Corporate Social Responsibility - A Study Guide for MBA Graduates

[ravindar]

Corporate Social Responsibility

ABSTRACT

"THE FIRST CONCERN OF A COMPANY IS THE HAPPINESS TO PEOPLE CONNECTED TO IT."

The modern scenario is no longer based upon the ethics of past, the competitive revolution among the organizations has changed the perception of employees. The technology savvy producers have kept many welfare options infront of the employees, which have attracted employees to work and to adopt the culture. The options which got created by the employees or by the organizations set a benchmark infront of them to practice the similar for all other organizations. Government and different Government bodies discovered the reliable ways by keeping the welfare aspect as the motivation factor. In other terms if we say then, the concept of corporate social responsibility is not new to Indian companies. Corporate social Responsibility activities have their advantages. The benefits are in terms of building a positive image and encouraging social involvement of employees, which in turn develops a sense of loyalty for the organization. The companies have understood that the retention of market depends upon productivity, goodwill, quality of their product, which can be expected from the people associated to them. This whole project-"The first concern of a company is the happiness to people connected to it" explains clearly about the major concern related to people of the organization, future challenges, corporate insight and corporate involvement in a community. The related subtopics collected and analysed from various sources provides a clear concept about the organizational concern for their people. The sub topic corporate scrutiny brought out the major understanding for the people from the corporate aspect which can help to understand clearly about the importance in this competitive scenario.

INTRODUCTION:

Business is facing challenging times world-wide. Management of business has progressed rapidly in last 50 years. It has now thoroughly matured to higher levels of performance. The present age is a money-dominated age. Every one is running after money. Business enterprises are coming up with new strategies to earn more and more profits. Economists are bringing new philosophies to enhance prosperity. Today the efforts and energy of the world is being spent on increasing the organizational wealth. Increased competition and commercial pressure are combining with rising regulatory standards and consumer demand to create a whole new playing field for business. Traditional expectations of business are also changing. It is no longer enough to simply employ people, make a profit and pay taxes. The entities with maximum wealth are the most powerful in the present era and capable of safe guarding their economic interests leading to the gap between rich and poor widening. It is leading to a complex situation, where some people try to find out unfair means to quickly fill this gap. It gives rise to unrest in the human mind and quickly erodes the feeling of satisfaction and happiness. Quality expert Kaoru Ishikawa emphasizes on the role of company to keep its employees happy by stating, ''the first concern of a company is the happiness of the people connected to it. If the people do not feel happy, . . . that company does not deserve to exist'' (Ishikawa, 1985)1.

The pursuit of economic growth does not necessarily lead automatically to social progress. In many cases it actually leads to a deteriorating physical environment, an unsafe workplace, needless exposure to toxic substances on the part of the workers and consumers, discrimination against certain groups in society, urban decay, and other social problems (Leonard and McAdam, 2003)2. Justice Kuldeep Singh, a judge of Supreme Court of India, while ordering the closure of more then 700 industrial units in Delhi which were actively harming ecological balance and had virtually converted river Yamuna into a sewer, observed that no one can allow economic progress and growth at the cost of ecological imbalance. As a result, corporate social responsibility (CSR) has become increasingly important in the modern era. Many Indian companies have understood the need of people and the way of utilizing the power for productive work, which turned organizations to think about their people and the people indirectly associated with the organization. The long term aspect from the organization shows a clear view towards the people management for existence in this competitive world. Society is the form of group of people which cannot be overlooked by the organizations because of their contribution towards the well being of the organization.

This view is governed by the common proposition that industry has economic contrast with society. This contrast is explicit in some areas, implicit in others and opens to negotiation, but it underpins all commercial activity. The need to look beyond the purely economic objectives of a business enterprise such as making profits, ensure adequate returns to the shareholders and making provision for future growth is becoming increasingly essential for achieving enduring success in business in real terms.

Today, business organizations increasingly concern themselves with a host public issue that are international in nature including trade legislation, regulations against corruption and growing concern about global issues based on industries.

FUTURE DIRECTIONS:

The drive of improvement never ends. The best culture, system and plans do not remain so far long. Economic conditions, competitor's behavior, market dynamics, technological advances and the political environment demand change. The global companies of tomorrow will have to actively work today to integrate social accountability issues into their key business processes in order to meet-and in some cases exceed-customer expectations. The 'neighbor -of –choice strategy' must become an integral part of a company's culture. Companies will know that they have succeeded in organizing corporate social responsibility activities when they automatically include corporate social responsibility considerations in their decisions. In fact, the international nature of the business environment means that these responsibilities exist in those areas where business operates or seeks to operate. This is a global responsibility which lies at the heart of the business contract. The economic function of the business and its wider responsibilities are integral features of this contract. By crossing the boundary between business and the community , the community will become a key shareholder in business and business will be encouraged to give up the traditional mode of resource utilization and adopt a suitable mode for resource enrichment of the planet.

THE EMERGING CHALLENGES:

Clearly society expects many things from the corporate sector. Enterprise are being asked to move beyond the commercial sphere. Different stake holders place varying demands on organizations. Such demand varies over time and in different contexts. The primary expectation centers on wealth creation or profit function of the enterprise. But this not the only expectation. Beyond, this ,consumers continue to demand products that are safe, reliable and useful, services that are responsive to the changing needs, and advertising that is honest and informative. The public at large expects business to help project the physical environment and the health and safety of all those who are exposed to dangerous technologies or substances. Issue such as corporate power and corporate compliance, corporate activities and corporate disclosures of information will continue to concern an increasing number of people in the community.

Clearly, the emerging multipurpose corporations will demand multipurpose goals and synergistic policies that accomplish more than a single goal at time. This compels organizations to develop new measures of performance. Instead of focusing on the single bottom line of profits as in the past, organizations are expected to focus attention on multiple bottom lines-social, environmental, political and ethical- which are all interconnected.

THROUGH CORPORATE SCRUTINY:

The concept of corporate social responsibility (CSR) is not new to Indian companies. However, what is new is the way it has caught on with Indian corporate and the direct involvement of employees in implementation of these projects. Dedicated departments in most organizations are looking into much more than just funding or getting involved in one-time projects. CSR activities have their advantages. The benefits are in terms of building a positive image and encouraging social involvement of employees, which in turn develops a sense of loyalty for the organization. CSR activities help bond employees as a team, and with the organization, which in turn helps in creating a dedicated workforce that is proud of its employer.

When public sector enterprises were started, they located themselves in backward areas, set up townships for employees, followed socially desirable policies like job reservation, employing the physically disabled, purchase preference to small-scale industries, etc. Ignoring Drucker's advice, they pursued CSR to the detriment of profitability and many of them became sick wasting national resources and endangering employment. Does CSR need incentives? A knee-jerk reaction to this question would be: 'Socially responsible behavior needs no incentives at all as it is the basic duty of every citizen and corporate; in fact, socially irresponsible behavior deserves punishment.' The three levels: (A) compliance in letter of the law; (B) observing norms of common morality, like ethics and fair play, in its internal management and dealings; and (C) a social trusteeship mindset in deploying its resources3.Level A needs deterrents for default rather than incentives for adherence, being the basic obligation of any ordinary or corporate citizen in any civilized society. Level B refers to behavior that is not specifically obligatory under law but is expected in any just society. Level C is a non-obligatory, discretionary area and a company's involvement would depend on its values and social commitment. While level A may not deserve any positive incentive, it is certainly an area where unscrupulous companies would try and steal an unfair advantage over scrupulous ones and tilt the playing field in their favor. Complying with the law of the land is no doubt non-negotiable, but the way laws are framed and administered often sorely tempts companies to circumvent them in order to survive. Most serious instances of unethical or unlawful behavior of companies at this level occur during their interactions with public agencies and not with businesses or customers. The government, therefore, has the moral and economic responsibility first, to ensure that the laws governing business are framed realistically and reasonably, and enforced fairly and constructively; and second, to cleanse its own work environment of harassment and corruption. Thereafter, the government should come down heavily on companies violating the law. In a sense, this is an 'incentive' for healthy, honest industrial growth.

Tata Group ever since the days of Jamshetji Tata. Even while he was busy setting up textile ventures, he always thought of his workers' welfare and requirements of the country. From granting scholarships for further studies abroad in 1892 to supporting Gandhiji's campaign for racial equality in South Africa to giving the country its first science centre, hospital and atomic research centre to providing relief and rehabilitation to natural disaster affected places - they have done it all. Jamshed Irani, Director, Tata Sons Ltd, says, "The Tata credo is that 'give back to the people what you have earned from them'. So from the very inception, Jamshetji Tata and his family have been following this principle." Moreover 'he says that for any business to sustain in the long run they have to look beyond business. Ages ago when Corporate Social Responsibility was either the government, or charitable organizations headache, the Tatas aggressively worked for the upliftment of the community. Tata initiated various labor welfare laws, like the establishment of Welfare Department was introduced in 1917 and enforced by law in 1948 or Maternity Benefit was introduced in 1928 and enforced by law in 1946.4 While today eyebrows are being raised about corporates doing social work, the Tata Group feels it is the need of the hour.

INVOLVEMENT CORPORATE IN A COMMUNITY:

The involvement of corporate in a community generates trust in front of people which in a positive manner creates the identity in the nation. Corporate Community Involvement is about the impact your company has on the wider community. Companies can support the community through a number of activities that use both its staff and resources. People ,who are the part of the community always observe the community based activities done by the target industry of their locality. This could include making charitable donations, allowing staff to volunteer their skills to help community groups, or donating PCs and office equipment to organizations that need them

Involvement
EXEMPLARY COMPANIES:

The following companies were listed as models by the survey Conducted by Centre for Social Markets. Of note, Infosys, Tata and Wipro were mentioned multiple times as models. The other companies were listed once each.7Refer appendix for detail company overview.8

INDIAN COMPANIES

* Birla Group of companies
* BSES (Bombay Suburban Electric Supply)
* DSP Merril Lynch
* Hindustan Lever
* Infosys
* ITC (Indian Tobacco Corporation)
* Larsen & Toubro
* MahindraBT
* Mitsui
* NTTF
* PriceWaterhouseCoopers
* Reliance
* Tata
* Tata Consultancy Services
* TISCO (Tata Steel)
* WBPDCL
* Wipro

INTERNATIONAL COMPANIES

* IBM
* EDS
* Goodyear
* Conagra Inc. in USA.
* Siemens training institute, Germany
* R&S, Germany
* Cisco Systems
* Motorola
* Microsoft

TABLE A and B9

CONCLUSION:
60 years of independent India, but we still haven't experienced a real economic growth and development. The government plans take a long time to get implemented and the policies are highly skewed. If the corporate houses choose to intervene, perhaps, the day wont be far when, India can boast of a real economic boom. The world map of happiness survey 2006, gave India 180 points. The only one reason, where it lagged behind other countries, was its inability to provide its people with basic education, healthcare, and reduce poverty. Every country should embrace the remarkable concept of individuals and businesses forming a partnership to support social causes. A successful modern Indian company also needs to be well managed, with a corporate culture that promotes integrity. This message was conveyed by half of those respondents who answered this question. Respondents referred to practicing ethical business values, values based management, participative leadership, and conduct[ing] business with integrity and honor as important conditions for business success. Professional management was mentioned as a criterion by several respondents. It is important for [management to be] agile and informed [and to] recognize the bottleneck in infrastructure and find methods to solve them. As one respondent summarizes, the role of a successful company is to contribute to national wealth, to generate employment opportunities, E-business and E-commerce, accountable employees, transparency of Managements policy, open communication, safe working environment, concern for society. In the context of India, such a partnership has enormous potential for strengthening society. The state broadly speaking was referred to by over a quarter of respondents as an obstacle to successful business. Problems included unclear, unpractical and poorly monitored regulations, poor infrastructure, a complicated tax system, and too much bureaucracy. The main obstacles, we think, are lenient attitude of the Government in enforcing Quality control measures. Interestingly, however, the state is also criticized for too much interference. Irresponsible & unpractical government regulations in sector that are best left to private hands, keeps the government to busy to understand the difficulties of an average small businessperson whose capabilities & spirit is being choked due to the lack of infrastructure. There were also references made to cleaning up the corporate governance structure and clamping down on corruption in India. Broad frameworks on corporate governance should be developed and followed. And, penalties for non-compliance should be strictly implemented. Benefit from corruption should be reduced. This is to be done by flattening the tax structure and reducing exclusive authority on Govt.agencies. In an era of increasing global competition, the need to create an image that shows that corporate are part of the community and care about it is growing. People as the part of community and a strong part of the workforce for the production in organizations plays important role and benefits acquired from them cannot be ignored as far as possible for growth.

1 Ishikawa, K. (1985), What is Total Quality Control?: The Japanese Way, Prentice-Hall, Englewood Cliffs, NJ, trans. by D.J. Lu, (2002).Kaoru Ishikawa (Ishikawa Kaoru ) (1915-1989) was a Japanese University professor and influential quality management innovator best known in North America for the Ishikawa or cause and effect diagram (also known as Fishbone Diagram) that are used in the analysis of industrial process. Ishikawa has emphasized include the seven Quality Control tools. As per his view and respecting the ideas that suggested by him-'' The first concern of a company is the happiness of the people connected to it".

[hannabaker]

Nice info thanks!