BUSINESS FINANCE

CSR Failure & Corporate Governance

SUBMITTED BY: Ahsan Ashraf

REG. NO: 2018-BBA-34
SECTION: A
SUBMITTED TO: Dr. Kanwal Iqbal Khan

Volkswagen
Introduction:
The organization intentionally set out to plan a way to dodge discharges control—a trick known
at the most elevated levels—with the point of giving the organization an out of line advantage
over its rivals that made it the world's main vehicle producer, in huge part based on its
apparently naturally agreeable vehicles; in the interim it was harming the planet.
This dismissal of any moral guidelines in designing, which has prompted the abdication of the
CEO, yet in addition Audi's head of R+D and Porsche's motor boss, makes one thing totally
understood: the organization's CSR office more likely than not realized what was happening.
The order affix that prompted the improvement of specific lines of programming that could
place a motor into to test mode and afterward return it to "filthy mode" are on record, all the
testing that was done is reported: those capable can be distinguished, and are to be found at all
levels all through Volkswagen. With programming assuming control over all the complexities of
an item, the best way to evade issues is to go completely straightforward, record each
progression of the cycle and grasp open source.

CSR Failure & Response:

Volkswagen (Hereafter known as VW) encountered a corporate social responsibility scandal
that brought its public image down. In September of 2015, the California Air Resources Board
began testing cars on the road. These tests led to the stunning discovery that VW diesel cars
emitted more than 40 times the regulation threshold for nitrogen oxide. An 8 investigation was
launched by the EPA and it was discovered that VW had equipped its cars with deceptive
software to cheat through the inaccurate lowering of emissions during emissions tests. Because
of this, VW experienced immense economic downturn with a net loss of $1.4 billion. Car sales,
stock value, and company value all plummeted and VW was suspended from the Dow Jones
Index. So how could a company with such a strong standing go through such a terrible scandal?
According to the case done by Jung and Park, it was “austere leadership styles, insular
corporate governance, and drawbacks from family feuds and nepotism,” that led to such a
hostile corporate environment. The CEO at the time, Ferdinand Piech, was notorious for having
a toxic leadership 9 style that reflected an “at any cost” mindset throughout the corporate
leadership. The board for the company was ruled with a majority by the Porsche and Piech
families who made all decisions amongst themselves without consideration of other board
members. Volkswagen had set its bets on diesel when many companies were investing in
technology. Finding it difficult to keep up with the Obama administration’s environmental
regulation, Martin Winterkorn, the interim CEOchanged the company focus to simply meeting
the environmental standards at any cost. Volkswagen faced many economic and political
consequences through recalls and lawsuits. In response to the scandal, VW changed its entire
managerial system promising maximum transparency. Before the scandal, the company
published public CSR reports focusing on their 10 efforts in sustainability, diversity, and
environmental health. While this information was published, it was not verified by outside
sources. If the Volkswagen CSR was verified by third parties, there is a chance that the auditors
may have caught the defeat devices prior to the scandal occurrence. If auditors tested the
vehicles using different methods than Volkswagen, as the California Air Resources Board did,
they would have seen the extremely high output of nitrogen oxide from the vehicles. Since the
scandal, it does not appear that VW is keeping up with the promises immediately following it. In
a recent article from Forbes, shareholders are demanding more transparency, but VW is
deflecting. Volkswagen reacted to the demand for an increase in transparency by 11 making
promises and fixing the problem at hand, but how does that affect the public trust in the
company? Measuring public trust through stock pricing, its stock reached its 5 year peak on
April 10th, 2015 at a price of $253.20 prior to the scandal and bottomed out on October 2 nd
2015 at 92.36 after the scandal was discovered publicly. The stock is currently around $163
which means that it is slowly climbing back from the scandal, but there is still clear hesitancy in
the market to bring Volkswagen’s pricing back to post-scandal pricing. While Volkswagen
implemented corporate social reporting even before its scandal, there was no third-party check
to verify the information. Because of this, even the implementation of its CSR was ineffective in
preventing this scandal.

Unilever
Introduction:
It has been analyzed that for the reason that year 2009, when the organization turned into
main in the commercial enterprise market, there raised some key problems and demanding
situations of Unilever which had caused the public relations damage and the economic damage
confronted by way of the business enterprise due to the disastrous leadership of Polman
(Borelli, 2017).
Polman, in his management placed excessive emphasis upon the superficial feel right policies
and practices instead of preserving accurate emphasis upon the sound commercial enterprise
choices. And as a result, Unilever was mired in a number of controversies related to sexual
harassment and environmental issues (Doane, 2005). In the year 2006, there has been a lawsuit
which changed into filed in opposition to the corporation over exposure to the extraordinarily
poisonous substances. In India, Unilever needed to settle with about six hundred people over
the publicity of mercury from a thermometer plant which is now closed (Borelli, 2017). This
corporate difficulty of Unilever has gained international attention from one of the songs of an
Indian rapper titled “Kodaikanal Won’t” which addresses the hassle of mercury infection. In the
12 months 2011, there was additionally uncovered the claims of sexual harassment by using the
Irish Times from the Workers of Africa that stated that there has been the practice of supplying
bribes to the supervisors for allowing them to forestall from the undesirable advances
(Browne&Nuttall, 2013).
CSR Failure:
There had been a number of the CSR projects taken with the aid of Polman for addressing the
problems and the demanding situations of sexual harassment claims which were not acceptable
via the NGOs. Another file of 2014 issued by the Netherlands-based Centre for Research on
Multinational Corporations had claimed that the already present systems of balances and
assessments had did not limit the people’ abuse at the Kenyan property of Unilever comprising
of the terrible housing conditions as well as the sexual harassment. Next to this, the South
African business of Unilever turned into additionally accused for having collusion with the
market competitor by means of the Competition Commission of Unilever. Polman had its key
consciousness in assisting the UN sustainable development dreams that the economic results of
the business enterprise (Borelli, 2017). And as a result neither the CSR could be fine
implementation nor there was growth of the enterprise as the commercial enterprise of
Unilever had suffered. The certainly one of the most important elements at the back of the
failure of the CSR technique of Unilever is its rejection of a $143 billion takeover of Kraft Heinz.
The takeover was rejected as it can have averted Polman in the usage of Unilever for advancing
the non-public or person political agenda (Borelli, 2017).

Response:
Sexual harassment cases are handled by persons of confidence with specific training in this
area. All complaints concerning sexual harassment are to be investigated securely,
expeditiously and confidentially. Investigation of complaints is to be carried out by independent
persons/structures as defined by the Code of Business principles procedure and/ or other
mutually agreed arrangements. Complainants in all cases must be informed of their legal rights.

Corporate governance:
Transparency and accountability are the two basic tenets of Corporate Governance. We, at
Hindustan Unilever, feel proud to belong to a Company whose visionary founders had laid the
foundation stone for good governance long back and made it an integral principle of the
business. To succeed, we believe, requires the highest standards of corporate behavior towards
everyone we work with, the communities we touch, and the environment on which we have an
impact. This is our road to sustainable, profitable growth and creating long-term value for our
shareholders, our people, and our business partners.

Huawei
Introduction:
Huawei has faced allegations, primarily from the United States and its allies that its wireless
networking equipment’s could contain backdoors enabling surveillance by Chinese government.
Huawei has stated that its products posed no greater cyber security risk. Huawei has also faced
allegations that it has engaged in corporate espionage to steal competitors intellectual
property.

CSR Failure:
In Kenya, Huawei worked with the government, UN and other partners to bring mobile
healthcare to rural populations. This is particularly so in digital fitness where access to new
technologies can actually imply the difference between lifestyles and death. Huawei is familiar
with this. With a corporate motto of “Building a Better Connected World”, Huawei has set a
bold goal bringing rural cellular insurance to a hundred million human beings connecting them
to higher healthcare, every different, and the world. Huawei improving telecommunications
improves get entry to to healthcare, in particular in developing international locations,
improving health. This is especially so, explains Lane, while upgrades to infrastructure come
with collaborative initiatives aimed toward advancing cellular healthcare. Lane defined that
Huawei’s collaboration in Kenya includes improving the “education of healthcare workers and
the first-rate and availability of medicines.”

Corporate governance:
Corporate governance report 102 organizational competencies business department broadly
adopt the shared carrier version to all operational sports. Huawei Corporate Governance has
additionally hooked up HR, IT, and bidding SSCs to higher offer satisfactory and green service
for economic statements to ensure check and balances whilst reasonably allocating assets
around the worldwide. The internal control gadget also includes internal controls for BGs and
nearby groups, allowing and price range, quarterly operational overall performance reports,
company governance shape and company building, business ecosystem building, appointments
and reimbursement rules for operations and disaster control during their tenure, the rotating
and performing CEO broadly speaking focuses on all team of workers individuals and their
patented technologies. Gradually, the organization will shift its committees reviewed and
accredited the agency's medium-to -long-time period strategic plan. We proactively make
contributions to monetary policies and sports. The corporation's monitoring governance
mechanisms and overseeing their execution. 85 Corporate Governance Report Board of
Directors and Committees the Board of senior control. The key roles and duties of the Chief
Executive Officer; Providing recommendation and steerage to -lengthy-term business plan, the
annual marketing strategy and price range, quarterly operational overall performance reviews,
corporate governance structure and agency building .

Tata (India)
Introduction:
TATA is the one of the prime corporations of India. The business of TATA varies from vehicles
to Steel and telecommunications to purchaser properly. TATA group has greater than 80
agencies below their umbrella. TATA has the privilege to be the largest personal enterprise
of India and there are greater than 2 Lac personnel are operating in its special corporations.
Ratan N Tata took the group to the new top below his chairmanship. He finished his look at
from New York's Cornell University and starts main the organization in 1991. He also is a part of
the board of the Ford Foundation and this system board of the Bill & Melinda Gates
Foundation’s India AIDS initiative. Recently he got down and transferred his obligations to the
Cyrus Mistry however after a while he got down from the post. Under the chairmanship of
Ratan N Tata, the organization achieved massive laurels and milestones and went via
important stages i.E., explanation, globalization, and now invention, as it tries to attain a
reported $500 billion in revenues by using 2020-21, that is equal the dimensions of the sales of
the worldwide large Wal-Mart. Almost two 0.33 of the fairness of the parent company, Tata
Sons Ltd., is held through philanthropic trusts endowed by way of Sir Dorabji Tata and Sir Ratan
Tata, sons of Jamsetji Tata, the founder of nowadays’s Tata empire in the 1860s. Through
those trusts, Tata Sons Ltd. Makes use of on common among 8 to fourteen percentage of its net
earnings each yr for several social reasons. TATA organizations continued their CSR work even if
the monetary circumstance turned into damaging. In the decade of 90 whilst the employer
become going via the difficult duration, the organization continues increasing its CSR spent
from Rs 670 million in 1997-98 to Rs 1.36 billion in 1999-2000. The organization spent 3.37% of
its income on CSR in the year 2012-thirteen and apart from this they spent 300 crores for
the surroundings protection.

CSR Failure:
The founder of TATA organization became a persona who always supports the social reasons.
He became also part of the Gandhiji’s marketing campaign inside the South Africa. Tata
organization gave a variety of technological know-how and studies Centre to the U.S.A .
Which support the growth of the U.S. Jamshed Irani, Director, Tata Sons Ltd, says "The Tata
credo is that 'give again to the human beings what you have earned from them'. So from the
very inception, Jamshetji Tata and his circle of relatives had been following this principle." (A
assertion at the Tata institution’s internet site www.Tata.Com). Tata institution observe their
concepts in all their businesses consisting of the TCS that is the technological phase of the
group. Though the TCS is a technological agency but it’s spent the CSR fund inside the
education, health and environment. The Company’s ingenuities in the community intend to
craft impact via empowerment so that the dwelling requirements and the pleasant of
lifestyles improves for the population of the society.
The corporation works on the subsequent 4 areas to boom the standers of residing for their
employees as the opposite people of the society.
• Leveraging the Corporation's middle skills in generation
• Generating conditions for worker contribution through volunteering
• Constructing synergistic association with clients and different companions like NGOs
• Monetary sponsorships
TATA organization has selected the following channels to drive its CSR initiatives:
• Building floor-breaking answers to deal with large-scale societal problems by means of making
use of core competence of the company.
• Volunteering for assignments that cope with the felt requirement of society wherein TATA
operates, while associating with the middle subject matters of TATA’s CSR.
• Contributing in network improvement software.
• Associating with pick out non-government and civil society organizations and other
government our bodies.
• Accompanying huge-scale reasons consisting of disaster assistance or some other motive as
unwavering through the Corporate CSR Association. Thus, as some distance as India is
worried, the connection among CSR and sustainability can be summarized as follows:
• Tata Steel has embraced the Corporate Citizenship Index, Tata organization Superiority
Model and the Tata Index for Sustainable Development.
Women empowerment packages in association with Self-Help Groups have been protracted to
extra than seven-hundred villages. From the year 2003 to 2006, the motherly and little one
patience project had an exposure place of forty two villages in Gamharia block in Seraikela
Kharsawa and imitation project was taken up in Rajnagar block. Delivering portable water to
nation-state communities 2, six hundred tube wells had been mounted for the help of greater
than four Lac public.
• Tata Steel assists numerous social welfare institutions which can be: “Tata Steel Rural
Development Society, Tribal Cultural Society ,Tata Steel Foundation for Family Initiatives,
National Association for the Blind, Shishu Niketan School of Hope, Centre for Hearing
Impaired Children Indian Red Cross Society and East Singhbhum“.
• The Tata Steel Centenary Project has been started out at the final touch of the one centesimal
year of the TATA group. The healthcare projects of Tata Steel incorporate enablement of child
getting to know, vaccination and childcare, farmstead actions, creation of recognition of
AIDS and many greater healthcare projects. • TATA institution also contributing inside the
area of monetary improvement. The group is running for monetary empowerment with the
help of modern agriculture techniques. TATA institution is spending INR one hundred crore to
set up the agriculture improvement facilities in Jharkhand, Orissa and Chhattisgarh. This
program is unfold over four hundred villages and impacts forty thousand lives. • TATA
organization is also spending on the National Horticulture Mission software that's s joint
venture of the TATA organization with the government of Jharkhand. This software focuses
on the non-traditional electricity and the renewable energy. This precise project influences
extra than 5000 lives.
Tata Motors has implanted 8000 flowers inside the works and the communities and greater
than 2.4 million plants were rooted in Jamshedpur district. Over half of one million plants have
been ingrained in the Poona vicinity. The corporation informed the providers to apply alternate
materials at the place of woods.
• The Tata Motors Grihini Social Welfare Society provide assistances to the employees'
women dependents; they make a various number of merchandise, oscillating from pickles
to electric cable.
Tata Steel is the second largest metal producer in Europe and has its most important
steelmaking plant life inside the UK and Holland. It substances metal and associated offerings
to essential businesses, inclusive of real property constructors, car producer and packaging.
The European approaches are a subsidiary of Tata Steel Group, one of the international’s
pinnacle ten metal producers. There are 80 thousand personnel’ works in this gadget. There
are positive law which group has to observe. To keep away from this, it has put the structures
in region to meet into the international requirements for environmental management
consisting of ISO14001. But it has no longer yet come into the impact.
• Also it isn't working with complete transparency as it has been visible that TCS has allegedly
stolen the fitness software program from an American business enterprise, Epic Systems,
for which Wisconsin federal has charged $940 million penalty( in April 2016).
• The unethical case has been pronounced, wherein the land of Singur farmers is being
overtaken by TATA group for its installion of recent nano factory plant. This result in huge
amount of dislocation to neighborhood human beings. Upon discussion it was suggested to shift
to Gujarat.
• The TATA product is likewise below the battle of making pollutants as well as a weird noise
pollution.

Response:
In a major victory for the West Bengal authorities, the Super Court on Wednesday advised that
Tata Motors clean its sta tad at the Singer land address the country, and go back the land to the
farmers. Meanwhile, the council from Tata Motors said the land had been given to them on
lease for ninety years. He said he could respond to the court’s feedback after talking to the
organization. Tata Motors highlights protective the nature in new marketing campaign. With
this campaign, the company hopes to continue to pressure the communication on EV adoption
even as emphasizing the want for an electric powered future.
Kulvinder Ahluwalia, president, FCB Ulka said, "Customers are seeking to interact with brands
which can be actual to his reason. And what better manner to deal with the concerns that these
days humans feel on climate alternate than choosing a vehicle that protects the beauty of
nature. Nixon Electric Vehicle is a powerful fashionable and safe SUV that has 0 emissions from
the tailpipe. Thus, enabling clients to do their bit to preserve nature. And provide them a choice
to act on their ideals.

Corporate governance:
As a Tata Company, the Company’s philosophy on Corporate Governance is founded upon a
rich legacy of fair, ethical and obvious governance practices, lots of which have been in location
even before they had been mandated via adopting the best requirements of professionalism,
honesty, integrity and moral behavior. As a international organization, the Corporate
Governance practices accompanied by the Company and its subsidiaries are well suited with
worldwide requirements and best practices. Through the Governance mechanism within the
Company, the Board at the side of its Committees undertakes its fiduciary responsibilities to all
its stakeholders by way of making sure transparency, fairplay and independence in its decision
making. The Corporate Governance mechanism is in addition bolstered with the adherence to
the Tata Business Excellence Model as a means to pressure excellence and the Balanced
Scorecard technique for monitoring development on long-time period strategic targets. The
Tata Code of Conduct, which articulates the values, ethics and enterprise principles, serves as a
guide to the Company, its administrators and employees and is supplemented with the right
mechanism to file any issues referring to non-adherence to the stated Code. The Company has
followed the Governance Guidelines on Board Effectiveness based on present day and rising
excellent practices from each within and outdoor the Tata Group of corporations. The Company
is in complete compliance with the requirements of Corporate Governance below the Securities
and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations,
2015 (“SEBI Listing Regulations”). The Company’s Depositary Programme is listed at the New
York Stock Exchange and the Company additionally complies with US regulations as applicable
to Foreign Private Issuers (non-US companies listed on a US Exchange) which solid upon the
Board of Directors and the Audit Committee, onerous obligations to ensure higher
requirements of the Company’s running efficiencies. Risk management and the inner control
process are consciousness regions that keep to fulfill the modern governance standards.

Nike (Indonesia)
Introduction:
Nike is a company in the shoe and apparel industry. Its business strategy focuses primarily
around low-cost innovative sports gear sold at optimal pricing. Nike’s operations include 490
factories in 52 countries. Nike operates through outsourcing its shoe and apparel
manufacturing. It has a trusting relationship with its shoe manufacturers, even though its shoe
factories are independent contract manufacturers. Nike has a relationship with many of its shoe
manufacturers due to consistent partnerships and able to quickly negotiate the testing and
turnaround of different shoe innovations. While Nike’s shoe manufacturers remain stable and
constant through the years, its apparel manufacturers are constantly changing based on costs,
style demand, etc. Because of the fluctuating nature of the apparel industry, Nike’s relationship
with its apparel manufacturers is not as trusting and consistent as its relationship with its shoe
manufacturers. This leads to difficulty regulating the operations within the third-party
manufacturers. Because of this, Nike was hit with a series of corporate social responsibility
scandals throughout the 1990s that shaped its company's image for a time. Currently, there is
no regulation for company accountability to their third party subcontractors, but there is an
expectation that companies operate through ethical procedures even within third party
contracting.

CSR Failure:
In this case study review, we will look at three separate corporate social responsibility scandals
in Nike’s history, how Nike responded to the scandals, and how its responses were followed up.
One of the early Nike social responsibility scandals involved low wages in Indonesia. In the early
1990s, various NGOs and labor activists began reporting on the low wages being paid to the
workers in a factory owned by one of Nike’s Korean contractors. Because of Nike’s increased
presence in Indonesia, its relationship with those contractors was increasingly scrutinized.
Many of the workers at the factories were not even being paid the minimum wage of $1 a day
because of “hardship” exemptions that the government granted to factories who claimed
inability to pay minimum wage. The minimum wage of $1 a day was estimated by the
government to cover around 70% of the needs for an individual as it was. Initially, Nike ignored
the reports, claiming they were not responsible for the management of its independent third-
party contractors. As the scandal became increasingly harmful to its image though, Nike
instructed its contractors to stop applying for the minimum wage exception. As more time
passed and it became clear that simply instructing its contractors to stop applying for minimum
wage was not enough to be considered socially responsible, Nike increased its corporate social
responsibility efforts. Nike promised to raise its contractor’s wages above minimum wage to
$26.00-$37.50/month and to monitor its third party contractor wages. Overall, in the case of 5
Indonesia, Nike had a rough start but over time incorporated its corporate social responsibility
to its company strategy. Nike’s next large CSR scandal took place in Pakistan. One of the highest
quality producers of soccer balls is located in Sailkot, Pakistan. Around 70% of the world’s high
quality soccer balls are made in Sailkot. “Homework” is a practice that was popular in the area
in the 1990s and led 6 to many well-known human rights issues. In 1996, Life magazine
published a photograph and an article of a 12 year old boy hand-stitching a soccer ball. The
photo and article caused a wave of criticism against Nike for employing child labor. According to
the vice president of compliance at Nike at the time, Dusty Kidd, Nike was already working with
the supplier to eliminate the use of homework and to become more accountable for its
employees. After the wave of criticism hit, Nike signed the Atlanta Agreement, implementing a
program to eliminate child labor from the soccer ball through International Labor Organization
(ILO) monitoring, social protections, and training of other-income generating activities. Also in
accordance with this agreement, any plant caught employing a child is required to remove the
child, but continue paying its wages up to when they reach working age. According to ILO
reports, many of these companies continue employing children and production has moved to
the less regulated surrounding areas of Pakistan in order to go around this regulation. The third
global scandal for Nike involved health and safety problems in Vietnam. In 1997, an Ernst &
Young report paid for by Nike was leaked to an NGO and subsequently made public. This report
showed that Nike’s Tae Kwang Vina factory had Toulene concentrations from 6-177 times the
acceptable standards in certain sections of the plant. Toulene is a chemical that causes various
skin and eye irritations along with liver and kidney damage and central nervous system
depression. The scandal was made worse when it was brought to attention that the UN
Ambassador, Andrew Young had visited the plant recently before the report yet had not
mentioned any health problems.

Response:
To combat the negative publicity Nike was receiving for all of its CSR scandals, it formulated a
code of conduct to be followed by all of its supplier factories. Companies working with Nike
were obligated to sign its code of conduct as well as an agreement to abide by the laws of
OSHA. Nike also created new departments to combat its ever growing global problems. Its
compliance department was moved into its apparel branch to combat the problems where
most of them appear. It also created an incentive system for managers to improve
environmental and labor conditions through implementing a Manufacturing Index. A7
manufacturing index provides measures for evaluating the environmental and social
performance of companies and acts as Nike’s measurement of corporate social responsibility
for their third party subcontractors. In order to publicly be held accountable for the promises
made regarding its global corporate social responsibility, Nike designated internal employees as
well as hired third parties such as PWC to audit its supplier’s factories. Nike employs 85 people
specifically designated for labor and environmental compliance and conducts inspections by
managers weekly or monthly depending on the company size and use frequency. In the early
2000s, the world watched as Nike embraced corporate social responsibility and went from the
face of social corruption to an accountable company that continued and even grew in success.
Since these scandals, Nike has been successfully monitoring its third-party suppliers and has
eliminated petroleum based chemicals in footwear productions. While there are still
imperfections in Nike’s social responsibility, it made its CSR position clear to the public through
exponentially increasing its social monitoring and reporting since the 1990’s.