Download WHY THE SOCIAL RESPONSIBILITY OF BUSINESS?

CORPORATE CITIZENSHIP
VIS-A-VIS
CORPORATE SOCIAL RESPONSIBILITY
Zeenat Jabbar
OBJECTIVES
Corporate social responsibility (CSR) is an integral part of
corporate governance. Promoting common welfare
programmess, protecting stakeholders’ interests,
exhibiting social concern, sponsoring social and
charitable causes and supplementing States’ efforts in
community development programmess are all areas
where corporates have a role to play. This chapter
defines CSR and explores the possible areas where
corporates can exhibit their social activism.
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OUTLINE
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Introduction
Definitions of Corporate Social Responsibility (CSR)
Justification of CSR
The Scope of Social Responsibility
Social Responsibility and Indian Corporations
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CONFLICTING TRANSPECTIVES
“The Business of Business is Business.” Narrowly
interpreted, it would mean that corporations have only
one responsibility, the single-minded pursuit of profit.
"Profit maximization by the maximization of efficiency is
the most socially responsible way of conducting
business.” This implies making quick money, with an
utter disregard for the responsibility of business towards
society. This limited view of business proves to be
counter productive in the long run.
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But on the other hand, the long range view of
business, which would imply aiming at the long term
gains rather than at quick returns, would take into
account the important dimension of social
responsibility.
The ethical and social behaviour of corporations
leads to their good reputation which is essential for
the generation of the ultimate “Profit”.
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As James Burke, the chairman of the well-known
consumer product and pharmaceutical company,
Johnson & Johnson, states, “I have long harboured
the belief that the most successful corporations in
this country, the ones that have delivered
outstanding results over a long period of time, were
driven by a simple moral imperative, namely
serving the public in the broadest possible sense
better than their competitors.”
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If we are to compete effectively in the global
market place, corporations must take a long, hard
look at their values, practices and assumptions.
They need to question their accepted modes of
behaviour, promulgate new values and set up new
standards of conduct which will be openly held and
shared within the corporation and proclaimed to
the outside world.
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ACCOUNTABILITY TO SOCIETY
There is yet another reason why corporations should be
conscious of their ‘social responsibility’. In a democratic
society any kind of enterprise exists for the sake of
society. If private enterprise is justified and allowed to
exist, it is because it is seen to contribute better to the
common good than public enterprise. It produces better
goods and functions more efficiently thanks to the
encouragement given to individual initiatives. Private
enterprise is not encouraged because individuals may
accumulate wealth for their own exclusive and selfish
benefit at the expense of the public.
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Industries are allowed to exist because they are
perceived by the public to be useful in the attainment
of the personal, social and material goals of people. It
is because of this ethical perception, that the
employees of TISCO and the general public protested
in 1977 when George Fernandes attempted to
nationalise TISCO. On the other hand, when the public
perceives that certain corporations do not function in
the general interest of the nation, it does not object to
their take over by the government, as happened in the
nationalization of the coal fields, the oil industry and
the Indian Copper Corporation. Since the corporations
exist for the sake of the public, they are accountable
to the public and have a social responsibility.
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CORPORATIONS HAVE A DEBT TO PAY TO
SOCIETY
Corporations, whether public or private, draw much
from society. No corporation is an island by itself! It
depends on society for a developed infrastructure
such as roads, water supply, electricity and an
educated work force. It also depends on society for
the maintenance of law and order, for transport
facilities and for its reaching out to its customers
through the mass media. Finally, all the consumers
of its finished products are drawn from society.
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If a corporation draws so much from society it has to
make its own contribution to society. In the first
place, a corporation has to behave as a good
citizen. This is to be shown in the faithful and full
payment of taxes, the observation of all laws and
perhaps even going beyond the law in the matters
of pollution, of standards of operational and product
safety, and energy and resource conservation. The
corporation has to donate generously towards
causes of public welfare and must get itself directly
involved in social welfare programmes.
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It is because of these aspects of social responsibility
and public accountability that corporations have to
consider not only the interests of its shareholders but
also those of the workers, consumers, suppliers, the
government and the general public who are its
stakeholders. In short, corporations because of their
social responsibility have to consider themselves
the custodians of public welfare.
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SOCIAL RESPONSIBILITY OF BUSINESS IS
UNDERSTOOD IN DIFFERENT WAYS:
• The social status which people enjoy, the social
groups to which they belong and within which they
have grown and from which they have initially
received their value system, deeply influence and
not infrequently, determine their understanding of
social responsibility. This is true of the business world
as well.
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JRD Tata outlined the ethos tradition of the Tatas in
his key note address at the inauguration of the Tata
Foundation for Business Ethics in these terms:
"The Tata industrialist ethos is inherited from the
great Jamsetji himself, who tried to combine high
standards and quality production with sincere
concern for ethical values such as fair and honest
management, product quality, human relations in
industry and industrial philanthropy."
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(I)
SOCIAL RESPONSIBILITY AS ABIDING BY
RULES AND REGULATIONS
In common practice, however, the concept of
ethical responsibility is restricted to the observance
of rules and regulations that govern business
transactions. Such a concept sis widely accepted
since it facilitates a smooth running of business. It
demands conformity with the accepted norms and
interpretations of the laws dealing with business
activity.
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(II)
SOCIAL RESPONSIBILITY AS
PHILANTHROPY
• “Philanthropy has always been the reflection of a society because on it
depended a division between givers and poor recipients. The wealthy have
not only given because they have more; but because by alleviating distress
they have secured their own position against those who might displace
them.”
• Philanthropy by big business is generally exercised through, "Foundations".
Such philanthropic activity not infrequently adds to the prestige of an
organization, builds up a humanitarian image among the public, and more
importantly, widens the organization's influence to fields which often are of
vital importance to the business world. In fact, some research studies have
found that "the major Foundations, function as public rather than private
institutions. Inevitably, they have become one of the major institutional forces
in modern society. In particular, their influence is of increasing importance in
the determination of educational policy, the goals of research in all fields and
the direction of thinking in international affairs.
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Ford, Rockefeller and Carnegie have been key
investors in the growth and development of higher
education institutions, think tanks and research centers
around the world. Indeed, The Ford Foundation has
been described as the world's largest investor in new
ideas. They are architects of international networks of
scholars and agencies involved in the production and
dissemination of knowledge. Through these institutions
and networks they have been in a unique position to
influence cultural and social policies on an
international scale.
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(III) SOCIAL RESPONSIBILITY AS CREATION OF
WEALTH
• Rev. John Mahoney, Dixon Professor of Business Ethics and
Social Responsibility at London Business School tends to
see in the very activity of a business organization
something beneficial in itself for society and truly
praiseworthy from an ethical and social point of view. He
explains:
• "Developing the earth's resources to produce goods and
services to satisfy the needs and aspirations of the
increasing millions of its inhabitants not only adds value in
economic terms. It also enhances the value and quality of
human living, by expanding human freedom and culture,
and by providing a social environment in which human
dignity can develop and prosper. Within this line of
reflection the business of creating wealth in and for
society is then seen to be a positive and constructive
occupation for men and women.”
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(IV) ENSURING ECOLOGICAL BALANCE
Most corporates while producing goods, have allowed
the environment to be polluted, the atmosphere and
water bodies poisoned. They have, therefore, a moral
responsibility to restore the ecological balance.
Many corporates, are already doing this :
Tata Steel
ITC
Sakthi Masala Pvt. Ltd.
Srinivasan Services Trust organized by TVS
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(V) HUMAN ELEMENT FOCUS
• Improve quality of work-life, reduce hazards, improve
equality in employment opportunities and wages.
• Settle disputes in industry settled within legal framework
and with minimum ecological disruption.
• Assist employees to new arrangements while relocating
plants.
• Provide job and retirement security of a reasonable
nature.
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(VI) IMPROVING PRODUCTIVITY
• Employees to be made creative and their treatment to
be humane.
• Working costs to be reduced.
• Induction of new technology while alert to negative
impacts.
• Improving productivity is to enhance wealth and to
increase standards of living of people. This is what
development stands for.
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(VII) PROTECTING AND PROMOTING
STAKEHOLDERS’ INTERESTS
Some consider social responsibility in terms of services
rendered to claimants or stakeholders, who could be both
insiders and outsiders. The insiders are employees and
shareholders while outsiders include consumers, suppliers,
creditors, competitors, government and the general
public. Consumers expect quality goods and services at
fair prices. Workers expect fair wages without being
exploited. Shareholders expect reasonable dividends
and fair return on investments. Managers expect
challenging jobs with attractive salary. Government and
the general public expect them to add to the wealth and
welfare of the country without polluting the environment.
In short, business organizations have to consider
themselves the “custodians of public welfare”, by
rendering such services to the various sections of society.
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(VIII) SOCIAL CONCERN AND PROMOTION OF
COMMON WELFARE PROGRAMMES.
Another way in which the scope of social responsibility could be viewed is in
terms of social concern and promotion of common welfare programmes for
the benefit of the poor and the indigent public. Companies have highlighted
social issues and brought them to the notice of the public.
There have been occasions, though limited in number, where corporates
have joined hands to sponsor advertisements promoting public causes or
issues of social concern such as drug addiction and smoking. Business
organizations could also consider social responsibility in terms of the
relatedness to their own activities. Producers of dental or eye care products
organize mass clinics in villages and semi-urban areas where surgeons attend
to the medical needs of the poor and indigent. Such attempts greatly relieve
the burden on the finance-strapped state in a developing country like India
where people, due to poverty and for historical reasons, depend solely on the
government to render every type of service.
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Take the instance of how industrialists came to the rescue
of the quake-devastated people in Gujarat. When
Gujarat was shattered by the fury of the worst earthquake
in the past 50 years, a free phone facility set up by Care
India, Bharti-BT and CISCO provided the most immediate
emotional relief for people anxious for news of their
families as well as access to medical assistance and
advice. Industrialists through the Confederation of Indian
Industry (CII) and the Federation of Indian Chambers of
Commerce and Industry (FICCI) have committed large
funds that have enabled several NGOs adopt villages that
were severely hit and provided several others a great
deal of relief measures.
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Likewise, when disaster struck New York and Washington
in the aftermath of terrorist attacks on 11th September,
2001, American MNCs played their part as good
corporate citizens. While the US food giant McDonalds
offered food for the rescue workers at different locations
across the country in addition to a donation of $2 million,
General Motors, General Electric, Ford Motor and Unocal
also did their best to alleviate the sufferings of those
affected by the tremendous human tragedy.
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(IX) GOOD CORPORATE GOVERNANCE
ITSELF IS A SOCIAL RESPONSIBILITY
• Some social thinkers even view in the Indian context that good
corporate governance itself is an ingredient of corporate social
responsibility. For too long, Indian corporates have insulated
themselves from wholesome developments evolving elsewhere. A
closed economy, a sheltered market, limited need and access to
global business/trade, lack of competitive spirit, a regulatory
framework that enjoined mere observance of rules and regulations
rather than realization of broader corporate objectives, marked the
contours of corporate governance for well over 40 years.
• Corporate democracy, professional management and maximization
of long-term share-holder value are attributes of good corporate
governance.
• Corporate governance has acquired a new urgency in India due to
the changing profile of corporate ownership, increasing flow of
foreign investment, preferential allotment of shares to promoters,
gradual unwinding of the control mechanism by the state that had
hitherto provided protective cover to even poorly managed
corporates and the increasing role of mutual funds since 1991.
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(X)
CORPORATES IN THE VANGUARD OF
RENDERING SOCIAL SERVICE
Some industrial houses have been promoting activities that supplement the
efforts of public authorities in certain areas that are important for all-round
human development. The Tatas have contributed to the growth of
fundamental and social sciences by building and nurturing institutions of
higher learning in these areas. The Birlas have been building and maintaining
beautiful and monumental places of worship in several cities in addition to
popularizing science through planetariums. Some corporates have been
sponsoring sports events and helping sportspersons attain international
standards. TISCO has made several contributions in such diverse areas as
community, especially tribal area development, rural industrialization. SAIL
has done its mite in agriculture, health care, drinking water supply, dairy and
poultry farming. ITC Ltd. is socially active in agriculture, sports and pollution
control, while Brooke Bond has interests in animal welfare, providing
veterinary services and improvements in animal breeding. Down south,
several corporates have done yeoman service in the field of education and
related areas such as sports, building of institutions that train personnel as well
as render social service.
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The Loyola Institute of Business Administration
(LIBA) that has instituted The Mother Teresa Award for
Corporate Citizen is a role model as a corporate that
has rendered social services far beyond the call of its
duty and responsibility for others to emulate. It has
identified Titan Industries, Tamil Nadu Newsprints and
Papers Ltd. and Orchid Chemicals for the Award so
far in recognition of several socio-economic projects
they have been running for the welfare of the
disadvantaged sections of society.
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Some other examples are : Bajaj Auto, Balmer
Lawrie, Bank of America, Business Standard,
Coca Cola India, Dr. Reddy’s Laboratories, Forbes
Marshall, Nicholas Piramal, Excel Industries,
Hindustan Machine Tools, Amar Jyothi Industries,
Hindustan Lever and International Business
Machines. While some of them work for the
welfare of the poor, handicapped and the
marginalized sections of society, others reach out
to those who are in dire need of their services.
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(xi) SPONSORING SOCIAL AND
CHARITABLE CAUSES
Some entrepreneurs had not only built industrial empires,
but also contributed individually to certain social and
charitable causes. J.R.D. Tata’s contribution to the growth
of the Indian airlines industry, population-related research,
education of the underprivileged has been exemplary.
The late D.C. Kothari, with his wide-ranging interests, had
been the moving spirit behind several charitable trusts
and institutions of higher learning, apart from being the
prime-mover of the Standards Movement in the country
and earned the rare distinction of becoming the President
of International Organisation for Standardization (ISO) from
a Third World country.
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(XII) CORPORATES SHOULD
SUPPLEMENT STATE EFFORTS
There are several areas where corporates can supplement
effectively the ever growing welfare activities the State is expected
to undertake, but does not have the resources to carry on.
Corporates can run schools, either in their own areas or in any other
adopted village of their choice, providing good quality primary
education. If each of the more than two lakh corporates the
country has adopts three villages, we will be able to cover the
entire country and provide better primary and elementary
education to our children. It will go a long way in promoting
literacy and the development of the country. In this context, it
should be borne in mind that the Asian tigers like Thailand,
Phillipines, Indonesia, Malaysia and Singapore have achieved
much higher growth rates before the currency crises
overshadowed their achievements because of universalisation of
primary education.
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Corporate resources can also be allocated
to run family planning clinics, medium sized
hospitals in villages, literacy campaigns and
adult education programmess, campaigns
against smoking, pollution, AIDS, casteism
and communalism and to provide housing,
sports and recreational amenities for slumdwellers etc. Corporates can also
contribute effectively towards urban
management as has been done in places
like Jamshedpur.
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Another area where their concern for social welfare can
be shown is in the maintenance of the Public Health
System. Corporates cannot be mute spectators to the
deterioration in public health. Besides the moral and
social aspects involved, they have to appreciate the
fact that all their activities, business or otherwise, will
come to a stand-still, if any disease of epidemic
proportions breaks out. In 1999, The Hindu reported a
unique Government and industry participation to
improve public health in Tamil Nadu. In the first phase
of the programmes, 57 Primary Health Centers (PHCs)
and 6 Government Hospitals were adopted by 19
industrial groups based in the State. According to
official sources, another 40 PHCs would be adopted in
the second phase with more industries joining in due
course. The then Chief Minister, while inaugurating the
programmes, commended the whole-hearted and
voluntary participation of industrial houses.
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• Social responsibility has to do with much more than
producing goods and services. Social responsibility
has to do with equitable distribution of wealth.
• It has to do with a concern for the needs of the
generations to come; It has to do with such things
as "sustainable development" and "safeguard of the
environment”.
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SOCIAL RESPONSIBILITIES OF
BUSINESS
Towards Consumers & Community
Goods must meet the requirements of different classes, tastes and
purchasing power.
Goods must be reasonably priced, must be of dependable quality and
of sufficient variety.
Provision of after-sales service advice, guidance and maintenance.
A fair, widespread distribution of goods and services among all
sections of consumers and community.
Provision of free competition and prevention of concentration of
goods in the hands of a limited number of producers or purchasers or
groups.
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TOWARDS CONSUMERS & COMMUNITY
Present a “good image” in the minds of the public for
honesty and integrity of character.
Advertising policy should be based on moral/ethical
principles. It should not mislead by false, misleading
and exaggerated advertisements.
Support to educational, charitable and other
programmess for the benefit of the community.
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TOWARDS CONSUMERS & COMMUNITY
Social accountability to consumers and public
regarding the business conditions.
Avoidance of social and moral dangers of “high
spots” and “social tensions”.
Prevention of slum development, improvement of
housing conditions, elimination of crimes in
industrial areas, and meeting the heavy costs of
pollution and waste disposal.
Business should lead a life of justice and have a
progressive outlook.
Other types of training to the existing employees.
To behave like a law-abiding citizen to the State.
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TOWARDS CONSUMERS & COMMUNITY
To pay its dues and taxes to the state fully and
honestly.
Impartiality towards political affairs, i.e., to abstain
from direct political involvement; and not to support
political parties.
To follow honest trade practices, and avoid activities
leading to restraint of trade.
To try not to contact public servants for selfish ends.
To sell commodities and services without adulteration.
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SOCIAL RESPONSIBILITIES OF BUSINESS
Towards Employees
Promote a spirit of cooperative Endeavour between
employees & employers through participation in
decision-making and in improving production and
administration.
To pay fair and reasonable wages to labour and staff
members.
To develop and adopt a progressive labour policy based
on recognition of genuine trade union right; settlement
of disputes and conciliation; to create a sense of
belonging, and to improve human qualities of labour by
education, training, better living conditions, housing,
leisure and amenities.
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TOWARDS EMPLOYEES
To provide reasonable and just work conditions.
To recognize the labourer as a “human being” and
respect his dignity, and preserve his individual
liberty.
To provide facilities for joint consultation and
collective bargaining.
To help development of proper leadership from
among the employees.
To guarantee religious, social and political freedom
to workers.
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SOCIAL RESPONSIBILITIES OF
BUSINESS
Owners & Inter-Business
To provide a fair return or dividend on the capital
invested.
To give fair and impartial treatment to all.
To develop a healthy co-operative business relationship
between different business.
To control such unfair practices as price-rigging,
undercutting, patronage, unfair canvassing and
unethical advertisements.
To control monopoly.
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OTHER RESPONSIBILITIES OF BUSINESS
1.
2.
3.
4.
5.
6.
Achieve ecological balance
Consider the human element
Improve Productivity
Be aware of global pressures and needs
Balance ethics & economics
Design social partnerships
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BALANCING ETHICS AND ECONOMICS
• Iron law of responsibility to society– responsibility to stake
holders and power to be used with responsibility.
• All decisions should be based on the cash benefit–human
rights–social-justice triangle.
• Not only interest of the business but broad – public
purpose, goals, values etc. to be aimed at through
economic, political and social points of the corporate
office.
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BALANCING ETHICS AND ECONOMICS
(CONTD.)
• Stockholder and employees are owners and suppliers of
capital – their interest to be protected.
• Enrich community life by events of philanthropy, charity –
develop and not donate.
• Technology should not destroy culture, ethical values.
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DESIGNING SOCIAL PARTNERSHIP
• Decision making to be decentralized involving all
interested parties and affected groups.
• Co-operative problem solving – dialogue – not
confrontation or court procedures.
• Act jointly with government and other community groups
for promoting social responsibility
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PRACTICAL STEPS TO CORPORATE
SOCIAL RESPONSIBILITY
The International Chamber of Commerce recommends
these nine steps to attain Corporate Social Responsibility:
1.
2.
3.
4.
Confirm CEO/Board commitment that priority to
responsible business conduct comes first
State company purpose and agree on company
values
Identify key stakeholders
Define business principles and policies
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5.
6.
7.
8.
9.
Establish implementation procedures and
management systems
Benchmark against selected external codes and
standards
Set up internal monitoring
Use language that everyone can understand
Set pragmatic and realistic objectives.
Corporations exist because they, in a sustainable fashion,
enable people to constructively practice their craft and
create jobs, economic value, and wealth for the society
and the enterprise.
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