swati journal on corporate social responsibility

Supervisor’s Name: Prof. Ruma Saha Dr. Kunal chattopadhyay.Prof. Manisha Telraja(Vivekananda College of empowerment)

2013

Corporate Social Responsibility in ‘INDIA’ Swathy Mendiratta

(Punjab Technical University)


By Swathy Mendiratta(Punjab Technical University)

Weekend M.B.A IInd Semester, Roll No:06

ACKNOWLEDGEMENT:

I would like to express my special heartiest thanks of gratitude to my professor “Ruma Saha” who was my soul guide for my journal on “Corporate Social Responsibility” and who has also taken the pain of taking out her time and going through my entire journal and helping me correct it with care and attention. My deep sense of gratitude goes to Dr.

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Kunal Chattopadhyay who was always there to extend his hand of assistance whenever required, also I owe the computer faculties and library staff for allowing us to use the library books and facilities in a liberal way that allowed me to explore the topic and do the further required research for the thesis. I would like to express my deepest feelings of appreciation towards my institution, my college faculty members, and even non staff members and college associates and friends who have always directly and indirectly supported all of us students in a way or the other.

In addition, a thank you to Mr Arijit Mondal, Project Manager Tata Steel, Sharmistha Mukherjee, H.R associate in Deloitte, Kavita Mendiratta, Talent Acquisition in Emerson Design Engineering Center, Pratyusha Ryali, Hr in Wipro, and Rahul Halder, Hr in Yellow Box Hr Services Pvt Ltd, Kapil Mendiratta, Ex- business analyst and software developer at E-valueserve, who have helped me out a lot to explore the topic by sharing their crucial time with me helping me learn a lot indeed. And also not to forget, I would like to extend my gratitude towards my family members and well wishers for their support throughout.

(Punjab Technical University)Date: 18 / 8 / 2013

CONTENTS:

1. Introduction: - - - - - - - Pg: 5-6

2. Relationship between CorporateGovernance and C.S.R: - - - - - - Pg: 7

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3. Literature Review: - - - - - - Pg: 8-16

4. Hypothesis: - - - - - - - Pg: 17-19

5. Research Methodology: - - - - - Pg: 20-21

6. Findings & Analysis: - - - - - - Pg: 22-29

7. Inference: - - - - - - - - Pg: 30

8. Conclusion: - - - - - - - - Pg: 31

9. Limitations of Research: - - - - - Pg: 32

10. Future Direction: - - - - - - Pg: 33

11. Summary: - - - - - - - - Pg: 34

12. Bibliography: - - - - - - - Pg: 35

1. INTRODUCTION:An overview into corporate governance and corporate social responsibility:

The basic idea of Corporate Governance and Corporate Social Responsibility (C.S.R) has arrived from the Western countries, where their practices have developed tremendously in the last decade. During this time the idea has spread to other parts of the globe mainly because

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of the activities of Multinational National Companies. Corporate Governance and C.S.R are actually two related and interrelated business concepts that are engrossed in business practices. The concept of C.S.R and Corporate Governance, therefore has an interrelationship, and are also prevalent and practiced within legal and regulatory framework in India. Companies at present date generally practice it with a view point of business strategy and for the benefits that they receive on a long term basis. India at present date is one of the first countries to legally adopt the C.S.R practice. The Indian incorporates are not entirely happy with the mandatory rule adopted by Indian governance however they understand the long term benefits that they will be receiving through the media of C.S.R. The idea of C.S.R is slowly taking its roots widely through out on a global basis and is expected to promote the economic and social development of developing and under developed countries hand in hand with their respective government.

DEFINITIONS:

1.) CORPORATE SOCIAL RESPONSIBILITY :

C.S.R is about how companies manage the business processes to produce an overall positive impact on society. There isn’t any globally accepted definition for C.S.R. However the definition of C.S.R mainly depends on two factors: Social contract and Stakeholder theory.

a.) SOCIAL CONTRACT:(Donaldson, 1982; Donaldson and Dunfee, 1999) – There is a tacit social contract between the firm and society; the contract bestows certain rights in exchange for certain responsibilities.

b.) STAKEHOLDER THEORY:(Freeman, 1984) –A stakeholder is “any group or individual who can affect or is affected by the achievement of an organization’s purpose.” ‘Argues that it is in

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the company’s strategic interest to respect the interests of all its stakeholders.’“It means that a firm needs to take into account the interests of all stakeholders in a corporation’s existence, and not just shareholders”

2.) CORPORATE GOVERNANCE:

The concept of corporate governance was almost non-existent in India. In late 90’s the concept of corporate governance was introduced in India by the Securities and Exchange Board of India (SEBI) through Listing Agreement, which is applicable to the listing companies only. According to OECD the Corporate Governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the Board, managers, shareholders and other stakeholders spells out the rules and procedures for making decisions on corporate affairs. “Corporate governance should be recognized as set of standards, which aims to improve a company’s image, efficiency, effectiveness and social responsibility” – As defined by Nigel Kendall.According to Sir Adrian Cadbury, “Corporate Governance is the system by which companies are directed and controlled……”Corporate governance may be defined as the broad range of policies and ethical practices which are adopted by an organization in its dealing with the stakeholders who are majorly comprised of employees, customers, investors, community, natural environment, and suppliers.2. RESEARCH PROBLEM:

The research problem is centered on the topic of Corporate Social Responsibility. Here we discuss on how corporate social responsibility developed and took its roots in India.

The research problem is majorly and wholly centered around weather the reason behind corporate social responsibility being followed is of philanthropic nature and for the growth and development of our Nation

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‘or’ the industrialists consider it to be just a part of the business strategy for the benefit of their own business growth objectives.

Also, on a small scale here it has been discussed how corporate governance and corporate social responsibility are interlinked and how their objectives and benefits are somewhat similar in nature to have a better understanding into the world of C.S.R.

The research problem to be summarized in a short question is:Is C.S.R a genuine effort towards national development by the industrialists or is it just a mere dressing window for their organization?

3. LITERATURE REVIEW:

Corporate governance refers to the system by which corporations are directed and controlled. Corporate Social Responsibility (C.S.R) is a basically form of corporate self regulation integrated into a business model.

Reference to the articles in the following given website: http://www.academia.edu/1954005/IOSR-JBM_www.iosrjournals.org_

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http://www.academia.edu/1954005/IOSR-JBM_www.iosrjournals.org_



C.S.R and Corporate Governance although being two different terms, they have always been interlinked and considered to be the same for the very basic reasons of their objectives and benefits being the same.C.S.R. was earlier just confined to charitable terms. But slowly it got infused into companies and corporate governance practices.But earlier in India according to clause 49 of the listing agreement, C.S.R had been made totally optional.Whereas, C.S.R is based on the concept of self governance which is related to external legal and regulatory mechanism, Corporate Governance is a widest control mechanism within which a company takes its management decisions.

C.S.R can be broadly divided into the following four categories:

1. Environmental C.S.R: It focuses on eco- issues such as climate changes.2. Community based C.S.R: Here, businesses work with other organizations to improve the quality of life of the people in the local community.3. HR based C.S.R: It includes projects that improve the wellbeing of the staff.4. Philanthropy: Here, businesses donate money to a good cause, usually through a charity partner.

After a detailed study I’ve summed up the benefits of C.S.R that a company derives which are as follows:

a. Reduction in wastage and proper utilization of resources:Cutting utility bills and waste disposal costs helps the environment benefits as well as bring in cash benefits for the organization.b. Better reputation with satisfied and loyal workforce: A good reputation makes it easier to recruit employees. Employees may stay longer, reducing the costs and disruption of recruitment and retraining. Employees are better motivated and more productive.

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c. Helps meet regulatory requirements and draws positive attention and PR: C.S.R helps ensure the companies to comply with regulatory requirements. Activities such as involvement with the local community are ideal opportunities to generate positive press coverage.d. Smooth functioning of business with scope of further development: Good relationships with local authorities makes doing business much easier. Also, Understanding the wider impact of the business helps develop new products and services or improvise on the existing ones.e. Building a competitive strength: C.S.R helps the business to be more competitive in nature and reduce the risk of sudden damage to its reputation (and sales). Investors can recognize this and it makes them more willing to finance in the company. f. Satisfied Customers: It is a well known fact that customers like to buy more products or services of a company they preferably like. C.S.R creates a positive impact on company’s reputation and hence attracts more and more customers towards the company.g. More business opportunities: A C.S.R program requires an open, outside oriented approach which means that the business is always in constant positive relations with the customers, suppliers and other parties that affect the organization. Because of the continuous interaction of the business with other parties, it is easier to get to know fast and first about new business opportunities.h. Avoidance of government regulations: When a business is unable to fulfill its social roles, it invites more government intervention in the business system. Therefore, in order to avoid government regulation of business, it is preferable to participate in C.S.R activities.i. Long run self interest of the business: C.S.R activities ensures long run self interest of the business by creating a strong goodwill for the company, and a better public image among various interest groups. j. Conscious customers: The customers are well informed. They expect higher and good quality products at reasonable rates. If they don’t get fair treatment from the business, they may bad mouth and not buy the companies products.

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k. Strong trade unions: The level of education among the workers has been increasing. They understand the need of organizing themselves into unions to advance their economic and social interests. The government has also enacted social security measures due to which it becomes difficult for the business to ignore the interests of the workers.l. Shareholder expectations: Historically, publicly-owned companies primarily aimed at maximizing the shareholder value. At present date, companies must balance the financial expectations of owners with the social and environmental requirements of other stakeholder groups. Some shareholders are happy to invest in companies that operate with high integrity. Others may not approve of the aforementioned expenses of operating under C.S.R guidelines.

However long list of benefits there may be, still there are many arguments also against C.S.R activities which the industrialists have, they are summed up as follows:

1. Conflicting Consideration: Hard core profit making policies of firm are opposite to following C.S.R. A business manager is guided by two consideration, namely private market mechanism & social consideration, which are opposite to each other. If he considers following C.S.R entirely then the profit objectives of the firm has to be put at stake.

2. Arbitrary power: Too much involvement in C.S.R activities and allocation of resources in the welfare of the society allows managers to get an arbitrary power. They should have no right to interfere with the external environment of the business.

3. Disregard of market mechanism: Market mechanism is opposite to the doctrine of social responsibility which firms prefer to put in action towards allocation of scarce resources to alternate uses.

4. Responsibility of government: The industrialists believe it is the government’s job to uplift the weaker sections of the society.

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5. Inefficiency in system: There should be self interests attached towards taking initiatives for social responsibility which is inefficiency in our system.

Reference to the articles in the following given website: http://articles.economictimes.indiatimes.com/keyword/corporate-governance

There are many examples of poor corporate governance in India which proves that the amount contributed by industries is pint-sized compared to the billions they receive in return of such activities, which is why the new companies bill provisions has been introduced under the supervision of the current Minister of Corporate Affairs, Sachin Pilot.

JRD Tata, was the first businessman who took the initial step towards social responsibility. In 1970, all the major companies in Tata group started following the concept of social responsibility. One of the efforts of the Tata group which is known to almost all is Jamshedpur Tata steel works which was established providing well built roads shaded with trees and lot of other amenities like free housing, free hospitals, free schools, sports stadiums and clean streets surrounding it making it a people’s place and a proper planned city. In 2004, Jamshedpur was chosen by U.N along with Melbourne and San Francisco as one of six examples of urban-planning excellence.”Slowly with time some other major industrialists also started to follow the C.S.R concept. There are in fact a lot of such examples we can site to which are not just the efforts of the Tata Group but a lot of other existing and emerging corporate. C.S.R has been taking shape in today’s current scenario and the government also recognizes it to be a very crucial step towards economic development. Still if we want to have a broader look into the emergence of C.S.R in India we can sum it up into five phases as described below:

Ist PHASE: Here, C.S.R was in its very basic form of charity and social work done by the then wealthy merchants. After the colonial rule arrived in 1850’s, approach towards C.S.R changed. During

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http://articles.economictimes.indiatimes.com/keyword/corporate-governance



19th century, the industrial families of Tata, Birla, Bajaj, Godrej, Modi, Singhania, came forward and contributed a lot towards economic and social considerations but it was seen that their contributions was not just because of selfless and religious motives but also it was influenced by caste groups and political objectives.

IIst PHASE: During the Independence Movement, Mahatma Gandhi ji introduced the notion of trusteeship according to which the industrial leaders had to manage their wealth so as to benefit the common man. Gandhi ji’s efforts had put pressure on various Industrialists to contribute to show their dedication towards building the nation by, setting up temples, establish trusts for schools and colleges, setting up of training and scientific institutions, to help abolish untouchability, and encourage empowerment of women and rural development, e.t.c.

IIIrd PHASE: The third phase dates from 1960’s to 80’s where public sector undertakings (PSU’s) set up by the government were emerging to engage in C.S.R activities along with establishing various laws relating to labor and environment standards. There were stringent laws controlling the activities of private sectors. As Public sector was single handedly not being able to contribute effectively towards social and economic development private sectors again emerged to act towards C.S.R. But in spite of all the efforts C.S.R failed to catch the system during this phase.

IVth PHASE: This phase dates from 1980’s till until recently where Indian companies adopted C.S.R in the forms of their business strategy. As the economy started to grow rapidly it was beneficial for Indian companies to expand and grow as well, and this made them contribute more towards social and economic causes. C.S.R helped the industries capture the global market and create a corporate brand for themselves.

Vth PHASE: The fifth phase describes the current Indian scenario we are in at present where C.S.R is concerned. The new companies Bill 2012 approved by the parliament now, states that companies up to a certain size will have to spend 2% of their three- year

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average annual profit towards C.S.R. It is being considered as a big leap towards national development.

Now let us have a look into the laws, provisions and efforts put in by the government.

C.S.R VOLUNTARY GUIDELINES 2009:

Companies Act consists of several acts and sections relating to how a company should function. Relating to C.S.R a Companies Bill was raised in 2008 but due to the dissolution of the Lok Sabha it had to be reintroduced in 2009 which was referred to the standing committee for its recommendations and after getting the suggestions it took the shape of Companies Bill 2012 which was passed by the Lok Sabha on 18.12.2012 and by the Rajya Sabha on 08.08.2013. Due to this immense delay of the Companies Bill being passed, Ministry of Corporate Affairs introduced C.S.R voluntary guidelines in 2009, which is what we are talking about right now.These guidelines issued by the then Minister of Corporate affairs, Salman Khurshid, say that:

“Each business entity should formulate a C.S.R policy to guide its strategic planning and provide a roadmap for its C.S.R initiatives, which should be an integral part of overall business policy and aligned with its business goals. The policy should be framed with the participation of various level executives and should be approved by the Board.”

The Core Elements of this guideline were:

1. Care for all Stakeholders

2. Ethical Functioning

3. Respect for Worker’s rights and welfare

4. Respect for Human right’s

5. Activities for Social and Inclusive development.

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As per these guidelines the companies were required to frame a C.S.R policy, constitute a C.S.R committee, set aside funds for C.S.R activities and finally execute the C.S.R projects.

PROVISIONS IN THE NEW COMPANIES BILL:

The clause no. 135 of the Companies Bill deals with C.S.R provisions. It states that a company must on a mandatory basis follow C.S.R activities if it meets any one of the following given criteria’s:

1. It has a Net worth of Rs. 500 Crore or more,2. It has a Turnover of Rs. 1000 Crore or more,3. It has a Net Profit of Rs. 5 Crore or more during any financial year.

1. COMPLAINCE OF C.S.R ACTIVITIES AS PER THE NEW COMPANIES BILL:

If any company meets up with the criteria mentioned in the Companies bill as aforesaid, then it is required to form a C.S.R committee with 3 or more Directors amongst which at least one of them has to be an independent Director.

The functions of the committee are as follows:

2. The committee should formulate a C.S.R policy and indicate the respective C.S.R activities to be undertaken.

3. The committee should recommend the amount of identified expenditure for C.S.R activities.

4. The committee should monitor the C.S.R policy from time to time.

Now Let us talk about a few of the contributions made by the corporate towards C.S.R which have been mentioned as follows:

1. Tata Group has always come forward taking numerous steps for the economic development of our country. It has created scholarship opportunities and has also provided endowment for creation of national institutions, like TATA institute for social sciences, Indian Institute of science, National Centre for Performing arts, and a number of other higher education centers. Standing today 2013, Tata Global beverages has been recognized and well appreciated by mass for women empowerment as it

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comprises of 40 % women and has also been awarded for its well known ‘Jago re’ campaign. Also Tata Group was one of the biggest contributors that had come forward to help towards Uttrakhand tragedy that had recently struck and devastated the whole place.

2. On 4th December, 1996 Infosis Foundation, the philanthropic arm of Infosis Technologies Ltd came into existence for the purpose of fulfilling the social responsibility of the company by supporting the underprivileged sections of the society by opening around 5500 libraries in government schools across many villages, aiding orphans and street children, providing medical facilities, organizing novel pension schemes, reconstructing school buildings, setting up science centers and schemes to provide support to dying traditional art and cultural forms, e.t.c.

3. Lupin India Ltd is India’s third largest manufacturer of pharmaceuticals which has started a project for providing sustainable development in 154 villages across Rajasthan. The scheme instead of providing for piece-meal assistance that does not lead to effective alleviation of poverty or adequate development is designed as a holistic action plan that includes an Agricultural Income Generation Scheme, land cultivation and fruit plantation programs, fodder preservation schemes, sericulture and water-recycling programs, establishment of medical and educational centers, adult literacy programs and credit schemes.

4. Tata Consultancy Services (TCS) has set up a fully-equipped computer training laboratory for children from the Society for the Welfare of the Physically Handicapped and Research Centre, in Pune for imparting basic computer knowledge. NIIT has launched a highly popular ‘hole-in-the-wall’ scheme where it places a computer on a public wall in urban and rural areas so that neighborhood children can learn computer basics using the play-way method.

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5. Cipla, another Indian pharmaceutical major has found a novel approach to fulfill its corporate social responsibility obligations by offerering to sell a cocktail of three anti-HIV drugs, Stavudine, Lamivudine and Nevirapine, to the Nobel Prize-winning voluntary agency Medicine Sans Frontieres (MSF) at a rate of $350, and at $600 per patient per year to other NGOs over the world. This offer has to lead to a significant decrease in the prices of these drugs worldwide increasing the accessibility of these drugs especially in the developing countries.

6. Ranbaxy, one of India’s major pharmaceutical firms operates seven mobile healthcare vans and two urban welfare centers that reach over a lakh people in various parts of northern and central India as part of its corporate social responsibility initiative.

7. Bharat Electronics Ltd built cyclone proof houses for the victims of the super cyclone in with the help of the victims themselves so that the houses are built according to their needs.

8. Ion Exchange has founded a profitable venture for environmental protection through water treatment, afforestation and organic farming.

4. HYPOTHESIS:

If we come to think of it clearly the objectives and benefits are common for both C.S.R and Corporate Governance however some of them are listed below:

1. Rebuilding of public trust and confidence by increased transparency in its financial as well as non-financial reporting and thereby increasing the shareholder value.

2. Establishing strong brand reputation of the company.

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3. Making substantial improvement in its relationship with various stakeholders.

4. Contributing to the development of the region and the society around its area of operation

5. Addressing the concerns of its various stakeholders in a balanced way so as to maintaining a strong market position.

Around 8000 companies are expected to fall under the coverage of new Companies bill (2013), and this means that there would be a sum of Rs. 12,000 – 15,000 crores annually raised for the purpose of social and economic development. Although the companies are not very happy with C.S.R activities being made compulsory however a large number of the corporate feel that C.S.R is not just another form of indirect expense but is important for protecting the goodwill and reputation, defending attacks and increasing business competitiveness and the government expects a positive trend and foresees this to add a new dimension in the field of economic and social development of the country.The C.S.R concept which was in its philanthropic nature has been developed today and if we see it has been adopted by many industries and a lot has been done also by them for the economic and social developmental causes but if we come to see the reasons behind it, it was majorly followed by these companies as a part of their business strategy and political reasons. Talking about Corporate Social Responsibility in general it is a business ideology which claims that businesses ought to be responsible for social and environmental welfare. This can be a disadvantage as it can hinder productivity and this can also impact on a business' profitability.But still from a broader perspective if we look there are many advantages that C.S.R activities have to offer. C.S.R activities helps a company grow building a corporate brand image in the eyes of its stakeholders. In simple terms if we explain C.S.R activities helps in national development and a company operating within it will automatically grow if the economic condition of a country is strong. Nowadays C.S.R is considered as a part of the business

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strategy. C.S.R activities benefit the companies in achieving the organizational objectives which is why C.S.R is being adopted and implemented by the organizations today. To conclude finally, the reasons that motivate organizations to involve in C.S.R activities are discussed as follows:

1. C.S.R activities have formed an integral part of business strategy which also helps in corporate branding and global recognition of the companies. Also, for a corporation to function a developed economy is required. If a society grows so does the corporate sector.

2. The upcoming young generations of managers in the organization want more than just the financial benefit. They feel sense of pride to be connected with the organization which is socially responsible. Hence, strong C.S.R practices can help in attracting, recruiting and retaining the best young talent.

3. Responsible companies give greater priority to their customers. With diminishing business boundaries across the world consumers have become aware and more demanding in terms of information regarding conditions in which the products and services are produced along with the sustainability impact thereof.

4. C.S.R is about values and accountability which includes the behavior of the people. Many potential clients who themselves operate the C.S.R related activities expect that their suppliers will be doing the similar kind of programmes. Sometimes the selection is on the basis of social responsiveness of the supplier.

5. Globalization and universal expansion of the economies enhances the consideration of image and reputation among organizations. An organizations image and reputation can be ruined in days through unregulated and unethical practices. So, imbibing C.S.R practices becomes the strong foundation in image building.

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6. Environment protection becomes an area of concern these days. A C.S.R programmes that aims to conserve earth's natural resources, avoiding pollution, water conservation and minimizing global warming effects are the areas in which the companies take initiative.

7. Legislators have introduced laws and regulations to force businesses to act more responsibly whether that is in regard to the environment, finance, health and safety, wellbeing or a variety of other areas. Corporations by taking substantive voluntary steps with respect to these issues can avoid government intervention when seen as a pioneer in these areas rather than being forced by law to comply.

8. C.S.R practices can help the organization to avoid the risk of corruption scandals, environment disasters, child labor violations and dangerous work environment. These incidents also draw unwanted attention from regulators, courts, governments and media. A genuine effort in playing straight and having good C.S.R record with the right check insulates the companies from such risks.

5. RESEARCH METHODOLOGY:

To understand the concept of research design properly we can look at the definition given by Bernard Phillips which is:

“Research design is the blue print for the collection, measurement and analysis of data”

My research on the topic of ‘C.S.R’ is majorly based on a qualitative analysis and interpretive research and inductive reasoning, using

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individual ideas and facts to give a general conclusion to the research problem. Through the help of collection and analysis of primarily non-numerical activities, and a detailed study, a structured approach has been applied to reach to the possible conclusion.

The research that has been conducted here on C.S.R is based on the following methods:

1. Historical research: It included getting into the roots from where C.S.R started to take a possible shape in India and the activities that had been done relating to it.

2. Ethnography: It included collection of empirical data on the human societies and cultures towards understanding the social life of humans and their personal perspectives towards the concept of C.S.R observing the benefits that the industrialists arrive from the point of view of the subject.

3. Case study: It included deeper understanding of C.S.R and analyzing it systematically in depth.

4. Ethology: It included the study of the set of ideas and attitudes of the firms towards C.S.R comparing its origins, characteristics, and culture of different societies.

5. Ethno methodology: It included studies of how the firms make sense of their everyday activities in order to behave in socially accepted ways by adopting C.S.R as a part of their business strategies and creating a public image and corporate brand.

6. Grounded Theory: It included investigation and developing theory based on the data collected looking at the specific and relevant information and deriving theories and real motives of industrialists behind following the concept of C.S.R.

7. Phenomenology: It includes detailed study of the events related to C.S.R.

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8. Symbolic interaction: It included word mouth interview session conducted with a few people regarding their perspectives of C.S.R.

9. Action research: It included research done by observing the data collected improving my view towards a better understanding of the topic C.S.R.

I have done an exploratory research gaining adequate knowledge about the topic “C.S.R.” My research is basically based on data collection, existing national survey and also on the basis of selecting quotes that are relevant and represent aspects related to C.S.R along with interviewing a few working professionals leading towards my research findings.

6. FINDINGS AND ANALYSIS:

Part I: A word- mouth interview was conducted by me of a few working professionals to know about their ideals in regards with C.SR and the contributions of their companies related to it. Following are the names of the people who gave their opinions on C.S.R:

1. Mr Arijit Mondal, Project Manager Tata Steel,2. Sharmistha Mukherjee, H.R associate in Deloitte,3. Kavita Mendiratta, Talent Acquisition in Emerson Design

Engineering Center,

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4. Pratyusha Ryali, Hr in Wipro,5. Rahul Halder, Hr in Yellow Box Hr Services Pvt Ltd,6. Kapil Mendiratta, Ex- business analyst and software developer at

Evalueserve.

Given below are their statements which they conveyed relating to C.S.R:

1. Mr Arijit Mondal: “Following Corporate Social Responsibility has always been a heritage culture at every Tata industries. Jamshedpur steel city in fact is one of the biggest examples, it is a perfectly set up and designed city with all the required amenities and facilities. Tata Steel in fact spends in crores annually for C.S.R activities opening new schools, spending for the benefit of the society; also recently we have donated quite a lump sum amount towards the Uttarakhand tragedy that had occurred. C.S.R is a very beneficial concept that has been recently only made mandatory with its necessary provisions and with this new advent I’m sure there will be scope for even more progress and development of our economy.”

2. Sharmistha Mukherjee: “C.S.R is a form of corporate self-regulation integrated into a business model. C.S.R policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms.Well if you ask me, I am in favor of the view. Every organization and person should participate helping the society to grow and ours does too as per my knowledge Deloitte is very much engaged in conducting blood donation camps, and also setting up libraries and supporting the children.”

3. Kavita Mendiratta: “C.S.R is a well known concept followed by almost every operating industry in India. Emerson Design Engineering Center is a global company. In India its horizons are centered on working with the local communities. It contributes towards community development focusing on the area of education, school improvement programmes, orphanage support, rural infrastructural development and promotion of better living standards across India. My opinion is that it is the work of the government

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majorly to contribute towards the growth and development of our people we pay the government in terms of taxes and the money which is not being utilized properly should be utilized. It’s not like the government doesn’t do anything they do but they should try and reduce money wastage and contribute more.”

4. Pratyusha Ryali: “C.S.R in Wipro is majorly centered around education promotional activities and towards protecting the environment. It is always engaged in health and wellness programmes, building up schools and to avoid wastages and proper utilization of natural resources. C.S.R is a developing concept in India and I believe it is not just the corporate but also the employees that have this responsibility to follow. India being a developing country needs joining hands and working as a team which is kind of like a dream more than reality but we should to play our parts well.”

5. Rahul Halder: “C.S.R is not just to be in charity level social responsibility plays a major role also. According to my knowledge my previous companies I have worked in be it Wipro or Vodafone, they were very much into the C.S.R concept helping the flood victims and establishing libraries or distributing books. My current company is not however involved in C.S.R activities since it’s not exactly a huge concern it only operates in three places Pune, Bangalore and Kolkata. Whenever u have a proper Infrastructure and a very high profit level u can think about involving into these activities. On a personal level I very much support C.S.R activities and have also involved myself with C.r.y and U.n.ic.e.f.”

6. Kapil Mendiratta: “Evalueserve is a global organization which has always supported the C.S.R activities. It sponsors the education of underprivileged children, and works with local schools, providing training programs for small business owners and also supporting communities affected by natural calamities, such as floods and earthquakes, etc. I am in favor of corporate social responsibility as it is very crucial for the economy to grow which in turn creates a stable platform for the company to grow as well and if the company grows the employees will also have more scope to grow.”

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Part II: The Stakeholder theory states that a company should proceed with its work keeping in mind the benefits of the company along with its stakeholder’s.

However, the Theory of the firm has stated that the sole motive of a company should be profit maximization.

In a developing country like India the Stakeholder’s theory holds no real value because for the economy to develop profit maximization is also required equally as much as the C.S.R activities.

Here, Jenson has enlightened the value maximization theory which combining both Stakeholder’s Theory and Theory of the Firm states that in order to create a sustainable firm, stakeholders need to be considered, but in order to remain efficient, there needs to be a singular objective as well for the firm to function.

Part III: Currently, a study by Oxford on Corporate Social Responsibility in India, has stated that:

“Industry leaders in India have repeatedly blamed the government’s poor performance in education for the dearth of qualified candidates and the ‘poor quality’ of most engineering graduates, and argued that steps should be taken to make young people from rural areas and lower castes more competitive in the job market, especially by improving the quality of school education.”

But still there are company groups and corporate who have begun to take matters in their own hands.

India has the world’s largest population of youth. Sam Pitroda, head of the Indian National Knowledge Commission spoke on the issue of India’s youth not being utilized fully to their capacity stating,

“Our youth can be an asset only if we invest in their capabilities. A knowledge-driven generation will be an asset. Denied this investment, it will become a social and economic liability.”

pg. 24



Yet many firms have recognized this issue and started projects to involve youth in business, getting them properly trained and to utilize their talent to the fullest.The corporations that are doing work that is benefiting the society also need to publicize and manage these projects effectively and efficiently in order to maximize their profits. This is not the way it is happening currently in India. “Only 17 percent of the companies surveyed in India had a written C.S.R policy while more than 80 percent of the surveyed companies engage in C.S.R programs.”Harvard Business school study warns that unless effectively managed C.S.R can become a large waste of money. If management does not have a concrete C.S.R plan consequences can be huge. HBS describes the common situation of ill managed C.S.R in their study: “And then the CEO wakes up one day and realizes that "we're doing $50 million worth of charity work, and we don't seem to be getting credit for any of it." “However, they advise that companies should not force the disparate C.S.R programs into their business strategies. Instead, the goal should be to “bring discipline and structure to the many fragmented components.” To have the C.S.R projects that the people of India need to climb out of poverty, management needs to be consistent and directed. Finally despite all efforts of well-managed and effective C.S.R, sometimes the families of corporate giants can single-handedly ruin entire programs effectiveness. Traditionally, many C.S.R projects have aligned with the families or CEO’s personal interests. However, for the benefit of the Indian people and profits, personal wishes need to be set aside and an unbiased, effective C.S.R program needs to be established.

The Negative press from the wealthy leaders can also override the positive C.S.R press as warned by Prime Minister Dr Manmohan Singh:

“In a country with extreme poverty, industry needs to be moderate in the emolument levels it adopts…The electronic media carries the lifestyles of the rich and famous into every village and slum. Media often

pg. 25



highlights the vulgar display of their wealth…. An area of great concern is the level of ostentatious expenditure on weddings and other family events. Such vulgarity insults the poverty of the less privileged, it is socially wasteful and it plants the seeds of resentment in the minds of the have-nots…”

Creating an effective Corporate Social responsibility Program is much harder than simply throwing money to charity. Firms need to consider aspects of their managements and community, or they may in fact do more harm than good to both parties.

Despite variants in the type or reason for C.S.R from firm to firm for corporations rising in India, it can be a way of maximizing growth and efficiency.

Based on conclusions in The Corporate Social Responsibility and the Theory of the Firm,

"C.S.R may be in certain cases a necessary condition for wealth maximization.”

Part III: As per a survey on the main drivers of C.S.R in India, “to build a global brand” was found out to be one of the higher ranked reasons for C.S.R being practiced by the companies.

pg. 26



If we talk on a global scale, Grant Thornton International Business report reported states that 65% of privately held businesses have considered worker retention as their main driver of keeping a C.S.R program. If we come to think about it worker retention is one of the major factors why C.S.R should be followed by companies as it will help gain lifelong consumers and loyal employees along with a healthy reputation in the market.

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Part IV: On the basis of an internet found survey result:Reference link: http://www.gbmr.ioksp.com/pdf/Gautam%20&%20Singh,%202010.pdf

As per a survey (Ref. link provided above) it was observed that 46% companies got zero rating (no reporting), around 8% scored 3/5 & 4/5 Karmayog rating shown in the below table. About 49% companies out of 500 largest Indian companies were reporting on C.S.R. Most of the companies report on donations, renovating schools in villages, mid day meals etc.It is expected from a company to at least spend a minimum of 0.2% of income on C.S.R activities annually. But in most reports there is no mention of the amount spent in any of their balance sheets or annual reports. Well defined expenditure on C.S.R has been shown by very few companies. Companies reach for C.S.R activities was also unsatisfactory in the sense only 25% companies C.S.R activities were for employees & rest were focusing on vicinity & society at large.

pg. 28

http://www.gbmr.ioksp.com/pdf/Gautam%20&%20Singh,%202010.pdf



Many companies are only making token gestures towards C.S.R in tangential ways such as donations to charitable trusts or NGOs, sponsorship of events, etc. believing that charity and philanthropy equals to C.S.R. Most companies use C.S.R as a marketing tool to further spread the word about their business, for instance, donation of a token amount to some cause on purchase of a particular product. The fact that companies are hiring advertising agencies for their C.S.R further highlights this. Companies hesitate to state the processes followed by them, the damage caused by these processes, and the steps taken to minimize this damage.

A summary of C.S.R ratings of top 500 companies is given below:

Karmayog C.S.R Rating No. of Companies Companies with the given rating

0/5 231 46%1/5 92 18%2/5 138 28%3/5 35 7%4/5 4 1%5/5 0 0%TOTAL: 500 100%

The results suggest that C.S.R is often guided by the commitment of the top management. With compliance and enforcement slack, employee’s care is just employers’ benevolence, environment care and total quality management are driven by market forces and legislation, C.S.R is considered as an additional activity of Human relation and public relation department, provides a glimpse of C.S.R focus areas and methodology adopted by 30 companies.

7. INFERENCE:

pg. 29



The inference drawn on the basis of the findings and analysis is mentioned below:

1. As per the interview session with a few working professionals, C.S.R is a well known but developing concept which was majorly supported by them deeming it important for national growth. C.S.R activities were also majorly followed by their companies and also they expect the new mandatory law to e beneficial for the uplifting of the society.

2. As per a survey on the main drivers of C.S.R in India, “to build a global brand” was found out to be one of the higher ranked reasons for C.S.R being practiced by the companies

3. On a global scale, Grant Thornton International Business report stated that worker retention was the main driver of C.S.R programs.

4. As per another survey it was observed that maximum companies do not spend in any C.S.R activities and that C.S.R activities should be made in a way that benefits the company’s reputation and it should also contribute towards the economic development of the country.

5. Some other studies based on the newspapers magazine’s and reviews given in part III of findings and analysis we conclude that proper education facilities should be provided to those underprivileged with the same. Corporates generally involve in monetary donations where they should be involved in some productive operations in the field of health, education, e.t.c

8. CONCLUSIONS:

Corporate Social Responsibility (C.S.R) although interlinked to the term Corporate governance is different to it but they both are mistakenly

pg. 30



considered the same because of their common benefits and advantages that they offer.

C.S.R is considered a profit-maximizing attribute in globalizing corporations. In our India, major C.S.R activities are concerned with community development activities, particularly in the areas of health and education because of the interdependency of the firms and their environment.

C.S.R is mainly followed by the companies as it is supposed to help a company gain lifelong customers or consumers and loyal dedicated employees. Also, a company can gain a good reputation through the medium of C.S.R which also helps in capturing the global market. In general terms for a company to survive in the long term C.S.R activities are very useful.

It is a very true fact that even though C.S.R activities itself incurs a certain heavy amount of expenditure still through getting responsibly involved in C.S.R activities a company can reduce its legal fees, advertisement expenditure, and also it can cut down on various other costs. In India, the firms are well known with the fact that C.S.R can affect their global reputation as well as at home as because to commerce trade globally also many companies need to fulfill certain laws related to C.S.R. Still very few companies follow C.S.R and it is done for the benefits of the company as a part of their business strategy.

Despite the current and potential benefits of C.S.R in India, there is much that still needs to be improved, to maximize the profits of society and that of the firm and even though the industrialists may be unhappy at first with the C.S.R activities being mandatory but this is expected to have positive outcome for the future.9. LIMITATIONS OF RESEARCH:

There are several limitations of research that hasn’t allowed my research work to be a completely perfect one. A few of the limitations I have faced during my research work is mentioned as follows:

pg. 31



1. The research is based majorly on collected data as it was not possibly to explore the practicality of the situation by going into deep analysis by entering and observing the industrial world and their application and perspectives about C.S.R.

2. The inadequate interaction with the university research departments and research institutions is also another limitation I have faced while conducting my research.

3. The inadequacy of continuous assistance for gaining in-depth knowledge and computer assistance was also a sort of hindrance for my research.

4. Since my research is qualitative in nature it is not as prescriptive and as definite when compared to a quantitative research which is based on mathematical calculations, scientific as well as graphical measurements whose conclusions are more definite in nature.

5. Issues of anonymity and confidentiality may have occurred which are unavoidable problems while conducting word-mouth interviews rather than survey-questionnaire method.

10. FUTURE DIRECTION:

The aim of this thesis is to help develop a rational approach for the motives behind C.S.R activities.

pg. 32



Further studies and researches can be based on the same topic by future researches from their own desired perspectives. Through a methodical and quantitative analysis several observations can be made for future research in the field.

They can use Questionnaire survey method and approach a few companies and do a more practical and detailed research on the same. One can even do the study for future research focusing on prior firm performance influencing the C.S.R agenda.

It is apparent that the information obtained is from a detailed study of data collected and the same has been applied towards a better understanding of the research problem but one can apply a more different approach towards the same through hard-core field work.

With a project topic as large and varied as this, additional and intensive studies can be done and results would likely to improve with a diversified view. Results can also be drawn from other scientific techniques also.

11. SUMMARY:

1. Introduction: An overview into corporate governance and corporate social responsibility with definitions of C.S.R, Social contract, Stakeholder Theory, Corporate Governance.

pg. 33



2. Research problem : Research is to find weather C.S.R a genuine attempt made by industries towards the economy and weather corporate governance and C.S.R are same terms or not.

3. Literature Review: A detailed description C.S.R, its evolutionary phases with the benefits and shortcomings. It also includes C.S.R voluntary guidelines 2009, provisions in the new companies bill and examples of a few C.S.R activities done by some industries.

4. Hypothesis: Understanding the objectives and benefits of C.S.R being same, and looking at the possible reasons for C.S.R being followed.

5. Research Methodology: The methods used namely historical research, ethnography, case study, ethology, ethno methodology, grounded theory, phenomenology, symbolic interaction, and action research.

6. Findings and Analysis: It includes word-mouth interview articles and wordings about C.S.R and surveys and reports.

7. Inference: It contains the outcomes of findings and analysis which is that C.S.R is majorly followed in India to build a corporate brand image and that it is beneficial for the company although many companies do not follow it.

8. Conclusion: C.S.R is done by the firms as a basis of profit maximizing business strategy.

9. Limitations of the Research: The limitations faced were lack of contact with the research departments, quantitative analysis, scientific methods; practical field work, questionnaire survey method.

10. Future Direction: One can do a more quantitative research based on scientific and practical method.

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