Since corporations have assumed a greater role in larger governance issues, they cannot shy away from assuming social responsibilities depending on the country and society in which they work.
Globalisation and development of the new market economy in the last decade have brought the global multinationals and investment houses to India for competing in the domestic and international markets. There is profound interest in India and its potential for investments with a view to maximising profits in all sectors. While profit and maximising investment returns remain the central goal of all corporate endeavours worldwide, there is need to fundamentally re-examine it in the light of the important role played by multinationals in the world economy. This has created huge tensions in developing countries including India, where vast disparities in income and wealth have led to social fragmentation and resistance to corporatisation of businesses. The role of multinational and Indian corporations in India and elsewhere should not be differentiated as far as corporate social responsibility practices are concerned. While there could be a margin of appreciation for the argument that such practices have to evolve over time in the domestic corporate sector, the fundamental notion that corporations ought to conduct their business practices in a socially responsible manner cannot be questioned.
There are three important dimensions of corporate social responsibility that need to be understood:
Responsible conduct of corporations vis-À-vis their employees: There is considerable improvement in corporations in matters of providing good workplace environment and following sound human resource policies that ensure employee satisfaction. Of course, there are wide disparities among different levels of employees and much needs to be done to improve the plight of those at the lower end of the organisational hierarchy. But a corporation taking a keen interest in the quality of life of its employees is only one dimension of promoting good corporate practices. The fact that there is a legal framework and employees can pursue legal options in the event of bad or unsafe work environment acts as a deterrent to corporations. Policies to curb sexual harassment at workplace are an example of corporations developing internal guidelines and mechanisms that can be used in the event of allegations. But this development was essentially due to the legal mechanism and court interventions forcing the corporations to develop a code of conduct.
Ethics in business and corporate governance: There is need to ensure that ethics and corporate governance become an essential part of corporate culture. In the last decade, a number of cases of major corporate misconduct and unethical and, some times illegal, behaviour led to major litigation in different parts of the world. The corporations need to consciously adhere to the rule of law and it is their duty and responsibility to institutionalise corporate governance as part of their culture. The Sarbanes-Oxley Act of 2002, a U.S. federal law, was enacted on July 30, 2002 in response to a number of major corporate and accounting scandals. The legal and regulatory framework under this Act was useful in restoring public confidence in the U.S. capital market and, in particular, strengthening corporate accounting controls. The Foreign Corrupt Practices Act of 1977 is another example of a U.S. federal law made to ensure accounting transparency with regard to bribery of foreign officials. The U.S.-registered multinationals are required to implement policies and procedures globally to ensure compliance with these legal instruments.
Social responsibility of corporations: The third and, probably the least developed aspect of corporate social responsibility, is the contribution of corporations to the societies in which they operate. Ideological differences have marred the development of the role of corporations in contributing to society at large. In a globalised world, the role of the state is diminishing and non-state actors, including corporations, are undertaking many functions previously performed by the state. There is no doubt that this has created a more open and liberal business environment, promoted competition leading to a better quality of products and services, improved the efficiency and effectiveness of the services offered and, indeed, given rise to profits. But corporations have to make conscious efforts to become socially responsible, recognising that the role and functions they perform inevitably have an impact on society. Since they have assumed a greater role in larger governance issues of countries, it is not possible for them to shy away from assuming different types of responsibilities depending on the country and society in which they work. It is also an area which is not regulated. Hence, it will depend on the corporations themselves to determine how they contribute to society. But it will not be long-lasting unless corporations get their act together and develop sound policies to determine how they can contribute to society, in addition to performing their primary role of promoting their business.
U.N. global compact: The United Nations global compact is an example of serious attempts at the international level to promote corporate citizenship on the basis of a voluntarily accepted set of principles and standards. As outlined in the organisational website ( www.unglobalcompact.org), “The Global Compact is a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, the environment and anti-corruption … The Global Compact is not a regulatory instrument — it does not “police,” enforce or measure the behaviour or actions of companies. Rather, the Global Compact relies on public accountability, transparency and the enlightened self-interest of companies, labour and civil society to initiate and share substantive action in pursuing the principles upon which the Global Compact is based.”
While this could be an important step in the right direction, there is much to be done to ensure that at least certain aspects of the compact get a legal framework for corporations to be held accountable in case of breach of these regulations. At present, both the public and private law remedies are rather ineffectively used in developing countries for pursuing claims against corporations. But it is important that a sound legal and institutional regime be established that would also take into account the perspectives of corporations so that the principles and values of the global compact get implemented in a wider manner with greater effectiveness.
Corporate philanthropy: The notion of corporate philanthropy needs to be promoted so that corporations take an active interest in the development of society. This will also make corporations stakeholders in the larger issue of nation building along with promoting good corporate practices. For example, the Goldman Sachs Foundation, established in 1999 with a donation of $200 million from The Goldman Sachs Group, Inc., has awarded grants in excess of $114 million since its inception, providing opportunities for the young in more than 20 countries. In developing countries, corporations are in a position to play an important role in education and healthcare. These are two important sectors that require huge investments. Corporate philanthropy alone can create infrastructure that matches international standards, yet remains accessible to the poor and the vulnerable to whom good education equals empowerment and basic healthcare is existence.
The Jindal Steel & Power Limited (JSPL), one of India’s largest steel conglomerates and its Executive Vice Chairman & Managing Director, Naveen Jindal, an elected Member of Parliament, is promoting and supporting the establishment of the O.P. Jindal Global University (JGU) and the Jindal Global Law School (JGLS) in Haryana. The proposed university and the law school, expected to be India’s first global law school, will be a non-profit initiative to promote global excellence in teaching and research. The motto of the proposed JGU is: “A Private University Promoting Public Service.”
Corporate social responsibility ensures that corporations promote corporate citizenship as part of their culture. Corporate social responsibility is about businesses transforming their role from merely selling products and services with a view to making profits and increasing their revenue to the development of a society through their abilities of generating capital and investing it for social empowerment.
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