Professional Documents
Culture Documents
ABSTRACT
The ability to demonstrate high standards of Governance and Business Ethics will be one of the most important
corporate competencies in the 21st century, and will be one of the main differentiators of successful companies from the
rest
In a global economy, increasingly organizations have a responsibility to facilitate, demonstrate and promote
corporate social responsibility (CSR). Long-term sustainability demands that organizations rethink their business goals and
objectives from solely focusing on making a profit to corporate citizenship. More and more companies are accepting
corporate citizenship as a new strategic and managerial purpose requiring their attention. CSR is helping companies in
employee recruitment, retention and motivation and supporting other business objectives, such as reducing business risk
and enhancing brand image. There is strong evidence to show that organizations with strong CSR can outperform those
who have not yet addressed the issue.
The paper examines the importance of corporate accountability. More and more companies are waking up to the
fact that corporate accountability is not only important for the enhancement of their brand equity but it is something they
cant do withoutthey cant survive in the market. It therefore becomes imperative for the companies worldwide to
acknowledge this fact and take sincere endeavor to enhance transparency and accountability towards the employees,
the shareholders and the society at large.
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business, as some critics of CSR assume. Very little of CSR is about corporate charityone of the critics' favorite
stalking-horsesand a great deal is about creating value. Too often, people assume that unfettered business acting in its
own self interest will create an unfriendly, polluted world where nothing but making money is rewarded.
Businesses engage in pollution prevention, offer good wages and benefits, make reliable products, and support
communities primarily because they know they can save money and attract and retain talented employees by doing so.
These forms of CSR also enable corporations to be competitive when new regulations curtail practices that threaten
society's health and well-being. On the last point, however, there is greater divergence between the aims of enlightened
business and the wishes of society. While CSR is about smart business, there are also corporations who pretend to be good
corporate citizens while supporting armies of lobbyists in hopes of forestalling new regulations aimed at protecting
workers, consumers, or the environment. While any citizen can lobby, the power of political voice is vastly amplified by
money, which gives corporations a huge advantage. This is done even though shareholders, who have a claim on corporate
profits, may have their own ideas about the desired directions of public policy. Until we live in a world where business
attends to making money and leaves government to look after societal needs, we need a practical approach to the use of
corporate power to influence government. A first step in that direction is disclosure. At a minimum, shareholders should be
able to find out how corporate management spends their money in the political arena, which are the activities the
organization is indulged into and what could be the ramifications of these activities on society at large.
CORPORATE GOVERNANCE
The processes and structures by which the business and affairs of the corporation are directed and managed in
order to enhance long term share holder value through enhancing corporate performance and accountability, whilst taking
into account the interests of other stakeholders1
The system by which business corporations are directed and controlled. The Corporate Governance structure
specifies the distribution of rights and responsibilities among different participants in the corporation, and spells out the
rules and procedures for making decisions on corporate affairs2
Therefore the essence of Corporate Governance is
It is about responsible corporate behavior in all facets of an organization and towards all stake holders
It includes all the structures and processes by which corporations are governed effectively
It is aimed at creating sustainable, long term value for the stake holders
As consumers move up the value chain, they increasingly look for products backed by ethical companies and
advertising
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Other things being similar, aspiring employees prefer to work for companies with high standards of business
ethics
Virtuous cycle
Long term relationships mean strong bottom line benefits for all
Good Governance Integrates the Corporation Strongly with the Societies in Which it Operates
Companies with good Governance command PE multiples in excess of the industry average
Take the example of the PE of Infosys (30x) and Wipro (30x) which is much more than rest of industry
average of ~ 18x.
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George Thomas
MEASURING CSR
Figure 1
Simon Knox, professor of brand marketing at Cranfield School of Management in the UK, and Stan Maklan,
visiting fellow with the marketing faculty with the marketing faculty at Cranfield, developed the above framework to link
CSR to business performance.
Knox says most efforts to measure CR too often fall on the left side of the diagram-setting CSR objectives,
identifying primary stakeholders, scoping obligations and developing some measure of employee awareness and their
buy-in towards such programs. But to be really effective companies need to measure the outcomes on the right side of the
diagram -employee retention, consumer and community buy-in. The key is to measure actual stakeholder behavior, not just
reported attitudes. Some, companies are actually doing it through consumer analytics using data mining tools.
Section 906
CEO and CFO to certify all public financial reports : information fairly represents, in all material aspects, the
financial condition and results of operations
Criminal penalties
SEC report being filed has been reviewed : no untrue statements, no material facts omitted
Material weaknesses in internal controls & frauds involving senior managers have been disclosed to Audit
Committee & Auditors
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Management to establish and maintain an adequate internal control system over all aspects of financial
reporting
Management to self-assess at the end of the year the effectiveness of such controls
Governance Ratings
GOVERNMENTS ROLE
As to the governments which should hold these corporations accountable for their actions, we discover a deadly
silence. At the CSD Intercessional, CSD-5, and the UN General Assembly Special Session (UNGASS), the NGO
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Taskforce on Business and Industry mounted a continuous campaign to engage government delegates in a dialogue with
NGOs on the topic of corporate responsibility and accountability. The main question was: What is governments role in
ensuring that corporations do not harm human communities or the environment?
In our statement and report, Minding Our Business: The Role of Corporate Accountability in Sustainable
Development, we identified the problem of societys inability to adequately deal with those corporations which refuse to be
responsible, and pointed out the responsibility of government to address this problem. We gave three case studies
illustrating the problem: the tragedy of Union Carbide in Bhopal, of Royal Dutch Shell in Nigeria, of the
Freeport-McMoRan mining company in Irian Jaya. In public panels and in government briefings we continued to raise the
question of the need for governments to define their responsibilities to the public; we proposed the creation of a UN Sub
commission on Corporate Accountability at the CSD to explore these issues and identify solutions. In the so-called NGO
Dialogue with Government, Maria Elena Hurtado of Consumers International again raised the question of the Sub
commission, but there was no dialogue, not one single word from the government delegates who heard her speak.
While no one overtly recommends that corporations should have no regulations or oversight at all, that they
should not be answerable to the law, or that the current laws should not be enforced, the trend appears to be moving in this
direction and most governments at the UN give the impression of either being intimidated or seduced by the power and
influence of the corporate sector. For many delegates it is perhaps political suicide to criticize or suggest holding such
economic giants accountable. Should it be surprising that so many delegates avoided and essentially remained silent in
response to our questions?
SURRENDERING RESPONSIBILITY
Behind this silence lies a tragic fact: while corporations refuse to voluntarily give up their unsustainable practices,
governments are voluntarily giving up their national sovereignty to corporations.
This surrender by government of their responsibility to people and planet can be heard in the official chorus of
calls for more deregulation and free trade, in providing more corporate rights and "breaking the barriers" of communities
trying to protect themselves from what amounts to corporate colonialism.
While individual citizens remain accountable to the laws of their national governments, transnational corporations
are increasingly allowed to operate in a global realm above all laws. It should not be surprising that there was little
discussion of corporate accountability at the UN Special Session: instead of accountability, the trend is toward corporate
immunity. Governments should realize that this trend of giving up their responsibility also means giving up their
legitimacy.
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This MAI now being discussed by the OECD governments and WTO partners currently promotes corporate rights
over human rights and the well-being of local communities. Receiving extremely little coverage by the media, the MAI has
been described as a plan to systematically turn the global economy over to a handful of dominant corporations. If allowed
to continue on its current course, the MAI will overrule the protests of the Gwichin, the Dineh, the Ogoni, the Innu, the
people of Bhopal and Guyana and other local communities as barriers to investment and trade. The communities that came
before the Peoples Tribunal will have no legal standing before the law of the market. When corporate protectionism in the
name of "free trade" is made law, the laws protecting our freedoms will be traded away.
This abdication of responsibility by government is a silent admission of governments willing role to diminish
their own legitimacy and right to govern. The people must not allow their citizenship to be reduced to passive
consumerism. When government refuses to lead, leadership must then come from below. The voice of civil society must be
clear and strong: people must take priority over corporations.
Individual Corporations: Organize or support public pressure on individual corporations known for socially
irresponsible practices. Actions can include shareholder initiatives, consumer boycotts, and litigation and media
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campaigns. Highlight how these specific corporations will gain from MAI rulings, in contrast to the losses to
communities and environment. Support public campaigns now in progress addressing the abuses of specific
corporations, such as Shell, Texaco, Freeport-McMoRan, and others.
Industry Lobbies: Help publicize the ways in which industries such as mining, oil, chemicals, agribusiness,
and others, are corrupting the democratic process through inappropriate financial influence of political
institutions. Support public initiatives calling for the elimination of destructive subsidies, industry tax breaks and
other forms of "corporate welfare." Draw special attention to politicians who have allowed themselves to be
corrupted by corporate influences; applaud those with the integrity and courage to resist.
National and Local Government Representatives: Continually question government spokespersons, local and
national, as to where their priorities lie, specifically with regard to protecting the public interest in the MAI and
WTO proceedings. At every public hearing and gathering, challenge those who claim to be representatives of the
people to define and act on their responsibilities to protect the health and well-being of citizens, their communities
and environment -- or publicly admit that they put corporations before people.
CONCLUSIONS
Business being part of society needs of society have a direct bearing on business organizations. Giving quality
goods and services at reasonable price at the right time and place paves strong roots for organizations brand image.
Stability, profitability and growth of business organizations are always gifted to organizations who give due care to
societys needs. Tata for instance is a shining example. Setting up TISCO and TELCO in backward place like Jamshedpur
and the efforts made to convert it into a township with hospitals and institutions undoubtedly earned the goodwill of the
society for the promoters. Ethics, values and spirituality today are an integral part of course curriculum of good schools all
over the world. Public sector in general and Nav Ratnas in particular follow social responsibility principles and ethics.
With goods and services of international acceptable standards they have, on their agenda, programmes like literacy
campaigning, rural development, pollution control etc. According to the great son of India - Vivekanandas words India
needs to combine western world efficiency with Indian spiritual world. Let the corporate community of India give
credibility to our motherland by being accountable to societys needs and enjoy the goodwill of Indian customers for ever.
Let the slogan serve and survive be a guiding principle for all the corporate activity in Indian society.
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