BUSINESS ETHICS

A PROJECT REPORT ON CORPORATE SOCIAL

RESPONSIBILITY

SUBMITTED BY

SANTHOSH KUMAR O (3510910983)

SANTHOSH R (3510910985)
SANTHOSH KUMAR PR (3510910984)
SARAVANAN TK (3510910994)
SANKAR A (3510910979)
SAMBATH KUMAR G (3510910674)

TO
MS. ASHMITHA R S
FACULTY
MANAGEMENT STUDIES
 DECLARATION

I hereby declare that the project report entitled “A PROJECT REPORT ON

CORPORATE SOCIAL RESPONSIBILITY” submitted to SRM School of
Management in partial fulfilment of the requirement for the award of the Degree
of Master of Business Administration, is a record of the original research work
done under the supervision and guidance of Miss R.S. ASHMITA,. Professor,
Department of Business Administration , SRM School of Management, Chennai
and that it has not formed the basis for the award of any degree/ associate
ship/fellowship of other similar title to any candidate of any university.

Date:

Place: Kattankulathur Signature of the candidate

 CERTIFICATE

This is certified that the project entitled “A PROJECT REPORT ON CORPORATE

SOCIAL RESPONSIBILITY” submitted to SRM School of Management in partial
fulfillment of the requirement for the award of the Degree of Master of Business
Administration, is a record of the original research work done by R.SANTHOSH during
the period of his study in the Department of Business Administration, SRM School of
Management, Chennai under my supervision and guidance and that the project has not
formed the basis for the award of any degree/ associate ship/fellowship of other similar title
to any candidate of any university.

SIGNATURE OF GUIDE SIGNATURE OF DEAN

 ETHICS & CORPORATE SOCIAL
RESPONSIBILITY
INDEX

Ethics

What are Ethics ------------- 2

Types of Managerial Ethics ------------- 2
Example 1 ------------- 3
Factors that Influence Ethical Behavior ------------- 5
Stages of Moral Development ------------- 6
Example 2 ------------- 9
Ethical Guidelines for Managers ------------- 10

Corporate Social Responsibility

What is CSR -------------- 12

Nature of CSR -------------- 13
Past Conceptualisation of CSR -------------- 15
CSR Management Capacity Model ------------- 16
Corporate Social Cost Benefit Analysis ------------- 18
Arguments for CSR -------------- 19
Arguments against CSR -------------- 20
ETHICS
Leading World Organizations like the World Bank and IMF are concerned about the the
aid provided being used in the proper manner and that whether the aid reaches the
intended affected people. The incidences of such aid being frittered away by corrupt
Govt. Officials are on the rise. To monitor and keep a tab on such occurrences
organizations like Transparency International bring out yearly ratings for countries on
an index of corruption that is intended to serve as a guideline for investors & donor
agencies.

In the past few years, many newspapers and magazines have reported on ethical
problems in business. The term ‘ethics’ is generally used to refer to the rules or
principles that define right and wrong conduct. In Webster’s Ninth New Collegiate
Dictionary, ethics is defined as “the discipline dealing with what is good and bad and
with moral duty and obligation.” According to Clarence D. Walton and La Rue Tone
Hosmer, “business ethics is concerned with truth and justice and has a variety of aspects
such as the expectations of society, fair competition, advertising, public relations, social
responsibilities, consumer autonomy, and corporate behavior in the home country as
well as abroad.” Practically speaking it can be said to be a system of values and is
“concerned primarily with the relationship of business goals & techniques to
specifically human ends”, It means viewing the needs and aspirations of individuals as a
part of society, it also means realization of the personal dignity of human beings.

In the present day scenario it is a major task for the leadership to inculcate personal
values & impart a sense of business ethics to the organisation, Managers, especially top-
level managers, are responsible for creating an organizational environment that fosters
ethical decision-making. Theodore Purcell and James Weber suggested three ways for
applying and integrating ethical concepts with daily actions: (1) establishing a company
policy regarding ethical behavior or developing a code of ethics, (2) appointing an
ethics committee to resolve ethical issues, and (3) teaching ethics in management
development programs. These concepts should be applied appropriately taking into
consideration the the significant Social, Cultural, Political, Technological, and
Economic factors that affect the state of personal values and business ethics within in
each industry, especially in a diverse environment like India.

Types of Managerial Ethics

Archie B. Carroll, an eminent researcher in the area of social responsibility, identified
three types of management, depending on the extent to which their decisions were
ethical or moral: (i) moral management, (ii) amoral management, and (iii) immoral
management (see Figure below).
1) Moral management
Moral management strives to follow ethical principles and doctrines. Moral managers
strive to succeed without violating ethical standards. They seek to succeed while
remaining within the bounds of fairness and justice. Such managers undertake activities
which ensure that even though they engage in legal and ethical behavior, they continue
to make a profit. Realizing that moral management calls for more than what is
mandatory, moral managers follow the law not only in letter but also in spirit. Moral
managers always seek to determine whether their actions, decisions, or behavior are fair
to themselves as well as to all the other parties involved. In the long run, the moral
management approach is likely to be in the best interests of the organization.
Types of Managerial Ethics

Example 1:
Unethical Practices at Snow Brand Milk Company
An outbreak of food poisoning can bring a food products company to the brink of
disaster. The year 2000 spelt doom for Snow Brand, one of Japan’s premier dairy foods
companies.

The disaster: On June 27, 2000, a large number of people, especially in Western Japan,
fell ill after consuming milk or related products made by Snow Brand. It was later
revealed that around 10,000 people had been affected by Snow Brand’s products. The
problem was caused due to the presence of a bacteria, Staphylococcus aureus, on the
production line at the Osaka factory of the Snow Brand Company. The bacteria was
found in a valve which should have been cleaned regularly. Inspections revealed that
production facilities at the plant did not meet the established standards of hygiene.

The company’s response: The Snow Brand Milk Products Company did not address
the concerns of the public immediately. It gave the impression of being more worried
about its reputation than about the victims. Instead of voluntarily recalling its products,
the company made an attempt to limit the extent of product recall. The Osaka City
Health Center issued a recall order for two products, and requested the company to
voluntarily recall other products. The company recalled the two products as ordered by
the city officials. The company agreed to recall the other products only after being
pestered by city officials. It also asked city officials not to announce the recall order
publicly so as to give an impression that the company was voluntarily recalling its
products. The city officials did not accede to the request and publicized both the recall
order and the company’s request to the city officials not to announce the recall order.
The company also tried to cover up the incident and did not provide full details
regarding the nature of the incident. Initially, Snow claimed that the valve which was
found to be contaminated was used very rarely. On further inquiry, it was learnt that the
valve was used almost everyday. Company officials also claimed that the area of
contamination was small, that is, about the size of a small coin; but investigations
revealed that the contaminated area was larger than what the company claimed it to be.
The situation deteriorated further because the company’s top management also was not
completely informed about the incident.
The overall impression caused by this incident was that Snow Brand Company was
bothered only about its reputation, not about its affected customers.

Consequences: As a consequence of this incident, the company was forced to close five
of its factories – including the one where the contamination was detected. This incident
also resulted in erosion of the consumer’s confidence. Snow Brand reported a
consolidated loss of 52.9 billion yens (about $ 430 million) for the year ending March
2001.
Prior to this incident, Snow Brand had a market share of about 45%. This unfortunate
incident and the poor way in which the company handled it led to a steep fall in the
company’s market share.

Conclusion: Snow Brand’s response to this crisis was ineffective because it was too
slow, because it did not communicate with the public, and because it did not seek to
limit the damage by recalling its products quickly. The company gave too much
importance to the impact of the incident on its financial performance instead of focusing
on the suffering of the people who had consumed the company’s products.
The Snow Brand Company should have recalled its products immediately and disclosed
all the pertinent facts to the public. This incident showed that the company had no proper
mechanism for dealing with such unprecedented crises. Also, since top management did
not have complete information about the incident, it was caught unawares when it spoke
to the media. To make matters worse, Snow Brand Company attempted to cover up the
incident. The best way out would have been to reveal all the facts to the public, thereby
allaying their fears. Since the company seemed hesitant to do so, not only did customers
perceive its products as unsafe, they also lost faith in its management.
Recent Events: The Company was still on its path to recovery when it again came into
the limelight for the wrong reasons. In October 2001, the Snow Brand Food Company,
a subsidiary of the Snow Brand Milk Products Company, was again in the middle of a
controversy. Following the outbreak of the Mad Cow Disease in Japan and the
consequent decline in beef sales, the Japanese agriculture ministry had started buying
back domestic beef. Therefore, in order to obtain government compensation, the Snow
Brand Food Company repackaged beef procured from Australia to make it appear as if it
had originated in Japan.

When the scam came into light, the company President, Mr. Shozo Yoshida admitted the
involvement of the company in the scam and promised to repay the government the
money it had received as compensation. Alongside this scam, the firm was also
implicated in another scandal. It had falsely labeled beef produced in Japan’s northern
island of Hokkaido (where the Mad Cow Disease had been discovered) as beef from the
southern city Kumamoto. When this fact came to light, the Japanese ministry of
agriculture launched criminal proceedings against the Snow Brand company. These
episodes further tarnished the reputation of the Snow Brand Milk Products Company,
which had been trying to recover from the setback it had received earlier due to the food
poisoning case. The firm now faces the uphill task of winning back the confidence of the
public in its products and its management.

2) Amoral management
This approach is neither immoral nor moral. It simply ignores ethical considerations.
Amoral management is broadly categorized into two types – intentional and
unintentional. Intentional amoral managers do not take ethical issues into consideration
while taking decisions or while taking action, because in their opinion, general ethical
standards are only applicable to the non-business areas of life. Unintentional amoral
managers, however, do not even consider the moral implications of their business
decisions and actions. In a nutshell, amoral managers pursue profitability as the only
goal and pay little attention to the impact of their behavior on any of their social
stakeholders. They do not interfere in their employees’ activities, unless their behavior
leads to government interference. The central guiding principle of amoral management
is – “Within the letter of the law, will this action, decision, or behavior help us make
money?”

3) Immoral management
Immoral management not only ignores ethical concerns, it also actively opposes ethical
behavior. Organizations with immoral management are characterized by:
i. Total concern for company profits only.
ii. Stress on profits and company success at any cost. Lacks of empathy –
managers
are hardly bothered about others’ desire to be treated fairly.
iii. Laws are regarded as hurdles to be removed or eliminated.
iv. Strong inclination to minimize expenditure.
The basic principle governing immoral management is: “Can we make money with this
action, decision, or behavior?” Thus, in immoral management, ethical considerations are
immaterial.

Factors that Influence Ethical Behavior

Complex interactions between the manager’s stage of moral development and the
various moderating variables determine whether he will act in an ethical or unethical
manner. Moderating variables include individual characteristics, structural design of the
organization, the organization’s culture, and the intensity of the ethical issue. Figure 3.3
presents a diagrammatic view of the interaction between these various factors.
Individuals are less likely to indulge in unethical behavior if they are bound by rules,
policies, job descriptions and cultural norms even if they have a feeble moral sense. But,
if the organization structure and culture allows unethical practices, even highly moral
individuals may become corrupt. The various factors that influence the ethical behavior
of managers are discussed below.

Factors affecting Ethical and Unethical Behavior

Stages of moral development
Managers making ethical decisions may belong to any of the three levels of moral
development shown in Table below. Each level is further subdivided into two stages.
The extent to which the manager’s moral judgment depends on outside influences
decreases with each successive stage. At the pre-conventional level, managers decide
whether an act is right or wrong depending on personal consequences like punishment,
favors or rewards. At the second level, the conventional level, managers perceive
moral values as important for achieving certain benchmarks and living up to the
expectations of others. Finally, at the third level, the principled level, managers frame
ethical principles without regard to social pressures.
Implications of six stages: The following conclusions can be drawn from the study of
the six stages of moral development of managers:
• Individuals move up these stages in a sequential manner.
• The moral development of an individual may stop at any stage.
• Most managers are at Stage 4 of moral development.
 Stages of Moral Development

Source: Stephen P.Robbins and Mary Coulter, Management (Delhi: Pearson

Education Inc., First Indian Reprint, 2002) 126.

Managers at stage 3 tend to make decisions that will be approved by peers, while
managers at stage 4 try to be a good corporate citizen who abide by the organization’s
rules and procedures. Managers at stages 5 and 6, however, are more likely to question
organizational practices which they believe to be wrong.

Individual characteristics
No two individuals behave in the same manner. They have different values and
personality variables. Values refer to the basic convictions held by an individual
regarding right and wrong. Each one of us follows certain values which we learnt in
our early years of development from our parents, teachers, and friends (and others who
influenced us). Thus, the personal values of the different managers in an organization
are often quite different. Values, to a large extent, determine a person’s ethical or
unethical behavior.
Personality variables are also known to influence a person’s ethical behavior. Two
such personality variables are ego strength and locus of control. Ego strength refers to
the strength of a person’s convictions. People with a higher ego strength tend to do
what they think is right. Managers with a high ego strength are more consistent in their
moral judgment and moral action than those with low ego strength.
The other personality variable, locus of control, indicates the degree to which people
believe that they are the masters of their own fate. Based on a person’s locus of
control, he can be categorized either as an external or an internal. Externals believe
that whatever happens to them in life is due to luck or chance. Internals believe that
they control their own destiny. Managers with an internal locus of control are more
likely to take responsibility for the consequences of their behavior than managers with
an external locus of control.

Structural variables
An organization’s structural design also influences the ethical behavior of managers.
Organization structures that create ambiguity and fail to provide clear guidance to
managers are more likely to encourage unethical behavior. Such behavior can be
checked by adopting formal guidelines like written job descriptions and codes of
ethics. Some organizations focus only on results, and not on the means for achieving
them. When people are evaluated only on the basis of their output, they may be
compelled to do whatever is necessary to achieve good results.
The structural designs of different organizations differ in the amount of time,
competition, cost and pressures faced by employees. The greater the pressure on
managers, the more likely they are to compromise their ethical standards. This has an
affect on the other employees of the organization. Research shows that the behavior of
superiors has a very strong influence on the behavior of subordinates.

Organization’s culture
The strength of an organization’s culture also has a great impact on the ethical
standards of its employees. An organization culture that is characterized by high risk
tolerance, control and conflict tolerance is most likely to foster high ethical standards.
Such a work culture encourages managers to be aggressive and innovative and to
openly challenge expectations which they consider to be unrealistic or personally
undesirable. Thus, a strong and ethical organizational culture would exert a positive
influence on managers’ ethical behavior.

Issue intensity
The most important factor that affects a manager’s ethical behavior is the intensity of
the ethical issue itself. A manager may consider a certain issue ethical or unethical,
depending upon certain factors. These factors are greatness of harm, consensus of
wrong, probability of harm, immediacy of consequences, proximity to victims and
concentration of effect. The intensity of the ethical issue is greater when:
• The number of people harmed is large.
 • Everyone agrees that the action is wrong.
• There are greater chances of the act causing harm.
• The consequences of the action may be felt immediately.
• The person feels close to the victims.
• The action has a serious impact on the victims.

Example 2:
Indian Direct Sellers Association – Code of Ethics Conduct Towards Consumers
Prohibited Practices: Direct Sellers shall not use misleading, deceptive or unfair sales
practices.

Identification: From the beginning of the sales presentation, Direct Sellers shall,
without request, truthfully identify themselves to the prospective customer, and shall
also identify their company, their products and the purpose of their solicitations. In
party selling, Direct Sellers shall make clear the purpose of the occasion to the hostess
and the participants.

Explanation and Demonstration: Explanation and demonstration of the product

offered shall be accurate and complete, in particular with regard to price and, if
applicable, credit price, terms of payment, cooling off period and/or return rights,
terms of guarantee and after-sales service, and delivery.

Answers to Questions: Direct Sellers shall give accurate and understandable answers
to all questions from consumers concerning the product and the offer.

Order Form: A written order form shall be delivered to the customer at the time of
sale, which shall identify the company and the Direct Seller and contain the full name,
permanent address and telephone number of the company or the Direct Seller, and all
material terms of the sale. All terms shall be clearly legible.

Verbal Promises: Direct sellers shall only make verbal promises concerning the
product which are authorized by the company.

Cooling-off and return of goods: Companies and Direct Sellers shall make sure that
any order form contains, whether it is a legal requirement or not, a cooling-off clause
permitting the customer to withdraw from the order within a specified period of time
and to obtain reimbursement of any payment or goods traded in. Companies and
Direct Sellers offering an unconditional right of return shall provide it in writing.

Guarantee and After-Sales Service: Terms of Guarantee or a warranty, details and

limitation of after-sales service, the name and address of the guarantor, the duration of
the guarantee and the remedial action open to the purchaser shall be clearly set out in
the order form or other accompanying literature or provided with the product.

Literature: Promotional literature, advertisements or mailings shall not contain any

product description, claims or illustrations which are deceptive or misleading, and
shall not contain the name and address or telephone number of the company or the
Direct Seller.

Testimonials: Companies and Direct Sellers shall not refer to any testimonial or
endorsement which is not authorized, not true, obsolete or otherwise no longer
applicable, not related to their offer or used in any way likely to mislead the consumer.

Comparison and Denigration: Companies and Direct Sellers shall refrain from using
comparisons which are likely to mislead and which are incompatible with principles of
fair competition. Points of comparison shall not be unfairly selected and shall be based
on facts which can be substantiated. Companies and Direct Sellers shall not unfairly
denigrate any firm or product directly or by implication. Companies and Direct Sellers
shall not take unfair advantage of the goodwill attached to the trade name and symbol
of another firm or product.

Respect of Privacy: Personal or telephone contact shall be made in a reasonable

manner and during reasonable hours to avoid intrusiveness. A Direct Seller shall
discontinue a demonstration or sales presentation upon the request of the consumer.

Fairness: Direct Sellers shall not abuse the trust of individual consumers, shall respect
the lack of commercial experience of consumers and shall not exploit a consumer’s
age, illness, lack of understanding or lack of language knowledge.

Referral Selling: Companies and Direct Sellers shall not induce a customer to
purchase goods or
services based upon the representation that a customer can reduce or recover the
purchase price by referring prospective customers to the sellers for similar purchases,
if such reductions or recovery are contingent upon some unsure future event.
Delivery: Companies and Direct Sellers shall fulfill the customer’s order in a timely
manner.

Ethical Guidelines for Managers:

A major task is to create a consistency among the business values and ethics & the
proposed strategy. This is done through inculcating the right set of values, reconciling
divergent views, and modifying values that are not consistent with the overall strategy
of the company. To ensure that their decisions and actions are ethical, managers
should strive to follow the guidelines listed below:
Appoint an Ethics Officer
Involve the employees in developing a mission statement.
Evolve a code of conduct.

Obeying the law: Managers must ensure that laws are not broken to achieve
organizational objectives.

Tell the truth: In order to build and maintain long-term relationships with relevant
stakeholders, it is essential to state the facts clearly and honestly.

Uphold human dignity :People should be treated with respect irrespective of their
race, ethnic group, religion, sex or creed.

Adhere to the golden rule: The Golden Rule, “Do unto others as you would have
others do unto you,” is often applied when monitoring the ethical dimensions of
business decisions. It involves treating individuals fairly and with empathy.
Premium non-nocere (above all, do no harm): Some writers regard this principle as
the most important ethical consideration. When pursuing profits, organizations should
ensure that they do not harm society.

Allow room for participation:This principle advocates the participation of

stakeholders in the functioning of an organization. It emphasizes the significance of
knowing the needs of stakeholders, rather than deciding what is best for them.

Always act when you have responsibility: Managers should utilize their capacity and
resources to take appropriate action when there is need for it. Also he should facilitate
upward communication from employees.
Build a ethical culture by example setting: Last but not the least the manager should
encourage the employees to follow a culture that is based on appropriate examples.

Mechanisms for Ethical Management

There is no specific method for making employees behave in an ethical manner.
However, there are a number of mechanisms that help managers create an ethical
climate. These include top management commitment, codes of ethics, ethics
committees, ethics audits, ethics training and ethics hot lines.

Top management commitment

Through commitment and dedication to work, top-level managers can act as role
models for their organization. Their behavior can influence the ethical behavior of
subordinates.

Code of ethics
A code is a statement of policies, principles or rules that guide behavior. A code of
ethics is a formal document that states an organization’s primary values and the ethical
rules it expects its employees to follow. Most of the companies that have a code of
ethics agree that it encourages employees to behave in an ethical manner.

Ethics committee
An ethics committee establishes policies regarding ethical conduct and resolves major
ethical dilemmas faced by the employees of an organization in the course of their
work. Establishing a code of ethics is not enough; the ethics committee also has to
make ethical behavior a part of the organizational culture.
Ethics committees perform the following functions:
i. Organizing regular meetings to discuss ethical issues.
ii. Communicating the code to all members of the organization.
iii. Identifying possible violations of the code.
iv. Enforcing the code.
v. Rewarding ethical behavior and punishing those who violate the
organization’s
code of ethics.
vi. Reviewing and updating the code of ethics.
 vii. Reporting the activities of the committee to the board of directors.

Ethics audits
Ethics audits involve the systematic assessment of the adherence of employees to the
ethical policies of the organization. They aid in better understanding of the policies
and also identify the deviations in conduct that require corrective action.

Ethics training
The purpose of ethics training is to encourage ethical behavior. It enables managers to
align ethical employee behavior with major organizational goals.

Ethics hot line: This is a special telephone line that enables employees to bypass the
proper channel for reporting their ethical dilemmas and problems. The line is usually
handled by an executive who investigates the matter and helps resolve the problems of
the concerned employee. Such a facility allows the problem to be handled internally
and reduces the chances of employees becoming whistle-blowers. An employee who
reports real or perceived misconduct to an external agency (which may be able to take
remedial action) is called a whistle-blower. A manager should take the necessary steps
to prevent a whistle-blower from going to an outside person or organization since such
action can lead to unfavorable publicity or legal investigation.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) today is a hot issue among IT companies and
CEOs like talking about what their company gives back to society. CSR encompasses an
organisation's commitment to behave in an economically and environmentally
sustainable manner, while honouring the interests of direct stakeholders. Realising the
importance of CSR, Indian IT firms have earmarked a sizeable portion of their profit for
social cause. Polaris Software Labs, for instance, spent Rs 20.94 lakh on social
responsibility during 2001-02, compared to Rs 17.39 lakh the previous year. Other
companies including NIIT, Tata Consultancy Services (TCS), Satyam Infoway and
Congnizant Technology Solutions have also earmarked sizeable sums for CSR.
"A leadership role in the technology services sector comes with a certain responsibility,
and the most successful organisations are the ones that give back to the community," says
R. Chandra Sekaran, Senior Vice-President, Cognizant Technology Solutions. IT firms
have realised that socially-responsible business practices not only benefit their employees
but also the greater community at large. Social responsibility reshapes the way business
should be done, both for profit and when not-for-profit, says an IT company official.
CSR is a concept that frequently overlaps with similar approaches such as corporate
sustainability, corporate sustainable development, corporate responsibility, and corporate
citizenship. While CSR does not have a universal definition, many see it as the private
sector's way of integrating the economic, social, and environmental imperatives of their
activities. As such, CSR closely resembles the business pursuit of sustainable
development and the triple bottom line. In addition to integration into corporate
structures and processes, CSR also frequently involves creating innovative and proactive
solutions to societal and environmental challenges, as well as collaborating with both
internal and external stakeholders to improve CSR performance.

What is CSR?
Corporate social responsibility is necessarily an evolving term that does not have a
standard definition or a fully recognized set of specific criteria. With the understanding
that businesses play a key role on job and wealth creation in society, CSR is generally
understood to be the way a company achieves a balance or integration of economic,
environmental, and social imperatives while at the same time addressing shareholder and
stakeholder expectations. CSR is generally accepted as applying to firms wherever they
operate in the domestic and global economy. The way businesses engage/involve the
shareholders, employees, customers, suppliers, governments, non-governmental
organizations, international organizations, and other stakeholders is usually a key feature
of the concept. While business compliance with laws and regulations on social,
environmental and economic objectives set the official level of CSR performance, CSR is
often understood as involving the private sector commitments and activities that extend
beyond this foundation of compliance with laws.

From a progressive business perspective, CSR usually involves focusing on new

opportunities as a way to respond to interrelated economic, societal and environmental
demands in the marketplace. Many firms believe that this focus provides a clear
competitive advantage and stimulates corporate innovation.

CSR is generally seen as the business contribution to sustainable development which has
been defined as "development that meets the needs of the present without compromising
the ability of future generations to meet their own needs", and is generally understood as
focusing on how to achieve the integration of economic, environmental, and social
imperatives. CSR also overlaps and often is synonymous with many features of other
related concepts such as corporate sustainability, corporate accountability, corporate
responsibility, corporate citizenship, corporate stewardship, etc.

CSR commitments and activities typically address aspects of a firm's behaviour

(including its policies and practices) with respect to such key elements as; health and
safety, environmental protection, human rights, human resource management practices,
corporate governance, community development, and consumer protection, labour
protection, supplier relations, business ethics, and stakeholder rights.

Corporations are motivated to involve stakeholders in their decision-making and to

address societal challenges because today's stakeholders are increasingly aware of the
importance and impact of corporate decisions upon society and the environment. The
stakeholders can reward or punish corporations. Corporations can be motivated to change
their corporate behaviour in response to the business case that a CSR approach
potentially promises. This includes: 1) stronger financial performance and profitability
(e.g. through eco-efficiency), 2) improved accountability to and assessments from the
investment community, 3) enhanced employee commitment, 4) decreased vulnerability
through stronger relationships with communities, and 5) improved reputation and
branding.

Nature of CSR Challenges and Opportunities

There is increasing focus on both the private and public sectors to be proactive in the area
of CSR. Various challenges are emanating from consumers, shareholders, non-
governmental organizations, international organizations, and other stakeholders. These
challenges are increasingly recognized in public policy debates as well as in the
marketplace by companies and industry sector associations and they are frequently
recognized as opportunities. Stakeholders challenge corporations to play social
responsibility roles - at both the domestic and international levels. Challenges usually
focus on one or more elements of CSR such as environmental protection, health and
safety, corporate governance, human resource management practices, human rights,
community development and consumer protection. In many cases, the challenges are
framed in an incremental way and on other occasions the challenges are spelled out in a
more comprehensive and overarching manner. The challenges often call for voluntary
actions by businesses to demonstrate responsible behaviour and effective responses to
social and environmental problems - both in the domestic and international contexts. The
demands also call upon the public sector to reinforce corporate leadership and to use
other policy tools such as economic and regulatory instruments to encourage CSR. The
challenges for action can differ considerably from one stakeholder group to another. For
example, the demands can range from a call for more disclosure of information to
demands for improved stakeholder involvement to requests for changes in management
practices to proposals for altering the relationships between company directors, business
managers, auditors, shareholders, debt holders, employees, suppliers, customers,
community members, and other stakeholders. Some of the challenges are oriented to the
ways that businesses manage their internal operations such as human resources
management while others are directed at the ways that a business interacts with the rest of
the community and society (e.g. human rights, consumers, and supplier relationships).
Accountability factor

The world-famous business strategy consultant, Peter F. Drucker, in a recent interview in

Joel Bakan's new book, The Corporation (2004), says, "If you find an executive who
wants to take on social responsibilities, fire him. Fast."

Those who believe, or are in favor of, corporate social responsibility (CSR) may be
shocked. But, bravery is indeed needed to scrutinize the very heart of business practice,
without which we may be misled when addressing the role of business and corporations
in our lives today. During the last century, the world witnessed how nations embraced
democratic ideals and expanded the government's domain over society and the economy,
toward greater public participation and shared humanitarian ideals. Social programs and
economic regulations were created by governments to protect their citizens from neglect
by the market and from exploitation by corporations.

While deregulation has freed corporations from legal constraints, privatization has
enabled them to govern areas of society where they have never been before. Today, it can
be argued the corporation has become the world's dominant institution, undermining
society and governments.
As a result, corporations are free to engage in questionable or even criminal behavior
often without fear of censure. Research conducted recently by international human rights
organizations such as a 2003 study by Amnesty International and one this year by Human
Rights Watch found international businesses were involved in many human rights
violations in the countries they operated. These violations included torture, forced
displacement of people, hostage-taking, violations against the right to form unions,
involuntary resettlement, forced or bonded labor, and practices that infringed on the
rights of women, children and traditional tribes. The reports have highlighted the
importance of corporate social responsibility (CSR) in business; an initiative taken up by
many business leaders.

Principally, the CSR principal recognizes companies are responsible not only to their
shareholders but also to their stakeholders -- all parties affected by a business including
workers, suppliers, the local community, government, NGOs and consumers. In recent
developments, the environment has also been put into the equation.

The new understanding of CSR is known as the triple bottom line -- Profit, People and
Planet. That is that (1) business goals are always for profit, and that (2) business and
corporations are supposed to take part in the efforts to fulfill people's welfare and this (3)
requires active participation in securing the planet's sustainability. There has been much
evidence to support this thought. Corporations now highlight social and environmental
initiatives on their websites and annual reports. Entire departments and executive
positions are dedicated to these initiatives.

The oil company Exxon Mobil, for example, is much bigger than the combined revenue
of poor 180 countries. Of course, money does not automatically reflect power, but it is
certainly parallel to power. About 85 percent of the world's flour stock is controlled by
only six TNCs. Five TNCs now control 90 percent of the music industry and seven
companies own 95 percent of the world's film industry, as disclosed in this year's Global
Inc. written by Gabel and Bruner.

This is why "Corporate Social Responsibility" needs a serious rethink. "Corporate

Accountability" would be a more correct term, for accountability deals with the control of
the exercise of power while responsibility merely counts on individual entities' voluntary
action.
And unlike the vague CSR, the "Corporate Accountability" concept is clear in its action

Past Conceptualizations of CSR: A Brief Overview

• CSR as social obligation.
• CSR as stakeholder obligation.
• CSR as ethics driven.
• CSR as managerial processes.

Given the variety of the viewpoints outlined above, it is evident that no single
conceptualization of CSR has dominated past research. The comparison and integration
of past definitions is especially difficult because scholars have considered the social
responsibilities of different conceptual entities, including (a) businesses in general, (b)
the individual firm, and (c) the decision maker (Wood 1991). In addition, while some
researchers have examined CSR from a normative standpoint (with a concern for the
duties of businesses in general toward society as a whole), others have favored a more
managerial approach (how can an individual firm successfully manage CSR?) or an
instrumental perspective (how can CSR generate organizational benefits?).

Competency in responding ethically and responsibly to societal expectations is a critical

issue for public affairs managers in multinational corporations (MNCs). Understanding
what comprises socially responsible behaviour and how to manage it is, however, an
unresolved issue. MNCs face complex challenges in establishing and maintaining
legitimacy, or their 'license to operate', across many host countries with differing social
and cultural norms and values. Firms have legitimacy when stakeholders perceive
congruence between societal values and the firm's activities and goals (Dowling and
Pfeffer 1975), subject to the boundaries set by universal ethical principles (Donaldson
and Dunfee 1994). Legitimacy contributes to firms' survival and prosperity by reducing
costs associated with stakeholder conflict and improving long-term sustainability and
employee satisfaction (Bansal and Roth 2000)

The concept of corporate social responsibility (CSR) management capacity to describe

the firm-wide ability to adapt to the social environment by recognizing and responding
effectively to the responsibilities inherent in firm-stakeholder relationships. Because
boundary spanning functions such as public affairs or public relations (PR) are used
frequently by firms to respond to the social environment, the CSR management capacity
tool developed in this paper measures two concepts: a firm's CSR orientation and its PR
orientation.

This paper addresses two key challenges in social responsibility management: what
capabilities firms require to be socially responsible, and how managers can measure the
extent to which these capabilities are embedded in their organisations. Developing a
model of the capabilities required for social responsibility management, answers the first
question, called CSR management capacity. CSR management capacity is defined as the
product of two firmwide orientations: a social responsibility orientation and a PR
orientation. For answering the second question, it is suggested to develop and test the
CSR management capacity index, a measurement tool intended to facilitate social
responsiveness capability development.

CSR management capacity model

To develop the model of CSR management capacity, the authors put together four
theoretical streams: strategic management, social responsiveness, PR and marketing. The
contributions of each of these literatures to this model are described next.

1) Core capabilities

The strategic management literature suggests that firms develop

capabilities that explain firm-level success or failure (Sharma and Vredenberg 1998;
Teece et al. 1997). Capabilities are deeply embedded bundles of complex skills and
knowledge that are the product of collective organisational learning (Day 1994). For this
reason, capabilities are difficult to replicate (Teece et al. 1997) and, as such, constitute a
resource that can deliver competitive advantage (Barney 1991). An organization’s
capability to be ethically and socially responsive may be a resource that contributes to
firm competitive advantage (Litz 1996). Litz suggested that the ability to perceive
stakeholder interests, ethical awareness and issues management ability are resources that
can help organisations achieve and maintain legitimacy. The authors suggest that firms
can develop capabilities that foster socially responsive management, and that these
capabilities contribute to competitive advantage by maintaining a firm's social license to
operate. Firms wishing to improve their social responsiveness must therefore critically
examine and develop the processes and capabilities that are modeled and tested in this
paper.

2) Social responsiveness

Social responsiveness has been described as the capacity for an

organization to respond to social pressure (Frederick 1994), using processes such as
environmental assessment, stakeholder management and issues management (Wood
1991). These specialized skills are normally the province of public affairs management;
however, for an organization to respond effectively to stakeholders, responsiveness
mechanisms must be integrated into operational decision making (Miles 1987) in a
proactive manner (Carroll 1979; Sethi 1979). Thus, a firm's ability to be socially
responsible relies both on the expert skills of public affairs professionals and the ability
of general managers to factor social impacts into their business decisions. Three critical
public affairs processes for social responsiveness (environmental assessment or scanning,
issues management and stakeholder management) describe how firms manage
information, people, organisations and issues in their environment (Wood and Jones
1998). The first process, environmental scanning, is the 'managerial activity of learning
about events and trends in the organization’s environment' (Hambrick 1981). It is 'the
first step in the ongoing chain of perceptions and actions leading to an organization’s
adaptation to its environment' (ibid.). Scanning takes place in many staff functions and at
different levels in an organization. Managers tend to scan as part of strategy making
(Bourgeois 1980), whereas public affairs professionals use it to gather social and political
intelligence (Post et al. 1983). The intelligence gathered results in identification of issues
that need to be managed. Issues arise from expectation gaps between organisations and
their stakeholders (Wartick and Mahon 1994), and their management can prevent
strategic surprises and facilitate corporate responses to threats or opportunities (Ansoff
1980).

Corporations respond to issues of the most powerful stakeholders (Nasi et al 1997);

therefore, stakeholder management represents an essential component of social
responsiveness.
From the instrumental point of view, stakeholders must be managed because they can
have an impact on firm success (Frooman 1999). Firms can use both bridging and
buffering strategies to deal with their stakeholders (Meznar and Nigh 1995). Typical
bridging strategies include adapting corporate practices to changing stakeholder
expectations and typical buffering strategies include lobbying governments and advocacy
advertising. While Meznar and Nigh noted parallels between their buffering and bridging
strategies and responsiveness categories of defence and accommodation, the present
authors also identify parallels between bridging and buffering concepts and the
competing paradigms in the PR theory of persuasion (buffers) and mutual gains (bridges).
From the normative point of view, stakeholders must be managed because they have
legitimate interests that give them a moral right to managerial attention (Donaldson and
Preston 1995; Post et al. 2002). Thus, stakeholder management requires managerial
commitment and learning (Post et al. 2002) that includes identifying and understanding
stakeholders and weighing decisions about social responsiveness according to the
stakeholder's salience (Berman et al. 1999; Mitchell et al. 1997). Multiple stakeholder
interests must be taken into account in policy making through establishing organisational
structures and policies (Donaldson and Preston 1995; Jones 1999). This balanced
approach to stakeholder management is fairly common among large companies and
results in collective gains or losses for stakeholders (Preston and Sapienza 1990).
Stakeholder management thus refers to a configuration of activities, managerial
orientations (cognitions and values) and ethics (Johnson-Cramer et al. 2003) that are
bounded by conditions such as stakeholder autonomy and alignability of firm-stakeholder
interests (Heugens and Oosterhout 2002).

3) Public relations

The PR literature identifies the need for dialogue with

stakeholders as part of a balanced, two-way communication with stakeholders (Pearson
1989). In contrast to the dominant view of PR. as persuasive and manipulative
communication (Miller 1989), support for the importance of dialogue arises from the
alternative, 'symmetrical' view of PR., which sees mutual understanding and managing
conflict as the purpose of PR (Grunig 1989). The symmetrical view of PR holds most
promise for informing a model of social responsiveness capabilities because it holds as
central the concern for ethical organization-stakeholder relationships. Dialogue requires a
particular attitude to and structure for communication. The proper attitude for dialogue is
'an effort to recognise the value of the other - to see him/her as an end and not merely as a
means to achieving a desired goal' (Kent and Taylor 2002: 22). The structure for dialogue
gives participants equal power over the rules of discourse: paramount are questions such
as who can initiate interaction, the frequency of communication, who selects the topics
for discussion, how topic changes are handled and the satisfaction of participants with the
rules of communication (Pearson 1989). PR scholarship further contributes to our
understanding of social responsiveness by emphasizing the need to communicate symbols
(Grunig 1993) to achieve legitimacy. For example, symbolic acts of communication such
as media releases, reports and special events are necessary to help organisations become
familiar and well known to their stakeholders (Aldrich and Fiol 1994), and, thereby,
legitimate.
It follows that firms can increase their legitimacy by integrating symbolic communication
with ethical, dialogic relationships with stakeholders. So far in this paper, contributions
have been identified from three streams of literature that structures the assumptions
underlying the authors' model of social responsibility capabilities. The strategic
management literature explains that capabilities can help to deliver competitive
advantage and suggests that the ability to manage firm stakeholder relationships is such a
capability. The social responsiveness literature stresses the need for both specialized
expertise and embedded capabilities across all aspects of the organization. It also
highlights the instrumental and normative motives that may drive firm action and offers
three processes for action: environmental scanning, issues management and stakeholder
management. The PR literature asserts that both symbolic communication and firm-
stakeholder dialogue contribute to ethical relationships with stakeholders. It can be
assumed, therefore, that: 1) organisations have, or can develop, social responsibility
capabilities; 2) these capabilities arise from the interaction between specialist staff and
general management and incorporate at least three key processes of environmental
scanning, issues management and stakeholder management; and 3) concern for ethical
firm-stakeholder relationships underpins responsiveness. Next, the authors turn to the
marketing literature, to identify a way in which their model can be operationalised and
measured.

4) Orientation

The market orientation concept describes a firm's behavioural

response to market information (Jaworski and Kohli 1993). It emphasizes the systematic
generation and distribution of intelligence about customers to develop a more customer-
focused organization. The authors borrow from marketing the term Orientation', to denote
a firm's behavioural response to intelligence about stakeholders. They suggest that a
firm's orientation towards its social environment has three components. First, orientation
implies that there is a goal towards which the firm is oriented. Goals arise in the context
of mental models or schemata held by organisational members that serve as a frame of
reference for action (Senge 1990; Weick 2001). Secondly, the internal environment or
behaviour of the firm must support the goal with structures and processes that can
translate goals into action. Thirdly, transactions occur with stakeholders; the firm acts in
ways consistent with its goals and internal structures and processes. The authors'
framework for classifying CSR management capacity capabilities is therefore based on
orientations that comprise goals, behaviours and transactions with stakeholders. Unlike
Carroll's (1979) classification scheme for social responsibility orientation, which
describes domains of firm activity (Wood 1991), the authors focus on the attributes of a
firm-level behavioural response - that is, the goals, internal behaviour and transactions
with stakeholders.
Corporate Social Cost Benefit Analysis:
A corporate should also keep its interest in mind while formulating a strategy for CSR.
They are answerable to the stakeholders for all the actions and the consequences.
Nowadays the companies are accountable on all fronts of business. These fronts may be
the commercial or the social. When spending company funds to further the social cause, a
company should also take into consideration as to what is this social cause cost going to
give back to the business. It means what kind of a reward would these CSR schemes
result into. Corporates now can work out the benefits that can be accrued from these
activities.

Social Cost Benefit Analysis (SCBA)

It is a framework for evaluating the social costs and benefits of any project. This
involves identifying, measuring and comparing the private costs and negative
externalities of a scheme with its private benefits and positive externalities, using money
as a measure of value. These benefits can be arrived at by applying the following steps:

Step 1: identify all costs and benefits using the principle of opportunity cost
Step 2: measure the benefits and costs using money as a unit of account
Step 3: consider the likelihood of the cost or benefit occurring (i.e. sensitivity analysis)
Step 4: take account of the timing of the cost and benefit (i.e. discounting). A £1,000
benefit now is worth more than £1,000 benefit in 10 years time

a) Identify all costs and benefits

A firm deciding on an investment project will only take account of its own private costs
and benefits e.g. total cost and total revenue. Firms ignore externalities. CBA will take
account of both private and external costs and benefits.

b) Measure the benefits and costs

Height can be measured using feet and inches. Benefits and costs can be valued using
money. Private costs and benefits relatively easy to measure in monetary terms

c) Likelihood of the cost or benefit

If there is a 50% chance that a life will be saved then the benefit is £750,000 x 0.5 =
£325,000

d) The timing of the cost and benefit

The major costs of the project occurs straight away. The benefits occur over the life of
the project. The bridge may cost £5m to build but consumers benefit by £1m a year. If the
expected life of the bridge is 25 years then how do we value now £1m of benefit in 25
years time?
Economists discount the future benefit to identify the present value.

e) Is a Project worth Undertaking?

Yes if discounted benefits outweigh discounted costs. If the government has to choose
between competing projects then the ones with the highest positive net present value
should be undertaken.

Arguments for Social Responsibilities of Business

Change in public expectations

The needs of today’s consumers have changed, resulting in a change in their expectations
of businesses. Since businesses owe their profits to society, they have to therefore
respond to the needs of society.
Business is a part of society
Society and business are benefited when there is a symbiotic relationship between the
two. Society gains through economic development and the provision of employment
opportunities; and business benefits through the workforce and consumers provided by
society.
Avoiding intervention by government
By being socially responsible, organizations attract less attention from regulatory
agencies. This gives them greater freedom and flexibility in their operations.

Balance of responsibility and power

Businesses have considerable power and authority. The exercise of this power should be
accompanied by a corresponding amount of responsibility.

Impact of internal activities of the organization on the external environment

Most firms are open systems, i.e., they interact with the external environment. The
internal activities of such firms have an impact on the external environment. To avoid a
negative impact on the external environment, firms should be socially responsible.

Protecting shareholder interests

By being socially involved, a company can improve its image and thus protect its
shareholders’ interests.

New avenues to create profits

Social responsibility involves the conservation of natural resources. Conservation can be
beneficial for firms. Items that had been considered waste earlier (for example, empty
soft drink cans) can be recycled and profitably used again.

Favorable public image

Through social involvement, a firm can create a favorable public image for itself and
endear itself to society. By so doing, a firm can attract customers, employees, and
investors.

Endeavor to find new solutions

Businesses have a history of coming up with innovative ideas. Therefore, they are likely
to come up with solutions for social problems, which other institutions were unable to
tackle.

Best use of resources of a business

Businesses should make optimum use of the skills and talent of its managerial personnel
as well as its capital resources to produce good quality products and services. By so
doing, the business will be able to fulfill their obligations toward society.
Prevention is better than cure
It is in the interests of business organizations to prevent social problems. Instead of
allowing large-scale unemployment to lead to social unrest (which will harm business
interests), businesses can be sources of employment for eligible youth.

Arguments against Social Responsibility of Business

Opposes the principle of profit maximization

The main motive of a business is profit maximization. Social involvement may not be
economically viable for a business.

Excessive costs
When a business incurs excessive costs for social involvement, it passes the cost on to its
customers in the form of higher prices. Society, therefore, has to bear the burden of the
social involvement of business by paying higher prices for its products and services.

Weakened international balance of payments

A weakened international balance of payments situation may be created by the social
involvement of organizations. Since the cost of social initiatives would be added to the
price of the products, the multinational companies selling in international markets would
be at a disadvantage when competing with domestic companies which may not be
involved in social activities.

Increase in the firm’s power and influence

Businesses are inherently equipped with a certain amount of power. Their involvement in
social activities can lead to an increase in their power and influence. Such influence and
power may corrupt them.

Lack of necessary skills among businesspeople

Businesspeople do not possess the necessary skills to handle the problems of society.
Their expertise and knowledge may not be relevant to deal with social problems.

Lack of accountability to society

Until a proper mechanism to establish the accountability of businesses is developed, they
should not get involved in social activities.

Lack of consensus on social involvement

There is no agreement regarding the type of socially responsible actions that a business
should undertake.

Conclusion

Taking into view the recent happenings at Reliance Industries, it can be said that the
focus on topics like Ethics And Corporate Social Responsibility is increasing. Nowadays
the companies have to keep in view the social benefits of all projects undertaken, they
have to keep in mind the well being of the Stakeholders as also issues like the
safeguarding of the Environment. These activities are constantly under the microscope of
the society.

When a corporate undertakes a new project it has to keep in mind how does it portray its
image in the market. Any wrongdoings can be potential pitfalls for the corporates; they
have to be right all the time, any mistake or shortcoming can immediately result in a loss
of market share as also reputation. Thus the companies have to continuously Re Evaluate
its goals and Objectives and align them with the Corporate Strategy. They can take this
opportunity to inculcate proper Business Ethics & Corporate Values in their employees.
Along with the CSR comes the opportunity to convert these social initiatives into tangible
results, namely profits. A company should look what amount of value the project can
give back to the company. A Social Cost Benefit Analysis can give the company a fair
idea about what kind of rewards the initiative can generate for the company. Thus a
company can decide on the initiatives taking into consideration these various factors.