corporate governance& csr lecture 6

8/7/2019 Corporate Governance& CSR Lecture 6

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Corporate Governance &Corporate Social

Responsibility


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Corporate Governance

Definition of Corporate GovernanceIntroduction of Corporate Governance

Fundamentals of Corporate GovernanceImportance of Corporate Governance


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Corporate Social Responsibility

DefinitionIntroduction

CSR in Indian ContextExamples of CSR Arguments for & against CSR

Conclusion


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D efinition of CorporateGovernance

Corporate Governance is defined as thepractices ,principles and values that guide

a company and its business everyday, at alllevels of the organization .


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I ntroduction to CG

Corporate governance is the ability tofunction profitably while obeying laws,

rules & regulationsGood Corporate governance is the gluethat holds together responsible businesspractices which ensures positive workplacemanagement & sustained financialperformance


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Good Corporate Governance practices instill incompanies the essential vision, processes andstructures to make decisions that ensure longerterm sustainability There can be no better way to restore publicconfidence in both businesses & markets & builda prosperous future than proper corporategovernance


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F undamental functions of CorporateGovernance

Corporate governance links directly to threefundamental functions of board and thedirectors of the company and shareowners they serve . They are :Protecting stake holders rightsManaging Risk Creating long term business value


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rotecting stake holders rights

&interestsO rganization for Economic Co-operation &Development ( O ECD) advises business to

recognize & safeguard stakeholders rights.These principles call on board to be truly accountable to share owners and to takeultimate responsibility for their firmsadherence to a high standard of corporatebehavior and ethics .


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If the shareholder are adversely affectedby a companys actions ,shareowner valuewill suffer


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M anaging Risk B y addressing & managing risks effectively,boards can position their business to performwell financially and secure a long term license tooperate. B y failing to do so , boards canundermine their companys reputation .Proactively identifying possible human rightsconcerns allows a business to more effectively arrest potential risk .


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The proper management of risk ensurescustomer satisfaction and reputation.


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Creating Business value

The role of any board is guiding corporatestrategy and creating wealth forshareholders.The most effective corporate citizenshipand sustainability strategies are led fromthe top , incorporate a wide range of stakeholder views & are aligned with thecompanys business priorities .


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B etter working conditions improve the efficiency

of the supply chainHuman rights strategies such as preventingdiscrimination in the work place and promotinggender & ethnic equality in business processes,have been shown to increase innovation inproducts & services .Good management of environmental, social andgovernance has shown to strengthen reputation& brand value .


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I mportance of Corporate Governance

Research shows that responsiblemanagement of environmental , social andgovernance issues creates a business ethos

and environment that builds both acompanys integrity within society and thetrust of its shareowners . It helps to increaseefficiency of all activities of the organization

besides minimizing its risks.


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Corporate Social Responsibility

D efinition of CSR : Corporate SocialResponsibility is all about how companiesmanage the business processes to producean overall positive impact on society .


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Introduction to CSR

Corporate Social Responsibility is thecontinuing commitment by business tobehave ethically & contribute to economicdevelopment while improving the quality of life of the workforce and their familiesas well as of the local community & society at large .


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CSR in I ndiaA survey carried out by the TimesFoundation in 2008 , revealed that over 90% of Indian organizations were involved inCSR initiatives in areas like :EducationHealthLivelihood creationSkill development and Empowerment of Women


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N otable efforts have come from Tata Group,

Infosys , Satyam , B harti Enterprises , Coco-ColaIndia, Pepsi co , and ITC welcome group amongothers .Corporate India has spread its CSR activitiesacross 20 states with Maharashtra gaining themost from them . About 36 % of CSR activitiesare concentrated in it .


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In a study undertaken by a researchcompany T N S, India has been rankedsecond in global CSR ,with Thailand beingthe first .Assoc ham's Eco Pulse Study on CSR for 2009-10 release in June 2009 , found

that corporate houses on an aggregatehave identified 26 different themes fortheir CSR initiatives .


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Examples

The paint industry is making its productmore environment friendly by opting forwater based paints that are carcinogenfree.The Heating, Ventilation, Air conditioningand refrigeration Industry ( HVAC) is

working to get rid of its global warmerstigma through greater use of gases withzero ozone depletion potential ( Zero DPP)


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Sustainable Technologies andEnvironmental Projects limited (STEPS)is planning to start a project tochange plastic, organic and electronicwaste into petroleum without the usualharmful residue .HDFC has started a village adoptionscheme to improve the investment climatein Indian villages .


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Arguments against CSR Economic I nstitutions : B usiness is theeconomic institution of the society .Itspurpose is to make the best use of resources& generate profits.L ack of Knowledge : Social responsibility is a vague concept and very difficult toformulate specific & measurable goals .A ccountability :Managers are notaccountable to society and hence there couldbe misuse of power , authority & resources .


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T axing, the shareholder : In the name of CSR managers may indirectly be responsiblefor taxing shareholders by utilizing profits

belonging to them for the welfare of thesociety .Power :The acceptance of responsibility would automatically lead to the assumptionof authority and there could be an expansionof the horizons of corporate power in thename of CSR.


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A rguments favoring CSR

Sub- System : B usiness organization aresubsystem of society performing anessential function needed by society ,namely the supply of economic goods &Services . It has to discharge its functionswith reference to social expectations &

demands. Hence B usiness must acceptCSR .


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Better I mage : A firm which accepts CSR can gain the approval and appreciation of allsections of society .A voidance of problems : A firm whichreduces to act responsibly in dealing withsociety will face opposition from all sectionsof society A ttraction & retention of goodemployees :

Employees are the most valuable assets of acompany . A socially responsible company with its good image can attract & retain goodemployees .


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Conclusion

Corporate Governance & SocialResponsibility help an organization toincrease its efficiency besides minimizingits risks .They are the best ways to restorepublic confidence in an organization &build a prosperous future.

corporate governance& csr lecture 6

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