Transcript Corporate Governance

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Session 5 – Corporate Governance
and Business Ethics
Sunil Budhiraja
What we have covered so far?
• History, Concept, Mechanisms, Shareholder, Stakeholders
• Roles, responsibilities and the interests of shareholders;
problems and their protections
• Bankruptcy system in India
• Decision System, corporate governance for corporate capital,
property rights, legal enforcement, Government Diversity in
US, Japan and South Korea
• Theories, Codes and Guidelines and various Models of CG
Topics to be covered today
• Corporate Social Responsibility; definition; major
responsibilities
• Ethics and Business; Ethical Principles of Business
• Ethics of advertisement and sponsorship
Historic Perspective
• Business activities were very small till 1750
• Two major sectors – Agriculture and Textile –
employed 90 %– small organizations -
• The supportive organizations were also small- cottage
industries
• No responsibility as such for business except that of
earning profit for the promoters
• Joint stock companies are only for commercial
activities
• Industrial Revolutions changed everything
Changes due to Industrial Revolution
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Shift of power from land lords to industrialists
Working conditions were very poor
Economy as whole grew very fast
The governments supported the industrialists as they brought in money
Labors were totally ignored
No support from community (as in the case of agro labor)
Governments focused on law and order rather than plight of employees
The issues like customer protection and environmental issues were nonexistent.
Second industrial revolution
1875 - 1910
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Electricity
Telephone and wireless
Diesel engine
Air plans
• Industrialization continued – Led to the birth of
communist regime
• Very big firms in USA- Standard Oil, AT&T – near
monopoly
• Anti trust laws- Sherman antitrust law -1890
• WW – I and WW – II happened
Corporate Social Responsibility
According the Keth Devis –
“Corporate Social responsibility refers to the
businessmen’s decision and actions taken for reasons
at least partially beyond the firm’s direct economic
and technical interests”
Corporate Social Responsibility is only about two aspects:
1) Reducing the Negative Effects: Steps taken by a company to neutralise,
minimise or offset the harmful effects caused by its processes and productusage
2) Increasing the Positive Contributions: Further steps by a company using
its resources, core competence, skills, location and funds for the benefit of
people and the environment
Easy everyday examples of
social responsibility
Type of Organisation
Examples of socially responsible activities
Movie Theatre / Multiplex
/ Malls
- Screening of NGOs films
- Special shows for underprivileged groups
- Offering table space for NGOs
- Adopting a nearby garden / open space and maintaining it
Private Hospitals
- Encouraging citizens to help accident victims by taking care
of legal aspects of accidents / emergency cases
- Providing free medical treatment to the poor
Hotels and Restaurants
- Donate excess food responsibly to NGOs / citizens.
- Compost organic waste
Media (TV, print, radio)
- Telecast/print profiles and achievements of NGOs / citizens
- Telecast/print social service messages along with
advertisements
- Dedicated section on social & developmental issues, and
for citizens’ dialogue / feedback
Triple Bottom Line and CSR
• TBL is a concept whereby a company will have to look at not just where
the company should deploy its profits but how it made its profits in the first
place .This implies looking at impacts on all its stakeholders which in
essence is the base of CSR
Pyramid of CSR
Corporate Social Responsibility (CSR)
Carroll’s Four Part Definition
Understanding the Four Components
Responsibility
Economic
Societal
Examples
Expectation
Required
Be profitable. Maximize sales,
minimize costs, etc.
Legal
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Obey laws and regulations.
Ethical
Expected
Do what is right, fair and just.
Discretionary Desired/
(Philanthropic) Expected
Business and Society: Ethics and Stakeholder Management, 5E • Carroll & Buchholtz
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved
Be a good corporate citizen.
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Corporate Social Responsibility (CSR)
Stakeholder View
Stakeholder Group Addressed and Affected
CSR
Component
Economic
Owners ConEmployees Community
sumers
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Others
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Legal
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Ethical
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Philanthropic
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Responsibilities towards shareholders
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Make money/ wealth …..
Participation in decision making ….
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Towards Employees
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Fair treatment
No discrimination
Fair Salary
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Towards Customers
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Quality products
Reasonable price
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Towards Community
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Environmental protection
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Towards Community
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Environmental protection
Optimum utilization of natural resources
Not to make losses
Fair trade practices
Local Development
Quality of life
Development of surrounding areas
Quality products
Infosys Foundation
• Founded in 1996 - Promoted by Infosys Technologies
Limited,
• The Foundation began its work in Karnataka, India,
gradually extending its activities to the states of Tamil
Nadu, Andhra Pradesh, Maharashtra, Orissa and
Punjab. Now it is planning to expand in Gujarat
Infosys Foundation -Focus
Healthcare
Social rehabilitation and rural upliftment
Learning and education
Art and culture
Infosys Foundation - Healthcare
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constructing hospital wards,
donating hi-tech equipment
organizing health camps,
Distributing medicines to economically-weaker
sections in remote areas.
Infosys Foundation Rural Upliftment & Social Rehabilitation
• Annual melas to distribute equipments and products
for self employment for destitute (poor) women
• Building Orphanages
• Funding programs of Governments/NGOs in rural
markets
Infosys Foundation –
Learning and Education
• Donating furniture, books and computers to schools
in villages
• donations towards the reconstruction of old school
buildings
• Setting up libraries in rural areas
Infosys Foundation - Arts
• identifying under-privileged artists from different
walks of like, be it writers, painters, poets or
musicians, who don’t have access to contacts or help.
It assists them on a “need” basis, offering financial
assistance, promoting their art, or helping them
receive much-deserved recognition
ITC
• Tobacco major and presence in FMCG, Hotels, Paper
and Fashion products sector
ITC
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e-Choupal
Social & Farm Forestry
Watershed Development
Women's Empowerment
Livestock Development
ITC - e-Choupal
• 4 million farmers empowered,
6,500 e - Choupals installed
By 2013
• 10 million farmers to be empowered
20,000 e - Choupals to be installed
ITC
Social & Farm Forestry
• 84,000 hectares greened,
generating 35 million person - days of employment
By 2013
• 100,000 hectares to be greened.
47 million person - days of employment to be
generated
ITC
Watershed Development
• More than 38,000 hectares brought under soil and
moisture conservation
By 2013
• 56,000 hectares to be brought under soil and
moisture conservation
ITC
Women's Empowerment
• Over 16,000 women members
984 self - help groups
By 2013
• 20,000 women members
1,500 self - help groups
ITC
Livestock Development
• 103 Cattle Development Centres
2060 villages covered annually
By 2013
• 150 Cattle Development Centres
3,000 villages to be covered annually
Ethics and Business
• What is Ethics?
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Morality ??
Moral principles ??
Moral values ??
Rules of Conduct ??
Golden Rule of Ethics
"Treat others only as you consent to being treated in the
same situation."
Ethical Principles in Business
• Teleological Ethical System – By measuring the
consequences and the outcomes of the decisions
• Deontological Ethical System – By measuring the
process of the decisions
Ethics and Marketplace
Quote some unfair practices in marketplace related to
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Price discrimination
Quality of product
Regional discrimination
Capitalist injustice
Market monopoly
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Ethics in Advertising