Business Ethics

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Business Ethics
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TRUSTEESHIP MANAGEMENTGandhian Philosophy of
Wealth Management

• Trusteeship, as applicable to the corporate
  world, refers to the act of holding and managing
  resources on behalf of the stakeholders of the
  firm.

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TRUSTEESHIP MANAGEMENTGandhian Philosophy of
Wealth Management

• Gandhian Philosophy of wealth management is based
  on the Servodaya principles of Truth,
  Non-Violence and Trusteeship wherein class
  harmony between labour and management reigns
  supreme.
• According to Gandhiji, managers and proprietors
  of business firms are only the trustees of wealth
  of society.
• The idea of trusteeship advocated by Gandhiji, is
  based on and has its origin in the Bhagaved
  Gita-in the principles of aparigraha
  (non-possession) and Sambhawa (equalism) which
  were ardently followed by Mahatma Gandhi.
• Unlike the Utilitarian motto of greatest good of
  the greatest number known as Teleology,
  Gandhijis motto was greatest good of all.

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Gandhijis views on labour management relations

• My ideal is that capital and labour should
  supplement and help each other. They should be a
  great family living in unity and harmony capital
  not only looking to the material welfare of the
  labourers, but their moral welfare
  also-capitalists being trustees of the welfare of
  the labouring classes under them.

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Gandhijis views on labour management relations

• Gandhiji assigned a paternalist role to
  management in their dealings with labour
• Gandhiji considered trade unions to be means of
  workmens material and moral development.
• He declared that a strike is an inherent right of
  the working man for the purpose of securing
  justice, but they must be considered a crime
  immediately the capitalists accepts the principle
  of arbitration.
• If conflict arises between labour and management,
  the weapon proposed by Gandhiji is Satyagraha

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Gandhijis principle of Trusteeship

• Trusteeship principle is foundation of philosophy
  of wealth management
• Principles of Trusteeship
• No recognition to right to individual property
• Resources must be held and utilised for the
  benefit of society.
• Management is the trustees of the stakeholders
  and must work towards optimising stakeholder
  value, not merely maximising shareholder value

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Gandhijis principle of Trusteeship

• In case of industrialist what they produce should
  be determine by social necessity with optimal
  utilization of scarce resources and not by
  personal whims
• If workers are to work with harmony and
  collaboration with management then that make
  workers also co-trustee with the management
• Though wealth legally belongs of owners of
  business, morally belongs to society and
  community

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Seven greatest Sins

• Politics without principles
• Education without character
• Commerce without morality
• Pleasure without conscience
• Wealth without work
• Science without humanity
• Worship without sacrifice

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Indian Corporate Leaders and Trusteeship

• Infosys, particularly from its former CEO and
  current chief mentor, Narayana Murthy for
  creating this company along with a small group of
  people (better sharing of wealth in society), the
  involvement of employees in the companys
  fortunes (through ESOPs) and his contentment with
  a mere 7 of company stock (he prefers it that
  way) reflect a deep-rooted commitment towards
  trusteeship.
• House of the Tatas with their corporatised
  initiatives for socio-corporate benefits
• WIPRO Cares Foundation, with a targeted corpus
  of Rs 100 crore for primary education
• Birla foundation with its focus on socio-economic
  improvement in the lives of the people touched by
  the corporation.

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• Social Economic Responsibilities of Business

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Reference books

• Representations of Social Responsibility Vol.II
  edited by David Crowther/Renu Jatana
• Corporate Social Responsibility Ethical and
  Strategic Choice by Jayanta Bhattacharya
• Corporate Social Responsibility Concepts and
  Cases - The Indian Experience Edited by C. V.
  Baxi and Ajit Prasad
• Essentials of Business Environment K. Aswathappa
  

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Meaning of CSR

• By the term Corporate Social Responsibility
  (CSR) what is generally understood is that
  business has an obligation to society that
  extends beyond its obligation to its shareholders
  or owners.

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Ten Principles The Global Compact

• Human rights
• 1. Businesses should support and respect the
  protection of internationally proclaimed human
  rights and
• 2. Make sure that they are not complicit in human
  rights abuses.
• Labor standards
• 3. Businesses should uphold the freedom of
  association and the effective recognition of the
  right to collective bargaining
• 4. The elimination of all forms of forced and
  compulsory labor
• 5. The effective abolition of child labor and
• 6. The elimination of discrimination in respect
  of employment and occupation.

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Ten Principles The Global Compact

• Environment
• 7. Business should support a precautionary
  approach to environmental challenges
• 8. Undertake initiatives to promote greater
  environmental responsibility and
• 9. Encourage the development and diffusion of
  environmentally friendly technologies.
• Anti-Corruption
• 10. Business should work against all forms of
  corruption, including extortion and bribery.

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The Global Compact

• There are now some 90 Indian companies, which
  have signed up to the UN Global Compact.
• More than 649 companies globally have signed the
  Global Compact
• (www.unglobalcompact.org)

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Definition of CSR

• CSR means operating a business in a manner that
  meets or exceeds the ethical, legal, commercial
  and public expectations that the society has of
  business.
• The World Business Council for Sustainable
  Development defines CSR as 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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Key Elements in Definition of CSR

• Corporations have responsibilities that go beyond
  the production of goods and services at a profit.
  
• These responsibilities involve helping to solve
  important social problems. especially those they
  have helped create.
• Corporations have a broader constituency than
  stockholders alone.
• Corporations have impacts that go beyond simple
  marketplace transactions.
• Corporations serve wider range of human values
  than can be captured by a sole focus on economic
  values.

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Social Responsibilities of Business Archie B
Carroll
Economic Responsibility
Legal Responsibility
Ethical Responsibility
Discretionary Responsibility
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To whom Business Organizations are
responsible?????

• Primary Stakeholders
• Secondary Stakeholders

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Relations between a business firm and its primary
stakeholders
Stockholders
Employees (Unions)
Wholesalers (Retailers)
Distribute products
Sell labor
Invest capital
Creditors
Business firm (Managers)
Buy products
Lend money
Customers
Suppliers
Sell materials
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Relations between a business firm and some of its
other (secondary) stakeholders
The General Public
Central/State and Local Governments
Local Communities
Positive, negative opinion
Jobs, environment
Regulation, taxes
Business Support Groups
Governments
Business Firm (Managers)
Advice, research
Friendly, hostile
Image, publicity
Social Activist Groups
Media
Social demands
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Social Responsibility Debate Arguments in Against

• In Friedmans view business has only one social
  responsibility and that is to maximize the
  profits of its owners. His very famous statement
  says it all, The business of business is
  business.
• Distorts allocation of Resources
• Business lacks training in social issues, and
  lacks social skills necessary to carry out social
  programs.
• Social policy is the jurisdiction of governments,
  not business
• Increase in business Power

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Social Responsibility Debate Arguments in Favor

• Corporations have too much power
• In 1999 the United Nations reported that the
  worlds then three richest people-Bill Gates of
  Microsoft, the Sultan of Brunei and the Walton
  family of the Wall Mart retail chain were worth
  more than the combined GDP of the worlds 34
  poorest nations.
• With great power and size comes great
  responsibility.

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How Does CSR benefit Business???
Reputation
Less Law Suits
Loyal Employees
Customers
Less Media Harassment
Access to Capital Improves
Improves Productivity
Community Goodwill
Better Environment
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DIFFERENCE
GOOD COMPANY Excellent Products Services
GREAT COMPANY Excellent Products/services Makes
the world a better place
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Developments of CSR in India

• First Phase Merchant charity Dates back to
  Vedic period Religious and social ethics
• Relief in natural disasters
• Dharam Shalas
• Drinking water

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Developments of CSR in India

• Second Phase Trusteeship
• Social responsibility was brought into
  communitys consciousness goes principally to
  business leaders like JRD Tata, Ramakrishna
  Bajaj, Arvind Mafatlal, Kasturbhai Lalbhai.
• Vinoba Bhave on whom Gandhijis mantle had
  fallen wanted businessmen to interest themselves
  in humanitarian, educational and other
  beneficial social activities and consider
  business as a social mission while promoting the
  trusteeship of wealth theory of Gandhiji
  whereby owners and workers were co-trustees of
  business for society.

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Developments of CSR in India

• Third Phase Declaration of social responsibility
• Role of Jaiprakash Narayan
• Organized Conferences on responsibilities of
  business
• Setting up of Fair Trade Practices Association
  by Tata, Bajaj and others

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Developments of CSR in India

• Fourth Phase Managerial Trusteeship
• 1970s later realization that continued
  profitability depended on involvement towards
  development of society
• Importance of ethical business practices and
  concern for the environment in which the business
  operates was also recognized.

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Developments of CSR in India

• Fifth Phase
• Corporate citizenship
• Realization that if social development is
  neglected, business cannot prosper.
• Government alone cannot handle all social issues.
  

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Traditional drivers for CSR

• Values
• Strategy
• Public Pressure

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Present Drivers for CSR

• Corporate Social Performance
• Stakeholder Management
• Corporate Environment Management
• Consumer Pressure
• Risk Management and Sustainability
• Business Ethics
• Attracting employees
• Personal Values

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Significant Drivers of CSR
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Social Audit

• Gerald Vinten defines social audit as a review
  to ensure that an organization gives due
  consideration to its social responsibilities to
  those both directly and indirectly affected by
  its decisions, and that a balance is achieved in
  its corporate planning between these aspects and
  more traditional business related objectives

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Area of Social Responsibility

• Respecting Human Rights not discriminating
  against caste, creed, gender, etc
• Contributing to socio-economic development
• Employee Welfare which includes the right to
  organize, eliminating child labour,
  non-discrimination, living wage and social
  security, training, safety, health and wellbeing,
  lifelong learning, empowerment of employees,
  share ownership schemes etc.
• Consumer Protection includes right to
  information, impact of product on local market,
  etc
• Respect for national sovereignty and local
  communities by multinationals.

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Areas of Social Responsibility

• Participating in academic research.
• Share resources with under-privileged communities
  e.g., transportation and medical facilities with
  the community senior citizens, etc.
• Community Investments e.g., companies can invest
  in sustainable development Programmes for the
  community.
• Socially Responsible Investments e.g., Investors
  should to invest in companies who follow
  responsible business practices
• Share expertise and knowledge with peers and
  learn from others experience.

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Areas of Environmental Responsibility

• Respect for the Environment
• Environmental friendly technologies investment
  in eco- friendly technologies.
• Use, conserve and discharge energy, material
  and water in an eco-friendly manner.
• Adopt preventive and precautionary measures for
  environment pollution control. Educate employees
  and the community to take collective, preventive
  and precautionary measures to reduce
  environmental pollution.
• Rectify environmental damage at source Treat
  waste before disposing it.
• Bio - diversity preservation
• Promote and implement an environmental policy
  for sustainable energy and sustainable
  environment.

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Areas of Business Responsibility

• Compliance with Tax Laws and other regulations.
• Corporate Governance Transparent Financial
  Reporting Auditing / Verification and
  Accountability addressing customer redressals
  and grievances.
• Invest in developing science and technology.
• Foster ethical trade practices
• Regulate suppliers CSR practices and
  distributors CSR practices. e.g. stop working
  with suppliers and distributors who do not
  follow responsible business practices
• Transparent financial reporting Public
  financial reports in newspapers for public
  information.

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Steps to implement CSR

• Mainstreaming CSR vision in Articles of
  Association
• Develop a written policy CSR and make it
  available in the public domain
• Assessment of internal environment
• Identification of drivers and barriers to change
• Assessment of core competencies of the company
• Building in the strategic business case
• Assessment of external environment
• Legal Context Development Context
• Identification prioritization of the
  opportunities for corporate collaboration
• Putting CSR policy in the public domain

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Steps to implement CSR

• Translating CSR policy into action
• Reporting, experience sharing and mutual
  learning
• External reporting and certification

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Why companies do not take up CSR???

• Markets do not reward ethical companies
• Lack of clear definition of CSR
• Systematic denial of wrong doings
• Location of CSR on the periphery of the corporate
  structure

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• Thank You