Business Ethics
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.
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, Gandhiji’s motto was ‘greatest good of all’.
Gandhiji’s 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.
Gandhiji’s 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 workmen’s 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
Gandhiji’s 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
Gandhiji’s 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
Seven greatest Sins
Politics without principles Education without character Commerce without morality Pleasure without conscience Wealth without work Science without humanity Worship without sacrifice
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 company’s 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.
Social & Economic Responsibilities of Business
Reference booksRepresentations 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
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.
Ten Principles: The Global CompactHuman rights1. Businesses should support and respect the protection of internationally proclaimed human rights; and2. Make sure that they are not complicit in human rights
abuses.
Labor standards3. 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; and6. The elimination of discrimination in respect of employment and occupation.
Ten Principles: The Global Compact
Environment7. Business should support a precautionary approach to
environmental challenges;8. Undertake initiatives to promote greater environmental responsibility; and9. Encourage the development and diffusion of environmentally friendly technologies.
Anti-Corruption10. Business should work against all forms of corruption,
including extortion and bribery.
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)
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”.
Key Elements in Definition of CSRCorporations 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.
Social Responsibilities of Business – Archie B Carroll
Economic Responsibility
LegalResponsibility
Ethical Responsibility
Discretionary Responsibility
To whom Business Organizations are responsible?????
Primary Stakeholders
Secondary Stakeholders
Relations between a business firm and its primary stakeholders
Business firm
(Managers)
Wholesalers(Retailers)
Creditors
Suppliers
Customers
Stockholders
Employees(Unions)
Investcapital
Lendmoney
Sellmaterials
Buy products
Distributeproducts
Selllabor
Relations between a business firm and some of its other (secondary) stakeholders
Business Firm
(Managers)
TheGeneralPublic
BusinessSupport Groups
Governments
SocialActivistGroups
Media
Central/Stateand Local
Governments
Local Communities
Regulation,taxes
Friendly,hostile
Socialdemands
Image,publicity
Advice,research
Positive,negativeopinion
Jobs,environment
Social Responsibility Debate: Arguments in Against
In Friedman’s 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
Corporations have too much power
In 1999 the United Nations reported that the world’s 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 world’s 34 poorest nations.
“With great power and size comes great responsibility.”
Social Responsibility Debate: Arguments in Favor
How Does CSR benefit Business???
Reputation
Loyal Employees
& Customers
Less Law Suits
Less Media Harassment
Access to Capital Improves
Improves Productivity
Community Goodwill
Better Environment
DIFFERENCE
GOOD
COMPANY
Excellent Products
&
Services
GREAT
COMPANY
Excellent Products/services
&
Makes the world a better place
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
Developments of CSR in India Second Phase Trusteeship
Social responsibility was brought into community’s consciousness goes principally to business leaders like JRD Tata, Ramakrishna Bajaj, Arvind Mafatlal, Kasturbhai Lalbhai.
Vinoba Bhave on whom Gandhiji’s 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.
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
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.
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.
Traditional drivers for CSR
Values
Strategy
Public Pressure
Present Drivers for CSR
Corporate Social Performance Stakeholder Management Corporate Environment Management Consumer Pressure Risk Management and Sustainability Business Ethics Attracting employees Personal Values
Significant Drivers of CSR
Why do it???
0%10%20%30%40%50%60%70%
% of
Com
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ies
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”
Area of Social ResponsibilityRespecting 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.
Areas of Social ResponsibilityParticipating 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.
Areas of Environmental ResponsibilityRespect 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.
Areas of Business ResponsibilityCompliance 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 supplier’s CSR practices and distributor’s 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.
Steps to implement CSRMainstreaming 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
Steps to implement CSR
Translating CSR policy into action
Reporting, experience sharing and mutual learning
External reporting and certification
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
Thank You