Ethics, Business and Society: Managing Responsibly
Publication Year: 2010
Subject: Business Ethics (general)
This compilation analyzes the differences between the concepts of ‘social responsibility’ and ‘business ethics’, which are often erroneously interpreted to be the same. It explains that social responsibility is a characteristic but just one of the many aspects of the much wider concept of business ethics. The collection includes contributions from experts from diverse fields such as industry, academia, and non-governmental organizations, who present the theoretical underpinning of the concepts, along with real-life case studies dealing with the varied, hands-on experiences of leaders from different industries.
This book will be an insightful read for professionals in the field of business and management.
- Front Matter
- Back Matter
- Section I: The Society, Business and Ethics: The Broader Canvas
- Chapter 1: Business Ethics
- Chapter 2: Governance and Economic Development
- Chapter 3: Corporate Philanthropy as an Integrated Concept: The Case of the Novartis Foundation for Sustainable Development
- Chapter 4: Perspectives on Corporate Social Responsibility (CSR): A Case Study of the Tata Group of Companies
- Chapter 5: Ethical Dimensions in Technical Education—The BITS Experience
- Chapter 6: XLRI: ‘Renewing the Face of the Earth’
- Chapter 7: Education for a Just, Humane and Equitable Society
- Chapter 8: Civil Society and Governance
- Section II: Ethics in Business and Corporate Social Responsibility: Towards Horizon
- Chapter 9: CSR for Promoting Stakeholder Engagement
- Chapter 10: Integrating Environmental Management in Small Industries of India: Towards Socially Responsible Initiatives
- Chapter 11: Ethics in Science and Technology: Exploring a Select Perspective
- Chapter 12: Indian Model of Leadership
- Chapter 13: Governing the Socially Responsible Corporation: A Gandhian Perspective
- Chapter 14: Corporate Governance and the Role of Independent Directors
Copyright © Ananda Das Gupta, 2010
[The copyright of each essay rests with its contributor(s).]
All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher.
First published in 2010 by
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Library of Congress Cataloging-in-Publication Data
Ethics, business and society: managing responsibly/edited by Ananda Das Gupta.
1. Business ethics. 2. Social responsibility of business. 3. Corporate governance. I. Das Gupta, Ananda, 1955—
HF5387.E837 658.4′08—dc22 2010 2010008934
ISBN: 978-81-321-0402-5 (PB)
The SAGE Team: Reema Singhal, Meena Chakravorty, Anju Saxena and Trinankur Banerjee
[Page v]To my daughter Debarati[Page vi]
List of Tables, Figures and Boxes[Page ix]List of Figures
List of Boxes
- 2.1: Control of corruption and per capita incomes 26
- 2.2: Rule of law and per capita incomes 27
- 2.3: Voice and accountability and per capita incomes 27
- 7.1: Children sitting in slush in the open to write their tests 83
- 7.2: More than 80 children squeezed tight in a small dark classroom 84
- 7.3: Participative engaging classroom in rural government school 85
- 7.4: Collective action for educational initiatives 85
- 12.1: Igniting the genius within 154
- 12.2: Leadership process 155
- 13.1: Sarvodaya and stewardship 172
- 3.1: REPSSI—The benchmark in psychosocial support in southern Africa 49
- 3.2: Providing comprehensive leprosy care—The Indian approach 50
- 3.3: Strengthening healthcare systems and patients alike—The Access Initiative in rural Mali 55 [Page x]
- 3.4: ICATT: Computer-based learning programme for health professionals in developing countries 57
- 6.1: Swavalamban 79
- 6.2: Parichay 80
- 13.1: Some do's and don'ts for Gandhian corporations and directors 175
List of Abbreviations[Page xi]
ACGA Asian Governance Association BITS Birla Institute of Technology and Science CLCA Comprehensive Leprosy Case Association CLCP Comprehensive Leprosy Care Project CSR Corporate Social Responsibility CSRC China Securities Regulatory Commission EPIC Election Process Information Collection ERC Expenditure Reforms Commission GCMMF Gujarat Cooperative Milk Marketing Federation GDI Gender-Related Development Index GEM Gender Empowerment Measures HDI Human Development Index HDR Human Development Report HPI Human Poverty Index HRM Human Resource Management IFFCO The Indian Farmers Fertilizer Cooperative Ltd. ILO International Labour Organization IMCI Integrated Management of Childhood Illness MDG Millennium Development Goals MDP Management Development Programme MDT Multi-drug Therapy NFSD Novartis Foundation for Sustainable Development NGO Non-governmental Organization NYSE New York Stock Exchange ODA Official Development Assistance PIL Public Interest Litigation PPP Purchasing Power Parity [Page xii] PSS Psychosocial Support Schemes PSU Public Sector Unit REPSSI The Regional Psychosocial Support Initiative S&T Science and Technology SBU Strategic Business Unit SEBI (The) Security Exchange Board of India SOA Sarbanes-Oxley Act TBEM Tata Business Excellence Model TCCI Tata Council for Community Initiatives UNDP United Nations Development Programme VRS Voluntary Retirement Schemes WCFCG World Council for Corporate Governance WHO World Health Organization WTO World Trade Organization XLRI Xavier Labour Relations Institute
Ethics, Business and Society: Managing Responsibly is an exciting, thought-provoking and challenging book. The organizers of this compendium and the contributing authors have attempted to bridge the gap between conceptual theory and grounded theory, globalization of commerce and national constraints on its unbridled reach, and between ethical norms of a secularized albeit Western society, and the deeply embedded and overlapping cultural and religious norms of the Indian society.
This could not have been an easy task. However, the editors and authors have largely succeeded in meeting this challenge. They have provided a good blending of various approaches to defining ethics and corporate social responsibility (CSR) in the context of public good, and the extent to which corporations can and must balance the competing interests of a company's direct stakeholders and those who are indirectly impacted—both positively and negatively—by corporate actions.
An important part of the book is the inclusion of numerous case studies dealing with ethics and CSR issues of Indian companies, large and small, and civil society organizations. These case studies demonstrate both implicitly and explicitly what is perceived to be a good corporation in the Indian context. This experiential road map is particularly important to scholars and practitioners dealing with CSR issues in other parts of the world. It suggests a more nuanced approach to comparing corporate conduct under different socio-cultural norms and levels of economic growth.
I only wish that the editors and authors of this compendium had gone beyond what CSR is and what CSR ought to be. In the changing [Page xiv]world of globalization with its ever shifting balance of power between multinational corporations and nation states, we cannot leave CSR to be defined, measured and considered satisfactory by the corporate leaders themselves without any meaningful input from and accountability to external stakeholders who are impacted by corporate actions but have little influence on corporate decision-making. Instead, we must ask a more fundamental question, that is, to what extent are companies minimizing negative externalities emanating from their normal business operations, and how are they ameliorating the adverse impact of these externalities on the environment and the people?New YorkUniversity Distinguished Professor Zicklin School of Business Baruch College CUNY, New York President Sethi International Center for Corporate Accountability, Inc.
We look forward to thank all our esteemed contributors, the entire editorial team of SAGE Publishing Group, New Delhi and Ms Reema Singhal, assistant commissioning editor, who, in fact took a serious initiative in materializing this project. I thank my wife Aruna, an emerging scholar of social responsibility of the organizations and my daughter, a scientific aficionado for providing me ample space for working on this project. I pay my regards to Professor S. Prakash Sethi, University Distinguished Professor of City University of New York at Zicklin School of Business and President of the International Centre for Corporate Accountability, located in New York.[Page xvi]
Business ethics can be examined from various perspectives, including the perspective of the employee, the commercial enterprise and society as a whole. Very often, situations arise in which there is conflict between one or more parties, such that serving the interest of one party is a detriment to the other(s). For example, a particular outcome might be good for the employee, whereas it would be bad for the company, society or vice versa.
Philosophers and others disagree about the purpose of a business ethic in society. For example, some suggest that the principal purpose of a business is to maximize returns to its owners, or in the case of a publicly traded concern, its shareholders. Thus, under this view, only those activities that increase profitability and shareholder value should be encouraged, because any others function as a tax on profits. Some believe that the only companies that are likely to survive in a competitive marketplace are those that place profit maximization above everything else. However, some point out that self-interest would still require a business to obey the law and adhere to basic moral rules, because the consequences of failing to do so could be very costly in fines, loss of licensure or company reputation.
Some theorists have adapted social contract theory to business, whereby companies become quasi-democratic associations, and employees and other stakeholders are given voice over a company's operations. This approach has become especially popular subsequent to the revival of contract theory in political philosophy, which is largely due to John Rawls’ A Theory of Justice, and the advent of the consensus-oriented approach to solving business problems, an aspect of the ‘quality movement’ that emerged in the 1980s. Professors Thomas Donaldson and Thomas Dunfee proposed a version of contract theory for business, [Page xviii]which they call Integrative Social Contracts Theory. They posit that conflicting interests are best resolved by formulating a ‘fair agreement’ between the parties, using a combination of (a) macro-principles that all rational people would agree upon as universal principles, and (b) micro-principles formulated by actual agreements among the interested parties. Critics say that the proponents of contract theories miss a central point, namely, a business is someone's property and not a ministate or a means of distributing social justice.Social Responsibility and Business Ethics
Social responsibility and business ethics are often regarded as the same concepts. However, the social responsibility movement is but one aspect of the overall discipline of business ethics. The social responsibility movement arose particularly during the 1960s with increased public consciousness about the role of business in helping to cultivate and maintain highly ethical practices in society and particularly in the natural environment.
Corporations are increasingly being challenged to act in ways that serve the best interests of society. Many companies are aggressively seeking strategies that can allow them to ‘do well by doing good’, leaving a positive ‘footprint’ on the world and avoiding actions that could harm consumers, employees, investors, competitors, suppliers and the general public. In this book, we will examine how corporations can become more effective at managing their social impact, improving the relationships they have with all of their stakeholders in the process. Among the corporate social impact challenges that will be addressed in the course are: How to achieve transparency without revealing proprietary information? How to differentiate a company/brand in the marketplace using social involvement? How to persuade consumers to engage in socially beneficial (for example, healthier, environmental friendly) behaviours? How to avoid misinforming consumers about product benefits and shortcomings? How to serve less-advantaged populations at the ‘bottom of the pyramid’ profitably? How to improve operational efficiency through careful environmental management? How to protect the welfare and rights of workers? How to manage and promote employee volunteering? How to avoid antitrust charges of collusion, monopolization or exclusionary [Page xix]behaviour? Recent debates about issues, such as obesity, tobacco and alcohol marketing, the immigration issues and gasoline prices will receive special attention.
Already an increasing number of companies are recognizing that globalization is transforming corporate responsibility from a choice into an imperative. A recent international inquiry into consumer expectations concluded, for example, that 20 per cent of consumers surveyed had avoided products and services of particular companies because of their negative ethical profile, and a further 20 per cent were considering doing so.
The fact is that in today's connected world, there is no hiding place for poor corporate citizens and no excuse for poor corporate citizenship. Whether it is labour practices, environmental habits or human rights, companies today must be concerned about their global reputations because their actions can quickly become globally known. The Internet is both the great advertiser and the great tattler—it can open doors faster than you would believe. But, it can also close them faster than you would imagine.The Threshold of CSR
The CSR is generally understood to be the positive role that businesses can play in a host of complex areas, including safeguarding employees’ core labour rights (to non-discrimination, freedom of association and collective bargaining; against child labour and forced labour), protecting the natural environment, eliminating bribery and corruption and contributing to respect for human rights in the communities where they operate.
The CSR is not new to the international agenda, it has been around for many years. It has been gaining prominence and momentum worldwide: conferences are held weekly; papers and articles are published almost daily; new and innovative partnerships are being developed. There is reason for optimism. Even if we look only as far back as the Battle of Seattle in the fall of 1999, since then numerous initiatives such as the Organization for Economic Co-operation and Development (OECD), Guidelines for Multinationals and the Global Compact have been introduced, implemented and, in some cases, refined and implemented again.[Page xx]The Global Scenario
The growing international and domestic interest in CSR stems largely from the concerns held by many in every society about the real and perceived effects of rapid globalization. The interest has been reflected in the expectation that globalization must proceed in a manner that supports sustainable development in all regions of the world. People insist that the activities of corporations should make a positive contribution not only to the economic development and stability of the countries in which they operate, but also to their social and environmental development. Failure to respond to such an agenda satisfactorily will contribute to increased social tensions, environmental degradation and political upheavals. Good corporate conduct makes an important contribution to sustainable development in any community, and thus goes a long way towards responding to the concerns that globalization raises.
Many companies and business associations have recognized the importance of CSR. Not very long ago, the dividing line between business and society appeared to be clearly drawn. According to the economist Milton Friedman, ‘There is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits’. This view no longer prevails. The CSR agenda is a complex one, requiring cooperation among a wide variety of stakeholders to be addressed effectively. Improved dialogue between the private and non-governmental sectors is one positive pattern emerging from recent CSR trends. While early relationships were often characterized by mistrust and misunderstandings that fed a cycle of opposing actions and reactions, today stakeholders are increasingly recognizing the value of multisector dialogue or partnerships to achieve substantive, long-term reform. Such a dialogue can facilitate a better understanding of the expectations and concerns of key stakeholders, and it can also act as a forum where debates over differences are more about identifying mutually acceptable solutions and practical implementation steps than reiterating entrenched, non-retractable positions. Forward-looking companies and non-governmental organizations (NGOs) are working with their stakeholders and, in the process, are benefiting from the expertise of all involved. Responsible development brings major challenges, and no stakeholder is capable of adequately responding to them alone.
[Page xxi]The international community has policy tools to influence business activity within and between nations, and to help ensure that globalization proceeds in a way that benefits all. These tools include legislation and regulatory frameworks, voluntary compliance with an agreed set of standards monitored by a third party, or self-regulation by businesses, often in conformance with voluntary codes of conduct.Indian Context
India is also working to promote CSR through support for the development of globalization, which is already a force for great change, not simply a spectre on the horizon. Through technology, communications and economics, globalization and our increasing interconnection are inevitable. Time, distance and geography are disappearing: globalization is a reflection of that reality. In this environment, companies can and do make an important contribution to sustainable development in communities where they operate. Certainly, progress has been made in some areas. But, we must temper our optimism with the awareness that there is still much to be done and many challenges for us to keep in mind as we strive to ensure that globalization is for the benefit of all people, in all countries of the world.Interlude
During the last 20 years, human resource management (HRM) has become a common way of managing people. Such an approach involves human resource professionals partnering with other managers so that people are used in the most effective way. More recently, there have been calls for HRM to demonstrate that it adds value to the business.
CSR and responsible capitalism pose a number of challenges for HRM and for leadership in organizations. The HRM paradigm is based on a rational strategic management framework which is consistent with traditional economic analysis. This paradigm is limited in circumstances where organizations seek to behave responsibly with regard to a range of internal and external stakeholders and seek to take a longer term perspective.
According to Milton Friedman, a business has no social responsibilities other than to maximize its profits. However, today there is a growing [Page xxii]perception among enterprises that sustainable business success and shareholder value cannot be achieved solely through maximizing short-term profits, but instead through market-oriented yet responsible behaviour. This responsible behaviour of corporations can be called CSR.
There are different approaches in explaining CSR. One of them is the classical theory stressing that the primary goal of company is to secure its shareholders’ financial goals and to respond to their wishes relative to the corporation. Second, the social demandingness theory of CSR means to promote and protect the general public's interests. On the other hand, the social activist theory holds that there exists a universal standard for determining responsible corporate conduct that is independent from the stockholders’ interests.
Finally, the stakeholder theory on the CSR, influenced by the view that companies are also corporate citizens, seeks to balance among the competing demands of stakeholders that support a company. From the stakeholder perspective, the CSR means a commitment by a company to manage its roles in a society as producer, employer, marketer, customer and citizen in a responsible and sustainable manner.
Especially since the 1980s, CSR has become an important business issue. Today, it has not only an impact on the local and national levels, but also on the global scale. It is getting more crucial for the global companies to support the social programmes. They especially realize that for several social projects, the national governments cannot give enough money. The purpose of this study is to present the main findings from a survey of the top 50 Turkish companies on the extent to which they evaluate the HRM dimensions of their CSR policies and practices. This book analyzes five HRM dimensions of CSR: To what extent do the companies see the role of HRM in their CSR policies and practices? How do the companies communicate their CSR policies to their stakeholders? To what extent do the companies view the influence of CSR policies and practices on the HRM functions? To what extent do the companies consider the HRM practices from their CSR perspective? What kind of incentives do the companies offer to employees to get involved in CSR activities?
The stakeholder theory is an important and commonly used framework within CSR. Therefore, the study relies on the stakeholder view as a basic approach in analyzing the dimensions of CSR.
[Page xxiii]In both practice-oriented and academic discourses, the concepts of CSR and HRM are often treated separately. It is argued here that this is an outdated approach. Starting from the observation that organizations develop towards open systems, it becomes obvious that CSR and HRM are intertwined. In open systems, cooperative action is based on the willingness of humans to bring in and develop their talents as part of communities of work. The proper functioning of organizations becomes dependent on shared values between networks of people. At the same time, these networks broaden the perception of what (new) roles and functions an organization should fulfil. This brings in the notion of CSR. Organizations are expected to encompass a broadening range of responsibilities combining the delivery of added value in the market place with broadening responsibilities. These developments require a repositioning of the role and perception of HRM towards a new strategic approach labelled here as Human Value Management.
CSR and sustainable development are gaining increasing prominence in the global business culture, as many businesses attempt to accommodate the CSR agenda. The concept of corporate sustainable development is still the subject of controversy, and therefore the indicators used to measure CSR continue to be the topic of debate. However, no matter what indicators are used, the notion of responsibility includes responsibility for people in the collective sense (such as communities) and also for individuals.
An Australian measurement process, the Reputex Social Responsibility Ratings, provides a system to measure social responsibility performance and attempts to integrate the expectations of a variety of stakeholders. Two of its four criteria reflect the impact on people and have direct relevance to HR. Four categories of measurement are used: environmental impact, corporate governance, social impact and workplace practices.
The criteria used to measure workplace practices relate specifically to HR practices. The criteria include: employee involvement, fair and reasonable rewards and conditions, a positive commitment to diversity and work-life balance, industrial relations arrangements based on mutual respect, occupational health and safety arrangements, executive remuneration that is fair and reflect the concerns of internal stakeholders, independently verifiable performance measurement and evaluation systems and training and development policies. These criteria [Page xxiv]indicate that an organization that is seen as socially responsible creates a culture that is perceived as open, fair and attractive to potential and existing employees.
But, is CSR nothing more than ‘a religion with too many priests, in which there is no need for evidence or theory … driven by top management's personal beliefs’, as management guru Michael Porter said at the 2004 European Business Forum.
Research demonstrates that CSR initiatives have a positive impact on employee morale, motivation, commitment, loyalty, training, recruitment and turnover. Benefits in these areas have been found to improve the bottom line of companies. Three surveys across Europe, the USA and a survey involving 25 countries found employees felt greater loyalty, satisfaction and motivation when their companies were socially responsible.
Therefore, corporate initiatives can contribute to the branding of organizations in the labour market. These initiatives can make the organization attractive to employees with similar values and so assist the organization to become an employer of choice for these potential employees. And, if it lives out the values and initiatives on a daily basis it will assist the retention of desirable employees.
This is supported by the experience at the 2004 Economic Forum in Switzerland. Less than 20 per cent of the 1,500 delegates, most of whom were business leaders, identified profitability as the most important measure of corporate success. Almost 30 per cent identified criteria that reflected CSR—almost one in four cited reputation and integrity of the brand and one in 20 cited CSR as the most important measure of corporate success.
CSR certainly seems to be the emerging flavour of the month, but is it a reflection of a ‘two-faced capitalism’? In some senses it could be.
First, Porter argues that CSR initiatives need to be undertaken not for ‘feel good reasons’ or as defensive actions to avoid scandals, but they should be integrated into an organization's competitive strategy. Companies need to be clear about how CSR initiatives contribute to organizational success and efficiency. This view reflects an emphasis on the desired outcomes of one stakeholder in relation to other shareholders.
Second, many CSR initiatives could just reflect the intention of management and be no more than rhetoric. The intention to further corporate and social responsibility does not appear to be implemented [Page xxv]in many cases. Research by Business in the Community (BiTC) found that 60 per cent of firms are not living up to their values. In addition, a report by a charity, Christian Aid, cites Shell, British American Tobacco (BAT) and Coca-Cola as paying lip service to CSR, but in reality the community development projects they undertake are ineffective.
It appears that many CSR initiatives reflect the essence of HRM activities. So, what is the role of HRM in CSR? At present, it appears HR is falling down in this task. A survey by Cronin and Zappala in Australia revealed that HR played a negligible role in decision-making in corporate citizenship. However, CSR will become an even more widespread and accepted way of doing business and it should have a further impact on HR's role. Not only will HR need to see its role as strategic from the shareholder's viewpoint, but it will also need to accommodate this view with the need to create a situation in which the workforce and the organization is sustainable over the longer term.
HR has a role in demonstrating the benefits of workplace practices that both reflect CSR and, at the same time, contribute to organizational efficiency and success. In order to do this, HR needs to be familiar with the latest research on work practices and employee performance and also the language of business. It requires HR to integrate CSR initiatives through its roles as business partner, employee champion, administrative expert and change agent. It also requires HR to be an organizational advocate in the community and with other external stakeholders.
CSR provides HR with opportunities. It provides a further opportunity to contribute to business success and employee satisfaction and performance. It also provides additional opportunities to contribute to community well-being.1
This is why, CSR means a commitment by a company to manage its roles in a society in a responsible and sustainable manner. Especially since the 1980s, CSR has become an increasingly important part of the business environment. Today, there is a growing perception among enterprises that sustainable business success and shareholder value cannot be achieved solely through maximizing short-term profits, but instead through market-oriented yet responsible behaviour. The aim of this study is to present the main findings from a recent survey of Turkey's top companies on the HRM dimensions of their CSR.
Much examination of corporate social performance has related whether or not good social performance is directly related to financial [Page xxvi]performance (Harrison and Freeman, 1999). By analyzing the interest of stakeholder groups, such as customers, employees and investors, the multifaceted aspects and contributions of corporate citizenship can be understood. Implementing a balanced perspective of stakeholder management can provide the opportunity to obtain maximum productivity from each stakeholder. A key principle is that managers should acknowledge the potential conflicts between (a) their own role as corporate stakeholders, and (b) their legal and ethical responsibilities for the interest of other stakeholders, and should address such conflict through open communication, appropriate reporting and incentive systems, and where necessary, third party review (Clarkson, 1999).
Our overall hypothesis is that corporate citizenship contributes to competitive advantage. We argue that corporate citizenship is a potentially lucrative business practice, a position based, primarily, on the findings of two research projects that demonstrate the existence of a relationship between corporate citizenship and improved competitive advantage.Stakeholder Responsibilities
Despite the variety of stakeholder groups and their demands, CSRs can be classified into four broad categories: (a) economic, (b) legal, (c) ethical and (d) discretionary responsibilities. Corporate citizenship can, therefore, be defined as the extent to which businesses meet the responsibilities imposed by their various stakeholders.
As society's economic agents, businesses are expected to (a) generate and sustain profitability, (b) offer goods and services that are both desired and desirable in society and (c) reward employees and other agents who help create success. To satisfy these expectations, businesses develop strategies to keep abreast of changing customer needs, to compensate employees and investors fairly and to continually improve the efficiency of organizational processes. A long-term perspective is essential when establishing these strategies: a responsible business must continue to earn profits from its ongoing business in order to benefit its stakeholders.
Regardless of their economic achievements, businesses must abide by established laws and regulations in order to be good citizens. Because training all the members of an organization as lawyers is impossible, the identification of legal issues and implementation of [Page xxvii]compliance training is the best approach to preventing violations and costly litigation. The establishment of strict ethical standards in the workplace may also be an excellent way to prevent legal violations by creating a focus on integrity in decision-making.
In addition, an organization guided by strong ethical values may also be better able to satisfy ethical responsibilities, the third type of responsibility imposed by stakeholders. Two main types of ethical issues are likely to emerge in an organizational context: (a) decisions in so-called gray areas in which the right decision is debatable and (b) decisions in which the right course of action is clear, but individual and organizational pressures propel even well-intended managers in the wrong direction. A proactive corporate citizen develops precise guidelines that help organizational members deal with such pressures by stressing the importance of stakeholders’ viewpoints relative to organizational achievements.
In addition to meeting economic, legal and ethical responsibilities, businesses are also expected to display a genuine concern for the general welfare of all constituencies. For example, society desires a cleaner environment, the preservation of wildlife and their habitats, as well as living wages for employees, but it also demands low-priced products. Companies must balance the costs of these discretionary activities against the costs of manufacturing and marketing their products in a responsible manner.The Relationship between Ethical Citizenship and Intrafirm Trust, Commitment to Quality and Market Orientation
One of the dimensions of corporate citizenship is an ethical work climate that includes values, traditions and pressures exerted in the work environment to make legal and ethical decisions. An ethical climate involves formal values and compliance requirements as well as an understanding of how interpersonal relationships affect the informal interpretation of ethics. Loe (Unpublished) examined the association between an ethical climate and improved organizational processes. When clear barriers are established to limit the opportunity for unethical activities, and when ethical behaviours are rewarded, an ethical climate prevails in an organization. In an ethical work climate, employees [Page xxviii]are able to identify ethical issues as they arise and are aware of the company resources available to help them act ethically and according to organizational policy and culture. An ethical climate characterizes businesses that are committed to ethical citizenship.
Before we examine the benefits of an ethical work climate, it may be useful to briefly consider the negative outcomes that may arise from a work climate that does not emphasize ethical conduct. Consider the case of Bausch and Lomb. The company's operations were governed almost exclusively by strict sales and earning objectives. Under stringent bottom-line pressures and with no counterbalancing values helping them to differentiate right from wrong, managers engaged in unscrupulous pricing and fraudulent billing. These practices translated into a series of lawsuits from customers and distributors, bad publicity and a sharp decline in the firm's market value.
Thus, a major benefit of an ethical climate is avoidance of negative consequences that may result from unscrupulous conduct in the workplace.The Linkages between ‘Business’ and ‘Society’
The linkages, relationship and interface between ‘business’ and ‘society’ are from their inception, over the years, has undergone spectacular changes. The survival and effectiveness of any organizational entity depend on the quality of support it gets from all stakeholders, including the society at large. Although in the initial years of this interface between ‘society’ and ‘business’ CSR was confined to ‘philanthropy’, there have been successive changes and developments in the understating of these stakeholders to make it more of ‘business strategy’ rather than ‘philanthropy’.
The CSR is the continuing commitment by business to behave ethically and contribute to the economic development while improving the quality of life of the workforce, their families as well as of the local community and society at large. Business needs a stable social environment that provides a predictable climate for investment and trade. Understanding society's expectation is quite simply enlightened self-interest for business in today's interdependent world. The CSR, therefore, will be centred on (a) to treat employees fairly and equitably, (b) operate ethically and with integrity, (c) respect basic human rights, [Page xxix](d) sustain the environment for future generations and (e) be a caring neighbour in their communities.
Due to globalization, corporations are no longer confined to the traditional boundaries of the nation state. On the one hand, globalization has provided a great opportunity for corporations to be globally competitive by expanding their production base and market share. On the other hand, the same situation poses a great challenge to the sustainability and viability of such mega businesses. Labourers, marginalized consumers, environmental activists and social activists have protested against the unprecedented predominance of multinational companies (MNCs). The success of CSR initiatives, in future, will largely depend upon the relationship between the corporate system and the social and political systems. The notion of a generalized responsibility is not an operational concept anymore than is the idea of profit maximization. A company's goals, policies and strategies must be uniquely determined in the light of opportunities and threats sighted in its external environment, its internal resource strengths and weaknesses and the values haled by its principal managers.Bibliography[Page xxx]1999. ‘Principles of Stakeholder Management’, 17 October. Available online at http://mgmt.utoronto.ca/stake/principles.htm1999. ‘Stakeholders, Social Responsibility, and Performance: Empirical Evidence and Theoretical Perspectives’, Academy of Management Journal (AMJ), 42: 479–485.and .‘The Role of Ethical Climate in Developing Trust, Market Orientation, and Commitment to Quality’, dissertation submitted to The University of Memphis, 1996.Unpublished.
Globalization along with changed norms of production, labour and environment with conditions of best practice has influenced behaviour of businesses across the world. The success of the acceptance of these norms has been outside the letter of law and the adoption has often influenced state to adopt better/improved or at least changed role for itself. The norms of resettlement and rehabilitation as dictated by the Indian state are by law, adopted by joint venture companies involved in extractive industries; yet, many other activities are also undertaken as corporate social responsibility, which are neither detailed nor dictated by law. Growth of civil society organizations has also led to increasing democratization in the marginalized and impoverished communities creating local responses to the grant metanarratives. Yet, nation state needs to evolve a new role for itself in this fast changing world. A stable nation providing good governance is thus basic requirement for developing countries in their attempt to safeguard rights and interests of their poor and marginalized.
Indian business has been actively involved in corporate philanthropy since the early 1900s. The charitable outlook of Indian businesses is progressively undergoing change under some external and internal influences. The increase in the momentum of corporate social responsibility has created new routes or avenues via which issues of corporate social responsibility are put to practice.
This has led to a marked and a welcome participation of corporate house in the local development agenda, showing that they do feel responsibility for the environment and people of the area where they set up business. Now it is no longer a question of what and how they help, because they have already proven, more so in the last decade, that they do want to help, and that they do have the local welfare at heart. [Page 206]This attitudinal shift is not a response to any industrial, commercial or government diktat, of course, certainly increases goodwill. The fact that this makes it a two-way interaction is very welcome too, as that was the primary goal of the exercise anyway.
The time for unmotivated philanthropy seems to be coming to an end in the Indian context, and the usage of the term ‘corporate social responsibility’ is gaining currency since the 1990s. Therefore, well-established business also may have a well-established strategy of ‘corporate social responsibility’ to (a) effectively deal with the instability of the Indian politico-economic climate, (b) proactively deal with all the other stakeholders and (c) meet the demands of international customer especially as regards to labour and environment.
The success of the acceptance of these norms has been outside the letter of law and the adoption has often influenced state to adopt better/improved or at least changed role for itself. The norms of resettlement and rehabilitation as dictated by the Indian state are by law adopted by joint venture companies involved in extractive industries yet many other activities are also undertaken as corporate social responsibility, which are neither detailed nor dictated by law. Growth of civil society organizations has also led to increasing democratization in the marginalized and impoverished communities creating local responses to the grant meta narratives. Yet nation state needs to evolve a new role for itself in this fast changing world. A stable nation providing good governance is thus basic requirement for developing countries in their attempt to safe guard rights and interests of their poor and marginalized.
About the Editor and the Contributors[Page 207]The Editor
Anaiida Das Gupta is Professor and Head, Human Resource Department, Indian Institute of Plantation Management, Bangalore. He has been engaged in teaching and research for more than 18 years in different universities and institutes across India. His areas of interest are Corporate Social Responsibility, Business Ethics, Organizational Development and Strategic Human Resources Management. He has a Masters Degree in Commerce with specialization in Personnel Management and he did his doctorate from Patna University as a University Grants Commission (UGC)-research Fellow. He is a Life Fellow of Indian Academy of Social Sciences and a Member of the Indian Society of Labour Economics. Presently he is member, Editorial Board, Encyclopaedia of Corporate Social Responsibility.
He has written many books like Human Values in Management (ed.) published by Ashgate Publishing in 2004, Ethics in Business: Concept, Cases and Context published by Rawat Publications in 2005 and Corporate Citizenship: Perspectives in the New Century published by Cambridge Scholars Publishing in 2008.The Contributors
Parthasarathi Banerjee is the Director of National Institute of Science, Technology and Development Studies, a Council of Scientific & Industrial Research (CSIR)-run Institute at New Delhi. His areas of interests are Economics and Management of Information; Technological and Strategic Changes; Management of Innovation and Organizational Change.
[Page 208]Arindam Baiiik has taught International Finance, Development Economics, Development Planning and Project Appraisal and Macroeconomics at the Department of Economics, University of West Indies, Barbados during the period 2001–2005(June) as a visiting faculty. He is the Associated Cement Companies Chair Professor in International Finance and Business at the International Management Institute (IMI) in New Delhi.
Pradip Bhaumik is Professor, Quantitative Techniques & Operations Management in International Management Institute (IMI), New Delhi. He has more than 25 years experience in teaching, consultancy and research in the areas of Operations Management and Management Science. Has been a senior consultant with the National Productivity Council, New Delhi and has served as the United Nations Development Programme (UNDP) consultant in North Korea on the design of project planning and control systems for the Pyongyang Informatics Center. He has also been UNDP Fellow in International Management Education.
N. Balasubramanian is a Professor of Finance and Control in Indian Institute of Management Bangalore and his areas of interests are Corporate Governance; Corporate Financial Policies; Social Responsibility and Citizenship. He has been the founding Chairperson, Centre for Corporate Governance and Citizenship at the Indian Institute of Management Bangalore (IIM-B).
Bibek Debroy is Professor at the International Management Institute and Research Professor, Centre for Policy Research, both in Delhi. He is an economist and has worked in universities, research institutes, industry and the government. He is also a columnist and is now Contributing Editor of the Express group. He has several books, papers and popular articles to his credit.
Usha Jumani is currently a management consultant, based in Ahmedabad, engaged in interventions that promote the concepts of self-employment for the majority of the working population and autonomy for all which lead to building people's organizations. She holds a Post Graduate Diploma in Management (PGDM) and is also a Fellow of [Page 209]the Indian Institute of Management Ahmedabad with specialization in Organization Development. She has to her credit two books Empowering Society: An Analysis of Business, Government and Social Development Approaches to Empowerment (2006) and Dealing with Poverty?Self Employment for Poor Rural Women (1992), several papers and reports as well as training materials for the literate and illiterate participants. She is a member of the Council of Management for VIKSAT in Ahmedabad; member of the Executive Committee of the Consumer Unity and Trust Society in Jaipur; member of the Governing Council of the Indian Society for Community Education, Ahmedabad; and member of the Governing Council of ETASHA Society in New Delhi.
Prasad Kaipa, since 1990, has advised chief executive officers and coached executive teams in the areas of Innovation, Business Transformation, Decision-Making, Strategic Thinking and Personal Mastery. Some of his clients include HP, CISCO, Disney, Adobe, Apple, Xerox, Boeing, Mastek, BAE Systems Mastek and Navteq. Currently, he is the Executive Director, Center for Leadership, Innovation and Change (CLIC), Indian School of Business, Hyderabad.
Klaus M. Leisinger is the President and Chief Executive Officer of the Novartis Foundation for Sustainable Development in Switzerland. In addition to his position at Novartis, he is Professor of Sociology at the University of Basel. He continues to pursue his academic and practical field work on a wide range of development-related topics; among them are business ethics, corporate responsibility, human rights and business as well as general topics of international development and health policy in less-developed countries. He has contributed to the academic debate widely through articles in peer reviewed journals and books in several languages.
L. K. Maheshwari, Vice Chancellor and Director, BITS?Pilani Campus, Birla Institute of Technology and Science, Pilani, Rajasthan has an experience of 35 years in teaching, research and educational administration as Chief, Instrumentation Centre; Dean, Research and Consultancy; Deputy Director (Academic); Director and Pro-Vice Chancellor-cum-Director; and Vice Chancellor-cum-Director. [Page 210]He received ‘Scientist of the Year’ award in 1995 from Gian Chand Jain Memorial Foundation, Ambala, for contributions in education, research and university?industry linkage programmes.
Subir Raha, former Chairman and Managing Director of the Oil and Natural Gas Corporation (ONGC) Ltd, is the only professional manager in India to have served as an executive member of the Boards of a Downstream (Indian Oil) and an upstream company (ONGC), and also as the Head of Oil Coordination Committee (OCC), the Government's Planning, Monitoring and Control agency. Throughout his tenure, ONGC was ranked as the most valuable company in India. Mr Raha served as Chairman of ONGC Videsh Ltd (OVL) and Mangalore Refinery & Petrochemicals Ltd (MRPL). He has also chaired Boards of companies engaged in liquefied natural gas (LNG), liquefied petroleum gas (LPG), Power, Manufacturing and special economic zones (SEZ). He was a member of the Board for Reconstruction of Public Sector Enterprises, Government of India. He was the President of International Federation of Training & Development Organizations, and in India, President of the All India Management Association and the founder-president of Global Compact Society. He is a Fellow of the World Academy of Productivity Sciences, Indian Society for Training & Development and the Indian National Academy of Engineers. He is a distinguished visiting professor of the Indian Institute of Technology, Kanpur, and serves on the Board of Governors of the Indian Institute of Management Ahmedabad. He was globally recognized as the ’Petroleum Executive of 2005’ by the Petroleum Economist, London.
Dileep Ranjekar, the Chief Executive Officer of Azim Premji Foundation, is a science graduate and has a Post Graduate Diploma of Business Management as well as Master's degree in Personnel Management and Industrial Relations from the Tata Institute of Social Sciences, Mumbai. He was appointed from campus by Wipro and became the Corporate Executive Vice President Human Resources. In addition to the Human Resources function, he also provided leadership to several functions such as human resource development, quality, brand, facilities and communication for entire Wipro Corporation.
Arabinda Ray belongs to what he calls the First Generation of Indian Professional Managers. Starting as a management trainee in Metal Box [Page 211]he rose quickly to be Deputy Managing Director when he decided to go to the public sector as Custodian of Indian Iron and Steel on Government taking over that company; he was also on the first Board of SAIL. Subsequently he worked on the Board of GKW and Warren Tea where he was the Managing Director. As a non-executive director he has at various times been associated with Garden Reach Shipbuilders and Engineers, United Bank of India and IFGL Refractories, among other companies. Currently he is a non-executive director of Jubilant Organosys and SDV International Logistics.
He helped to found the Indian Institute of Packaging and represented India at the inauguration of the Asian Packaging Federation. He has served on the Board of Governors of National Institute of Bank Management and the Institute of Financial Management and Research. He was Chairman of Indian Tea Association.
He is the author of several books, notably The Indian Manager in Search of a Style (EPW), The Manager?Beyond the Organisation (Macmillan), Fifty Years of Indian Management (OUP) and Independence to Globalisation? An Indian Manager's Journey (Anthem Press).
He is also on the Board of Governors and a Trustee of Indian Institute of Social Welfare and Business Management, Kolkata, India's first Business Management College.
D. K. Srivastava has M.Com. and D.Phil, from Allahabad University. He is an expert in the area of Industrial Relations and Negotiation Management. At the Tata Institute of Social Sciences, Mumbai, he has done extensive research in the area of Trade Unionism, Industrial Democracy and Corporate Social Responsibility. He features consistently in the Indian Journal of Industrial Relations and Indian Journal of Labor Economics. He has worked as a Consultant with various public and private enterprises such as Hero Honda, Britannia, and so on. He is also a visiting faculty with Cairo University under the University Grants Commission (UGC) Cultural Exchange Programme.
Pingali Venugopal is currently the Dean (Academics) and Professor (Marketing) at the Xavier Labour Relations Institute (XLRI), Jamshedpur. He has been a Marketing faculty at XLRI, Jamshedpur since 1994. He has also been a visiting faculty to the Indian Institutes of Management in Ahmedabad, Calcutta and Lucknow and the American [Page 212]University of Armenia. Prior to his stint at XLRI, Professor Venugopal held managerial positions for 10 years in the marketing divisions of two agribusiness companies. Professor Venugopal has authored books such as Marketing Channel Management: A Customer Centric Approach and Input Management, The State of the Indian Farmer: A Millennium Study. He has presented papers at national and international conferences as well as published articles in leading national and international journals. He has also been involved as a consultant with several projects for both the profit and non-profit sectors.