Corporate Social Responsibility

An Introduction

Suranjana Roy
January 5, 2023
• Globalisation holds out the promise of improved productivity and greater
standards of living. On the downside however, it has thrown us challenges like
increases inequality, volatility in the nancial markets, environment
degradation, etc.

• Competition among corporations, to overcome these challenges, has given

rise to the concept and practise of Corporate Social Responsibility.

• CSR is commitment by organisations to balance nancial performance with

contributions to improve the quality of the lives of their employees, local
community, and society at large

• CSR includes a broad range of practises and activities like: charitable

donations, cause branding, business strategies to address human rights and
labour issues

• How organisations demonstrate corporate social responsibilities may vary

depending on industry, sector, and country they operate in.
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Definitions
• Viewed as a comprehensive set of policies, practises and programs that are
integrated into business operations, supply chains, and decision making
processes throughout the organisation and includes responsibility for current
and past actions, as well as future impact

• Involves addressing legal, ethical, commercial, and other expectations society

has for the business and making decisions that failed balance the claims of all
key stakeholders

• Aims to honour ethical values and respect people whilst achieving

commercial success

• CSR issues can be broadly categorised as related to business ethics,

community investment, environment, governance, human rights, the
marketplace and the workplace
(Formal) Definitions
• International Labour Organisation (2009): a way in which enterprises give
consideration to the impact of their operations on society and a rm their
principles and values both in their own internal methods and processes and in
their interaction with other actors.

• World Business Committee for Sustainable Development: Corporate Social

Responsibility is the continuing commitment by business to behave ethically
and contribute to economic development while improving the quality of life of
the workforce and their families as well as of the local community and society
at large

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Motives of Corporate Social Responsibility

• Globalisation and market forces: As companies have expanded over sees,

they have met with varying government regulations, tari s, environmental
restrictions, labour standards, etc. some view such ethical issues simply as a
costly hindrance. Companies use CSR methodology as a strategic tactic to
gain public support for their presence in global markets, using their social
contributions to provide a subconscious level of advertising

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Motives

• Law and Regulation: Government may ensure that corporations are prevented
from harming the broader social good including people and and the
environment. However, issues surrounding government regulation pose
several problems. Regulation in itself is unable to cover every aspect in detail
of a corporation's operations. This leads to burdensome legal processes
bogged down in interpretations of the law and debatable grey areas.
Motives

• Social Awareness: The role among corporate stakeholders to work collectively

to pressure corporations is changing. Shareholders and investors themselves,
through socially responsible investing are exerting pressure on corporations
to behave responsibly. Nongovernmental organizations are also taking an
increasing role, leveraging the power of the media and the Internet to increase
their scrutiny and collective activism around corporate behavior. Through
education and dialogue, the development of community in holding businesses
responsible for then./actions is growing
Motives

• Ethical Consumerism: The rise in popularity of ethical consumerism over the

last two decades can be linked to the rise of CSR. As global population
increases, so does the pressure on limited natural resources required to meet
rising consumer demand. Industrialization in many developing countries is
booming as a result of technology and globalization. Consumers are
becoming more aware of the environmental and social implications of their
day-to-day consumer decisions and are beginning to make purchasing
decisions related to their environmental and ethical concerns. However, this
practice is far from consistent or universal.
Motives

• Stakeholder Priorities: Increasingly, corporations are motivated to become

more socially responsible because their most important stakeholders expect
them to understand and address the social and community issues that are
relevant to them. Understanding what causes are important to employees is
usually the rst priority because of the many interrelated business bene ts
that can be derived from increased employee engagement (i.e. more loyalty,
improved recruitment, increased retention, higher productivity, and so
institutional investors, regulators, academics, and the media). There is a wide
consensus among public and private institutions that the concept of
Corporate Social Responsibility (CS) is based on a company attaining a
balance between the interests of all its stakeholders within its strategic
planning and operations.
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Motives

• Consumer Satisfaction: 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. CSR is about values and accountability
which includes the beha"our of the people. Many potential clients who
themselves operate CS activities expect their suppliers to do similar kind of
programmes. Sometimes the selection is on the basis of social
responsiveness of the supplier.
 Motive

• Employees Satisfaction: Young blood in the organisation wants more than the nancial
bene t. They feel sense of pride to be connected with the organisation which is socially
responsible. Strong CSR practices can help in attracting, recruiting and retaining the
best young talent.

• Image Building: Globalisation and universal expansion of the economies enhances the
consideration of image and reputation among organisations. An organisations image and
reputation can be ruined in days through unregulated and unethical practices. So,
imbibing SR ppractices becomes the strong foundation in image building. CSR practices
can help the organisation to avoid the risk of corruption scandals, environment disasters,
child labour violations and dangerous work environment. These incidents also draw
unwanted attention from regulators, courts, governments and media. A genuine e ort in
playing straight and having good CSR record with the right check insulates the
companies from such risks.
such risks
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Motives

• Risk Management: Managing risk is a central part of many corporate

strategies. Reputations that take decades to build up can be ruined in hours
through incidents such as corruption scandals or environmental accidents.
These events can also draw unwanted attention from regulators, courts,
governments and media. Building a genuine culture of
'doing the right thing' within a corporation can o set these risks.

• License to operate: Corporations are keen to avoid interference in their

business through taxation or regulations. By taking substantive voluntary
steps, they can persuade governments and the wider public that they are
taking issues such as health and safety, diversity or the environment good
corporate citizens with respect to labour standards and impacts on the
environment.
diversity or the environment good corporate citizens with respect to labour standards and impacts on the environment

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Motives

• Environment Protection: Environment protection becomes an area of concern

these days. A CSR programme that aims to conserve earth's natural
resources, avoiding pollution, water conservation and minimising global
warming e ects are the areas in which the companies take initiative
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Approaches to CSR
4 Approaches

• Obstructive
• Defensive
• Accommodating
• Proactive
Approach 1: Obstructive

• Obstructive: Perhaps the most deceitful approach to social responsibility is

obstructive. Obstruct means to block or get in the way. So, an obstructive
stance blocks out its social responsibilities. It is more concerned with pro ts.
Obstructive companies are known to pollute, deceive customers, and even
exploit their own employees

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Example 1

• Example: manufacturers of fruit juices who hide evidence about using

industrial sugar in the manufacture of pure fruit juice products this is clearly
exploitation of consumers as companies are trying to make juice more tastier
thus attracting more consumers but by adding sugar they are making juice
unhealthy for consumption
Example 2

• Example: obstructionist approach in the United States was the handling of the
Homestead Strike of 1892. Management placed an emphasis on opposing
any business activity that threatened pro ts. 3000 workers from Andrew
Carnegie's Homestead Steel Mill went on strike for better wages and working
conditions. Instead of trying to come to a mutually bene cial agreement,
management choose to hire a private army to quell the strike. The following
confrontation led to the deaths of nine workers and three detectives. These
types of incidents were not uncommon and were the result of the
obstructionist view commonly taken by management during the late 1800's.
Historian Joseph Frazier Wall said, "Frick was the norm, not Carnegie, in management's relationship with labor at that time". (PBS, The Homestead Strike, 1999).

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Approach 2: Defensive

• Defensive: In most cases, companies that take a defensive stance towards

social responsibility are not particularly responsible. These companies may
consider themselves neutral, and they make pro ts a more important motive
than performing actions in a socially responsible way. These companies make
a point of following the law to ensure that others cannot take legal action
against them but they do not more than what is legally required

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Example 1

• Example: a company may create more waste than necessary, but it will
remove all the waste in a legal method rather than dumping it illegally so this
way the company is over exploiting resources which is unethical but to cover
it up they are using legal disposable methods thus showing that they are
contributing to the society
Example 2

• Example: Another example of it can be that companies as per law are

required to contribute 2% of their net pro t as sr and the companies are
contributing only 2% not more than this thus ful lling the legal requirements
so that no one can take any legal actions against them and no one can cross
question them on this

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Example 3

• Example: When making ethical choices, they put the interests of their
shareholders rst at the expense of other stakeholders. Like when dividend
decision is to be taken, they give more dividend to shareholders but cut
salaries or do not promote deserving candidates in the organisation. this way
they are keeping the shareholders happy and satis ed but employees are
getting dissatis ed
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Approach 3: Accommodating

• Accommodating: An accommodating stance signi es that a company

believes social responsibility is important -- and perhaps as important as
making a pro t. These companies satisfy all legal requirements and attempt
to meet ethical standards. An accommodating company does not attempt to
hide its actions and remains open about why it takes speci c actions.
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Example 1

• Example: Walmart, Disney, and Google are great examples of companies

going above and beyond. The three companies have been known to give
great bene ts to their employees.
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Example 2

• Example: it may decrease its creation of waste, source products that are not
tested on animals and pay its employees a fair wage. The company would
keep its records open to the public.
Though these companies are often socially responsible, they may change their policies in response to criticism.
Approach 4: Proactive

• Proactive: Like an accommodating company, a proactive company makes

social responsibility a priority. Instead of reacting to criticism, a proactive
company attempts to remain ahead of the curve when it comes to social
responsibility. It may make ethics part of its mission statement and attempt to
avoid any harm to the environment or its employees. A proactive company
may go out of its way to institute new recycling programs, give all of its
employees a living wage and bene ts, and donate a portion of its pro ts to
charity. fi
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Example 1

• An excellent example of proactive stance is the Ronald McDonald House

program undertaken by McDonald's. These houses, located close to major
medical centres, can be used by families for minimal cost while their sick
children are receiving medical treatment nearby. This program has been
widely applauded
Example 2

• Example: Toro Company, Exmark Manufacturing and Dixon Industries Inc.

They collectively recalled 62,000 faulty commercial riding mowers. These
companies worked directly with their dealers, distributors and customers
during the recall campaign to proactively x or replace the a ected units
already on the market Toro Company, Exmark Manufacturing and Dixon
Industries Inc. They collectively recalled 62,000 faulty commercial riding
mowers.

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Example 3

• Example: King sher, a company that owns the British chain B&Q, has
successfully implemented a proactive stance on waste reduction, chemicals
and green issues in 2007. The company had goals for waste reduction and
use of certi ed timber, sourcing the majority of its timber from sources that
the Forest Stewardship Council has certi ed. King sher's policies on
chemicals in 2007 required its operating companies to have an action plan
available by 2008 to identify products containing certain chemicals and to
work with vendors on plans to remove or substitute them
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Benefits of CSR

• Bulding Reputation by increasing environmental e ciency and improving

environmental responsibility, an enhanced reputation is often manifested in
awards and recognition from governments, rating agencies, and public
surveys.

• Developing human capital through better human resource management, a

high quality work force is essential for competitiveness since it improves
productivity, product quality, and innovation.

• Improving access to capital through high standards of corporate governance

that reassure investors on issues relating to shareholder and stakeholder
rights, transparency and disclosure, and proper governance structures.

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 Benefits of CSR

• Easier hiring of the best talent Researchers estimate that the most important
corporate resource over the next 20 years will be talented employees, many
of which pay attention to corporate social and environmental behaviour.

• Higher retention of top talent Studies show that talented employees tend to
stay with a company when they have meaningful work

• Increasing employee productivity: studies show the connection between

meaningful work and productivity, and shows that engaging the entire
organization in sustainable development goals like zero emissions, self-
su cient energy production, zero waste, helping restore the planet's health,
ensures that the company gets more output from its employees.
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Benefits of CSR

• Reduced expenses in manufacturing: Willard demonstrates savings

opportunities through eliminating or recycling waste and redesigning
processes to use less energy, water, and materials in manufacturing, which
are the low hanging fruits of eco-e ciency

• Reduced Expenses at commercial sites A lot of unnecessary waste takes

place at non-manufacturing sites. Through more judicious waste handling,
energy e ciency, water conservation, and naturalized landscaping, SD Inc.
can add 26 million dollars of pure pro t
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 Benefits of CSR

• Improved Financial Performance As stated above a corporations' priority is to

maximize pro ts and therefore it is interesting to discuss the relationship
between social responsibility actions and economic performance. There
di erent opinions on this matter and they can be structured into three di erent
viewpoints. The rst viewpoint believes that there is a trade o between social
responsibilities and nancial performance. Engaging in CSR will get in the way
of pro t maximization and it is therefore irresponsible of a corporation towards
its shareholders to engage in CSR operations. The second viewpoint believes
that the costs occurring when the corporations embrace their social
responsibilities are marginal and outweighed by bene ts such as improved
employee moral and productivity. The third viewpoint believes that CS is
important in itself and its costs are o set by a reduction of other costs.
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CSR Tools and CSR activities at
national and international level
CSR IN INDIA

Corporate Social responsibility (CSR) is continuing commitment by

businesses to integrate social and environmental concerns in their business
operations.Changes in the global environment increasingly challenge business
around the world to look beyond nancial performance, and to integrate social
and environmental concerns into their strategic management.
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Prior to Companies Act 2013, CSR in India has traditionally been seen as a
philanthropic activity. And in keeping with the Indian tradition, it was believed that
every company has a moral responsibility to play an active role in discharging the
social obligations, subject to the nancial health of the company. In the early 90’s
Mahatma Gandhi introduced the concept of trusteeship helping socio-economic
growth. CSR was in uenced by family values, traditions, culture and religion.
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On 29th August 2013, The execution, fund allotment and
Companies Act 2013 replaced the reporting for successful project
Companies Act of 1956. The New Act implementation.
has introduced far-reaching changes
that a ect company formation, India became the rst country to
administration, and governance, and legislate the need to undertake CSR
incorporates an additional section i.e. activities and mandatorily report CSR
Section 135 – clause on Corporate initiatives under the new Companies
Social Responsibility obligations Act 2013. This is the beginning of a
(“CSR”) for companies listed in India. new era for CSR in India.
The clause covers the essential
prerequisites pertaining to the
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Who qualifies for CSR Duty?

Every Company which has,

a)Net Worth of Rs.500 Crores or More

b)Turnover of Rs.1000 Crores or More

c)Net Pro t of Rs.5 Crore or More (Net Pro t Before Tax)

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WHAT IS THE ROLE OF CORPORATE SOCIAL RESPONSIBILITY COMMITTEE?

(a) formulate and recommend to the Board, a Corporate Social Responsibility

Policy,

(b) recommend the amount of expenditure to be incurred on the activities and

(c) monitor the Corporate Social Responsibility Policy of the company from time
to time.
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What will the board do?

The Board of every company shall —

(a) approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also
place it on the company’s website,

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company,

Ensure that the company spends, in every nancial year, at least 2% of the average net pro ts of the company made during the three
immediately preceding nancial years, where the company has not completed the period of three nancial years since its
incorporation, during such immediately preceding nancial years (Yet to be noti ed)

Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount kept
for Corporate Social Responsibility activities:

If a company contravenes the provisions shall be punishable with ne which shall not be less than fty thousand rupees but which
may extend to twenty- ve lakh rupees and every o cer of such company who is in default shall be punishable with imprisonment for
a term which may extend to three years or with ne which shall not be less than fty thousand rupees but which may extend to ve
lakh rupees, or with both.
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CSR ACTIVITIES

As per the schedule VII of the Companies Act 2013, activities which may be included by companies in
their Corporate Social Responsibility Policies Activities should be related to:

i)Eradicating hunger, poverty and malnutrition, ‘promoting health care including preventinve health care
and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the
promotion of sanitation and making available safe drinking water.

(ii) promoting education, including special education and employment enhancing vocation skills especially
among children, women, elderly and the di erently abled and livelihood enhancement projects.

(iii) promoting gender equality, empowering women, setting up homes and hostels for women and
orphans; setting up old age homes, day care centres and such other facilities for senior citizens and
measures for reducing inequalities faced by socially and economically backward groups.
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(iv) ensuring environmental sustainability, ecological balance, protection of ora and
fauna, animal welfare, agroforestry, conservation of natural resources and maintaining
quality of soil, air and water including contribution to the Clean Ganga Fund set-up
by the Central Government for rejuvenation of river Ganga.

during the immediately preceding nancial year shall establish a Corporate Social
Responsibility Committee of the Board involving of three or more directors, out of
which at least one director shall be an independent director.

Provided that where a company is not required to appoint an independent, it shall

have in its Corporate Social Responsibility Committee two or more directors.
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v) protection of national heritage, art
and culture including restoration of
buildings and sites of historical
importance and works of art; setting
up public libraries; promotion and
development of traditional art and
handicrafts.
vi) measures for the bene t of armed
( (viii) contribution to the prime
forces veterans, war widows and their minister’s national relief fund or any
dependents; other fund set up by the central govt.
for socio economic development and
relief and welfare of the schedule
caste, tribes, other backward classes,
(vii) training to promote rural sports, minorities and women.
nationally recognised sports,
paralympic sports and olympic sports
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(ix) Contribution to incubators funded by Central Government or State Government or any agency or Public
Sector Undertaking of Central Government or State Government, and contributions to public funded Universities,
Indian Institute of Technology (IITs), National Laboratories and Autonomous Bodies (established under the
auspices of Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council
of Scienti c and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence Research and
Development Organisation (DRDO), Department of Biotechnology (DBT), Department of Science and Technology
(DST), Ministry of Electronics and Information Technology) engaged in conducting research in science,
technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).
(x) rural development projects
(xi) slum area development.
Explanation.- For the purposes of this item, the term `slum area’ shall mean any area declared as such by the
Central Government or any State Government or any other competent authority under any law for the time being
in force.
(xii) disaster management, including relief, rehabilitation and reconstruction activities.
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What activities shall not be considered as CSR activities?

To prevent any misappropriation, following activities are not considered as CSR

activities-

• Contribution of any amount directly or indirectly to any political party shall not
be considered as CSR activity.

• The CSR projects or programs or activities that bene t only the employees of
the company and their families shall not be considered as CSR activities in
accordance with section 135 of the Act.

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CSR Strategies at Global level

CSR Strategies at Global level

Some common examples of CSR strategies adopted globally are-

a) Renewable Innovation : An initiative by Johnson & Johnson

An excellent example of CSR on the frontline is big pharma pioneer Johnson & Johnson. They have focused on reducing
their impact on the planet for three decades. Their initiatives range from leveraging the power of the wind to providing
safe water to communities around the world. Their purchase of a privately-owned energy supplier in the Texas Panhandle
allowed the company to reduce pollution while providing a renewable, economical alternative to electricity. The company
continues to seek out renewable energy options with the goal of having 100% of its energy needs from renewable
sources by 2025.

Google earned the Reputation Institute’s highest CSR 2018 score much in part due to their data centers using 50% less
energy than others in the world. They also have committed over $1 billion to renewable energy projects and enable other
businesses to reduce their environmental impact through services such as Gmail.
 Issue of Sustainability : Coca-Cola Spotify o ers a similar program, although for a shorter duration of 24 weeks of paid
leave. The company believes the launch of this initiative resulted in a spike in external
As a brand, Coca-Cola is putting a huge focus on sustainability. The key areas are job applications which has never abated.
climate, packaging and agriculture along with water stewardship and product quality.
Their message is ‘a world without waste’, with the aim of collecting and recycling When it comes to social causes, Net ix and Spotify use their social media platforms to
every bottle, making their packaging 100% recyclable and replacing all water used in show support for movements such as Pride month, environmental sustainability, and
creating their drinks back to the environment to ensure water security. They aim that Black Lives Matter. Net ix sets an example on how to target -and appeal to - niche
by 2030, they will have reduced their carbon footprint by 25%. and minority audiences through clever social media.

In 2021, Coca-Cola unveiled its rst-ever beverage bottle made from 100% plant-
based plastic. “Our goal is to develop sustainable solutions for the entire industry, We
want other companies to join us and move forward, collectively. We don’t see Access to healthcare: P zer
renewable or recycled content as areas where we want competitive advantage,” said
Dana Breed, Global R&D Director, Packaging and Sustainability, The Coca-Cola When disaster strikes, emergency assistance in healthcare is crucial. To aid in these
Company. circumstances, P zer has a three-pronged approach; product donations, grants and
solutions to access.
Employee rights: Net ix & Spotify
Grants have been provided to countries such as Haiti in the aftermath of Hurricane
From a social perspective, companies such as Net ix and Spotify o er bene ts to Matthew and the global refugee crisis in Europe and the Middle East. This money is
support their employees and families. provided in cooperation with NGOs to reach as many people as possible.

Net ix o ers 52 weeks of paid parental leave to the birth parent and non-birth parent During the COVID-19 pandemic, through its Global Medical Grants program, P zer
(which includes adopted children). This can be taken at any time whether it is the rst provided $5 million to help improve the recognition, diagnosis, treatment and
year of the child's life or another time that suits their needs. This compares to a management of patients. In addition, grants were made available to clinics, medical
median of 18 weeks at other major tech companies. centers and hospitals to improve the management and outcome of COVID-19
patients.

In 2022, P zer was named one of the most ethical companies in the world by
Ethisphere.
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Drivers of CSR

There are numerous drivers in the marketplace that have encouraged larger companies to be more socially
responsible, as discussed in more detail below. But the key drivers for rms becoming more socially responsible are:

• Government legislation
• customers expectations of rms
• consumer lobby groups
• the extent of costs involved
• the type of industry in which they operate
• the potential for competitive advantage
• top-level corporate culture
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Government legislation

In many countries across certain industries, the government has imposed legislation
that requires companies to conform and behave in a certain manner. In this case,
however, the organizations impacted by this legislation are only complying with various
requirements because of regulation. They may or may not be willing to incorporate
social responsibility initiatives into their day-to-day operations of an overall strategy.

Examples here would include legislation relating to environment, pollution, use of

workers and conditions, product disposal, materials used in production, and so on.
Therefore, this is not necessarily a driver of corporate social responsibility, but is
adopted and followed by companies as it is a requirement imposed upon them by
government.
 Customers’ expectations of rms For instance, Disney has faced
signi cant criticism in the past relating
Consumers are becoming more aware to the use of low paid workers in
of social and environmental issues and developing countries to produce toys,
the consideration of the future is games and novelties. Likewise, some
becoming slightly more important when consumers have been critical of KFC
consumers consider purchase because of the conditions that their
decisions. As a result, some consumers supply chickens are held in. The
will have an expectation that certain changing expectations of consumers
companies behave in an appropriate has resulted in rms being more
manner, relative to society and the responsive to these issues and
communities. adopting a more corporate responsible
outlook
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Consumer lobby groups of product value. For example, Walmart is
often the target of lobby groups because of
In conjunction to the previous driver of their perceived actions and impact on local
corporate social responsibility, the Internet communities and business centers. Another
and social media has made it much easier example is McDonald’s, who are frequently
for consumer lobby groups to form, to criticized for the perceived impact that they
generate attention and adverse media may have on obesity and people’s health.
coverage, and therefore achieve its goals of
change. Therefore, larger companies who are more
likely to be the target of lobby groups,
Typically, these consumer lobby groups will become more likely to be willing to be
target large and well-known companies engaged in corporate social responsibility
within industries that adversely a ect the initiatives.
environment were deemed to not provide a •
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 The extent of costs involved However, a bank can shift its customer
bank statements from paper-based to
A shift to increase social responsibility electronic (known as e-statements) on
may come at a reasonable cost to the the basis that they are saving lots of
organization. For example, a paper – but this has the impact of
manufacturer choosing to manufacture reducing costs for the organization.
its products in more developed countries Likewise, a major hotel chain can
or choosing to pay the production encourage its customers to reuse their
workers are much better salary – rather bath towels each day. Again the hotel
than “exploiting” unskilled workers in can claim an environmental bene t of
developing countries – will signi cantly reduced water and power usage, all the
impact their unit margin and overall while delivering themselves a reduction
pro tability. in costs and increase in pro tability.
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 The type of industry in which they transparent and ethical in their
operate business operations.

There are a number of more signi cant Obviously manufacturing is another

industries where there is greater industry that has greater pressure on it
pressure an expectation on the rms to – particularly heavy manufacturing
become responsible corporate citizens. where there could be signi cant
Following the Global Financial Crisis, pollution, or large companies deciding
there has been in increased to manufacture in developing countries,
expectation on banks and other or manufacturers who have issues with
nancial institutions to be more product disposal (e.g. mobile phones
and batteries and chemicals).
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Corporate Philanthropy

The origin of the word philanthropy is Greek and means love for mankind. Today,
philanthropy includes the concept of voluntary giving by an individual or group to
promote the common good. Philanthropy addresses the contribution of an
individual or group to other organizations that in turn work to improve the quality of
life for all citizens or residents. – via Michigan Foundations

That de nition makes some very interesting points about the idea of philanthropy:

Love for mankind

Promoting the common good

Improving the quality of life for all citizens

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 • Corporate Philanthropy Bene ts of corporate philanthropy

Corporate philanthropy refers to the Corporate philanthropy helps support

all of the ways in which companies communities where companies are
achieve a positive social impact based. It supports corporate giving
1 through strategic and generous use of programs, which essentially lead to
nances, employee time, facilities, or free money for non-pro ts.
their own products and services, to
help others in the community and
support bene cial causes.

Corporate philanthropy is the act of a

corporation or business promoting
the welfare of others, generally
through charitable donations of funds
or time.
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 Potential for a competitive advantage customers with cheaper home loans if
by image they have environmentally friendly
houses.
There are some companies that are
attempting to build their core image, In this case, these types of
or at least parts of their brand organizations are truly practicing the
association around their socially societal marketing concept. They are
responsible behavior. Some foregoing some pro tability in order to
companies will highlight that they are contribute to society or to certain
ethical manufacturers – Etiko is one communities.
such manufacturer, and bankmecu is
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a nancial institution that rewards

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 Corporate culture and top overall strategy, or is it simply an
management values exercise in publicity?

Corporate social responsibility is also

a re ection of the overall corporate
culture and of top management
values. In other words, how important
is making a contribution to society to
the senior management of the
organization? This will guide how
embedded social responsibility is the
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 How can corporate philanthropy help Corporate philanthropy help
non-pro ts? businesses

Corporate philanthropy helps non- Corporate philanthropy fosters

pro ts through various methods of employee engagement and generates
support, such as corporate matching business value. When businesses
gift programs and volunteer grants. participate in corporate philanthropy,
The impact of donations and they are creating a positive public
volunteering for non-pro ts can be image for themselves, enhancing their
drastically increased with the help of relationships with consumers, and
corporate programs. creating a positive work environment.

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Difference between corporate philanthropy and corporate social responsibility
While they may seem similar,corporate social responsibilitydescribes the overall
attitude of an organization toward society at large, while corporate philanthropy
is a narrower form of corporate social responsibility.
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 Types of Corporate Philanthropy 2. Volunteer Grants

1. Matching Gifts Volunteer grants are second only to matching gifts in

popularity. These corporate philanthropy programs
Matching Gifts are the most popular form of corporate match employees’ volunteer hours with donation to
philanthropy. Companies with matching gift programs those non-pro ts. It means once employee have
donate the same amount of money ( or double or triple volunteered for a minimum predetermined number of
this amount) to the same non-pro t that their employees hours (e.g., 20 hours) their employer will donate a set
do. amount to that non-pro t (e.g., 4000 rupees).
Common parameters set on such programs are 3. Employee Grant Stipends
employee eligibility (e.g., only full time employees), non-
pro t eligibility (e.g., only educational institutions), match Some corporation will award grants to employees to
ratio (e.g., 1:1or 2:1), maximum and minimum donations donate non-pro t of
matched (e.g., gifts of 50 dollars to 2000 dollars), and
deadlines (e.g., one year after the donation). their choice. While these programs are less common
than matching gifts or volunteer grant programs, they
are impactful for the non-pro ts that bene t from them.
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 4. Community Grants employees with non-pro t to provide
specialised support only that company
Companies, not employees are the one can provide.
who initiate community grants. Non-
pro ts can apply to companies with these 6. Corporate Sponsorships
programs in place to explain why their
organisation’s mission would bene t from Companies frequently give nancial
the grant money. support to a non-pro t to help further

5. Volunteer Support Initiatives their mission. The non-pro t then

recognize this by acknowledging that the
Corporate philanthropy is not always business has supported their activities,
donating money. With volunteer support programs and/or larger events.
initiatives companies partner their
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Leading Corporate philanthropy Coca-Cola Company values the
programs economic empowerment and
entrepreneurial development of
Google recently set a ve year goal to women, education and youth
give dollar 1 billion in grant an o er development of local communities
1million volunteer hour. It also want to around the world, and access to
help close the world’s education gap clean drinking water in deprive areas.
by supporting non-pro ts that build Through their corporate philanthropy
platform to scale digital learning programs, they will match up to dollar
resources to everyone. Google will 20,000 per employee at a 2:1 ratio.
match up to dollar 12,000 in
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employee donations at a 1:1ratio.

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Ethics

• Moral principles that govern a person’s behaviour or the conducting of an

activity

• The branch of knowledge that deals with moral principles

• Fundamental principles include universal values such as essential equality
between men and women, human or natural rights, concern for health and
safety and also for natural enviroment
Business Ethics

• Applied/professional ethics that examine ethical principles and moral/ethical

problems that arise in a business environment.

• Applies to all aspect of business conduct and is relevant to the conduct of

individuals and entire organisations
 Need and Importance of Business Ethics

• Stop business malpractices

• Improve consumer con dence
• Survival of business
• Protecting consumer rights
• Protecting employees, shareholders, etc
• Development of good relationship between business and society
• Image building of business
• Smooth functioning of business
• Healthy competition
• Talent retention
• Pro tability
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Principles of Business Ethics

• Honesty
• Integrity
• Promise-keeping and trustworthiness
• Loyalty
• Fairness
• Respect
• Accountability
• Leadership
• Commitment to excellence
• Law abiding
Scope of Business Ethics
Ethics in Compliance

• Compliance is about obeying and adhering to rules and authority. The

motivation for being compliant could be to do the right thing out of the fear of
being caught rather than a desire to be abiding by the law.

• Workspaces should have a ethics and compliance program that includes 6

key elements - (1) written standards of ethical workplace conduct, (2) training
on the standards, (3) company resources that provide advice about ethical
issues, (4) a means to report potential violations con dentially or
anonymously, (5) performance evaluations of ethical conduct, (6) systems to
discipline violations.

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Ethics in Finance
The ethical issues in nance that companies and employees are confronted with include:

• In accounting - window dressing, misleading nancial analysis

• Related party transactions not at arm’s length
• Insider trading, securities fraud leading to manipulation of nancial markets
• Executive compensation
• Bribery, kickbacks, over billing of expenses, facilitation payments
• Fake reimbursements
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 Ethics in Human Resource

• Human Resource management plays a decisive role in introducing and implementing ethics. Ethics in HRM covers those
ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer
and employee. Issues include:

• Discrimination - based on age, gender, race, religion, disabilities, weight, etc

• Sexual harassment
• A rmative action
• Issues surrounding the representation of employees and the democratisation of the workplace, etc
• Issues a ecting privacy of the employee: workplace surveillance, drug testing
• Issues a ecting the privacy of the employer: whistle blowing
• Issues relating to the fairness of the employment contract and the balance of the power between employer and employee
• Occupational safety and health
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Ethics in Marketing
Issues related to:

• Pricing: Price xing, price discrimination, price skimming

• Anti-competitive practises like manipulation of supply, exclusive dealing
arrangements, tying arrangements etc.

• Misleading advertisements
• Children and marketing
• Black and grey markets
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Ethics in production
Issues relating to:

• Defective, addictive and inherently dangerous products

• Ethical relations between the company and the environment include pollution,
enviromental ethics and carbon emissions trading

• Ethical problems assuring out of new technologies for example, genetically

modi ed food

• Product testing ethics

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Ethics in IPR knowledge and skills

• Patent infringement
• Patent misuse
• Copyright infringement
• Copyright misuse
• Trademark Infringement
• Misuse of IPR’s
 Corporate Governance: Preliminaries

Public Governance System: Concept and de nition

Public governance deals in utilization of available resources and its use for the public. Precisely
public governance deals with public.
It is to protect the human values and rights, implement the laws in non- discriminatory manner,
and ensure transparent public agencies and o cial decision making.

Public governance system is an e ective, impartial and quick judicial system. It includes all
citizens in debating public policies and choices.
In a society ultimately citizens become the customers. The primary objective of public
governance is to serve the customer or citizen in an e ective and e cient manner.

Public governance system has created a legislature structure for the purpose of implementing
speci c mandate in order to provide better services to the public at large. This structure involves
board, department, minister, cabinet, house of assembly and public.
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Corporate Governance: Preliminaries

Types of Public Governance System

In public governance system the whole emphasis is given on public, who is vested with the
sole authority to decide who will govern the nation. There are three types of public
governance system:
Communistic System: The roots of the system can be related with the idea of the Marxism.
As per the ideology of communism the working class should govern the system. The entire
properties belong to the government and all the citizens should be treated equally.

Socialistic System: It is based on the doctrine of abolishing the private property and
exercising social control. Under this system doctrine of social control of property and wealth
distribution is believed to be accepted. Democratic System: In the democratic system of
governance people appoint their public representatives to govern the country. As per
Abraham Lincoln, Democracy means “Of the people, for the people and by the people.”
 Corporate Governance System entrepreneurs, on the one hand, and those who invest
resources in corporations on the other.”
Corporate Governance: An International Review (1992)
de nes Corporate Governance broadly as “the exercise Robert Monks and Nell Minow (2001) de ne Corporate
of power over corporate entities so as to increase the Governance as “the relationship among various
value provided to the organization’s various participants in determining the direction and
stakeholders.” performance of corporations. The primary participants
As per the Cadbury Report (1992) “Corporate are the shareholders, the management and the board of
Governance is the process by which companies are directors.”
directed and controlled.”
Thus, management runs the business; the board of
According to the Organization for Economic directors ensures that it is being well run and in the right
Cooperation and Development (OECD) “Corporate direction.
Governance refers to the private and public institutions, Corporate governance is emerging out as the
including laws, regulations and public institutions, movement to build up the systematic, transparent and
which together govern the relationship, in a market value based governance culture in business and
economy, between corporate managers and corporate world. It is absolute re ection of public
governance system.
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 Comparison between Public Governance System and public governance system is governance of the
Corporate Governance System public a airs by the elected people’s representatives,
Under the public governance system, the public corporate governance system is governance of
choose their representatives from each constituency a airs of a company by the stakeholders. In public
through election and voting system. The winner governance system, public choose and elect their
candidate is selected as Member of the Parliament representatives, similarly the shareholders have rights
(MP). All the members of the parliament among to elect their representatives in the Board of Directors
themselves decide the cabinet and cabinet decides in a company. The Board of Directors is very similar
the Prime Minister. Again, the President of India is to the Council of Ministers or cabinet which is
elected by all the members of both the houses of involved in decision making but not responsible for
parliament and state legislative assemblies by implementation of these decisions. The Board of
constituting the Electoral College. Here it is important Directors decides the Chief Executive O cer (CEO)
to note that the cabinet is the legislative body, which or Managing Director (MD) of the company. The CEO
take decision but cannot execute the decision taken is just like the Prime Minister, who is responsible for
by it. executing the decisions taken by the Board of
There are similarities between public governance Directors. If Chairman and Managing Director (MD) is
system and corporate governance system. As the the same, then separate CEO is appointed
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 Good Corporate Governance Good corporate are not born but they are made
by collective e orts of all stakeholders. Only law
Concept and regulation cannot change corporate to
behave better to bene t all concerned. Director
The terms ‘Governance’ and ‘Good Governance’ and management prompted by the shareholders
are used in the literature of corporate and inspired by societal values play important
governance. Another term ‘Bad Governance’ is role in this regard. The company and its all
now-a-days recognized as one of the root o cers including the board of directors and other
causes for prevailing corrupt practices in our o cials should strictly follow a code of conduct.
societies or corporations. The nation and
corporations both must provide good Good corporate governance goes hand in hand
governance to bene t all their stakeholders. with increased transparency and accountability.
Good governance is the pre-condition for •

receiving loan, aid etc from foreign institutional

investors, international nancial institutions,
donors etc.
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 Need for Good Corporate Governance 3. Attraction for investors

Good corporate governance is very helpful to 4. Powerful development tool

restore investors’ con dence in the market. In
last few years Malaysia, Japan, Russian
Federation and other countries have been 5. Positive relationship between corporate
a ected by a lack of con dence in investors at governance and corporate
the market place. Hence, improved corporate performance
governance has been introduced featuring the
following characteristics:
6. Transparency in operation
1. Improved share price performance
7. Accountability of managers and governors

2. Potential for outperformance in developing

1.

economies
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Corporate Governance
Summarising

• Corporate Governance is the way in which companies are managed and

governed

• It is about balancing individual and societal objectives as well as social and

economic goals

• It conducts business as per the desires of the shareholders (wealth

maximising), but also conforms to the basic rules of society embodied in laws
and local customs
Why corporate governance?

• Better access to external nance

• Lower cost of capital - interest rates on loans
• Improved company performance and sustainability
• Higher rm valuation and share performance
• Reduced risk of corporate crisis and scandals
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Four Pillars of Corporate Governance

• Accountability
• Fairness
• Transparency
• Independence
Accountability

• Ensuring that management is accountable to the board

• Ensuring board is accountable to shareholders
• The board must explain the purpose of a company's activities and the results
of its conduct. It and company leadership are accountable for the assessment
of a company's capacity, potential, and performance. It must communicate
issues of importance to shareholders.
Fairness

• Protect stakeholder rights

• Treat all stakeholders including minorities, equitably
• Provide e ective redress for violations
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 Transparency

• Ensure timely, accurate disclosure on all material matters, including the

nancial situation, performance, ownership con icts of interest, and risks to
shareholders and other stakeholders.
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Independence

• Procedures and structures are in place so as to minimise or avoid con icts of

interest

• Independent directors/advisers i.e. free from in uence of others

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How to Assess Corporate Governance

You can research certain areas of a company to determine whether or not it's practicing good corporate governance. These areas include:

• Disclosure practices
• Executive compensation structure (whether it's tied only to performance or also to other metrics)
• Risk management (the checks and balances on decision-making)
• Policies and procedures for reconciling con icts of interest (how the company approaches business decisions that might con ict with
its mission statement)

• The members of the board of the directors (their stake in pro ts or con icting interests)
• Contractual and social obligations (how a company approaches areas such as climate change)
• Relationships with vendors
• Complaints received from shareholders and how they were addressed
• Audits (the frequency of internal and external audits and how issues have been handled)
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 Types of bad governance practices include:

• Companies that do not cooperate su ciently with auditors or do not select

auditors with the appropriate scale, resulting in the publication of spurious or
noncompliant nancial documents

• Bad executive compensation packages that fail to create an optimal incentive

for corporate o cers

• Poorly structured boards that make it too di cult for shareholders to oust
ine ective incumbents
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SAMPLE QUESTIONS

• Give examples of CSR practices you have come across in your life. Do you
believe they have helped the society in any way? Explain.

• Explain with examples: Ethics with Finance

• What is corporate governance? Explain the bene ts of good corporate
governance.

• What is the mandatory CSR clause under the Companies Act, 2013? Explain
the activities that a rm can engage in as CSR in India.

• What are the motives of Corporate Social Responsibility?

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