Corporate Social Responsibility in India

Corporate Social Responsibility is the most neglected issue in developing economies. India is a classic example of being a hub of unfair trade practices, which invariably undermine the interests of the communities and damage their environments. While the victims of Bhopal Gas Tragedy have not received a fair compensation even after twenty long years of legal battle, Indian subsidiary of another MNC –Nike has set records in flouting the international labour standards. Both Indian companies and the MNCs have little regard for well-being of the communities where they operate. Thus, while an independent research agency comes up with a report of presence of pesticides in the cold-drinks, the concerned companies start questioning the veracity of the report and competence of the laboratory instead of introspecting and initiating enquiries within their own work-systems.Generally people think that the Corporate Social Responsibility relates to companies’ funding of some social development projects through their welfare departments or some non-government organizations. However, the concept is not as simple as it appears. Lord Holme and Richard Watts in their report on Making Good Business Sense published by the World Business Council for Sustainable Development, have defined 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. Indeed, Corporate Social Responsibility concerns quality of management both in terms of human resources as well as processes and impact of their business on the communities vis-à-vis environmental degradation, climatic changes, health hazards, social safety, labour practices etc.Maintenance of an interactive relationship with the various stakeholders such as workers, suppliers, local population, consumers, social organizations and public authorities on the basis of transparency and dialogue is the hallmark of Corporate Social Responsibility. Fair competition, transfer of science and technology, labor and socio-economic values, supply chain responsibilities, stakeholder involvement, transparency in reporting and independent verification, respect for national sovereignty and local communities, preventive action and precautionary approach in rectifying environmental damage at source, use of environmental friendly technologies, preservation of biodiversity, judicious use of energy, material and water, proper management of emissions, effluents and waste are some of the important components of Corporate Social Responsibility. Stakeholder involvement is an important condition for effective implementation of the Corporate Social Responsibility as a management strategy to boost company’s goodwill, market share, brand loyalty, workers commitment etc.Most of the companies in India as elsewhere generally tend to be compliance oriented while tackling the issue of corporate social responsibility. They somehow manage to meet the prescribed labour standards, environmental and safety norms, product quality norms, social security provisions for their workforce etc so that they can evade the legal action. However, consumer activism and human rights movements have changed the entire socio-economic scenario in which the businesses operate and flourish. It is now imperative that the companies take interest in more active management of changing social expectations concerning corporate governance, compliance and risk management, transparency and disclosure etc. Now, people are not bothered about mere compliance of norms set by the government under different heads. They expect the companies to be pretty serious about their moral liability in terms of fair trade and fair pricing among other things. Proper management of Corporate Social Responsibility may arrest the declining trust in business.A number of large companies including some MNCs are engaged in health-care, education, rural development, sanitation, micro-credit and women empowerment, arts, heritage, culture, and conservation of wildlife and nature, etc. Some of them have created their own trusts and foundations while others are generous towards their favourite NGOs. They have in deed confused corporate philanthropy aimed at social welfare and community development with Corporate Social Responsibility, which has failed to become a part of the core business process. The corporate philanthropy is basically the part of their business tradition rather than a reflection of their social obligation. Possibly due to their indulgence in corporate philanthropy, there is not much demand for policy-formulation and implementation of Corporate Social Responsibility in the country. However, the Corporate Social Responsibility Survey 2002 conducted by British Council, UNDP, CII and Pricewaterhouse Coopers indicated a growing recognition among companies that passive philanthropy is no longer sufficient so far as Corporate Social Responsibility is concerned. However, a common understanding of Corporate Social Responsibility is still in an evolving stage in India. Much emphasis in the country is on value aspect while operational aspects are generally neglected. Besides, there is a remarkable gap between corporate policies and practices. Large MNCs generally fail to ensure compliance of norms related to Corporate Social Responsibility in their supply-chains. On the other hand, the MNCs do not monitor implementation of Corporate Social Responsibility policy by their local partners/subsidiary companies or suppliers and they generally do not check if the production in sub-contracting chain follow the internationally agreed labour and other human rights and environmental standards as indicated by a joint survey conducted in 2003 by Consultancy and Research for Environmental Management (The Netherlands) and Partners in Change (India). Some of the bottlenecks in the growth of CSR in India identified by Centre of Social Markets such as unclear policy of the government, ineffective bureaucracy, poor monitoring record, complicated tax systems, and poor infrastructure provide further leverage to the MNCs and their Indian subsidiaries to evade Corporate Social Responsibility.Certain policy changes in India regarding competition, monopolies, state control of trading activities, price regulation, labour reforms, tariff wall, privatization of state assets, rationalization of direct and indirect taxes; fiscal deficits, social expenditures, subsidies, user charges for public services and utilities, trade liberalization, market-driven exchange rates, norms of current account transactions, foreign direct investments etc have changed the way business and trade are conducted in the country.However, positive results of the reforms process have failed to reach the masses. On the other hand incidence of unemployment, income-inequality, and regional development disparity have increased while social infrastructure development, social security and trade union activism have taken back seat. The emerging scenario has necessitated the proper development of a national perspective on Corporate Social Responsibility so as to build people’s confidence in trading activities and improve the overall quality of life in the society.

CGBE Handout # 3

International Corporate Governance Scenario

Cadbury Committee on Financial Aspects of Corporate Governance
The Cadbury Committee report came in 1992. The Committee was constituted to help raise the standards of corporate governance and the level of confidence in financial reporting and auditing by setting out clearly what it sees as the respective responsibilities of those involved and what it believes is expected of them. The Cadbury Committee made 19 recommendations, which are set out as code of best practices:
The Board of Directors
The Board shall meet regularly, retain full and effective control over the company and monitor the executive management
There should be a clearly accepted division of responsibilities at the apex level to ensure a balance of power and authority so that no one has unfettered power of decision-making. Where the Chairman is also the Chief Executive, it is essential that there should be a strong and independent element on the Board with a recognized senior member
The Board should include non-executive directors of sufficient caliber and number of their views to carry significant weight in the board’s decisions
The Board should have a formal schedule of matters specifically reserved to it for decision to ensure that the direction and control of the company is firmly in its hands
There should be an agreed procedure for directors in furtherance of their duties to take independent professional advice, if necessary at the company’s expense.
All directors should have access to advice and services of the company secretary who is responsible to the Board for ensuring that the Board procedures are followed and that the applicable rules and regulations are complied with. Any question of the removal of company secretary should be a matter for the Board as a whole.
Non-executive Directors
Non-executive Directors should bring an independent judgment to bear issues of strategy, performance, resources, including key appointments and standards of conduct.
The majority should be independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgment apart from their fee and shareholding
Non-executive director should be appointed for specified terms and reappointment should not be automatic
Non-executive directors should be selected through a formal process and both this process and their appointment should be a matter of approval for the Board as a whole
Executive Directors
Director’s service contract should not exceed three years without shareholders approval
There should be full and clear disclosure of directors’ total emoluments and those of the chairman and highest paid director, including pension contributions and stock options. Separate figures should be given for salary and performance related elements and the basis on which performance is measured should be explained
Executive Director’s pay should be subject to the recommendation of a Remuneration Committee comprising of non-executive directors.
Reporting and Control
It is the Board’s duty to present a balanced and understandable assessment of company’s position
The Board should ensure that an objective and professional relationship is maintained with the auditors
The Board should establish an audit committee of at least three non-executive directors with written terms of reference which deal clearly with its authority and duties
The directors should explain their responsibility for preparing accounts next to a statement by the auditors about their reporting responsibilities
The directors should report on the effectiveness of company’s system of internal control
The directors should report that the business is a going concern with supporting assumptions or qualifications as necessary.

Greenbury Committee Recommendations

CODE OF BEST PRACTICE
THE CODE
The remuneration committee
To avoid potential conflicts of interest, Boards of Directors should set up
remuneration committees of Non-Executive Directors to determine on their
behalf, and on behalf of thc shareholders, within agreed terms of reference the
company's policy on executive remuneration and specific remuneration packages for each of the Executive Directors, including pension rights and any
compensation
Remuneration committee Chairmen should account directly to the shareholders
through the means specified in this Code for the decisions their
committees reach
Where necessary, companies’ Articles of Association should be amended to
enable remuneration committees to discharge these functions on behalf of the
Remuneration committees should consist exclusively of Non-Executive
Directors with no personal financia1 interest other than as shareholders in
the matters to be decided, no potential conflicts of interest arising from crossdirectorships
and no day-to-day involvement in running the business.
The members of the remuneration committee should be listed each year in the
committee’s report to shareholders. When they stand for re-election,
the proxy cards should indicate their membership of the committee .
The Board itself should determine the remuneration of the Non-Executive
Directors, including members of the remuneration committee, within the limits
set in the Articles of Association .
Remuneration committees should consult the company Chairman and/or Chief
Executive about their proposals and have access to professional advice inside
and outside the company.
.
The remuneration committee Chairman should attend the company’s Annual
General Meeting (AGM) to answer shareholders’ questions about Directors’
remuneration and should ensure that the company maintains contact as
required with ils principal shareholders about remuneration in the same way as
for other matters.
The committee’s annual report to shareholders should not be a
standard item of agenda for AGMs. But the committee should consider each
year whcrhcr the circumstances are such that the AGM should be invited to
approve the policy set out in their report and should minute their conclusions

Disclosure and approval provisions
The remuneration committee should make a report each year to the
shareholders on behalf of the Board. The report should form part of, or be
annexed to, the company’s Annual Reporl and Accountr. It should be the main
vehicle through which the cornpany accounts to shareholders for Directors’
remuneration.

The report should set out the Company’s policy on executive remuneration,
including levels, comparator groups of companies. individual components,
performance criteria and measurement, pension provision, contracts of service
and compensation commitments on early termination
The report should state that, in framing its remuneration policy, the committee
has given full consideration to the best practice provisions set in following paragraphs

The report should also include full details of all elements in the remuneration
package of each individual Director by name, such as basic salary, benefits in
kind, annual bonuses and long-term incentive schemes including share options

Information on share options, including SAYE options, should he given for
each Director in accordance with the recommendations of the Accounting
Standards Board’s Urgent Issues Task Force Abstract 10 and its successors.
If grants under executive share option or othcr long-term incentive schemes are
awardcd in one large block rather than phased, thc report should cxplain and
justify.
Also included in the report sbould be pension entitlements earned by each
individual Director during the year, calculated on a basis fo be recommended
by the Faculty of Actuaries and the Institute of Actuaries
If annual bonuses or benefits in kind are pensionable the report should explain
and justify

Any service contracts which provide for, or imply. notice periods in excess of
one year (or any provisions for predetermined compensation on termination
which exceed one year’s salary and benefits) should be disclosed and the
reasons for the longer notice periods explained.
BII Shareholdings and other relevant business interests and activities of the
Directors should continue to be disclosed as required in the Companies Acts
and London Stock Exchange Listing Rules.
BI2 Shareholders should be invited specitically to approve all new long-term
incentive schemes (including share option schemes) whether payable in cash or
shares in which Directors or senior cxecutivcs will participase which potentially
commit shareholders’ funds over more than one year or dilute the equity.

Remuneration policy
Remuneration committees must provide the packages needed to attract, retain
and motivate Directors of the quality required but should avoid paying more
than is necessary for this purpose
Remuneration committees should judge where to position their company
relative to other companies. They should be aware what other comparable
companies are paying and should take account of relative performance
Remuneration committees should be sensitive to the wider scene, including pay
and employment conditions elsewhere in the company, especially when
determining annual salary increases
The performance-related elements of remuneration should be designed to align
the interests of Directors and shareholders and to give Directors keen incentives
to perform at the highest levels
Remuneration committees should consider whether their Directors should be
eligible for annual bonuses. If so, performance conditions should be relevant,
stretching and designed to enhance the business. Upper limits should always be
considered. There may be a case for part-payment in shares 10 be held for a
significant period

Remuneration committees should consider whether their Directors should be
eligible for benefits under long-term incentive schemes. Traditional share
-, option schemes should be weighed against other kinds of long-tenn incentive
scheme. In normal circumstances, shares granted should not vest, and options
should not be exercisable, in under three years. Directors should be encouraged
to hold their shares for a further period after vesting or excrcise subject to the
need to finance any costs of acquisition and associated tax liability :’
Any new long-term incentive schemes which are proposed should preferably
replace existing schemes or at least form part of a well-considered overall plan,
incorporating existing schemes. which should be approved as a whole by
shareholders. The totall rewards polentially available should no, be excessive
Grants under incentive schemes, including new grants under existing share
option schemes, should be subject to challenging performance criteria reflecting
the company’s objectives. Consideration should be given fo criteria which
rellect the company’s performance relative to a group of comparator
companies in some key variables such as total shareholder return

Grants under executive share option and other long-term incentive schemes
should normally be phased rather than awarded in one large block Cl0 Executive share options should never be issued at a discount

Remuneration committees should consider the pension consequences and
associated costs to the company of basic salary increases, especially for
Directors close fo retirement

In general, neither annual bonuses nor benefits in kind should be pensionable

Service contracts and compensation
Remuneration committees should consider what compensation commitments
their Directors’ contracts of service, if any, would entail in the event of early
termination, particularly for unsatisfaciory performance
There is a strong case for setting notice or contract periods at, or reducing them
to, ene year or lcss. Remuneration committees should, howcver, be
sensitive and flexible, especially over timing. In some cases notice or contract
periods of up to two years may be acceptable. Longer periods should be
avoided wherever pasible
D3 If it is necessary to offer longer notice or contract periods, such as three years,
to new Directors recruited from outside, such periods should reduce after the
initial period
Within the legal constraints, remuneration committees should tailor their
approach in individual early termination cases to thc wide variety of
circumstances. Thc broad aim should be to avoid rewarding poor performance
while dealing fairly with cases where departure is not due to poa performance

R e m u n e r a t i o n committees should take a robust line on payment of
compensation where performance has been unsatisfactory and on reducing
compensation to reflect departing Directors’ obligations to mitigale damages
by earning money elsewhere
D6 Where appropriate, and in particular where notice or contract periods exceed
one year, companies should consider paying all or part of compensation in
instalments rather than ene lump sum and reducing or stopping payment when
the former Director takes on new

CGBE Handout # 5

Corporate Ownership and Control
Ownership pattern is crucial as it decides the power of the promoters to influence decision-making process at the Board level. This also happens due to dormancy of major shareholders to muster support of the remaining mass of shareholders scattered across the length and breadth of the country. On an average, Indian promoters seem to hold largest stake followed by financial institutions, public shareholding, and foreign investors. Since public shareholders do not participate in the decision making process in an effective manner, the financial institutions are suitably poised to challenge the undesirable governance practices in which the BOD indulges.

In India, the promoters’ ownership is clustered in the range of 25-75% while public ownership and those of the financial institutions is in the range of 10-40% and 5-40% respectively. According to a survey conducted by CMIE in 1999, Directors and top 50 shareholders held 43% shares, government and financial institutions held 14% share, public and others held 29% shares and foreign investors held 14% shares.

The above statistics is alarming. Traditional business families who also have controlling stakes in large holding companies thus own most of the Indian companies. They exercise various control mechanism to ensure maximum influence in the board room.

Control Mechanism:
Election of Directors
Amendments in Company documents
Approval of Extra-ordinary transactions
Appointment of Auditors
Amendment in the internal statutes

Ownership pattern and control mechanism invariably jeopardize the interest of minority shareholders, employees, consumers and above all, the State. The provisions of Corporate Governance are therefore invoked to protect their diverse interests.

A few of the protective measures are as under:
Shareholders interests and Birla Committee Report:
Shareholders should use Annual General Meetings to ensure good governance
Shareholders have the right to participate in and be adequately informed on major corporate decisions.
Shareholders should show greater degree of interest in the appointment of Directors and Auditors
Companies should send half-yearly declaration of financial performance including summary of significant events to all the shareholders.
Investors’ Relations under Clause 49 of the Listing Agreement
1. Installation of Shareholders’ Grievance Committee: Non-executive Director should be appointed as the Chairperson of the Committee that takes care of such issues as share transfers, non-receipt of copy of annual return, and non-receipt of declared dividends.
2. Providing information regarding General Body Meetings covering such points as location, date and time of three previous AGMs; special resolution put to vote through postal ballot; details of voting pattern; persons who conducted the postal ballot, resolutions proposed to be conducted through postal ballots; and procedure of postal ballot.
3. Means of communication adopted to communicate with shareholders: Quarterly results through website of the company/stock exchange.
4. Information to shareholders on Directors: In case of appointment of a new director/reappointment of a director, the shareholders must be provided with the following information: (a) a brief resume of the director (b) nature of his expertise in specific functional area (c) names of the companies in which the person also holds directorship and membership of the committees of the Board (d) shareholding of non-executive directors.
5. General information: Following information must be provided to the shareholders: (a) particulars of AGMs (b) financial calendar (c) date of book closure (d) dividend payment date (e) name of stock exchange where the company is listed along with the stock code (f) market price data and performance of the company.

CGBE Handout # 4

Corporate Crime
Corporate crime refers to crimes committed either by a corporation (i.e., a business entity having a separate legal personality from the natural persons that manage its activities), or by individuals that may be identified with a corporation or other business entity. Corporate crimes also implies frauds committed by entities to willfully erode shareholder value. Corporate mis-governance and misconduct also amount to corporate crime. Criminal behavior in most jurisdictions include: insider trading, antitrust violations, fraud (usually involving the consumers), damage to the environment, exploitation of labour in violation of labor and health and safety laws, and the failure to maintain a fiduciary responsibility towards stockholders.
Corporate crime overlaps with:
white-collar crime, because the majority of individuals who may act as or represent the interests of the corporation are employees or professionals of a higher social class;
organized crime, because criminals can set up corporations either for the purposes of crime or as vehicles for laundering the proceeds of crime. Organized crime has become a branch of big business and is simply the illegal sector of capital. It has been estimated that, by the middle of the 1990s, the "gross criminal product" of organized crime made it the twentieth richest organization in the world -- richer than 150 sovereign states (Castells 1998: 169). The world’s gross criminal product has been estimated at 20 percent of world trade; and
state-corporate crime, because, in many contexts, the opportunity to commit crime emerges from the relationship between the corporation and the state.
Examples of corporate crime:
Money laundering: Financial transactions in which identity, source and destination of money are concealed.
Bribery
Corruption
Evasion of Foreign Exchange regulations
Falsification of Accounts
Misappropriation of depositors’ money
Ballooning of executive remuneration

Reasons behind corporate crime
Excessive power in the hands of Management: Due to separation of ownership and control, Management has assumed enormous power. And as the adage goes –Power corrupts and absolute power corrupts absolutely –excessive power in the hands of Management often results in misuse of executive power.
Instances of gross misuse of executive power are as under:
Expropriation of investors’ funds (by simply taking out money and putting it elsewhere from where it may be easily taken out)
Transfer Pricing mechanism: internal price charged for a product or service by a selling division to a buying division within the same organization.
Rise in perquisites of higher level officers
Irrational expansion of firms
Abuse of democratic processes
Abuse of workers
Abuse of stakeholders (overlooking their claims in corporate accountability process)
Abuse of consumers
Environmental abuse
Abuse of third world: dumping, selling sub-standard/banned products etc.

Short-term orientation: Since the membership of the board has a definite tenure, most of the BOD members work towards short-term goals/benefits.

Lack of public understanding: People generally lack understanding of issues pertaining to unsafe working conditions, violation of consumer laws, environmental degradation etc. Hence they fail to raise a hue and cry. Most of the cases of corporate crime thus go unnoticed.

Statutory Inadequacies: There is no legal provision to take punitive action against companies. Punishments like death sentence, life imprisonment, imprisonment for short term etc cannot be imposed upon an erring company.

Problems of Externality: This leads to by-passing of social responsibilities by corporations. Due to imperfect markets, profit maximizations does not lead to maximization of social wealth. Firms tend to maximize their profits by externalizing most of their costs on the third parties. As a result, environmental concerns also take a back seat.

Bureaucratic structures: Loopholes in the bureaucratic structures also contributes to corporate crime though quite indirectly.

Greed and lax control mechanism.

Preventive measures:
Systemic improvement:
Responsibility structures
Fraud-risk Assessment
Employee Awareness
Community Awareness
External Notification
Internal Reporting Structures
Policies, Standards and Procedures on Conduct and discipline

Legal Action as a deterrent

Business Etrhics as an antidote to corporate fraud
Whistle-blowers’ protection
-----------------------------------------------
Corporate Crime: Indian Experience
By Nityanand Jayaraman
(Source: http://www.combatlaw.org)
In India, the pattern of corporate crime is almost the same as in any other part of the world. Efforts to tackle such crime are grossly inadequate. Only 4 percent of the white-collar criminals get convicted in the Supreme Court, according to a PTI report of November 2003 that quotes C.L. Ramakrishnan, former director of Vigilance and Anti- Corruption. The report also notes that "criminals escape with fines of few thousand rupees for offences running to several hundred crores." Criminal charges seldom reach the stage of sentencing. The Union Carbide case in Bhopal presents a classic example of corporate crime gone unpunished. Union Carbide Corporation's status as a US multinational, no doubt, added a further complicating factor. Immediately after the disaster, the US courts refused to hear the plaints for compensation filed by Bhopal victims on grounds that the forum (in the US) was inappropriate given the robustness of the Indian judicial system. The US court, instead, exhorted Carbide and its officials to cooperate with Indian authorities. The company and its chief executives did nothing of that sort. They fled to seek refuge in their home country to escape liability that could arise from their crimes in Bhopal if convicted. Both Union Carbide and Warren Anderson, the chairman of Union Carbide at the time of the disaster, are proclaimed absconders by the Chief Judicial Magistrate's court in Bhopal for their failure to honour summons issued by the court. Both Carbide and Anderson face charges of "culpable homicide not amounting to murder" and other crimes. A notice of extradition for Warren Anderson was served more than 10 years after the order seeking his extradition was given. The US Government is yet to respond to the request. In the meantime, Carbide has added insult to injury by reappearing in India, albeit in proxy. In February 2001, the company merged with US-based Dow Chemical. Although Dow acquired Carbide with full knowledge of the latter's pending criminal and civil liabilities in India, Dow has made clear that it will not address any of Carbide's Bhopal liabilities. So certain is it about its position and security of its assets that Dow has opened several offices in India, including the manufacture and marketing of Dursban (chlorpyriphos), a deadly pesticide, in collaboration with National Organic Chemcials Industries Limited (NOCIL). Meanwhile the Indian Government seems in no hurry to challenge Dow's version of law. At least part of the blame for the predicament we find ourselves in lies with the fact that our society sees a corporate criminal as undeserving of the strict punishment meted out to common criminals. Senior corporate executives, like Warren Anderson, who make decisions that kill, poison or rob people often pass off for respectable law-abiding citizens. Unlike the stereotypical common criminals, the top directors of corporate criminals - even convicted criminals - often smell good, drive expensive cars and can legitimately gain access to the policy-making circles of the world governments. When corporate crimes involve premeditated murder, as in the case of Dubey, the law is clear on the fate of at least the human perpetrators. But what about poisoning that results from wilful negligence? Not all corporate criminals set their goons to murder those who stand in the way of their money. Some like Mangalam still exhibit the same depraved indifference to human life and environment in their pursuit for money that they subsidise their production by feeding off the health of the communities and the environment. The courts are clear about murder, but seem confused about whether or not a little poisoning is inevitable and should be allowed in the interests of "development."

Handout # 1

Corporate Governance, Corporate Social Responsibility & Ethics

Issues to be discussed
• Concept of Corporate Governance
• Objectives of Corporate Governance
• Fundamental Principles of Corporate Governance
• Concept of Corporate Social Responsibility
• Objectives of Corporate Social Responsibility
• Concept of ethics in managing business

Concept of Corporate Governance
• Performance as well as Conformance
• Responsiveness to the rights of the stakeholders
• Relationship among various participants in determining the direction and performance of a company
• Fair practices, transparency and accountability
• The way a company is organized and managed to ensure that all the stakeholders receive their fair share of a company’s earnings (Standard and Poors)
• A system by which business corporations are directed and controlled (OECD)
• Process, structure and relationships through which the Board of Directors oversee what Management does.

Defining Corporate Governance
• A blend of rules, regulations, laws and voluntary practices that enable the companies to attract finance and human capital, perform efficiently and thereby maximize long-term value for the shareholders besides respecting the aspirations of multiple stakeholders including those of the society.

• It is the system by which companies are directed and controlled with the following specific aims:
• Fulfilling long-term strategic goals of the owners
• Taking care of the interests of the employees
• A consideration for the environment and local community
• Maintaining excellent relations with both customers and suppliers
• Proper compliance with all the applicable legal and regulatory requirements
--Cadbury Committee (UK)


• An economic, legal and institutional environment that allows companies to diversify, grow, restructure and exit and do everything necessary to maximize long-term shareholder value.
• It deals with laws, procedures, practices, and implicit rules that determine a company’s ability to take managerial decisions vis-à-vis its shareholders, creditors, the State and employees.
--CII

Objectives of Corporate Governance
• Installation of a properly structured board which is capable of taking independent and objective decisions.
• Ensuring properly balanced board having representation of an adequate number of non-executive independent directors capable of taking care of the interests of all the stakeholders.
Objectives of Corporate Governance
• Adoption of transparent procedures and practices in decision-making by an informed comity of board members
• Effective and regular monitoring of management functioning by the Board
• Disclosures to shareholders with a view to help them become informed of the relevant developments affecting the company
• Exercise of effective control on corporate affairs by the board at all times.


Fundamental Principles of Corporate Governance
• Transparency
• Accountability
• Trusteeship
• Ethics
• Empowerment
• Oversight
• Fairness to all stakeholders


Concept of Corporate Social Responsibility
• Corporate Social Responsibility (CSR) is the decision-making and implementation process that guides all company activities in the protection and promotion of international human rights, labour and environmental standards and compliance with legal requirements within its operations and in its relations to the societies and communities where it operates.


• CSR involves a commitment to contribute to the economic, environmental and social sustainability of communities through the on-going engagement of stakeholders, the active participation of communities impacted by company activities and the public reporting of company policies and performance in the economic, environmental and social arenas.

• The corporate responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce, their families and the local community and society at large.
--World Business Council for Sustainable Development

Objectives of Corporate Social Responsibility
• Address climate change
• Discourage intrinsically harmful products
• Internalize costs
• Pay taxes in full
• Stop lobbying against public interests
• Democratize the workplace
• Reduce consumption and limit growth

Concept of Ethics in Managing Business
• Consequence-based framework: Do whatever is in the best interest of the majority
• Duty-based framework: Follow the universally acceptable principles
• Virtue-based framework: Do as a good person would do in identical situation

Advantages of ethical practices in management
• Employee commitment and loyalty
• Less likelihood of theft and fraud in the company
• Better organizational climate
• Greater customer care
• Customer loyalty
• Repeat customers
• Goodwill in the market

Course Outline

Corporate Governance and Ethics

Course Credit: 1 Trimester: VI (Core)

Faculty: Dr Srirang Jha

Pedagogy: Lectures, Case Studies and Project work/Assignment

Course Objectives:

a) To sensitize the PGDBM students to the key issues in Corporate Governance and associated patterns of Corporate Behaviour
b) To help understand international scenario in Corporate Governance.
c) To help formulate reasoned views on the need for appropriate controls with regard to Corporate Governance

Course Outline:
1 Corporate Governance, Corporate Social Responsibility & Ethics
2 Corporate Governance-Indian Scenario
3 International Corporate Governance Scenario
4 Corporate crime
5 Corporate ownership and control
6 Role of Regulators
7 Market, Market makers and Intermediaries
8 Role of Board of Directors, Relation between Board and CEO
9 Code of Corporate Governance
10 Desirable Directions in Corporate Governance, Corporation, Government and Media

Suggested Readings:
Fernando, Corporate Governance, Pearson Education, 2006
Boatwright, Ethics and the conduct of business, Pearson Education, 4th edition
Reed Darryl, Corporate Governance economic reforms and development, Oxford, 2004
Velasquez, Business Ethics concepts and cases, PHI, 2006
Kistson Alan, Ethical Organization, Palgrave, 2006
Chakraborty, S.K, Ethics in Management, Oxford University Press, 2005