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ContentsTitle Page

A Prospective Process for Implementing Human 10Resource Development (HRD) for Corporate Social Responsibility (CSR)Thumwimon Sukserm, Yoshi Takahashi

An Exploration of Partnerships, Coalitions, Sole and 33Trans-organizational Systems in the Current Turbulent Environment Mohammad Reza Noruzi, Dr José G. Vargas Hernández

The Effect of Gender and Different Managerial Labels on 54Evaluations of ManagersS.O. Adebayo , Maimuna I. Ogbonna.

Stock Market Volatility and Information Asymmetry: 67Lessons from Nigeria.Nathaniel Chinedum Nwezeaku, Godwin Chigozie Okpara

Business Graduates Career Preference: Multinational 80Corporations / Small Business Entrepreneurshipsin PakistanTanvir Ahmed, Muhammad Adeel Noor, Dr Muhammad Aslam KhanHasan Afzal, Dr Kashif ur Reman,

An Exploration of Critical Thinking Necessities, Barriers and 92CAT MAGIC NotionMohammad Reza Noruzi, José G. Vargas Hernández, Gholam Reza Rahimi

Reviewing Corporate Social Responsibility Initiatives of 105Tobacco Industry in PakistanMian Sajid Nazir, Mehnoor Iftikhar ,Aiza Hussain Rana, Naeem Sadiq , Faria Ahmed

Autism: Sociological Perspectives 118Christine K. Syriopoulou- Delli




Title Page

Importance-Performance Analysis of Service Quality 132among Business Students: An Exploratory StudyIzah Mohd Tahir , Nor Mazlina Abu Bakar, Wan Zulqurnain Wan Ismail

Impact of Spiritual Consciousness on the Job Performance 142of Banking ExecutivesMohammed Ehsan Malik, Rizwan Qaiser Danish, Ali Usman

Impact of Demographical Factors and Extent of SMS usage on 159Customer Satisfaction and Retention; An Empirical Study of Cellular CompaniesIshfaq Ahmed , Muhammad Musarrat Nawaz, Zafar Ahmad, Muhammad Zeeshan Shaukat, Ahmad Usman, Sarfraz Ahmed

The Protective Role of Research and Development in 169Crises ManagementDr. Ahmad Yousef Areiqat, Dr. Hussien Ahmad Al-Tarawnwh

E-Recruitment: Across the small and large firms in Pakistan 179Muhammad Haroon. Muhammad Zia-ur-Rehman

Implications of Earnings Management for Implementation 192of Sharia Based Financial SystemMuhammad Hanif

Is Entrepreneurial Competency the Silver Bullet for 217SME Success in a Developing Nation?Noor Hazlina Ahmad, Hasliza Abdul Halim , Siti Rohaida Mohamed Zainal

A Critical Evaluation of the Issue of Gender Inequality in 237Pakistan s Labor MarketFayaz Ali Shah, Muhammad Nauman Habib, Alamzeb Aamir




Title Page

The Influence of Using Celebrities on Consumers 257Buying BehaviorIbrahim, A.M. Alnawas

The Relationship between Active Teaching and Learning 283with Graduate s Entrepreneurial Intention and InterestAnita Md. Shariff, Nik Fakrul Hazri Nik Hasan, Zaleha Mohamad,Kamaruzaman Jusoff

Teacher Stress in Pakistani High Schools A case study 295of Government High Schools

Alamzeb Aamir, Mansoor Ullah, Muhammad Nauman Habib, Fayaz Ali Shah

Private Sector Managers Approach to Conflict Management: 304A Study of Relationships between Conflict ManagementStyles and Personality TypeSabina Mukhtar, Muhammad Nauman Habib

Forced Adoption of Technology due to Energy Crises 313Irfan Raza, Abdul Rehman Chaudhry, Muhammad Zia-ur-Rehman

Project Management: A step-by-step Approach of Yes Practice 327Jung-Tsung Tu, Sheng-Wen Liu, Yi-Man Teng, May-Jing Ting

Implementation of Models to measure the Performance of 348Mutual FundsZeba Shariff Khan

Transformational Leadership Style and its Relationship 370with SatisfactionMahmood Ahmad Bodla, Muhammad Musarrat Nawaz




Title Page

Total Quality Management and Leadership 382An Experimental Investigation of ISO Certified Companies in JordanDr. Hussien Ahmad AL- Tarawneh

Globalisation Sustainability of Malaysian Small 399and Medium-Sized Enterprises (SMEs) through Gaining Competitive AdvantagesNorliza Abd Samad, Zalinawati Abdullah Kamaruzaman Jusoff,Zaleha Mohamad, Gopala Krishnan Sekharan Nair

Ethnic Polarization during 1980s, in Sindh : A case study of 414Muhajir Quomi MovementAmir Ali Chandio, Sayed Ahmed Hussain Shah

A Measurement Model of Lecturer s Personality for Public 432Higher Education Institution in MalaysiaNorazuwa Mat, Norsiah Mat, Ruslan Romli, Kamaruzaman Jusoff, Noornina Dahlan , Intan Osman




Reviewing Corporate Social Responsibility Initiatives of Tobacco Industry in Pakistan

Mian Sajid NazirLecturer Department of Management Sciences, COMSATS Institute of IT, Lahore

Mehnoor Iftikhar ,Aiza Hussain Rana, Naeem Sadiq , Faria AhmedBBA Students

Department of Management SciencesCOMSATS Institute of Information Technology

Defence Road off Raiwind Road, Lahore

Abstract

The performance of the firms in corporate sector is heavily dependant upon the corporate

governance practices (Nazir et al. 2009) as well as consideration of social responsibility

into the general managerial practices of firms, the dimensions of socio-cultural

environment into business procedures and compliance with other ethical and regulatory

issues. The researchers have focused on the incorporation of corporate environmental

governance issues into business practices in order to gain a competitive advantage for the

firms (Wise and Ali, 2008; Mitra et al. 2008). However, a little has been found on the

corporate environmental governance issues and practices of Pakistani firms in tobacco

industry since the concept of corporate governance and corporate social responsibility is

newer for the emerging economies like Pakistan. This shows study tells about the two

companies and their corporate responsibility towards the society. Pakistan Tobacco

Company and Lakson both are in same business which is risky to health for customers but

they are considering Corporate Social Responsibility and environment safety for generating

goodwill in the minds of customers and stakeholders.

Key words: corporate governance, corporate social responsibility, health and safety,

environmental issues, community involvement, case study, Pakistan.

JEL Codes: G30, G38, I30, J20, K23, Q25

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1. Introduction

The performance of the modern corporations is heavily dependent on business activities as well

as its role for sustaining long term reputation and good will, which in general called Corporate

Social Responsibility (CSR) of firms. CSR is the subset of firms overall corporate governance

practices regarding business procedures, legal and ethical practices with the focus on investors

rights protection and social stakeholders of the firm. During the past few decades, this role of the

firms in the society has been as issue of growing public awareness. Many firms contributing

towards economic growth have been blamed for creating social problems in the society. Some of

the issues researched most frequently include long corporation power, employer safety and

health, environmental proactiveness, waste management, resource depletion and product quality

(Mitra et al. 2008). The corporations are induced to be accountable to a wider set of audience

than share holders only. Friedman s (1962) doctrine, that the only social responsibility of the

manager is to maximize the profit of shareholders, is not universally acceptable; rather the role of

the corporate governance is to maximize the share holders wealth along with sustaining

appropriate returns for all other societal stakeholders. Studies have proved that awareness is

being growing on the part of firms putting an obligation to help society even if it earns loss or

profit (Wise and Ali, 2008).

During the mid 1970 s, various accounting institution began to consider social disclosures in

company s reports due to the criticism of using profit as the final mean to evaluate corporate

performance. Moreover the researcher also began to articulate the different theories in this regard

i.e. agency theory, legitimacy theory, stakeholder theory and political economy of accounting

theory (Belkaoui and Karpik, 1989; Gray et al., 1988; Guthrie and Parker, 1990; Patten, 1991,

1992; Roberts, 1992; and Gray et al., 1995a). However, there is still no consensus exist on the

generally accepted frame work of the accounting for corporate social responsibility (Mitra et al.,

2008). Despite of this lack of consensus about why firms report social responsibility information,

an increasing number of local and multinational firms started disclosing their activities of social

responsibility in their annual reports voluntarily. In this regard, Corporate Social Disclosures

(CSD) are defined by Guthrie and Mathews (1985) as the provision of financial and non

financial information stated in its annual report or separate social reports relating to interaction

with its physical and social environment.




The present study aims at analyzing the corporate governance practices of two Pakistani firms

relating to corporate social responsibility with a view to examine and link corporate governance

practices with ethical business processes as well as providing some domestic evidence on

corporate social disclosures of firms in Pakistan using a case study method. The remainder of the

paper has been organized as follows; the second section of the paper develops the theoretical

background and model for the paper, the third discusses and analyzes the three case studies

selected for study and final section concludes the paper suggesting some implications for the

companies and management.

2. Theoretical Background

Majority of the studies in CSR have focused on the developed economies of the world and a little

work has been done in emerging markets like sub continent. UNCTAD (2004) defined CSR as

imparting the social responsibility actions into the business policies and procedures including

economic, social and environmental concerns. The minimum standard observed by the

organization is to compliance with law regarding CSR. The scope of CSR includes the direct as

well as spill over impact of organization s actions that may affect society. However the extent of

organization social liability is still a debatable issue.

Kendall and Kendall (1998) proposed that good corporate governance encompasses an ethical

approach, culture, society, organizational paradigms and the balance between the objectives of

all interacted parties of organization. There should be a decision making model giving weight to

all above stakeholders and there must be accountability and transparency in the actions and

decisions. However, Talakdar and Bakhtear (2007) reported that top performing sector of Dhaka

Stock Exchange in December 2007, i.e. banking sector, indicated a low incidence of corporate

social responsibility reporting which is a negative implication of corporate governance in

banking sector of Bangladesh.

Chowdhury (2006) also considered the environmental perspectives and urged that there is strong

need for firms to incorporate environmental responsibility in to their corporate governance

practices & policies and future strategies should avoid manipulation and misrepresentation of the

information. Because, in the long run, the choices of being not green may has serious




consequences financially and environmentally. Same thing is also observed by Kabir (2007) for

Lover Brothers Bangladesh Limited to allocate more resources and time to become a model of

green business in its sector and achieve long term benefits.

Environment Reporting" is a concept that is relatively new in Pakistan. It provides an

opportunity for companies to inform stakeholders of their corporate efforts in ensuring that

operations and businesses have minimum impact on the environment. Companies should not

view environmental reporting as an impediment to their businesses. Instead, they should embrace

it as an opportunity to enhance their business. This is a real challenge in a country like Pakistan,

where the command and control systems permeate the governance of our economy. The

tendency for pervasive regulatory frameworks often tends to prove self defeating in that they

only tend to focus on disciplinary actions, rather than providing the corporate sector with an

enabling environment for greater compliance on social and ecological standards.

In this regard, Institute of Chartered Accountant of Pakistan (ICAP) has introduced IAS 19 that

deals with employees benefits for short term, long term, post employments and termination

benefits. Benefits regarding wages, salaries, securities contributions, short term leaves, sick

leaves, medical leaves for family and different retirement benefits are given to employees

according to their job status. Disclosures about employee s safety and job security policies

ensure public about ethical and moral values of a corporation and attract foreign investments;

hence a positive effect is shown on firm s performance. ICAP has launched reporting

requirements regarding internal control and disclosure of different risk management systems, yet

no particular standard has been developed regarding the external environmental control

standards.

Moreover, government has introduced established Pakistan Environment Protection Act (PEPA)

and introduced National Environmental Quality Standards (NEQS) in 1997. According to which

companies are required to follow environmental regulations controlling for population,

agricultural wastage, social hazards or any damage to human life. The ACCA-WWF Pakistan

Environmental Reporting Awards were launched with the collaboration with the Ministry of

Environment and IUCN Pakistan in 2002 to recognize and reward companies that report




corporate environmental, social and sustainability performance to a broad range of stakeholders.

In addition to it, the work of the Global Compact is to be organized through the soon to be

functional Global Compact Foundation, a not-for-profit company that seeks to work closely with

the corporate sector on Corporate Social Responsibility issues and in developing effective

incentive systems for rewarding and sustaining good corporate performance in Pakistan.

In the light of above discussion, the present study provides a link between theoretical

perspectives of corporate social governance with practices to Pakistani companies regarding

CSR reporting. Two companies from the tobacco industry of Pakistan are selected as case study

to analyze the corporate social disclosure. The tobacco sector of Pakistan just consists of three

public limited companies listed on Karachi Stock Exchange including Pakistan Tobacco

Company (PTC), Lakson Tobacco Company and Khyber Tobacco Company limited. We are

unable to find any data regarding the corporate social responsibility and environmental reporting

about Khyber Tobacco so this company was skipped out. The major indicator of corporate

governance in any country may include establishment of rights of stakeholders, enforcement of

regulation and law and order, protection of creditors and customers. Mostly, researchers

categorize the reporting of these social actions for the purpose of study. In this regard, current

study utilizes the six categories of CSD proposed by Hackson and Milne (1996).i.e.

environmental; (2) energy; (3) employees; (4) product; (5) community involvement; and (6)

others. The CSR reporting of the three selected companies has been analyzed using the above six

categories.

3. Case Study 1 -- Pakistan Tobacco Company (PTC)

3.1 Background

Being the first multinational company in the country, Pakistan Tobacco's operations started in

1947 and it was first foreign direct investment from British American Tobacco Company in the

sub-continent. The company produces high quality branded products for customers Benson and

Hedges, Gold Leaf, Capstan, Gold Flake and Embassy. PTC role is to build long term

shareholders value and to give high quality products and to balance people's expectations.




Pakistan Tobacco Company mainly has three business principles in which one principle support

environmental impact that is good corporate conduct. The belief of this principle includes:

i. Business should have high level of behavior and integrity

ii. Achieving standard environmental performance

iii. Respect human rights

iv. High level of corporate social responsibility should be in tobacco industry.

v. Tobacco industry should participate in the formation of government polices that affects it.

3.2 Corporate Social Responsibility

Pakistan Tobacco Company believes to have a good business practice which they think is

attained by good environmental practices. They control their impact on environment by using

3R's principle i.e. Reduce, Recover and Recycle. So now the question arise that how they work

on this principle and what they have done till now regarding environmental practices. They basic

aim of PTC is to control or reduce CO2 (carbon dioxide) which effect the environment badly.

They have several environmental programs which include: (1) Waste management; (2) Energy

conversation; (3) Water management; (4) CO2 emission. PTC also guides other companies to

become environmental friendly and to work on 3R's principle. PTC believes that their approach

to CSR is letting them to survive in the market because by doing business in risk to health

product and still doing business from so long means that they are behaving in socially

responsible way and care for the impact and effect on environment. PTC is also trying to fulfill

society's expectations by taking in account some concern issues. In terms of the transparency to

the stakeholders of the company, PTC Annual Report for 2007 was recognized as the best in its

category by Institute of Chartered Accountants of Pakistan.

3.3 Environment Health and Safety (EHS)

PTC conducts their business operations in a way which is not harmful for their employees or

workers. The management uses clean technologies and safety systems and it is ensured that there

is safe environment for employees by minimizing the use of natural resources, water recycles etc




and all these are done in NEQS (national environmental quality standards) limits. PTC ensures

that their EHS policy is fulfilling British American tobacco policy which has international

standards and best practices. PTC is also involved in monitoring their environmental

performance for GRI (Global Reporting Initiative) where they communicate their social

performance. In 2006, National Forum for Health and Education (NFEH), a Non-Profit

organization focusing on environmental, health and educational awareness in Pakistan, has

awarded Pakistan Tobacco with the "Environment Excellence Award". Moreover, British

American Tobacco Company has awarded PTC with "EHS Excellence Award" in 2007.

3.4 Community Involvement Initiatives

Pakistan Tobacco Company is very much concerned with its community development. In this

regard, the management has taking some somber actions relating to community involvement and

for taking care of the general public. Some of these initiatives are:

i. People believe that hepatitis disease is because of pesticides and it should be avoided in

cigarettes. In response to this, PTC started using pesticides which is approved by

Government of Pakistan. This disease has another cause so for this PTC has also made a

joint venture with NIH (National Institute of Health) to pay attention to the issue.

ii. PTC has also reduced the use of agro chemical in their crops which is another dangerous

element for environment diseases and PTC is leading in this initiative.

iii. PTC has set mobile doctor units to facilitate the people in order to fight against diseases.

This strategy is mainly for people in rural areas because they need medical assistance.

iv. Medical camps are also arranged by PTC in collaboration with LBRT (Leyton

Rehmatullah Benevolent Trust) and Merck Pakistan limited.

v. PTC is providing educational opportunities like scholarships and building schools. The

company has also partnered with two NGO's that is ABES (adult basic education society)

and TCF (the citizen foundation)

vi. PTC is not using child labor in operations of the company because it has prohibition

clauses in contracts with the farmers that don't allow the use of child labor.




vii. They work on new products by in contact with regulators, government and scientists and

to create a less harmful product.

It is evident from the above discussion that Pakistan Tobacco Company has very serious

concerns for the corporate social responsibilities and environment health and safety in the

community in which it is operating. All these initiatives taken by Pakistan Tobacco Company are

letting them to build good image in the mind of the customers despite of their unhealthy products

and service for customers. According to Hackston and Milne (1996) categories of CSD, Pakistan

Tobacco Company is complying with employee s safety, environmental proactiveness and

community involvement initiatives. They try to come up the expectations of the customers and

create them socially responsible institutional citizens, as this is an integral part of the green

environment and community involvement policy of Pakistan Tobacco Company Limited.

4. Case Study 2 -- Lakson Tobacco Company Limited (LTC)

4.1 Background

Lakson Tobacco Company Limited (LTC), an affiliate of Philip Morris International Inc., is a

publicly listed company on the Karachi and Lahore Stock Exchanges. Lakson was awarded for

best company in 2005 from KSE and ranked in top 25 companies of KSE in the years 1997,

1998, 1999, 2003, 2004 and 2005 respectively. Lakson Tobacco Company manufactures

cigarettes in three factories which produce cigarettes and one tobacco leaf threshing plant, all

located in various parts of the country. Being the second largest tobacco company in country

Pakistan, LTC provides 2500 jobs to people all across the country by in operation and sales

offices. Lakson Tobacco Company aims at to provide best products to their customers and it also

help to reduce unemployment by contributing in other business units.

4.2 Corporate Social Responsibility

Lakson has been contributing for the welfare of the society in Pakistan. In corporate

responsibilities they have been doing in many ways that is in Health, Atmosphere, Agriculture,

Education and Employee.




4.2.1 Health

Lakson Tobaaco Company has started a medical trust in 1994 which have arranged many eye

camps for the needy people. LTC employees have also participated in these camps. In these

camps, eye surgeries and eye test of poor people were done and glasses were provided for free of

cost. LTC have established many hospitals: (1) Medical hospital at Mardan in 1998; (2) Medical

hospital at Sahiwal in 2002; (3) Medical hospital at Kotri in 2005. LTC provided mobile

dispensaries the remote areas of various parts of the country.

4.2.2 Environment

Lakson Company has tried to protect the environment by reducing the boiler emission. This

includes emission of few gases which are CO2, NO2 and SO2. The use of latest technology of the

boiler plant and other related machinery has reduced the emission of CO2 from almost 451.09

mgNm3 in 2005-2006 to 246.22 mgNm3 in 2006-07 and emission of SO2 from reduced from

14.21 mgNm3 to 8.33 mgNm3 in the respective years.

4.2.3 Agriculture

In order to avoid environmental issue and crop diseases, Lakson Tobacco Company has reduced

the use of chemicals in their plant site and crops as compared to other neighbor sites. This will

surely reduce the general public diseases caused by the infected eatables.

4.2.4 Education and employees:

Lakson is working on the education and employees' safety by building schools and providing

opportunities for gatherings. AK-12 school was established at Kotri (Sind) in 2005 by Lakson.

LTC provides better environment to their employees by best surrounding and community. Every

year employee's families are invited on 14 August celebration. Eid Milan parties and annual

dinners are held. Sanali Khara Bhai foundation is working with Lakson to provide educational

expenses to brilliant and deserving students.




4.3 Safety Policies of Lakson Tobacco Company

Lakson take in account their employees and environment safety. They have some safety policies

in order to avoid mishaps which include:

i. Implementation of necessary control measures in operations

ii. LTC provide proper training to their employees

iii. Safety policies are improved on regular basis and monitored properly.

This case study shows that LTC is contributing in social welfare even if they are producing the

products which are assumed by the general public to be harmful to health. Among the proposed

categories of corporate social disclosures of Hackston and Milne (1996), Lakson is following the

environment, community and employees modules. The company is taking employees safety

measures which show their serious concern about safety of the employees. All the welfare

operations help them to create goodwill of the company in specific, and for Lakson group in

general.

5. Conclusions and Recommendations

The present study sheds some light on the corporate environmental practices of two leading

companies of Pakistan in tobacco industry. After the analysis of these cases discussed, it can be

concluded that the behavior of firm is heavily dependent on the social work and community

involvement in the society in which it is operating. Although the traditional finance theory

argues that profit maximization is main objective of the mangers; however, business norms have

been changed now. The organizations are participating in the welfare of the society and its

employees by incurring heavy expenditures for the sustainable and long term development just

like PTC and Lakson. These organizations are trying to build trust and confidence of the society

in the business operations and procedures. Despite of the fact that, there is no strict law and

regulation regarding these CSR initiatives of the company, they are making it possible on the

volunteer basis. The other facet of these initiatives may be seen as; stakeholders of the industry

are getting more aware and conscious of business processes that are having impact on the

environment and society. According to these cases discussed above, it shows that both




companies although dealing in products which is not environment friendly like tobacco,

cigarettes etc. but they are doing a lot for the welfare of the country like building hospitals and

also people are getting aware to diseases. Both the companies are also developing and

implementing their own environment and safety polices for the employees.

Finally, the study discussion regarding the corporate social responsibility and initiatives taken by

these firms suggest some implications for the other firms in Pakistani market. Corporate social

responsibility is not a social activity these days; rather, it has become as one of the core business

procedures and policies. The firms following these practices are very successful; not only in

terms of financial matters, but also sustaining their long term positive image in the minds of

customers, investors and other societal members. The choice is in the hands of the management

of business concerns; whether they are incurring some expenditures and getting green today or

ready to facade pressure and consequences from the stakeholders tomorrow. Companies are now

trying to get a positive image regardless of what products or services they are providing to the

customers.




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