Corporate GovernanceCorporate Governanceandand

Corporate Social Corporate Social ResponsibilityResponsibility-Trivikram. Ch-Trivikram. Ch

IndexIndex

Corporate GovernanceCorporate Governance

• Definition of Corporate Governance. Definition of Corporate Governance.

• Introduction to Corporate Governance.Introduction to Corporate Governance.

• Fundamental functions of Corporate Fundamental functions of Corporate Governance.Governance.

• Importance of Corporate GovernanceImportance of Corporate Governance..

Corporate Social Corporate Social ResponsibilityResponsibility

• Definition of CSR.Definition of CSR.

• Introduction to CSR.Introduction to CSR.

• CSR in Indian context.CSR in Indian context.

• Examples of CSR.Examples of CSR.

• Arguments for and against CSR.Arguments for and against CSR.

• Conclusion.Conclusion.

Definition of Corporate Definition of Corporate GovernanceGovernance

Corporate Governance is defined Corporate Governance is defined as the practices, principles and values as the practices, principles and values that guide a company and its business that guide a company and its business every day, at all levels of the every day, at all levels of the organization. organization.

Introduction to CGIntroduction to CG

• Corporate governance is the ability Corporate governance is the ability to function profitably while obeying to function profitably while obeying laws, rules and regulations. laws, rules and regulations.

• Good corporate governance is the Good corporate governance is the glue that holds together responsible glue that holds together responsible business practices which ensures business practices which ensures positive workplace management and positive workplace management and sustained financial performance.sustained financial performance.

• Good corporate governance practices Good corporate governance practices instill in companies the essential vision, instill in companies the essential vision, processes, and structures to make processes, and structures to make decisions that ensure longer-term decisions that ensure longer-term sustainability. sustainability.

• There can be no better way to restore There can be no better way to restore public confidence in both businesses and public confidence in both businesses and markets and build a prosperous future markets and build a prosperous future than proper corporate governance.than proper corporate governance.

Fundamental functions of Fundamental functions of Corporate GovernanceCorporate Governance

• Corporate governance links directly Corporate governance links directly to three fundamental functions of to three fundamental functions of boards and the director’s of the boards and the director’s of the companies and shareowners they companies and shareowners they serve. They are:- serve. They are:- – Protecting stakeholder rights.Protecting stakeholder rights.– Managing riskManaging risk– Creating long-term business valueCreating long-term business value

Protecting stakeholder Protecting stakeholder rights and interestsrights and interests

Organization for Economic Co-Organization for Economic Co-operation and Development (OECD) operation and Development (OECD) advises businesses to recognize and advises businesses to recognize and safeguard stakeholders rights.safeguard stakeholders rights.

• These Principles call on boards to be These Principles call on boards to be truly accountable to shareowners and truly accountable to shareowners and to take ultimate responsibility for to take ultimate responsibility for their firm’s adherence to a high their firm’s adherence to a high standard of corporate behavior and standard of corporate behavior and ethics.ethics.

• If stakeholders are adversely If stakeholders are adversely affected by a company’s actions, affected by a company’s actions, shareowner value will suffer.shareowner value will suffer.

Managing riskManaging risk

By addressing and managing risks By addressing and managing risks effectively, boards can position their effectively, boards can position their businesses to perform well financially businesses to perform well financially and secure a long-term license to and secure a long-term license to operate. By failing to do so, boards can operate. By failing to do so, boards can undermine their company’s reputation.undermine their company’s reputation.

• Proactively identifying possible human Proactively identifying possible human rights concerns allows a business to rights concerns allows a business to more effectively address potential more effectively address potential risks.risks.

• The proper management of risk The proper management of risk ensures customer satisfaction and ensures customer satisfaction and reputation.reputation.

Creating business valueCreating business value

The role of any board is guiding The role of any board is guiding corporate strategy and creating wealth corporate strategy and creating wealth for shareholders. for shareholders.

The most effective corporate The most effective corporate citizenship and sustainability citizenship and sustainability strategies are led from the top, strategies are led from the top, incorporate a wide range of incorporate a wide range of stakeholder views and are aligned with stakeholder views and are aligned with the company’s business priorities. the company’s business priorities.

• Better working conditions improve the Better working conditions improve the efficiency of the supply chain.efficiency of the supply chain.

• Human rights strategies, such as Human rights strategies, such as preventing discrimination in the workplace preventing discrimination in the workplace and promoting gender and ethnic equality and promoting gender and ethnic equality in business processes, have been shown to in business processes, have been shown to increase innovation in products and increase innovation in products and services. services.

• Good management of environmental, Good management of environmental, social and governance has shown to social and governance has shown to strengthen reputation and brand value.strengthen reputation and brand value.

Importance of Corporate Importance of Corporate GovernanceGovernance

Research shows that responsible Research shows that responsible management of environmental, social and management of environmental, social and governance issues creates a business governance issues creates a business ethos and environment that builds both a ethos and environment that builds both a company’s integrity within society and the company’s integrity within society and the trust of its shareowners. It helps to trust of its shareowners. It helps to Increase efficiency of all activities of the Increase efficiency of all activities of the organization besides minimizing its risks.organization besides minimizing its risks.

Corporate Social Corporate Social Responsibility (CSR)Responsibility (CSR)

Definition of CSRDefinition of CSR: -: -

Corporate social Corporate social responsibility is all about how responsibility is all about how companies manage the business companies manage the business processes to produce an overall processes to produce an overall positive impact on society. positive impact on society.

Introduction to CSRIntroduction to CSR

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

CSR in IndiaCSR in India

A survey carried out by The Times A survey carried out by The Times foundation in 2008, revealed that over foundation in 2008, revealed that over 90% of Indian organizations were involved 90% of Indian organizations were involved in CSR initiatives in areas like: -in CSR initiatives in areas like: -

• EducationEducation• HealthHealth• Livelihood creationLivelihood creation• Skill development and Skill development and • Empowerment of the women.Empowerment of the women.

• Notable efforts have come from Tata Notable efforts have come from Tata Group, Infosys, Satyam, Bharti Enterprises, Group, Infosys, Satyam, Bharti Enterprises, Coco Cola India, Pepsi co and ITC Welcome Coco Cola India, Pepsi co and ITC Welcome Group among others.Group among others.

• Corporate India has spread its CSR Corporate India has spread its CSR activities across 20 states with activities across 20 states with Maharashtra gaining the most from them. Maharashtra gaining the most from them. About, 36% of the CSR activities are About, 36% of the CSR activities are concentrated in it.concentrated in it.

• In a study undertaken by automotive In a study undertaken by automotive research company TNS, India has been research company TNS, India has been ranked second in global CSR, with ranked second in global CSR, with Thailand being the first.Thailand being the first.

• Assocham’s ‘Assocham’s ‘Eco Pulse StudyEco Pulse Study’ on CSR ’ on CSR for 2009-10 released in June 2009, found for 2009-10 released in June 2009, found that over 300 corporate houses on an that over 300 corporate houses on an aggregate have identified 26 different aggregate have identified 26 different themes for their CSR initiatives.themes for their CSR initiatives.

ExamplesExamples

• The Paint Industry is making its products The Paint Industry is making its products more environmental friendly by opting for more environmental friendly by opting for water based paints that are Carcinogen water based paints that are Carcinogen free.free.

• The Heating, Ventilation, Air conditioning The Heating, Ventilation, Air conditioning and Refrigeration (HVAC) industry is and Refrigeration (HVAC) industry is working to get rid of its ‘global warmer’ working to get rid of its ‘global warmer’ stigma through greater use of gases with stigma through greater use of gases with zero ozone depletion potential (Zero DPP).zero ozone depletion potential (Zero DPP).

• Sustainable Technologies and Sustainable Technologies and Environmental Projects ltd (STEPS) is Environmental Projects ltd (STEPS) is planning to start a project to change plastic, planning to start a project to change plastic, organic and electronic waste into petroleum organic and electronic waste into petroleum without the usual harmful residue.without the usual harmful residue.

• HDFC has started a HDFC has started a ‘village adoption’‘village adoption’ scheme to improve the investment climate scheme to improve the investment climate in Indian Villages.in Indian Villages.

Arguments against CSRArguments against CSR

• Economic Institution: - Economic Institution: - Business is the Business is the economic institution of the society. Its economic institution of the society. Its purpose is to make the best use of purpose is to make the best use of resources and generate profits.resources and generate profits.

• Lack of Knowledge:Lack of Knowledge: - Social responsibility - Social responsibility is a vague concept and very difficult to is a vague concept and very difficult to formulate specific and measurable goals. formulate specific and measurable goals.

• Accountability:Accountability: - Managers are not - Managers are not accountable to society and hence there accountable to society and hence there could be misuse of power, authority and could be misuse of power, authority and resources.resources.

• Taxing the share holders:Taxing the share holders:- In the name of - In the name of CSR, managers may indirectly be CSR, managers may indirectly be responsible for taxing share holders by responsible for taxing share holders by utilizing profits belonging to them for the utilizing profits belonging to them for the welfare of society.welfare of society.

• Power:Power: - The acceptance of responsibility - The acceptance of responsibility would automatically lead to the would automatically lead to the assumption of authority and there could assumption of authority and there could be an expansion of the horizons of be an expansion of the horizons of corporate power in the name of CSR.corporate power in the name of CSR.

Arguments favoring CSRArguments favoring CSR

• Sub-System:-Sub-System:- Business organizations are Business organizations are sub systems of society performing an sub systems of society performing an essential function needed by society, essential function needed by society, namely the supply of economic goods namely the supply of economic goods and services. It has to discharge its and services. It has to discharge its functions with reference to social functions with reference to social expectations and demands. Hence, expectations and demands. Hence, Businesses must accept CSR.Businesses must accept CSR.

• Better Image:Better Image: - A firm which accepts CSR - A firm which accepts CSR can gain the approval and appreciation of can gain the approval and appreciation of all sections of society. all sections of society.

• Avoidance of problems:Avoidance of problems: - A firm which - A firm which reduces to act responsibly in dealing with reduces to act responsibly in dealing with society will face opposition from all sections society will face opposition from all sections of society.of society.

• Attraction and retention of good Attraction and retention of good employees:employees: - Employees are the most - Employees are the most valuable assets of a company. A socially valuable assets of a company. A socially responsible company with its good image responsible company with its good image can attract and retain good employees.can attract and retain good employees.

ConclusionConclusion

Corporate Governance and Corporate Governance and Social responsibility help an Social responsibility help an organization to Increase its efficiency organization to Increase its efficiency besides minimizing its risks. They are besides minimizing its risks. They are the best ways to restore public the best ways to restore public confidence in an organization and confidence in an organization and build a prosperous future.build a prosperous future.

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