Ethics And Sr

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 First generation of industrialists dominated the business scene Family business operating on the joint family and highly personalized decision making

From 1960 New generations of first time entrepreneurs more educated Indianisation of Non – Family owned business like Hindustan Lever, ICI, L & T

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 selfconfidence 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 nonprofit 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

Calcutta to preserve shishya parampara.

and

Research

Academy

rejuvenate

the

in

guru

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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