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Ethics and Social

Responsibility
Doing good also involves doing right

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FLOW OF PRESENTATION

1. What is Ethics

2. Decline and Growth of Philanthropy : the Paradox

3. Towards Social Responsibility

4. Business Response

5. Conclusion
Ethics

Ethics is a Greek word, it means Character or manners.

Ethics is about sense of belongingness to society of


business or Organization Formed with a limited vision for
economic generation but should resolve conflict with
society by servicing the community.
Ethics in Business
Deals with determination what is ‘right'," fair, prior and just" in
decisions and actions made that affect stake holders. It focuses
on the business relationship with employees, customers,
stockholders, creditors, suppliers and member of the society in
which it operates. Business is a part of activity of society..

Corporate ethics , is a a matter of leadership.

Adhere to corporate credos-code of conduct.

Development of IQ,EQ and SQ culture.


Decline and Growth of Philanthropy :
The Paradox
The Business Scene

Corporate Growth

Five Year Plans and Industrial growth ( 1951- 1965)

Industry top League and Economic power of the Corporates remained


concentrated with the pre Independence Business Houses.

Continuous Growth in the number and size of Business Growth


TOP 10 Business Houses (1965)
Rank Growth Assets (Rs
million)
1 Tata 4177.2
2 Birlas 2927.2
3 Martin Burn 1496.1
4 Bangur 779.1
5 ACC 773.6
6 Thapar 779
7 Sahu Jain 676.9
8 Bird Heilgers 601
9 JK Singhania 592
10 Soorajmull Nagarmull 573.7

Source : Report of the monopolies Inquiry Commission 1965


Changes in the Business Class
Changes in Organizations and Management of Industry and in nature of
business class.

Industrial Entrepreneurship more driven by Economic and Industrial Factors


such as Capital, Possession of business experience, etc . Rather than by

social factors such as caste, community, and social approval or disapproval.

Till 1950
From 1960
First generation of
industrialists dominated the
New generations of first time
business scene
entrepreneurs more educated
Family business operating
Indianisation of Non – Family
on the joint family and
owned business like
highly personalized decision
Hindustan Lever, ICI, L & T
making
Economic Difficulties
The third Plan Ran into heavy weather due to a series of unforeseen difficulties such
as the border troubles with China in 1962, failure of monsoon and war with
Pakistan.

Population Growth

Unemployment

Recessionary Conditions in Heavby Industry

Growing Budgetry Difficulties

The unfavourable Economic climate impacted adversly on the industrial growth and
therefore on the business pschye, making it less willing to be generous. Matters
were made worse by government’s restrictive policies.
State and Business: Emergence of Disharmony

Distrust of Business:

Public image of the business as a whole begun to deteriorate in public eyes


soon after the World War II.

Widespread hoarding, black marketing and Price manipulations.

Unhealthy and undesirable trends in company formation and management


such as interlocking of funds, diversion of profits and defrauding of
shareholders.
Obsession with Concentration of
Economic Power
Government’s industrial policy incorporated social goals such as
reduction of disparities in income and wealth; prevention of
monopolies and concentration of Economic

Power; reduction of regional disparities and improving living


conditions of the workers.

Holding of corporate sector and business houses was synonymous


with monopoly in a particular industry .
Tax Policy
Heavy taxation by the state to finance planned
development and to make more equitable distribution of
income and wealth.

Compulsory distribution of dividend coupled with corporate


taxation made business to divert available funds into
working capital and development, rather than into
charity.
Impact on Philanthropy

 The deceleration of industrial growth, controls on


industry, a high tax regime and changes in the
attitudes of new business class had several adverse
consequences for philanthropy:
The industrial and govt. policy sapped self-
confidence and self-esteem, lowered business
morale, and charity.

Paying heavy taxes, anti-poverty programmes.

High tax rates, licence permit, political corruption,

Black money
Growth in Govt. and Foreign Funding of
voluntary Action
In 1953 and 1966 the Central Social Welfare Board
sancioned Rs 61.6 million by way of grants to
approximately 6000 Institutions for the Welfare of
Women, children, handicapped.

In 1960-61, 36% of a voluntary agency’s came from


Central, state and local governments.
Malpractice and Regulation

The Direct Taxes Administration Enquiry Committee


of 1958-1959, noted that loopholes in the provisions
relating to charity in the income tax Act had helped
the formation of pseudo charitable trusts which
appropriated trust funds for their own business.
Cont..

When there was a large influx of foreign fund from


the 1960s onwards in response to the social and
economic troubles, the indigenous business
community felt further relieved of its earlier
obligation to society.

Social development hereafter become increasingly


funded by govt. and foreign donor agencies.
Growth of Philanthropy

A seeming paradox

The finance Act of 1948 had extended to companies


the existing 50% tax exemption for charitable
contributions available to individuals.

The companies Act of 1956 introduced Section 25 to


enable individuals and corporations to set up non-
profit companies for charitable purposes.
Foundations

Foundation 1960
Towards Social Responsibility

1970s : shift from pure charitable behaviour


measured in terms of money

Development of communities

Charity through trusts, establishing institutions

Global trends, mounting social problems, proactive


chambers and carrot and stick policy
Fall from Grace
Unethical practices

Vivian Bose Commission – Dalmia Jain Co. 1963

Monopolies Inquiry Commission – 1965

1957 Kanoria : the general impression we have made on the


masses is that we are intoxicated with power and wealth, amass
fortunes for ourselves regardless of national interest

TATA : Business man must become politically active, openly


espouse the virtues of free enterprise, and ostracise anti-social
elements in the community
Advocating Responsibility
Kasturbhai Lalbhai, JRD Tata, Arvind Mafatlal and
Ramakrishna Bajaj
believed in the trusteeship ideals of Mahatma Gandhi and in
sound business ethics.

Moral leadership and social responsibility.


IMC 1963 : actively participate in every worthwhile movement directed
towards preserving for our country a sound social and economic structure.
Industry and trade have to discharge many responsibilities to the
community. They should provide support – moral, personal and financial –
to institutions or causes which make their towns and villages better for
living and which are intimately connected with our spiritual heritage.
Vinoba and the Trusteeship Ideal
Gramdan; bhoodan; sampattidan

Businessmen interest in humanitarian,


cultural,educational and other beneficial social
activities.

To adopt fair trading practices, and to consider their


business as a social mission.

Trusteeship theory
Debating Responsibility
Jai Prakash Narain: 1965 seminar in Delhi, Calcutta.

Build social audit as part of social responsibility

Justice and fair play in all dealings

Attempts at growth and development of owners and consumers,


community, employees, shareholders, other businesses, and towards the
state.

Utilisation of surplus for social purpose : education, health, research etc.

Fair Trade Practices Association in Bombay in 1966.


Showing the way
Low ethical std … tax evasion, black marketing, illegal foreign exchange etc

JRD : use of fin, hr, to provide task forces to provide relief and reconstruction measures . The
business community is an essential ingredient of our democratic society and it has a duty not
only to create wealth but also to promote the ethical and social goals of the community.

Mafatlal : beyond philanthropy … self discipline, quality control of consumer goods, fair trade
practices, avoidance of vulgar display of wealth

Grass root issues : unemployment, social unrest, inadequate provision for social welfare.
Escalation Of Social Problems

Factors Leading to Emphasis on Escalation of

Social Problems:

• Population Growth

• Governments Socialist Policies

• Growing Unemployment

• Deprivation
Growth Of Voluntary Sector

Factors Leading to Growth of Voluntary Sector

• Number of Calamities

• New Welfare Organizations

• Growing Social Consciousness

• Women’s Issues
Government’s Carrot & Stick Policy

Realization Of the Government

• Nehru’s Last Message

• Tax Concessions
Leadership

JRD Tata Leads

Arvind Mafatlal follows


Proactive Chambers

Chambers Of Commerce & Industry

 Pre-Independence Emphasis
 Post-Independence Emphasis

1.Population Growth
2.Rural Development
3.City Development
BUSINESS RESPONSE
Tata Iron & Steel Company (TISCO)

 Community Development & Social Welfare Program started before the concept
of Social Responsibility.

 Commenced in 1949, covered a small Adivasi population around Jamshedpur.

 Provided Training in Technical trades and allied occupations, scholarship for


education of women as well as men and a midwife training programme.
Cont…
 Autonomous body called Tata Steel Rural Development
Society for community services in 32 villages.

 Today the Society operates in 600 villages in eight districts of


Bihar, Orissa and MP for undertaking construction of roads,
water sources for drinking and irrigation, promotion of Rural
Sanitation and other welfare programmes.

 The Company stood to gain in terms of Improved Industrial


Relations, rapport with Tribal Leaders, international Exposure
and an image as a good Corporate Citizen.
Cont…

TATA MOTORS

 Initial thrust on Healthcare, education and building


roads to link remote villages and also Family
Planning and Watershed Management.

 Made history when conducted the first Social Audit


in 1979.
Other Business Units
BAJAJ

Systemized and expanded its Rural development work .

Kasturbhai Lalbhai Group

Set up the Narottam Lalbhai Rural Development Fund(NLRDF)


to undertake several programmes of development in family
planning, forestry, rural industries, sanitation and so on.
BIRLA

 Mix of traditional and Modern philosophy.

 Building several new temples and prestigious Institutions like


Sangeet Kala Mandir & the Sanskrit Sagar.

 In 1978 BM Birla established the Birla Rural Development


Association with the objective of improving the life of the
villagers.

 For improved agricultural practices, the Birla Agricultural Farm


was set up in Ropar inPunjab.
Multinationals

Indian Tobacco Company (ITC)

First major contribution to society by establishing in


1977, the ITC Sangeet Research Academy in
Calcutta to preserve and rejuvenate the guru
shishya parampara.
Hindustan Lever Limited (HLL)

Its involvement with rural communities included


educating farmers in improved dairy farming,
provision of interest free loans, R &D for rural
problems, demonstration of improved practices in
oilseeds production and introduction of new income
generation activities such as poultry farming, etc.
CONCLUSION
It began to be accepted that business had to share a
part of the social overhead cost of economic
development if it wished to share in its fruits.

Shift in beneficiary and issue focus from Urban to Rural


areas, and from education to concerns like population
control, agricultural improvement, employment skills for
women and so on.

Moreover newer and smaller groups with no previous


tradition of philanthropy joined established houses to
take on this new responsibility.
References
•Fernando A C, Corporate Governance Principles, policies and
practices, , Dorling Kinder Sley (india) Pvt. Ltd, 2006

•Banerjee R P, Ethics in Business and Management, Himalaya


Publishing House, Mumbai, 2008

•Sharma Subhash, New Mantras in Corporate Corridors, New Age


International Pvt. Ltd. , New Delhi, 2007

•Jayashree S, Dastoor S Dhun, Sadri Sorab, The Theory and


Practice of Managerial Ethics, Jaico Publishing House, Mumbai,
1999

•Maddux B Robert, Maddux Dorothy, Ethics in Business A guide


for Managers, Crisp Publications Inc., 2005
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