CORPORATE GOVERNANCE AND ETHICS

SYLLABUS

UNIT I - Corporate Governance

Corporate governance – meaning – objectives – need - importance – principles –

corporate governance and organization success. Corporate governance in India

UNIT II - Levels of Governance Structure

Corporate governance and role, responsibilities and powers - Board of Directors,

Corporate Management Committee and Divisional Management Committee.

UNIT III - Corporate Governance Forums

CII code on corporate governance – features - Various Corporate Governance

forums – CACG, OECD, ICGN AND NFCG.

UNIT IV - Corporate Social Responsibility

Corporate Social Responsibility – definition – nature – levels – phases and

approaches, principles, Indian models – dimensions. Corporate social reporting -

Objectives of Corporate Social Reporting and case studies.

UNIT V - Business Ethics

Business ethics – meaning, significance, scope – factors responsible for ethical

and unethical business decision. Unethical practices in Business – Business ethics

in India – Ethics training programme.

UNIT I - Corporate Governance

MEANING OF CORPORATE GOVERNANCE

 Corporate governance is the system of rules, practices, and processes by

which a company is directed and controlled.

 Corporate governance essentially involves balancing the interests of a

company's many stakeholders, which can include shareholders, senior

management, customers, suppliers, lenders, the government, and the

community.

 corporate governance encompasses practically every sphere of

management, from action plans and internal controls to performance

measurement and corporate disclosure.

DEFINITION OF CORPORATE GOVERNANCE

American Management Association “Corporate Governance is about how

suppliers of capital get managers to return profits, make sure managers do not

misuse the capital by investing in bad projects and shareholders and creditors

monitor managers”

OBJECTIVES OF CORPORATE GOVERNANCE

There are various objectives of corporate governance.

 To protect and promote the interest of shareholders and stakeholders:

Corporate governance has numerous claimants such as shareholders and other

stakeholders which include suppliers, customers, creditors, bankers, the

employees of the company, the government and the society at large.

 The main objective of corporate governance is the enhancement of

shareholders' value, practice and not only to draft a code

 Corporate governance is not merely drafting a code, but practicing it. the

existenanies are following exemplary practices, without and istence of

formal guidelines on this subject. Structures and rules are important alone

but these cannot raise the standards of corporate governance.

 What is important is that the way in which these are put to use and the best

results would be achieved when the companies begin to treat the code not

as a mere structure, but as a way of life. To create a transparent working

system

 In achieving the confidence of shareholders and other stakeholders, the

extent of discipline, transparency and fairness, and the willingness shown

by the companies themselves in implementing the code plays a vital role.

 All the work carried out by the executive should be in the public domain

for better grievance redressal and timely disposal of complaints.

 To implement work culture

  To carry out and make a decision that is ideological to the welfare of the

public with maximum participation of every segment of society evenly,

including the marginalized segment.

 To make socially responsible All stakeholders should be accountable to

society.

 In a diverse society, each segment should have its own ideological

representation from which the policy could be framed. Similarly, the

ministers are jointly accountable

NEED AND IMPORTANCE OF CORPORATE GOVERNANCE

Corporate governance is important because it creates a system of rules and

practices that determines how a company operates and how it aligns with the

interest of all its stakeholders. Good corporate governance fosters ethical

business practices, which lead to financial viability. In turn, that can attract

investors

 Good corporate governance creates transparent rules and controls, guides

leadership, and aligns the interests of shareholders, directors,

management, and employees.

 It helps build trust with investors, the community, and public officials.
  Corporate governance can give investors and stakeholders a clear idea of

a company's direction and business integrity.

 It promotes long-term financial viability, opportunity, and returns.

 It can facilitate the raising of capital.

 Good corporate governance can translate to rising share prices.

 It can reduce the potential for financial loss, waste, risks, and corruption.

 It is a resilience and long-term success.

The Principles of Corporate Governance

While there can be as many principles as a company believes make sense, some

of the most common ones are:

 Fairness: The board of directors must treat shareholders, employees,

vendors, and communities fairly and with equal consideration.

 Transparency: The board should provide timely, accurate, and clear

information about such things as financial performance, conflicts of

interest, and risks to shareholders and other stakeholders.

 Risk Management: The board and management must determine risks of

all kinds and how best to control them. They must act on those

recommendations to manage risks and inform all relevant parties about the

existence and status of risks.

  Responsibility: The board is responsible for the oversight of corporate

matters and management activities. It must be aware of and support the

successful, ongoing performance of the company. Part of its responsibility

is to recruit and hire a chief executive officer (CEO). It must act in the best

interests of a company and its investors.

 Accountability: The board must explain the purpose of a company's

activities and the results of its conduct. It and company leadership are

accountable for the assessment of a company's capacity, potential, and

performance. It must communicate issues of importance to shareholders.

BEST PRACTICES

Companies must plan and put into practice best practices that comply with both

legal requirements and satisfy their needs which will have a positive impact on

corporate performance.

The following are the five corporate governance best practices that will

benefit every company.

 Define roles and responsibilities

 Integrity and Ethics

 Effective risk management

 Evaluate performance

 Board structure and process

THE FOLLOWING THE THEORIES OF CORPORATE

GOVERNANCE:

1. AGENCY THEORY: As the name suggests, in the agency theory, the owner

of the Company hires the agent, that is, the manager or director, to manage

the affairs of the Company in the best interest of the Company and the owner.

The problem arises when the person so appointed works for self-interest and

to secure his basic salary and does not work to increase the profit and life of

the Company. When the agent is appointed, there is delegation of power, and

there is separation of power and control from the hands of the owner. The

agent is responsible for the decisions taken and the working of the Company.

PRINCIPLE ⇒HIRES ⇒ AGENT ⇒ WORK IN SELF INTEREST.

2. STEWARDSHIP THEORY : This theory was introduced by Donaldson

and Davis (1989). Stewards in the Company basically means the directors or

the manager of the Company. According to this theory, as a steward, when

managers are given the power to work in the interest of the Company, they

work responsibly for the organisational success and balanced growth of all

the stakeholders—the work in the interest of the shareholders to maximise

their wealth.

SHAREHOLDERS ⇒ EMPOWER THE TRUST ⇒ STEWARD

STEWARD⇒ ORGANISATIONAL SUCCESS⇒ SHAREHOLDERS

3. RESOURCE DEPENDENCY THEORY: For efficient working of any firm

resources are required. The firm’s director has the responsibility to bring and
 make efforts to bring resources to the firm. These resources can be

information, skill, suppliers, buyers, dealers, social groups etc to secure and

enhance the organizational functioning, performance, and its success.

DIRECTORS ⇒ BRING IN RESOURCES ⇒ ORGANISATIONAL

SUCCESS

4. STAKEHOLDER THEORY: According to this theory, the manager should

take steps in the interest to secure good governance to improve the

relationship and interaction between the various stakeholders involved, such

as Investors, workers, board of directors’ shareholders, general public,

regulatory bodies, Business Partners, Employees, etc. This theory implies that

the director is responsible and accountable to a wide range of stakeholders

involved in the Company. This theory primarily focuses on balancing the

interest of all stakeholders whilst making any managerial decision and that

nobody’s interest is kept above the other’s and is not given supremacy and

the decision are taken in the long run interest of the Company.

5. TRANSACTION COST THEORY: The transaction cost is the expense

incurred while moving the thing from one place to another or conducting an

economic transaction. The transaction cost can be monetary, extra time or

inconvenience caused. The Company works by making contracts and each

contract brings with it the compliance requirement and some transaction

costs. This theory suggests that the Company’s decision should be such that
 it works to achieve the optimum organizational structure. It should be

economically efficient so that the cost of exchange is minimised.

6. POLITICAL THEORY: This theory appeals to righteousness. The manager

should gain the shareholders’ trust and votes rather than purchasing the voting

power. This theory focuses on the government’s political influence in the

working of the Company that the political power significantly influences

corporate governance.

CORPORATE GOVERNANCE IN INDIA

Corporate governance is an increasingly important issue in the Indian economy.

The past decade has seen a number of scandals and shareholder disputes.

Regulators have responded to these challenges by amending and, in some cases,

introducing new legislation, and shareholders are resorting to activist intervention

in companies to secure their rights. This, coupled with the closely held

shareholding of Indian companies, as well as the several factors that contribute to

India's ranking on the Transparency Index, keep corporate governance on the

radar.

The Indian corporate governance framework focuses on:

1. protection of minority shareholders;

2. accountability of the board of directors and management of the company;

 3. timely reporting and adequate disclosures to shareholders; and

4. corporate social responsibility.

The regime emphasises transparency through disclosures and a mandatory

minimum proportion of independent directors on the board of each company. the

corporate governance regulatory framework is composed of statutes and

regulations that require supervision by multiple regulators:

1. the Securities and Exchange Board of India (SEBI) is the principal

regulator for listed companies;

2. the Ministry of Corporate Affairs (MCA) and the registrar of companies

(Registrar) administer the Companies Act 2013 and the relevant rules that

apply to all companies, including listed companies; and

3. additionally, sector-specific regulation also applies, and this can have a

significant impact on the governance regime.

Perhaps the most significant issue that Indian regulators must address is ensuring

that independent directors can fulfil their obligations in the closely held and

controlled world of Indian corporates.

UNIT II - Levels of Governance Structure

The board of directors are a group of elected professionals that represent

shareholders who plan and manage the direction and activities of a company. The

board's role is to manage and enforce a company's rules while making decisions

for it. They can both set and follow the governance rules. This group has the

authority to appoint the chief executive officer (CEO) and general manager of a

company. There are a few types of members on a board of directors:

The following are the two types of members of the board of directors:

Executive director: These members are employees of the company. An

executive director has two separate jobs as a director and as an employee

Non-executive director: Non-executive directors do not work for the company.

They can assist a company in reducing conflicts of interest

The following are a few of the key positions on the board of directors:

CEO: The CEO manages a firm's operations. They can observe and implement a

company's internal governance rules

Chairperson: The chairperson is usually a non-executive director who is

accountable for leading the board of directors. A chairperson can organise a

board's accountability in governance

Secretary: The secretary creates meeting plans and organises a board's

administrative support. The secretary also records minutes for board meetings

AUDIT COMMITTEE: People from the board of directors can assemble an

audit committee. This committee regularly handles the reporting of a company's

financial state. The audit committee may ensure a company's transparency,

accountability and risk management. They help in protecting shareholders and

the company by regularly reviewing its compliance with financial regulations and

laws

SHAREHOLDER:

A shareholder is someone who owns a minimum of one share of a company's

stock. Shareholders of a company may also vote on company activities and share

accountability for the company's key decisions with the board of directors. They

can also appoint members of the board to represent their concerns. By evaluating

risks and promoting integrity, shareholders can help to promote governance

BOARD OF DIRECTORS:

A board of directors is a group of people who represent the interests of a

company's shareholders. It also provides guidance and advice to an organization's

CEO and executive team. A board provides general oversight of operations

without getting involved in day-to-day operations.

A board of directors primarily functions as a fiduciary, acting on behalf of the

organization's shareholders. A fiduciary is bound legally and ethically to act in

their best interests. “Director” is the general term for those who serve on the

board. Board members make decisions about issues, such as:

 Establishing compensation for executives

 Hiring and firing senior executives

 Creating dividend policies and payouts

 Establishing stock option policies

 Leading acquisitions and mergers

 Responding to crises within the company

 Setting company goals

 Supporting executive duties

 Providing necessary resources

Corporate Management Committee:

Corporate Management Working Principles have been regulated as follows

through the date and number of the Board of Directors.

PURPOSE:

 Enable harmony of the Company with the Corporate Management

Principles;

 Create a transparent system on the issues of detecting, evaluating, training

and awarding the suitable applicants to work in the company and to work

on issues of determining policies and strategies on this regard,

 Support and help the Board of Directors as working on public disclosure,

 Make suggestions to the Board of Directors on issues of realizing the

management practices to increase the company’s performance; revising

and evaluate the systems and processes that the Company has formed or

will form.

AUTHORITY AND SCOPE

 Corporate Management Committee, elected and authorized by the Board

of Directors, has been given authority on issues inviting the people and

organizations’ representatives who are related with the Company,

internal and external auditors (Auditors) and expert people including the

Company workers or affiliates to meetings and receiving information and

having legal and professional consultancy when required.

  The Committee acts within its own authority and responsibility and

makes suggestions to the Board of Directors, yet final resolution

responsibility always belongs to the Board of Directors.

STRUCTURE OF THE COMMITTEE

 The committee is formed in accordance with the articles of association of

the Company.

 The Chairman of the Committee is elected among the independent

members of the Board of Directors.

 The Committee is composed of minimum two members who are elected

among its own members by the Board of Directors, and when required,

elected among expert third persons who are not members of the Board of

Directors. Within the opportunities, the members of the Committee are

elected among those who are not assigned in management.

i) Expert people in accounting, finance, audit, law, management etc.

fields can be assigned in the Committee.

ii) Opinions can be received from independent experts and the expert

people can be included in the committee as the wages are paid by the

Company during operation of the activities of Corporate Management

Committee.
 iii) Those who have been the consultant of the Company in the past

cannot be elected as a member to the Corporate Management Committee.

iv) General Director of the Company shall not take place in the

Corporate Management Committee.

Governance by Divisional Management Committee (DMC)

I. Roles of the DMC

 DMC is composed and determined by the line director with the approval

of the CMC.

 Its objective and role is the executive management of the divisional

business to realise tactical and strategic objectives of the company.

 DMC meetings are chaired by the divisional heads.

 If he is unable to convene the meeting, he shall in writing delegate the

power to convene and chair the meeting to one of the DMC members

who is identified by name.

 This delegation will hold good either for a stipulated time period or for a

particular meeting.

 The whole process has to be in writing to convence and chair the meeting

to one of the DMC members identified by name.

 Delegation cannot be open-ended.

  The DMC shall generally meet at least once a month to review the

divisional performance and related issues.

 Quorum of meeting is at least 50% of the members subject to a minimum

of three members.

 In case of Divisional Management Committee (DMC), all the decisions

are taken by simple majority.

 Minutes are prepared and tabled before CMC for its information.

 Comprehensive notes are also attached along with agenda and shall be

circulated at least three days prior to the meeting.

Roles of the Divisional Head

Divisional head is responsible for day to day responsibility of the division

business. He functions as a chief operating officer. He shows the leadership to

the divisional management committee in its task of executive management of

the divisional business.

Responsibilities of the DMC

1. Helps in formulating and recommending divisional business plans

including objectives and strategies to CMC.

2. Monitors effective implementation of approved business plans.

3. Determination and recommendation of business specific policies,

systems and processes to CMC.

 4. Ensuring effective adherence and implementation to approved

systems, policies and processes.

5. Monitors business environment.

6. Ensures implementation of approved plans of human resources and

policies at empowered levels.

7. Determines and ensures right implementation of industrial /

employee relation policies.

8. Ensures all statutory compliance in right functioning of the

division.

Responsibilities of the Divisional Head

1. The main responsibility of divisional head is effective executive

management of the divisional business within CMC/Board

approved plans.

2. Presides over DMC meetings.

3. Provides effective leadership to the DMC.

4. Signs statutory compliance to confirm statutory compliance.

5. Reports to the Board/CMC jointly with the divisional financial

controller.

III. Powers of the DMC

Following issues must obtain prior approval of the DMCs :

1. All business plans including business strategy, functional

strategies, related action plans, revenues, cost, profits, investments

for recommendation to CMC.

2. Pricing of division’s products.

3. Recommendation for CMC’s approval for policy and control

system manuals relating to major areas of risk management.

4. Policy guidelines relating to maintenance and management of

inventories of raw materials, finished goods and spares.

5. For any kind of rebates/allowances/discounts pertaining to policy

of pricing, DMC may delegate the power to any designated

managers up to the specified limits.

6. Approve within CMC sanctioned, item-wise cost overwinds up to

the value of each item, provided total specified budget is not

exceeded.

7. Policy framework in relation to credit sales including terms and

conditions of sale. All these powers can be delegated to a

designated manager also.

8. For writing off fixed assets, raw material, spare parts, inventories,

receivables, claims etc. for the approval of CMC.

9. Appointment and transfers of experts.

10. Execution of long-term agreements with employee unions.

 11. Matters relating to dismissal of non-management staff, workmen

and secretaries.

12. Issues relating to sale/disposal of assets to management staff.

Powers of the Divisional Head

He has the following powers :

1. He takes day-to-day decisions except those which are entrusted to

DMC.

2. In case of emergencies, he can exercise all powers vested with the

DMC provided these decisions are ratified by the DMC.

3. He can supersede any decision taken by the DMC provided he

states reasons to that effect in writing and gets the approval of the

CMC.

UNIT III - Corporate Governance Forums

CII code on corporate governance

CII has urged companies to adhere to the Guidelines as below:

1. Integrity, ethics and governance – Companies should establish a culture of

responsibility with accountability. Training should be imparted to employees to

understand the culture.

2. Responsible governance and citizenship – Corporates to integrate

environmental, social and governance principles in business and avoid giving and

receiving bribes, corruption, market manipulation and anti-competitive practices.

They should take anti-money laundering steps and precautions.

3. Role of Board – The CII Guidelines cover multiple recommendations for

company Boards including balancing roles of supervision and stewardship,

allowing for dissenting views, set out Key Result Areas and balanced scorecard,

etc.

4. Balancing interest of stakeholders – CII has advised disclosure of conflicts

of interest of Directors and management and taking into consideration the interest

of shareholders and other stakeholders in corporate activities.

5. Independent Directors and Women Directors – Corporates to include

independent directors with industry expertise and strive to improve gender

diversity by inducting more women directors.

6. Safe harbors for independent directors – Enforcement agencies should put

in pace clear safe harbours so as not to hold independent directors personally

liable if they have done their duty. Laws need to be changed accordingly along

with decriminalisation of laws.

7. Risk management – Risk Management Committee may be set up and assess

various risks including IT and financial risks.

8. Succession planning – Succession planning should be instituted for chairman,

managing director and other senior management.

9. Role of audit committee – Audit committee briefing to the Board to be

formalized and spend sufficient time on integrity of financial statements, internal

controls and so on, apart from handling whistle blower complaints and internal

investigations.

10. Improving audit quality – Managements and audit committees should work

closely together on understanding financial statements.

11. Disclosure and transparency related issues – The organisation should

institute a social media policy to deal with information responsibly including

price sensitive information.

12. Vigil mechanism – A whistle blowing mechanism may be formulated and

periodic updates provided to the Board in its implementation.

13. Stakeholder, vendor and customer governance – The organisation must

extend the concept and principles of governance to a larger number of

stakeholders including bankers, creditors, lenders, customers, and employees,

among others. A gifts policy should be devised.

14. Investor activism – Governance concerns of investors including institutional

investors to be addressed and external stakeholders to be able to raise questions.

The organisations should educate stakeholders to exercise their vote on all

matters.

15. MSME and startups – MSME and startups should consider good

governances as a complement to their business growth and appoint non-executive

directors with appropriate skill sets.

VARIOUS CORPORATE GOVERNANCE FORUMS – CACG, OECD,

ICGN AND NFCG.

ORGANIZATION FOR ECONOMIC CO- OPERATION AND

DEVELOPMENT (OECD)

 The Organisation for Economic Co-operation and Development (OECD)

was established on 30th September 1961.

 The OECD was one of the first non government organizations to spell out

the principles that should govern corporates. OECD Corporate

Governance Principles are divided in six different chapters, which are:

Ensuring the basis for an effective corporate governance framework

 The rights and equitable treatment of shareholders and key ownership

functions Institutional investors, stock markets, and other intermediaries.

 The role of stakeholders in corporate governance Disclosure and

transparency.

 The responsibilities of the board Disclosure and transparency

  The responsibilities of the board

NATIONAL FOUNDATION CORPORATE GOVERNANCE (NFCG)

 NFCG endeavours to build capabilities in the area of research in corporate

governance and to disseminate quality and timely information to concerned

stakeholders. Objectives of NFCG

 To catalyse capacity building in new emerging areas of Corporate

Governance.

 To further research, scholarship, and education in corporate governance in

India.

 To foster a culture of good governance, voluntary compliance and facilitate

effective participation of different stakeholders.

 To create a framework of best practices, structure, processes and ethics.

 Governance Structure The internal governance structure of NFCG

consists: Governing Council Board of Trustees Executive Directorate

INTERNATIONAL CORPORATE GOVERNANCE NETWORK (ICGN)

 ICGN’s mission is to promote effective standards of corporate governance

and investor stewardship to advance efficient markets and sustainable

economies world-wide.

 It has four primary purposes:-

  to provide an investor-led network for the exchange of views and

information about corporate governance issues internationally;

 to examine corporate governance principles and practices; to develop and

encourage adherence to corporate governance guidelines; and standards to

generally promote good corporate governance.

 ICGN Global Corporate Governance Principles are–

Principle 1: Board role and responsibilities.

Principle 2: Leadership and independence.

Principle 3: Composition and appointment.

Principle 4: Corporate culture

Principle 5: Risk oversight.

Principle 6: Remuneration.

Principle 7: Reporting and audit.

Principle 8: Shareholder rights

UNIT IV - Corporate Social Responsibility

Corporate Social Responsibility – definition

Corporate social responsibility (CSR) is a self-regulating business model that

helps a company be socially accountable to itself, its stakeholders, and the

public.
By practicing corporate social responsibility, also called corporate citizenship,

companies are aware of how they impact aspects of society, including economic,

social, and environmental. Engaging in CSR means a company operates in ways

that enhance society and the environment instead of contributing negatively to

them.

Types of CSR

 Environmental responsibility: Corporate social responsibility is rooted

in preserving the environment. A company can pursue environmental

stewardship by reducing pollution and emissions in manufacturing,

recycling materials, replenishing natural resources like trees, or creating

product lines consistent with CSR.

 Ethical responsibility: Corporate social responsibility includes acting

fairly and ethically. Instances of ethical responsibility include fair

treatment of all customers regardless of age, race, culture, or sexual

orientation, favorable pay and benefits for employees, vendor use across

demographics, full disclosures, and transparency for investors.

 Philanthropic responsibility: CSR requires a company to contribute to

society, whether a company donates profit to charities, enters

into transactions only with suppliers or vendors that align with the
 company philanthropically, supports employee philanthropic endeavors,

or sponsors fundraising events.

 Financial responsibility: A company might make plans to be more

environmentally, ethically, and philanthropically focused, however, it

must back these plans through financial investments in programs,

donations, or product research including research and development for

products that encourage sustainability, creating a diverse workforce, or

implementing DEI, social awareness, or environmental initiatives.

Importance of CSR

Some of the significant importance of corporate social responsibility include:

1. Enhanced Reputation

One of the foremost benefits of engaging in CSR activities is the enhancement of

an organization's reputation. A company that demonstrates its commitment to

social and environmental concerns is likely to be viewed more favorably by

customers, employees, and investors.

2. Competitive Advantage

CSR provides a competitive edge by allowing businesses to stand out in a

crowded market. Companies that incorporate corporate social responsibility into

their core values are often seen as more attractive by consumers, investors, and

prospective employees.

3. Risk Mitigation

CSR initiatives can help mitigate various risks, such as regulatory, legal, and

reputational. By proactively addressing social and environmental issues,

companies reduce the likelihood of negative consequences that can impact their

bottom line.

4. Social Welfare

At its heart, CSR is about contributing to the welfare of society. By engaging in

philanthropic activities, supporting local communities, and addressing social

issues, businesses play a pivotal role in improving the quality of life for many.

5. Environmental Protection

Environmental responsibility is a critical component of CSR. Businesses that

embrace sustainability and eco-friendly practices help reduce their carbon

footprint and conserve natural resources.

6. Economic Growth

CSR can also stimulate economic growth, especially in communities where

businesses are actively involved in development projects. This leads to job

creation and increased economic opportunities.

PHASES OF CSR:

CSR is a sense of responsibility towards the community and environment, both

ecological and social, within which a business operates. The concept of CSR took

several decades to develop. The present CSR concept is extremely complex.

Although CSR is a product of capitalism, the concept has been socialized in

India. The CSR concept in India has evolved in four phases.

To enhance the knowledge of the readers, it is presented here:

First phase

 With the arrival of colonial rule in India in the late 1850s, the approach

toward CSR was modified.

 The industrial families of the 19th century were strongly inclined towards

economic as well as social considerations and used to provide more for the

welfare of society.
  However, it has been observed that their efforts toward social as well as

industrial development were not only driven by selfless, religious motives

but also influenced by caste groups and political objectives.

Second Phase

 In the second phase, during the independence movement, there was

increased stress on Industrialists to demonstrate their dedication toward the

progress of society.

 This was when Mahatma Gandhi introduced the notion of trusteeship,

according to which the industry leaders had to manage their wealth to

benefit the common man. “I desire to end capitalism almost, if not quite,

as much as the most advanced socialist. But our methods differ. My theory

of trusteeship is no make-shift, certainly no camouflage. I am confident that

it will survive all other theories.”

 These were Gandhi’s words that highlight his argument for his concept

of trusteeship. Gandhi’s influence put pressure on various Industrialists to

act toward building the nation and its socio-economic development.

 According to Gandhi, Indian companies were supposed to be the temples

of modern India.

 Under his influence, businesses established trusts for schools and colleges

and also helped in setting up training and scientific institutions.

  The operations of the trusts were largely in line with Gandhi’s reforms

which sought to abolish untouchability and encourage the empowerment

of women and rural development.

Third Phase

 The third phase of CSR, around the 1960s, had its relation to the element

of a mixed economy, the emergence of public sector undertakings (PSUs)

and laws relating to labour and environmental standards.

 During this period, the private sector was forced to take a backseat.

 The public sector was seen as the prime mover of development.

 Due to the stringent legal rules and regulations surrounding the activities

of the private sector, the period was described as an era of command and

control.

 The policy of industrial licensing, high taxes, and restrictions on the private

sector led to corporate malpractices.

 This led to the enactment of legislation regarding corporate governance,

labour and environmental issues.

 PSUs were set up by the state to ensure the suitable distribution of

resources – wealth, food, etc. to the needy. However, the public sector was

effective only to a certain limited extent.

  This led to a shift of expectation from the public to the private sector and

their active involvement in the socio-economic development of the country

became necessary.

 In 1965, a group of academicians, politicians and businessmen set up a

national workshop on CSR aimed at reconciliation.

 They emphasized transparency, social accountability and regular

stakeholder dialogues. Despite such attempts, the concept of CSR failed to

catch steam.

Fourth Phase

 In the fourth phase, since the 1980s still, Companies had started

abandoning their traditional engagement with CSR and integrating it into

a sustainable business strategy.

 In the1990s, the first initiation towards globalisation was undertaken.

Controls and licensing systems were partly done away with which gave a

boost to the economy, the signs of which are evident today.

 The increased growth momentum of the economy helped Indian

companies grow rapidly and this made them more willing and able to

contribute to a social cause.

 Globalisation has transformed India into an important destination in terms

of production and manufacturing bases for MNCs.

  As Western markets are becoming concerned about labour and

environmental standards in developing nations, companies in India which

export and produce goods for developed countries, need to pay close

attention to their compliance with global standards.

PRINCIPLES OF CORPORATE SOCIAL RESPONSIBILITY:

1. Accountability

 Taking responsibility for actions and decisions.

 Being transparent about the effects of their activities.

 Addressing any negative impacts and striving to mitigate them.

 Companies should be accountable for their impacts on society, the

economy, and the environment.

2. Transparency

 Regular and honest communication with stakeholders.

 Reporting on financial, social, and environmental performance.

 Disclosing both positive and negative outcomes.

 Companies should operate openly and provide clear, accessible

information about their activities.

3. Ethical Behavior

 Adhering to ethical standards and principles.

 Avoiding corruption and unethical practices.

 Treating all stakeholders fairly and with respect.

 Companies should conduct their business ethically and with integrity.

4. Respect for Stakeholder Interests

 Companies should consider the interests of all stakeholders in their

decisions and activities.

 Identifying and engaging with stakeholders, including employees,

customers, suppliers, and the community.

 Balancing diverse stakeholder needs and expectations.

 Involving stakeholders in decision-making processes when appropriate.

5. Respect for the Rule of Law

 Staying informed about and adhering to legal requirements.

 Promoting legal compliance throughout the organization.

 Ensuring business activities are lawful.

 Companies must comply with all applicable laws and regulations.

6. Respect for International Norms of Behavior

 Companies should follow international standards and guidelines for

responsible conduct.

 Adhering to global principles such as those outlined by the United

Nations and other international bodies.

 Avoiding participation in activities that violate human rights or ethical

standards.

 Promoting best practices across borders.

7. Respect for Human Rights

 Ensuring no involvement in human rights abuses.

 Providing fair working conditions and respecting labor rights.

 Promoting equality, diversity, and inclusion.

 Companies should uphold and respect human rights in all their

operations.

8. Sustainability

 Integrating environmental considerations into business strategies.

 Reducing environmental impact and promoting resource efficiency.

 Investing in sustainable practices and technologies.

  Companies should focus on long-term sustainability rather than short-

term gains.

9. Continuous Improvement

 Regularly reviewing and updating CSR strategies and practices.

 Seeking stakeholder feedback for improvement.

 Adapting to new challenges and opportunities in CSR.

 Companies should strive for ongoing improvement in their CSR efforts.

10. Community Involvement and Development

 Companies should actively contribute to the development and well-being

of the communities in which they operate.

 Supporting local community projects and initiatives.

 Engaging in philanthropy and charitable activities.

 Promoting economic and social development.

11. Integration into Core Business Strategy

 CSR should be embedded into the company’s core business strategy and

operations.

 Aligning CSR goals with business objectives.

 Ensuring CSR is part of the company’s mission and vision.

 Integrating CSR into everyday business processes and decision-making.

Indian models

Corporate social reporting

A corporate social responsibility (CSR) report is an internal- and external-facing

document companies use to communicate CSR efforts and their impact on the
environment and community.

An organization’s CRS efforts can fall into four categories:

 Environmental

 Ethical

 Philanthropic

 Economic
 OBJECTIVES OF CORPORATE SOCIAL REPORTING:
o To provide a neutral and credible platform to all stakeholders
engaged in CSR best practices for capturing relevant issues to
foster sustainable growth.
 To provide research, training, practice, capacity building, standard
setting, advocacy, rating, monitoring, recognition and related support in
the field of CSR.
 To facilitate exchange of experiences and ideas between various
stakeholders for developing a framework for strengthening of CSR
indicatives.
 To facilitate any other assistance directly or indirectly for activities which
seek to promote CSR practices.
 To establish and deepen links with the organisations in various parts of
the world which promote CSR practices for exchange of ideas and for
collaborative actions and programmes.
 To collaborate and to support, directly or indirectly, the initiative of any
individual, group, organisation or institution in promoting good practices
in CSR.
 To establish a database of credible implementing outfits with whom the
corporate entities as well as the donor organisations can collaborate and
work.
 To create CSR fund with contribution of Government PSUs and private
sector companies and channelize the CSR fund for optimum utilisation
through a sustainable mechanism.
 To implement various CSR projects of state importance through credible
implementing agencies in that area.
 To conduct activities relating to
o Public health in general but preventive health care and sanitation in
particular
 o Promotion of employment enhancing vocation skills especially
among youth
o Promotion of an ecosystem for enhancement of cognitive growth of
Pre-Anganwadi children
o Contributions of funds to the technology incubators located areas
o Such other activities relating to CSR as may be prescribed in the
Companies Act 2013 or Companies (Corporate Social
Responsibility Policy) Rules, 2014 or any other rules which
Central Government may make from time to time.
 To do all such other things as may be deemed incidental or conducive to
the attainment of the above objects.