsibility is adherence tonormative rules, justice and fairness, which maynot have been codified as law, but are expectedby society. The philanthropic responsibilityincludes being a good corporate citizen such thatthe business gives back to society and the variousstakeholders by undertaking activities andprogrammes that lead to human welfare. Butphilanthropy is the discretionary function ofbusiness.Holme and Watts define corporate socialresponsibility as the continuing commitment bybusiness to behave ethically and contribute toeconomic development while improving the qualityof life of the workforce and their families as well


as of the local community and society at large.CSR to Ward and Fox (2002) is environmental,social and human rights based impacts andinitiatives of companies.Researchers have found that companies respondto external social change in different ways. Post(1980) categorizes these ways into threeapproaches: (a) an adaptive strategy, (b) aproactive strategy, and (c) an interactive strategy.The first strategy is usually adopted after somesignificant social change is already under way. Thefirm then tries to adapt to a change in itsenvironment that it may not have anticipated.Often, company practices will be modified onlyafter strong pressures are applied. Proactivecompanies are a step ahead of those that merelyadapt in a reactive way, because they understandthe need to get on top of the changes that areoccurring in their environment. Such companiestry to manipulate the environment in ways that willbe to their own advantage; and these steps mayor may not be in the broader public interest. Whena company is able to anticipate environmentalchange and blend its own goals with those of the


public, it has adopted an interactive strategy. Aninteractive strategy promotes harmonious relationsbetween a firm and the public by reducing the gapbetween public expectations and businessperformance. Post concludes that in the long runan interactive strategy will bring greater, morelasting benefits for both business and society.Any organization and executive must seek to jugglemultiple responsibilities as shown in the figurebelow (Post, et al, 1994). Business has challengesin managing its economic responsibilities to itsstockholders, its legal requirements to societallaws and regulations, and its social responsibilitiesto various stakeholders. Although these obligationsmay conflict at times, a successful firm is one forwhich management finds ways to meet each of itscritical responsibilities and develops strategies toenable these obligations to help each other.

Economic

Responsibility

SocialResponsibility

Legal

Responsibility


CSR: PROS AND CONSThough social responsibility of business canbenefit both the business and stakeholders of thefirm, there are arguments against corporate socialresponsibility. The views against corporate socialresponsibility are that it lowers profit, imposesunequal costs among competitors, introduceshidden costs passed on to stakeholders, andrequires social skills which business may lack.Perhaps the most powerful argument against socialinvolvement is the classical economic doctrine ofprofit maximization presented by Adam Smith in1776, which has influenced economic thoughtsince that time (Davis and Frederick, 1984). AdamSmith in his book An Enquiry into the Natureand Causes of the Wealth of Nations launchedthe economic doctrine of free enterprise. He isconsidered the father of economic liberalism. Thepublication of his book in 1776 coincided withthe Declaration of Independence of America. Thebook provided the theoretical framework of freemarket. Accordingly, business is most sociallyresponsible when it attends strictly to its economicinterests and leaves other activities to other


institutions*. Nobel laureate Milton Friedman(1971), an outstanding economist and a majorproponent of this point of view, asserts as follows.

A corporate executive is an employee of theowners of the business. He has directresponsibility to his employers. Thatresponsibility is to conduct the business inaccordance with their desires, which generallywill be to make as much money as possible whileconforming to the basic rules of the society.Insofar as his actions in accord with his socialresponsibility reduce returns to stockholders, heis spending their money. Insofar as his actionsraise the price to customers, he is spending thecustomers money. Insofar as his actions lowerthe wages of some employees, he is spendingtheir money.

The unbridled market forces of the capitalisteconomy do not deliver the goods in a fair manneraccording 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 considerablepart of his income to charitable activities.


Keynesian economics influenced the fiscal policiesof many capitalist governments for the cause ofsocial liberalism. According to Friedmans line ofreasoning, if executives use resources for socialpurpose, they are in effect spending other peoplesmoney without those people having a voice in thedecisions made. The strong counter argument isthat business should be socially responsiblebecause responsible actions are right for their ownsake. As stated by Goodpaster and Mathews(1982), A corporation can and should have aconscience. The language of ethics does have aplace in the vocabulary of an organization. Itfollows that if business insists on avoiding socialresponsibility, then other groups gradually maytake its social power away. This idea may beexpressed as the Iron Law of Responsibility.In algebraic terms the law states that for a longperiod of time, if Power/Responsibility is greaterthan one, social forces eventually will arise toreduce power until there is an approximationof Power/Responsibility = 1 (Davis andBlomstrom,1966).Economic profit is basic to business success.


Business uses economic resources, and if theseresources are wasted, both society and businessare adversely affected. In business, economicoutputs have to exceed inputs. If they do not,business cannot make profit and societysresources will be wasted. Business has to be botheconomically and socially productive. Thebusiness that achieves both the objectives is theone that will be immensely stronger and betteraccepted by society. The difficult task of businessis to balance economic and social outputs inaccordance with the priorities of each society inwhich it operates. The public expects business tobe part of the community and to act responsiblytherein. But this does not change the basiceconomic mission of business, because societystill expects business to provide economic goodsand services efficiently. What is happening is thatnew social constraints are being placed on businessto assure that it responds to the needs and socialgoals of a changing society. Business is expectedto respond to both market forces and social (non- market) forces because both of these affectbusiness costs, revenues, profits, and long-runsuccess (Weidenbaum, 1981). To summarize, there


is an increasing recognition that the bottom - lineis no longer Profits only. People, Planet andProfit form the triple bottom-line which stressesthe following: The stakeholders in a business are not just the

companys shareholders Sustainable development and economic

sustainability Analysis of corporate profile in conjunction

with social prosperity.However, a company that undertakes activitiesaimed at communities whether they arephilanthropic or social investment initiatives, butdoes not comply with business basics cannot betermed socially responsible (Srivastava andVenkateswaran, 2000).

REVIEW OF STUDIESFor a long time, the role of business in societyhas been debated in economic literature. But theorigin of the modern debate on socialresponsibility was a book written by HowardBowen and published in 1953. The book, entitled


Social Responsibility of the Businessman, wasdevoted fully to the theme of social responsibilityand how it might apply to business. Bowendiscussed the general economic and social benefitsthat might result from the recognition of broadersocial goals in business decisions. This bookprovided an excellent coverage of a subject thatwas very much undeveloped at that time. As theconcept of corporate social responsibility is stillat the initial stage, Indian studies on corporatesocial responsibility are limited in number andsignificantly, all the studies are conducted after2000.The first major survey on CSR in India was carriedout in 2001 by TERI Europe, the London affiliateof the Tata Energy Research Institute in New Delhi,covering 1212 individuals in five Indian cities Chennai, Kolkata, Mumbai, New Delhi andTiruppur (in Tamilnadu). The study is on theperceptions and expectations of workers,corporate executives and the general publictowards business in India. The survey was thefirst of its kind to include workers in a survey oncorporate responsibility, thereby providing a


broader cross-section of opinion. Five majorfindings emerged from this survey: The information technology (IT) sector is

regarded as the most responsible, and thealcohol and the tobacco industries as the least.

Public expectations of corporations on socialand environmental matters are high and rising.

More trust is placed in the media and non-governmental organizations (NGOs) than inbusiness or trade unions, and global companiesoperating in India are rated low in terms of theirtrustworthiness.

Gender discrimination is a prominent issue inthe workplace.

Workers and management have sharplydiverging perceptions of labour conditionsincluding child labour issues (Kumar, et al,2001).

Another survey was conducted in 2001 by theCentre for Social Markets (CSM), a UK and India-based non-profit organization dedicated topromoting the triple bottom-line. The surveyreport presents a broad brush picture of modern


Indian business perceptions of, and attitudetowards corporate social and environmentalresponsibility. Data was collected online from across section of Indian industry. Companies wereselected from the database of CSM and partnerorganizations, and an Indian business directorywebsite (Indiamart.com). But the report does notindicate the sample size. The survey report statesthat when asked to rank the main factors drivingthe changing attitude towards CSR, the executivesnamed increasing awareness and reputation. Also,over 80 per cent of the respondents feel that CSRis an important characteristic of business success.All respondents say that there is a definite linkbetween corporate citizenship and corporatemight. The government has been mentioned as akey barrier with unclear policies, bureaucracy, lackof proper monitoring, complicated tax system andpoor infrastructure.The National Stock Exchange, in 2003, conducteda survey of 50 companies, out of which only 19companies responded. Including the informationfrom published sources of 11 companies, thesurvey report presents the findings of a total of


30 companies. Areas in which large proportionsof the sample companies are active are educationand training (80 per cent), healthcare (66 per cent),environment (60 per cent), welfare of theunderprivileged sections of the society (57 percent) and rural development (23 per cent). Thereare two surprising results, which emerge out ofthe above analysis, according to the authors ofthe report. None of the companies have said that they are

doing anything actively in the area of religionand spiritual development, while it is well knownthat many companies are doing a lot in this area.One probable reason for this could be that theseactivities are being undertaken by trusts formedspecifically for the purpose, though under theumbrella of the group.

Only less than a half (46 per cent) of thecompanies in the sample have mentioned naturaland other calamities as part of the area in whichthey are active. One would have probablyexpected all companies to be doing their bit inthis area.

The National Stock Exchange survey report cites


another survey of CSR practices in Indiaconducted by CII, UNDP, British Council andPrice 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. Passingphilanthropy is no longer sufficient and manyrecognize that CSR would enhance long-termstakeholder value. Most companies do not have asystematic approach to CSR as well asimplementation of CSR. Most companies lackcomprehension of CSR and capacity to implementcorporate social responsibility.The popular website Indian NGOs.com conducteda survey of 196 companies in 2003, and 58 percent of the companies surveyed are involved inCSR initiatives. An increasing number ofexecutives, particularly in the IT sector, haveexpressed the desire to give back something tothe society, according to the survey. The surveyhas indicated that Indian companies are awareand sensitive of corporate social responsibility,but quite a few executives say that they do notknow what it means. Also, some executives


express their reservations about the need for CSR.The issue that draws most support from Indiancompanies is health with 52 per cent of thecompanies surveyed saying that they supporthealth related issues. Education follows next with50 per cent, while 30 per cent of the companiessupport causes relating to the environment. Thesurvey reveals that many companies have internalCSR policies for issues like disaster management,environment, disability and sexual harassment. Thesurvey concludes that the major obstacles to theimplementation of CSR in India are lack ofawareness and conviction among the corporatemanagers.

Studies on corporate social responsibility are at anascent stage in India. This is a reflection of thestate of CSR among the companies in India ascited in the TERI survey report. The report statesthat a 20-country public opinion survey carriedout by the Toronto-based Environics Internationalin 2001 has concluded that India ranks last in termsof the level of social responsibility demanded fromcompanies.


2THE SETTING AND THE METHODOLOGY

CHENNAI AND CSR INITIATIVESChennai, the first city of South India and capitalof the state of Tamilnadu, owes its genesis toAndrew Cogan and Francis Day of John Companyor the East India Company. They received a grantof 3 square miles of land, about 2 miles north ofSanthome, from Venkatadri Nayak in August 1639and established on it a factory, which was atrading post that grew into the seat of British poweron the Coromandel Coast. The settlement foundedover three and a half centuries ago was known bydifferent names. In 1653, the settlement was namedMadras, which was renamed Chennai in 1996.According to the 2001 census, the population ofChennai was 4.34 million and the area was 174square kilometres. In December 2009, thegovernment of Tamilnadu extended the boundariesof the city by annexing 42 local bodies (9municipalities, 8 town panchayats and 25 villagepanchayats) with an estimated area of 430 squarekilometres.


Chennai, the fourth largest city in India, has beengrowing as one of the most important industrialcentres. It is called the Indian Detroit. Chennai isemerging as Asias automobile capital as it is thehome for seven automajors out of the top twentyglobal automobile manufacturers. It also aims atbecoming a global health hub.Chettiars and Brahmins are two communities thathave contributed significantly for the economicdevelopment of Tamilnadu. Chettiar is a title,commonly used by people of south Indian origin.The linguistic origin of the word is derived fromDravidian usage. One theory is that the root wordis etti that means look up, jump up, or forwardjerk and around simultaneously calling out to sell.Chettiars are known for business acumen andbenevolence to people in need. The community isalso known cuisine. Many castes of different ethnicorigins use the title chettiar today. The foremostin Tamilnadu are the Nattukottai chettiars orNagarathars, who are ethnically Tamil andoriginated from the Nattukottai region. TheNagarathar community has nine clan temples. TheNagarathars first settled around the Ilayathankudi


clan temple after migrating from Cholanadu toPandyanadu in the thirteenth century. AMMMurugappa Chettiar, the eldest son of DiwanBahadur AM Murugappa Chettiar, is consideredto be a leader among the industrialists who enabledthe industrial advancement in South India afterIndependence.Prominent among the business groups inTamilnadu are the Murugappa group and the TVSgroup. The Murugappa group has its origin in 1900,when Dewan Bahadur AM Murugappa Chettiarestablished a money-lending and banking businessin Burma (now Myanmar) which then spread toMalaysia, Sri Lanka, Indonesia and Vietnam. Inthese 100-plus years, it has withstood enormousvicissitudes, including strategically moving itsassets back to India and restarting from the scratchin the 1930s, before the Japanese invasion ofBurma in World War II. The Murugappa group,headquartered in Chennai, is a major businessconglomerate with interests in engineering,abrasives, sanitary ware, fertilizers, finance,insurance, cycles, sugar, farm inputs, plantations,bio-products, and nutraceuticals. It has


manufacturing units spread across many states inIndia. Started more than one hundred years agoas a small family-run business in indigenousfinancing, the Murugappa group is the firstbusiness group in Asia to have been awarded theIMD Distinguished Family Business Award bythe Management Development Institute (IMD),Switzerland.East India Distilleries Parry (India) Limited, knownas Parrys, is the oldest British mercantile namesurviving in Chennai and the second oldest inIndia. EID Parry traces its history to Thomas Parry,who established it in 1788. The junction wherethe business is located came to be known asParrys Corner, an important landmark of thegeography of Chennai for more than threecenturies. Dare House, the headquarters of thecompany at Parrys Corner, was built in the late1930s and named after a dynamic partner J.W.Dare. The company has survived many challengesand it has written a glorious chapter in Indiancommercial history. In 1981, the Murugappa groupacquired EID Parry. But the company retains itsseparate identity.


TVS group is another prominent businessenterprise of Tamilnadu. T.V.Sundaram Iyengar,the founder of TV Sundaram Iyengar andSons group of companies, was born inThirukkurungudi, Tirunelveli district . He startedhis career as a lawyer, then moved to work for theIndian railways and later in a bank. He later quithis job and laid the foundation for the motortransport industry in south India when he firststarted a bus service in the city of Madurai in theyear 1912. During the second World War, whenMadras Presidency faced petrol scarcity,Sundaram Iyengar designed and produced theTVS gas plant. What started as a single manspassion soon became the business of a family.TVS group is currently the largest automobiledistribution company in India. The group operatesin diverse fields like automotive componentmanufacturing, automotive dealership, electronicsand finance. Sundaram Iyengar was also a staunchsupporter of social reform movement. He got hisdaughter T.S. Soundaram, then a teenage widow,remarried under the auspices of Mahatma Gandhi.She became active in the Indian Independencemovement. She, along with her husband, was the


force behind the Gandhigram Rural Institute,which is now a rural university. She was honouredwith a postal stamp by the government of India.Many Tamilnadu-based companies are engagedin CSR activities. Health, education, vocationaltraining and rural community development are themajor areas of CSR. The community developmentprojects generally promote self-help groups ofwomen as key change agents. Srinivasan ServicesTrust and AMM Foundation are two prominentCSR models. Some companies are active in thewelfare of the differently abled. Sakthi Masala andCavinkare are two such companies. Sakthi DeviCharitable Trust, the social welfare arm of SakthiMasala, runs a well-equipped medical centre fortherapy and rehabilitation of special children.Sakthi Masala is a progressive employer ofdifferently abled persons.AMM FoundationThe Murugappa group of companies has beenpromoting social development in Tamilnadu bysetting aside a portion of its annual profits.Nagarathar Chettiars have a tradition calledmahemai, which is a practice of earmarking a


portion of the profits each year by families for theclan temple. The founder of the company set asidea large fund for charity to launch the AMMCharities Trust in 1953, which was later renamedAMM Foundation. The thrust areas of theFoundation are education, health and ruraldevelopment. The Foundation runs four schoolsin and around Chennai, where about 9,000 boysand girls are given education till the seniorsecondary level. These schools are equipped withgood libraries, advanced laboratories and playgrounds. Meritorious students are givenscholarships from primary school to postgraduatelevels.The Foundation started the MurugappaPolytechnic in 1957. It is a government aidedpolytechnic. The institution has a state- of- the -art robotics and mechotronics laboratory. Thegovernment of India, the World Bank and theSwedish government assist the polytechnic. Thepolytechnic, under the project of Canada - IndiaInstitutional Co-operation, trains teachers in diverseareas like management principles, team buildingand human relations. The polytechnic collaborates


with two polytechnics in Singapore for a series ofexchange programmes. The polytechnic is an ISOcertified educational institution training around1,000 students annually.The Foundation has set up four hospitals, onenear Chennai and three outside the city. One ofthem, the Sir Ivan Stedford Hospital, situated inthe industrial belt of Ambattur near Chennai,houses excellent facilities in specialized areas ofmedical care.Shri AMM Murugappa Chettiar Research Centre(MCRC) at Tharamani was founded in 1977. It isrecognized by the Council for Scientific andIndustrial Research, government of India. Thecentre comprises specialists from multi-disciplinary backgrounds ranging from socialsciences to molecular biology. The centre hasgiven training to people including the nomads ofthe Kumaon Hills in Uttaranchal and the fishermenon the Coromandel coast in the fields of fodder,forestry and agriculture. The Foundation hasadopted a number of villages where villagers havebeen encouraged to take up self-help schemes.The MCRC has developed high quality rafts for


de-weeding and insect control in the waterwaysof Chennai. The centre has also reclaimedagricultural land and used it for high densitycultivation of casuarinas*, which is a source oflivelihood for many people. The centre has trainedrural women in the state to grow the spirulina algae,a good source of essential amino acid, vitamins,nutrients and other minerals in their own backyardson a commercial scale. The centre is alsopromoting solar energy, vermin composting,organic farming and the use of micro-organismsin paper making and natural dye extraction. Allthese measures have enabled the organization toearn the prestigious Jamnalal Bajaj Award for ruraldevelopment.Tube Investments of India, the nucleus of theMurugappa group, identified as a trumpcardmaking the poor mans vehicle, the bicycle, for anascent nation in 1949. Another significant socialcontributon of Tube Investments of India is thepromotion of traditional arts. Its subsidiary TICycles and India Foundation for the Arts jointly_______________________

* Casuarina is an Australian tree.


organize festivals to bring alive traditional formsof dance .The festivals travel to different states.Srinivasan Services TrustThe Srinivasan Services Trust (SST) is anorganization founded by Sundaram Clayton Ltdand TVS Motor Company. SST has beenpromoting community development programmesin Tamilnadu and Karnataka. Working throughgrass- root organizations, SST has active presencein 703 villages(as in May 2010). The specificactivities are as follows:

Self-help groups of women and incomegeneration

Health: primary health care and promotionof sanitation

Education: 100 per cent enrolment inschools

Adult education of women Environment: garbage collection from

houses by SHGs. Degradable waste isconverted into vermin compost.

Infrastructure development such as roads,


drinking water facilities, sewage andsanitation, pre-school centres, schools,health centres and community buildings inpartnership with government bodies andlocal communities.

Motivating farmers to adopt modernagriculture practices.

Regular veterinary camps and awarenessprogrammes to introduce modern livestockmanagement 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 comprisingmany corporate groups.The Foundation came intobeing with the proceeds of the sale of the LadyWillingdon Nursing home to Sankara Nethralaya.CWCF has been funding many voluntaryorganizations engaged in health care, healthresearch and education.


The Tamil Nadu government instituted in 2007 theCSR award under the auspices of the departmentof rural development and panchayati raj. Privatecompanies, public sector undertakings and NGOswith a good record in the past five years wouldbe eligible for the award. It is a first of its kindinitiative among Indian states. The CSR awardcarries a cash award of Rs five lakh and a certificateto each company commending the CSR activitiesin different spheres including agriculture, education,womens empowerment and renewable energy.

RATIONALE OF THE STUDYSociety counts on business for employmentgeneration, much of the well-being of thecommunity, the standard of living people enjoy,the tax base for municipal, state and nationalservices, and many other needs. Business is oneof the most powerful institutions in society. Itsinfluence is felt throughout society in education,in government, in the market place, and even inthe home. It moulds many social values. All theseare shaped and guided by corporate executivesand corporate leaders. A societys well - being


depends largely on having a high and rising levelof productivity. A societys productivity dependson how efficiently it uses its resources. If thenatural, human and capital resources arecombined and managed effectively by businessfirms and executives, then societys productivityis high. Corporate executives perform multiplefunctions. They direct an open system and operatein the boundary between an organization and itsenvironment receiving inputs from both and, inturn, receiving outputs as change agent, facilitatorand leader (Davis and Frederick, 1984).

One study in the United States concluded that onlya relatively small number of top managersdetermine major social policies and practices of

Corporate

Executives

O

R

G

A

N

I

Z

A

T

I

O

N

E

N

V

I

R

O

N

M

E

N

T

Output Input

Input Output


corporations. These managers may be narrow andrigid in their views, with the result that their firmsrespond less creatively to social change. Or theymay be insightful and sensitive to social needs, sothat creative, constructive policies are developed(Sturdivant and Ginter, 1977).Socially responsive executives are more likely tomodify their business policies and practices thanthose who discharge their responsibilities only inan economic context. Executives in sociallyresponsible companies consider not only theinterests of their core stakeholders but also theinterests of all the stakeholders. Hence studieson the social orientation of corporate executivesare a necessity. That is the rationale of the presentstudy.

RESEARCH METHODOLOGY

Objectives of the Study To study the perceptions of corporate

executives on corporate socialresponsibility and related issues.

To examine the major developmental issues


and their implications for corporate socialresponsibility initiatives.

Sampling DesignA two-stage sampling design was used for thestudy. At the first stage, companies were selectedand at the second stage, corporate executives wereselected from the sampled companies.Business World, a leading business magazine,conducts annual financial analysis of companiesand ranks 500 biggest public limited companies,both listed and unlisted, in India. The BusinessWorld ranking published in the magazine dated28th February 2005 was the source for preparationof the first stage sampling frame. Business World,in collaboration with the Centre for MonitoringIndian Economy, covered all public limitedcompanies, which were statutorily required to filetheir annual returns with the Registrar ofCompanies. Out of the 500 companies, 26 wereregistered at Chennai, which constituted thesampling frame at the first stage.Out of the 26 companies, five were selectedpurposively for the study; three with a long


tradition belonging primarily to the manufacturingsector and two recently established belonging tothe information technology sector. One of the twocompanies in the information technology sectorexpressed its inability, while the study was inprogress, to spare the time of their executives.Thus the final sample had four companies.The sampling frame at the second stage comprised902 executives in the four companies havingdesignations from Assistant Manager to Vice-President, and a sample of around 100 executiveswas considered statistically sufficient and efficient.Hence it was decided to select around 11 per centof the universe for the final sample. The humanresource (HR) departments of the four companiesadvised against the selection of random samplesbecause of the likelihood of no-response cases.Therefore the quota sampling method waspreferred. Accordingly, around 11 per cent quotaswere fixed for each of the companies and thepersons for administering the questionnaires wereidentified by the HR departments. The totalnumber identified by the HR departments was 102,out of which one did not respond due to heavy


professional commitments. Thus the final samplewas 101.

Table 1

Universe and SampleDesignation Universe Sample Percentage

o fRepresentation

Assistant manager(AM) 406 44 10.8Manager(M) 247 29 11.7Senior manager(SM) 107 13 12.1Deputy general manager (DGM) 63 7 11.1General manager (GM)/ Vice- president (VP) 79 8 10.1Total 902 101 11.2

Research InstrumentsData for the study was collected from both primaryand secondary sources. The primary data wascollected from the sampled corporate executivesusing a structured questionnaire, which was mailedto them. The draft questionnaire was pre-testedon eight executives; two from each company andall of them strongly preferred a brief questionnairebecause of their heavy workload. The HRdepartments also wanted a short questionnaire.The secondary data was collected from the annualreports and information from the websites of thecompanies.


LimitationsCollection of data was a very time consuming task.Many reminders were needed to get the filled-inquestionnaires from the corporate executives.Though a random sample of corporate executiveswas not possible because of valid circumstances,it is a limitation. However, that weakness wascompensated to a great extent by the selection ofan effective quota sample.


3CORPORATE EXECUTIVES AND THEIR PERCEPTIONS

The profile of the corporate executives selectedfor the study, and their perceptions of corporatesocial responsibility and related aspects arepresented in detail in this chapter.

PROFILE OF THE EXECUTIVESRecruitment and other human resourcemanagement practices in industrial and businessestablishments have been undergoing drasticchanges and improvisations. In a highlycompetitive market economy, shortage ofcompetent personnel and increasing attrition ofhuman resources make it imperative for businessorganizations to recruit young graduates withattractive salary and perquisites, preferably throughcampus recruitment. Well-planned trainingprogrammes and challenging career growthopportunities are offered to the young entrants.Attracting talented young persons, identifyingleadership potentials and developing futurecorporate leaders are visible in many companies.


Even family business houses have been becomingincreasingly professionalized in their managementstyles. Therefore, the demographic profile of theexecutives in the corporate organizations isundergoing transition. In the sample selected forthe study, slightly more than 50 per cent are below35. Nearly one third of the executives are in theage group 35-39, while less than one fifth ofthe executives are in the older age group of 40and above. As young executives are in a largerproportion in the companies than those inthe higher age groups, the analysis of data hasbeen attempted by dividing the executives into two

Table 2

Executives by Age and Designation

Age group Designation

(Years) AM M SM/DGM GM/VPBelow 35 42 5 3 1

(95.5%) (17.2%) (15.0%) (12.5%)35-39 2 21 8 2

(4.5%) (72.4%) (40.0%) (25.0%)40 and above 3 9 5

- (10.3%) (45.0%) (62.5%)N 44 29 20 8

(100%) (100%) (100%) (100%)

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


are referred to as older instead of the term senior.The sociological definition of organization as groupeffort is most suited for a company. This groupeffort has been undergoing significant changes instructure and functions. The career growthopportunities in companies have been on theincrease. The relationship patterns have beenchanging from boss- subordinate to a warmlateral relationship, often addressing each otherby first name. The decision making process isbeing facilitated by shared inputs instead of merevertical commands from top to bottom. Seniormangers today are mentors of younger executives.Some companies have introduced reversementoring programmes whereby youngeremployees teach older employees.Normally young recruits join as managementtrainees before being inducted as officers and thenpromoted as assistant managers. Assistantmanager is the first level on the management ladder.Assistant managers and managers form the middlemanagement, senior managers and deputy generalmanagers are categorized as higher levelmanagement, and general managers and vice-


presidents are among the top management. In theearlier period, becoming a general manager waspossible only after many years of service and mostlikely when the person is around fifty. But now,becoming a general manager is common in thethirties. The decision making process today,therefore, is influenced by younger managementpersonnel.Almost all the assistant managers are below 35,while nine out of ten managers are below 40.Among the senior managers and deputy generalmanagers, more than a half are less than 40. Thetop management categories of general managersand vice-presidents have nearly 40 per cent inthe younger age cohort.

OPINION ON FOCUS AREASThe major focus areas of the four companies arepresented below:

Company

Focus Area I II III IV

Education/Vocational training

Health - -

Environment - - -

Rural development -


The executives were asked to mention the CSRfocus areas of their companies. There are threesignificant features of the responses of theexecutives.a) There is confusion among many executiveswith regard to the focus areas of social orientationactivities undertaken by their companies. All thefour companies promote education and /orvocational training, while only about 75 per centof the executives report correctly. All the executivesof company I are aware of this, whereas thecorresponding percentages of the executives inthe other companies range from 65 to 69. Healthis a focus area of companies I and II. At the sametime, only 35 per cent of the executives in companyII have knowledge of this fact. Significantly, allthe executives in company I have information onthis area of their company activity. Environmentprotection is a major concern of companies II andIII. But only slightly more than 50 per cent of theexecutives are aware of this focus area. Ruraldevelopment is a key focus area of threecompanies. But the responses of the executivesare at variance. Only 17 per cent of the executives


in company III and 30 per cent of the executivesin company II are aware of this. However, nearlytwo - thirds of the executives in company I areinformed of their companys rural developmentwork.

b) Often the executives refer to occasionalfinancial or other support given by their companiesfor different causes, when they mention thedifferent areas as focus areas, which actually theyare not.

c) Quite surprisingly, a significant number ofexecutives in all the four companies ranging from13 to 22 per cent report that their companies haveno specific CSR programme, which indeed is adark area of ignorance.

KNOWLEDGE OF POLICYIt is desirable that corporate social responsibilityis part of the stated policies of corporateorganizations to guide their business and socialcommitments. It is also equally desirable that thesepolicies are made known to all the employees,particularly to the executives. Among the four


companies studied, Company IV does not have awell-specified CSR policy, probably due to thefact that the company has been striving hard tomake profit and to establish itself as a viablecorporate unit. But the other three companies haveclear CSR policies. However, two out of everyfive executives interviewed do not know whethertheir organizations have CSR policies or not, whilenearly one - third of the executives assert that theircompanies do not have such policies. It issurprising that in company III, more than 50 percent of the executives fall in the do not knowcategory. These do not appear to be encouragingfindings.

KNOWLEDGE OF DEPARTMENTAt present there does not appear to have a separatedepartment of corporate social responsibility inthe companies in Chennai. Normally, the humanresources department directly or otherwise co-ordinates the CSR programme. It is significantthat one - fifth of the executives say that they donot have any knowledge of the departmentresponsible for promoting CSR activities.


PERCEPTION OF CSRThe common understanding of corporate socialresponsibility among the majority of the executivesis any socially useful activity; 60 per centhave this opinion. A substantial proportion of theexecutives (22 per cent) report that ethical practicesshould be the prime focus of corporate socialresponsibility. Nearly a fifth of the executives (18per cent) stress protection of environment as thekey element of CSR.Socially useful services reported by the executivesinclude the following: Helping the needy sections to have a better

standard of living Providing basic necessities to the

underprivileged 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


Upliftment of society by responding to theneeds of the communities in a systematicmanner

Executives, who advocate ethical practices, saythat the companies should formulate and practisea code of conduct, and aim at achieving a visionfor society. Ethical corporate governance isnecessary to be responsible organizations.Looking after the welfare of stakeholders shouldonly be through ethical means. By adhering tovalues and ethics, the companies would be ableto make a difference to the quality of life of thepeople through their products and services.Executives, who want corporate socialresponsibility to focus on protection of theenvironment, express the following views. Anindustry should not cause damage to theenvironment and as a conscientious company, itshould protect the immediate surroundings. Itshould contribute towards neighborhood andenvironment development. Companies, being anintegral part of society, should accept theresponsibility in creating a cleaner environment andin protecting heritage, culture and nature. There


should be a mutually symbiotic relationshipbetween industry and environment, and causingdamage to the environment intentionally orunintentionally is a violation of human rights.Though in a minority, the views of the executiveson the environmental thrust are commendable.The reasons attributed by the executives to theneed for corporate social responsibility are worthmentioning. Companies derive benefits fromsociety in many ways. So accountability of abusiness organization is towards the society atlarge. Awareness and acceptance of thisaccountability should be the basis of corporatedecision-making process. Many corporatedecisions have a direct impact on the immediateas well as the larger interests of society. Businessinterests need to be combined with communitywelfare. Doing something for people around mayhelp add to the bottom line of a company, butwould not contribute to sustainable benefits to thecommunity.

GROWING AWARENESS OF CSRCorporate social responsibility has been gaining


wider acceptance among the companies in India.Even though the concept is understood in differentways, the corporate executives are aware of thegrowing awareness of CSR. Most of theexecutives (86 per cent) say that there is a growingawareness of corporate social responsibility.Opinion of 14 per cent of the executives thatcorporate social responsibility is not gainingincreased recognition should be taken note ofseriously as this group of executives is eitherignorant of or indifferent to social realities.The major factors that are contributing to thegreater awareness of CSR among the companiesare as follows :a) Competition in the marketb) Rising domestic standardsc) Growing international standardsd) Public opinione) Corporate reputationf) Group pressureThe executives selected for the study were askedto rank the factors in order of importance ranging


from a score of 1 for the least important to a scoreof 9 for the most important. The scores aregrouped into three categories: low, moderate andhigh. Scores 1 to 3 fall in the low category, 4 to 6fall under moderate category and 7 to 9 in thehigh category. The same method of rating andcategorization is followed in the subsequentsections also.a) Competition in the Market

Table 3

Executives by Ranking of Competition in the MarketAge group Ranking

Low Moderate High N

Below 35 20 13 11 44(45.5%) (29.5%) (25.0%)

35 & above 22 11 10 43(51.2%) (25.6%) (23.3%)

Total 42 24 21 87(48.3%) (27.6%) (24.1%)

Fierce competition is the order of the day in thepresent market economy backed by imaginativeadvertisement campaigns, particularly in theelectronic media, as part of the efforts to boostthe sales of products and services. Companiessponsor sports, reality shows and various othercompetitions spending a substantial part of their


income to create a sustainable brand image in ahighly competitive market. Yet nearly a half of theexecutives give a low rating to market competitionas a factor driving to the increased awareness ofcorporate social responsibility. This factor isranked high only by about a quarter of theexecutives, while slightly more than a fourth ofthe executives give moderate rating. This may bebecause of the assumption that competition is anatural feature of free market economy. Theopinion pattern is almost similar among theyounger and the older executives.b) Domestic Standards

Table 4

Executives by Ranking of Domestic StandardsAge group Ranking

Low Moderate High N

Below 35 8 21 15 44(18.2%) (47.7%) (34.1%)

35 & above 14 18 11 43(32.6%) (41.9%) (25.6%)

Total 22 39 26 87(25.3%) (44.8%) (29.9%)

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


market, domestic standards of products have beenon the increase. The market of today has shiftedfrom the sellers market to the buyers market.This shift has propelled the companies to givegreat attention to the constant improvement in thestandards of products and services. Three out ofevery four corporate executives rate increase indomestic standards as a factor of greaterawareness of corporate social responsibility,which includes thirty per cent giving high rating.There is a substantial difference between the twogroups of younger and older executives in therating. While 82 per cent of the younger executivesgive moderate or high rating, only about 68 percent among the older executives give such a rating.c) International Standards

Globalization of capital necessitates continuousupgradation in the standards of products andservices. International Standards Organization andthe Indian affiliate determine globally acceptablestandards securing of which has almost becomea necessity to gain acceptance of the quality ofthe products of companies. Not only thecompanies, but also hospitals, schools, and evenpolice stations value certification of standards as


a mark of respectability. Most of the corporateexecutives (82 per cent) give moderate or high

Table 5

Executives by Ranking of International StandardsAge group Ranking

Low Moderate High N

Below 35 7 21 16 44(15.9%) (47.7%) (36.4%)

35 & above 9 16 18 43(20.9%) (37.2%) (41.9%)

Total 16 37 34 87(18.4%) (42.5%) (39.1%)

ranking to rising international standards as a factorof awareness of corporate social responsibility.The assessment is not at much variance betweenthe younger and the older executives giving higherranking to international standards.d) Public Opinion

Public opinion influences all aspects and facetsof society. Public opinion can make or mar thefortunes of companies. The recently witnessedprotests throughout the country against GM seeds(Bt brinjal) demonstrate the power of publicopinion. More than a half of the corporateexecutives quite naturally rate this factor ofcorporate social responsibility awareness high.


Table 6

Executives by Ranking of Public OpinionAge group Ranking

Low Moderate High N

Below 35 1 14 29 44(2.3%) (31.8%) (65.9%)

35 & above 4 20 19 43(9.3%) (46.5%) (44.2%)

Total 5 34 48 87(5.7%) (39.1%) (55.2%)

Age-wise, the difference in proportions betweenthe younger and the older executives is as high as22 per cent with about two - thirds of the youngerexecutives giving high ranking. Nearly 40 per centof the executives give moderate ranking to publicopinion and the proportion of older executivesrating so is substantially in excess of the proportionof younger executives. The percentage differencein ranking between those in the two age groups issignificantly perceptible.A companys reputation is vital for its existence.All levels of management as well as all employeesare likely to be sensitive to the reputation of theircompany. Associating oneself with a reputedcompany is a matter of great prestige. A goodcompany, which is also socially oriented, has


greater reputation and hence it is natural that mostof the executives give high rating to this factor.e) Companys Reputation

Table 7

Executives by Ranking of Companys ReputationAge group Ranking

Low Moderate High N

Below 35 3 9 32 44(6.8%) (20 .5%) (72.7%)

35 & above - 5 38 43(11.6%) (88.4%)

Total 3 14 70 87(3.4%) (16.1%) (80.5%)

The difference in percentages between the youngerand the older executives is substantial. While 73per cent of the executives in the below 35 agegroup give companys reputation high ranking, 88per cent of the executives above 35 are moresensitive to the reputation of the organization. Thisprobably is because of the longer experience ofthe older executives.f) Group Pressure

The Confederation of Indian Industry (CII) is aninfluential national level organization of Indiancompanies. In addition, there are chambers of


commerce in the states and they are combinedinto Associated Chambers of Commerce andIndustry of India (ASSOCHAM) as well as theFederation of Indian Chambers of Commerce andIndustry (FICCI) as national federations. Thesebodies give guidance and professional support on

Table 8

Executives by Ranking of Group PressureAge group Ranking

Low Moderate High N

Below 35 12 14 18 44(27.3%) (31.8%) (41.0%)

35 & above 8 21 14 43(18.6%) (48.8%) (32.6%)

Total 20 35 32 87(23.0%) (40.2%) (36.8%)

government policies, economic issues, corporatesocial responsibility and other matters, whichare of concern to industrial and businessorganizations. The corporate group pressure,thus, is an important factor influencing increasedawareness of corporate social responsibility.More than one- third of the corporate executivesgive high rating to this factor, and more ofthem are younger executives. A slightly greaterproportion of executives consider group


pressure as a moderately influencing factor ofgreater awareness and the older executives ratingso exceed the younger executives by 17 per cent.Parameters of Increasing CSR AwarenessThe executives, as stated earlier, have identifiedsix drivers that propel increased awareness ofcorporate social responsibility. The ratings of eachfactor by the younger and the older executiveshave also been discussed. This section examinesthe comparative ratings of the six factors basedon mean scores.

The reputation of a company stands out as themost prominent factor causing greater awareness

of corporate social responsibility. Closelyassociated with this factor is public opinion, whichis the second - ranked factor. Rising international

Mean Scores of Factors of Awareness

4.2

5.25.7

6.5

7.5

5.3

0

1

2

3

4

5

6

7

8

Market

competition

Domestic

standards

International

standards

Public

opinion

Corporate

reputation

Group

pressure

Mean

Score


standards is rated third. Group pressure and risingdomestic standards are the next two factors inorder of importance with a very small differencein mean scores. Competition in the market is rankedlast as an awareness - enhancing factor.

STAKEHOLDERSThe interests of many sections of society are atstake when a company comes into existence andstarts growing. Seven main stakeholders areidentified for assessment of the opinions of thecorporate executives.a) Providers of fundsb) Shareholdersc) Employeesd) Unionse) Regulatory bodiesf) Customersg) CommunityIt is significant to understand the perceptions ofthe corporate executives regarding the importancethey attach to the seven corporate stakeholders.


a) Providers of Funds

It is common knowledge that capital is the mostimportant component to establish a businessorganization. Promoters, banks, financialinstitutions and institutional investors are the

Table 9

Executives by Ranking of Providers of Funds

Age group Ranking

Low Moderate High N

Below 1 17 33 51(2.0%) (33.3%) (64.7%)

35&above 2 12 36 50(4.0%) (24.0%) (72.0%)

Total 3 29 69 101(3.0%) (28.7%) (68.3%)

sources of capital inflow. Naturally, more than two- thirds of the executives give high rating to theproviders of funds. This rating is almostindependent of age difference. However, nearlythirty per cent of the executives give only moderateranking possibly because there are other equallyimportant stakeholders in their perception.b) Shareholders

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


investors to major institutions holding a largenumber of shares in a company. The fluctuations

Table 10

Executives by Ranking of ShareholdersAge group Ranking

Low Moderate High N

Below 35 1 14 36 51(2.0%) (27.5%) (70.6%)

35 & above 2 7 41 50(4.0%) (14.0%) (82.0%)

Total 3 21 77 101(3.0%) (20.8%) (76.2%)

in the share market, which are monitored andanalyzed regularly by the media and otherspecialized agencies, make many ordinaryinvestors millionaires and reduce dramatically thefortunes of many others. More than three - fourthsof the executives consider shareholders the high-ranking stakeholders of the company.Shareholders and providers of funds as sourcesof capital do overlap, though there is a differencebetween the two. Age-wise, older executives ratingshareholders high exceed the younger executivesby 11 per cent.c ) Employees

Human resources constitute the backbone of any


Table 11

Executives by Ranking of EmployeesAge group Ranking

Low Moderate High N

Below 35 3 20 28 51(5.9%) (39.2%) (54.9%)

35 & above 4 24 22 50(8.0%) (48.0%) (44.0%)

Total 7 44 50 101(6.9%) (43.6%) (49.5%)

performing company. Motivating and retainingemployees are challenging tasks facing the humanresource managers of the companies. More than90 per cent of the executives consider employeesas important stakeholders of a company withmoderate or high ranking. However, only a half ofthe executives give high rating to employees asstakeholders. An important point in this context isthat younger executives exceed the older executivesby 11 per cent as regards their perception of theemployees as high ranking stakeholders.d) Unions

The perception of employees as individuals is verydifferent from that of employees as members oftrade unions, which are power organizations. Butquite surprisingly two out of every three executives


Table 12

Executives by Ranking of UnionsAge group Ranking

Low Moderate High N

Below 35 42 4 5 51(82.4%) (7.8%) (9.8%)

35 & above 28 10 12 50(56.0%) (20.0%) (24.0%)

Total 70 14 17 101(69.3%) (13.9%) (16.8%)

do not consider unions as important stakeholders.The younger executives giving low rating to theunions constitute a strikingly high percentage of82. There are two significant explanations for thisopinion. One, managing employees has shifted inemphasis from the traditional fire fighting industrialrelations to the employee - centered humanresource management. The younger executiveswith their exposure to the modern managementmethods are justified in not holding unions asimportant stakeholders. Further trade unions havelost much of their sharpness of teeth after theintroduction of economic reforms in India.e) Regulatory Bodies

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


Table 13

Executives by Ranking of Regulatory BodiesAge group Ranking

Low Moderate High N

Below 35 16 22 13 51(31.4%) (43.1%) (25.5%)

35 & above 15 19 16 50(30.0%) (38.0%) (32.0%)

Total 31 41 29 101(30.7%) (40.6%) (28.7%)

But they are indeed crucial stakeholders becausethe way the companies function is a very importantparameter of the economic health of the country.The volatile share market affects the well - beingof investors. More or less equal proportions ofexecutives assign high and low ratings respectivelyto regulatory bodies in their importance asstakeholders. The remaining two- fifths givemoderate ranking to regulatory agencies. Theseratings are shared almost equally by the youngeras well as the older executives.f) Customers

The mantra of the market economy is thatcustomer is the king. There is a well- enforcedlaw to protect the interests of the customers fromdeficiency of services and defective products. The


Table 14

Executives by Ranking of CustomersAge group Ranking

Low Moderate High N

Below 35 2 8 41 51(3.9%) (15.7%) (80.4%)

35 & above 4 9 37 50(8.0%) (18.0%) (74.0%)

Total 6 17 78 101(5.9%) (16.8%) (77.2%)

companies compete with each other to influencethe customers as well as to retain customer loyalty.The executives naturally recognize this reality andmore than three- fourths of the executives givehigh rating to customers as stakeholders. Theyounger executives reporting so are only slightlyin excess of the older executives making highassessment of the customers as stakeholders.Thus the importance given to customers cutsacross age groups.g) Community

Customers are a part of the community. But allmembers of the community are not customers ofthe products and services of a company. Hencethe executives of companies may view thecustomers as differently from the community


Table 15

Executives by Ranking of CommunityAge group Ranking

Low Moderate High N

Below 35 15 27 9 51(29.4%) (52.9%) (17.6%)

35 & above 22 15 13 50(44.0%) (30.0%) (26.0%)

Total 37 42 22 101(36.6%) (41.6%) (21.8%)

because of the selective perception of thecustomers and the community. Consequently, onlyone fifth of the executives give high rating to thecommunity as stakeholders. However two out ofevery five executives give moderate ranking to thecommunity as stakeholders of companies. Ageappears to be associated with these opinions.Interestingly, more older than younger executivesgive low as well as high ranking to the communityas stakeholders.Comparative Ratings of StakeholdersCustomers top the list of stakeholders as rated bythe executives and indicated by the mean scores.Shareholders and providers of funds are the nexttwo major stakeholders according to the ratingsof the executives. These three are almost equally


ranked stakeholders by the executives. Employeesget a close fourth rank in the order of importanceof stakeholders, while the unions are the lowest

ranked among the stakeholders. Regulatory bodiesand the community are ranked fifth and sixthrespectively. The highest rating to the customersis understandable. But the lowest ranking of unionsis a significant pointer of the changing climate ofunion - management relations, and the decliningstrength of unions as power organizations.

ADVANTAGES OF CSRWhen a company undertakes socially usefulprogrammes, the resultant benefits to the companyare many. Image, customer satisfaction, employeeloyalty, capital flow, support of governmentagencies, and increased profit are the major

Mean Scores of Stakeholders

7.1 7.26.5

3

7.4 7.4

4.6

0

1

2

3

4

5

6

7

8

Providers

of funds

Share

holders

Employees Unions Regulatory

bodies

Customers Community

M

e

a

n

S

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benefits, each of which is ranked by the executivesin the succeeding sections.a) Social Image

Table 16

Executives by Ranking of Social ImageAge group Ranking

Low Moderate High N

Below 35 1 12 38 51(2.0%) (23.5%) (74.5%)

35 & above 1 13 36 50(2.0%) (26.0%) (72.0%)

Total 2 25 74 101(2.0%) (24.8%) (73.3%)

Industry is a social system. Companies are,therefore, conscious of their social image. Theperceptions of the various organs of the societytowards a company influence the volume ofbusiness very significantly. The executives wouldbe keen to create a good social image of theircompanies. Consequently, three - quarters rate theadvantage of a positive image high. The rating isshared equally by the younger and the olderexecutives.b) Customer Loyalty

Customer loyalty is a direct function of customersatisfaction of the products and services of a


Table 17

Executives by Ranking of Customer LoyaltyAge group Ranking

Low Moderate High N

Below 35 4 21 26 51(7.8%) (41.2%) (51.0%)

35 & above 11 14 25 50(22.0%) (28.0%) (50.0%)

Total 15 35 51 101(14.9%) (34.7%) (50.5%)

company. The social orientation of a companyneed not imply that the products and services ofthe company are of good quality. That may explainwhy only 50 per cent of the younger and the olderexecutives give high rank to customer loyalty as abenefit. A substantial 22 per cent of the olderexecutives consider customer loyalty as a low-ranked benefit of socially oriented efforts of thecompanies. While 41 per cent of the youngerexecutives feel that customer loyalty is a moderatebenefit, only 28 per cent of the older executivesshare this opinion.c) Retention of Employees

Employee turnover is a serious stress-causingproblem to the companies. So it may be presumedthat a company, which is socially committed, is


Table 18

Executives by Ranking of Retention of EmployeesAge group Ranking

Low Moderate High N

Below 35 10 22 19 51(19.6%) (43.1%) (37.3%)

35 & above 7 16 27 50(14.0%) (32.0%) (54.0%)

Total 17 38 46 101(16.8%) (37.6%) (45.6%)

also likely to be concerned more about the welfareof its employees. However, only less than a halfof the executives give high ranking to retention ofemployees as a benefit of CSR initiatives.Significantly, the older executives giving high ratingto retention of employees are in a majority. Theyconsider retention of employees as an importantbenefit of socially meaningful ac

corporates and social responsibility - k n ajith

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