Corporate Social Responsibility & Corporate Governance

LECTURES 1,2 &3 2013-2014 MBA- BANKING

Course Outline

Detail session plan Assessment method

Internal Evaluation
Mid Term 20 Marks Assignment 1- 5Marks Assignment 2 10 marks Written Assignment- 15 Marks

External Evaluation
Final Examination - 50 Marks

Reading list

Compliance, Expected, DESIRED Mid Term Assignments Finals

Readings Assessment Working Relationship

Important Websites
www.bsr.org : Business Social Responsibility www.wbcsd.org : World Business Council for Sustainable Development www.worldbank.org :The World Bank www.csrforum.com : Corporate Social Responsibility Forum www.infochangeindia.org : Info Change India www.undp.org.in : United Nations Development Programme www.bitc.org.uk : Business in the Community

What is a Corporation?

What is a corporation?
The corporation is the dominant form of business entity in the modern global economy. A corporation is essentially defined in terms of legal status and the ownership of assets. Corporations have three key features:
1. 2. 3. Corporations are typically regarded as artificial persons in the eyes of the law Corporations are notionally owned by shareholders who have limited liability. Shareholders not responsible for the debts Managers and directors have a fiduciary responsibility to protect the investment of shareholders

The current global economic scenario

Global economy downturn continues

Collapse of trust in capital markets

Obsession of the financial markets with short term gains over long-term considerations leading to sustainability risks

Crisis and its Impact

Recession in developed countries
Severest credit crunch and recession Growth and access to external financing are subject to unusually large downside risks.

Financial crisis

Solvency risk

Affecting trade and financial market channels in developing countries

Bank equity prices and credit premiums reflect serious solvency concerns

Impact of crisis on selected countries

0 Tanzania -5 -10 Fiscal balance Kazakhstan Chile Latvia

-15
-20 -25 -30 Source: Global Monitoring Report

Net capital flow

Real GDP

Socio- Economic Impacts

Global poverty(estimated 925 million hungry people in the world, 13.1 percent, or almost 1 in 7 people are hungry)
Increase in inequality and growing food prices

Increase in reverse migration

Expansion of the informal economy

Small and Medium Enterprises adversely affected

Reason for the crisis which has affected every country across the globe

Globalization is
Phenomenon of increased economic integration among nations , characterized by the movement of people , ideas, social customs and products/services across borders
Deepening and speeding of worldwide interconnectedness in all aspects of life

Process by which network of interdependence becomes large and continuous

A process characterized by

Opening of new markets

Lowering of tariffs worldwide boosted international trade

Revolution in information and communication technology

Reduced transportation costs/ Increase in the speed of transportation

In what way has organizations added value to the society/individuals in a globalized economy?

Benefits of globalization
Essentially based on the benefits of free trade

New job creation

Growth of international trade ( FDI)

Increase in the variety of goods & services available to consumers

Fusion of scientific data and rules to form a uniform network of database

Trade

Developing countries share of international trade flows has risen steadily, from 30 percent in 1995 to an estimated 45 percent in 2010.India had established itself as the world's India-second-fastest growing major economy

FDI

Emerging and developing countries now hold two-thirds of all official foreign exchange reserves India-India--US$ 1,97,935 million ( April 2000- April 2011)

2025

Six major emerging economiesBrazil, China, India, Indonesia, the Republic of Korea, and the Russian Federation will collectively account for more than half of all global growth.

Have the Benefits of Globalization Reached All? What is the Debate?

Is globalization a force for economic growth, prosperity, and democratic freedom?

Or is it the dominance of developed countries in decision-making, at the expense of poorer, less powerful nations?

Is it a force for environmental devastation, exploitation of the developing world, and suppression of human rights?

Does globalization only benefit the rich or can the poor take advantage of it to improve their well-being?

Norway-1
Australia- 2 New Zealand- 3 USA - 4 Ireland-5 Japan- 11 Singapore- 27

India ranks 134 ( Bottom 50) China-89, Brazil 73, Russia-65

SriLanka 91
Pakistan 125 Bangladesh- 129

13.1 percent, or almost 1 in 7 people are hungry 1.4 billion people live below 1.25 $

Source: World Bank 2010

India home to quarter of worlds hungry people

Nine planet Earths would be required to absorb the world's carbon if every person had the same energy-rich lifestyle as people in developed countries. Nearly one billion people live in slums. 2.5 billion people-nearly half the population of the developing world-live without adequate sanitation. 75 million still miss out on education-34 million boys and 41 million girls. More than 90% of children in developing countries are enrolled in primary schools and 54% attend secondary school

A child born in a developing country is over 13 times more likely to die within the first five years of life than a child born in an industrialized country

Malaria kills a child every 30 seconds. It infects 350-500 million people each year, killing 1 million

More than 500,000 women in developing countries die every year in childbirth or during pregnancy.

In 2006, nearly 61% of women gave birth with the help of a midwife or doctor, compared to 55% in 2004 Women have more access to employment now than ever before. But they still earn one-third less than men.

In 2008, women held 18% of parliamentary seats worldwide

Downside of globalization : Labour & Health

Loss of jobs due to industrial restructuring Rising income inequality between low-skilled and high skilled workers Increase in supply of labour puts downward pressure on wages Investments leading to sweat shops Health conditions affecting people across boundaries, culture & generations Infectious diseases: HIV/AIDS, TB, Influenza, SARS Lifestyle diseases and conditions: obesity, lung cancer, heart disease, STDs, Type 2 Diabetes

Downside of globalization: On environment

Global warming
Agricultural development and food security Water stress and water insecurity Rising sea levels and exposure to climate disasters

Environmental pollution Loss of bio diversity

A World increasingly shaped by

Sustainable Development issues
Climate Change Water Bio-diversity and ecosystem related issues Development and poverty related issues

Can Business Environment Flourish?

Hunger Index 66 out of 88 countries

Peace Index 135/ 153 countries

Corruption Perception Index 87/178

Environment Sustainability Index 101/146

What can be done to correct the imbalance?

How to build a fair globalization to reduce poverty and inequality & sustainable development?

In 2000, 189 nations made a promise to free people from extreme poverty and multiple deprivations.
This pledge became the eight Millennium Development Goals to be achieved by 2015

How has India Fared in MDGs?

 Declined from about 320 million (36 percent of total population) in 1993-94 to about 301 million (27.6 percent of total population) in 2004-05. Poverty & The country is expected to have a burden of about 279 Hunger million of people (22.1 percent) living below the poverty line in the year 2015. India is on-track and in some cases, ahead of targets that relate to universalizing primary education in India. Gross Enrolment Rates for both girls and boys in 2006-07 crossed 100%.

Achieve Universal Primary Education

Participation of women in employment and decision making remains far less than that of men and the disparity is not likely to be eliminated by 2015. Gender Equality & Labour market openness to women in industry and services Empowerm has increased by only 6 percentage points, from 13% to 18% ent between 1990-91 and 2004-05.

U5MR

Declined from 125 per 1,000 live births in 1990 to 74.6 per 1,000 live births in 2005-06. U5MR is expected to further decline to 70 per 1,000 live births by 2015. This means India would still fall short of the target of 42 per 1,000 live births by 2015.

MMR

Between 1990 and 2006, there has been some improvement in the Maternal Mortality Rate (MMR) which has declined to 254 per 100,000 live births as compared to 327 in 1990. However despite this progress, India is expected to fall short of the 2015 target by 26 points.

Health

Malaria diagnosis has declined from 1.745 in 2005 to 1.52% in 2009. HIV - reduced from 5.5 million in 2005 to 2.39 million in 2009 TB is under control. 40 % is still infected

Forest cover has increased to 21.02% and protected areas cover about 4.83% of the countrys total land area

Proportion of households having access to improved water sources increased from 68.2% in 199293 to 84.4% in 2007-08

The proportions of households without toilet facilities declined from 70% in 1992-93 to about 51% in 2007-08

At current progress, the country is unlikely to achieve the target of reducing the proportion of households having no access to sanitation to 38% by 2015.

MDG 8 Developing a Global Partnership for Development

Developing countries primary responsibility for achieving MDGs 17 mobilising domestic resources, ensuring good governance, policy reforms and so on Developed countries also have obligation (MDG 8) to help countries achieve MDGs 1-7 Expand market access to increase trade Better access to technological progress eg bridging digital divide, access to HIV/AIDS treatment and other measures More Overseas Development Assistance

 If the private sector does not deliver economic growth and economic opportunity equitable and sustainable around the world, then peace will remain fragile and social justice a distant dream. That is why I call today for a new partnership between governments, the private sector and the international community. Kofi Annan, SG of the UN, Davos, 1999

Why should business contribute to these MDGs?

Need for Intervention of Business for Sustainable Development

If business has to be developed, the society needs to be developed, business sector cannot flourish in any country, if the environment required by business is not conducive. Increasing social issues impacts the entire society in general and business in particular because to a large extent business is dependent on the society for its growth and prosperity.

Need for Intervention of Business for Sustainable Development

The most fundamental impact on society is from technological and social change.

Creation of new cultural and social attitudes

New set of relationships between the business firm and the surrounding society.

Stakeholders, who have long remained dormant, have stirred awake and are now proving themselves as major forces to be reckoned with.

Need for Intervention of Business for Sustainable Development

Challenges in the 21st Century cannot be tackled by yesterdays rule of governance. There is a need to develop new ways of thinking and new approaches to governance at every level of society.
It is an accepted fact, that, there are crucial linkages between economic growth, human development, social cohesion and environmental sustainability.

Perspective on Business Intervention for Sustainable Development

Regulatory compliance Increased labour productivity Value alignment : Organizational values and personal values of employees Crucial linkages between economic growth, human development, social cohesion and environmental sustainability Demand from stakeholders

Corporate payoff: Innovation & Repositioning

Corporate Payoff: Growth & Trajectory

Corporate Payoff: Cost & Risk Reduction

Corporate Payoff: Reputation & legitimacy

Source: Hart, Stuart.(2010). Capitalism at the Crossroads: Next Generation Business Strategies for a Post-Crisis World

Any Questions?