Session III Ethics & CSR.pptx for MBA students

Various CSR activities companies take and Various modes of CSR with examples and case studies of M/s Thermax

1. Corporate Social Responsibility (CSR)

2. Evolution of Corporate social responsibility Pyramid of Corporate responsibility Degree of Social Responsibility (Griffin’s Model) Interaction with its stakeholders CSR as per M/s Thermax 10 Ways To Practise CSR Models of CSR

3. Corporate Social Responsibility The concept of CSR originated in 1950 in USA and the concept came into prominence in public debate during the 60’s and 70’s US had lots of pressing social problems like poverty, unemployment, race, urban blight and pollution. CSR became a matter of utmost importance for diverse groups demanding change in the business During 1980’s to 2000, corporations generally recognised responsibility to society and weighed against the demands of being competitive in a rapidly changing global economy.

4. Pyramid of Corporate Responsibility Obey the Law Be Profitable Contribute to community and quality of life Be ethical, what is right. Avoid Harm

5. Manifestations Degree of Social Responsibility (Griffin’s Model) According to Griffin(1990) business positions on the issue tend to fall within four categories 1. Social opposition: It is the position taken by those companies, which are convinced that they have no responsibility in general to the society in which they operate. When they are caught behaving in an illegal or unethical manner, their immediate response is to try to cover it up while denying it. Social contribution Social Response Social Obligation Social opposition

6. 2. Social Obligation: It is the position taken by the companies, which believes that they have an obligation to obey the law. Such a firm would install safety equipment or pollution abatement measures that are required by the law, but would not spend additional money in order to install even better systems. 3. Social Response: It is the position taken by the firms that meet their social responsibilities as dictated by the law. On a selective basis, they may go beyond the legal requirement. These firms may volunteer to participate in limited socially responsible , but not until they are convinced that the benefits will outweigh the costs. 4. Social Contribution: It is the position taken by the companies, which believe that they have a deep obligation to serve the overall society. Such firms consider themselves to be responsible bodies and are eager to contribute whatever they can to the improvement of the society.

7. CSR as per M/s Thermax Anu Aga Anu Aga  (born 3 August 1942) is an Indian billionaire businesswoman and social worker who led  Thermax , an energy and environment engineering business, as its chairperson from 1996 to 2004 . [ After retiring from Thermax , she took to social work, and in 2010 she was awarded the  Padma Shri  for Social Work by the  Government of India . What is CSR? CSR is achieving commercial success in ways that honour ethical values and respect people, communities and the natural environment. In its simplest form it is, “What you do, how you do it and when and what you say”.

8. Interaction with its stakeholders Thermax Board Customers Employees Suppliers Environment & Community Government Shareholders & Investors Centre is Thermax board, consisting of four independent directors, three non-executive family members and the managing director. Since the circle is pulling and pushing Thermax in all directions, it is the responsibility of the board to perform a stewardship role. It needs to balance the short-term interest of the present day shareholders with the need to safegard the long-term interest of all the stakeholders- now and in the future.

9. Customer : We have continued to be in business for last 37 years and it must be thanks to our satisfied customers. The day we loose their goodwill we will also loose our right to exist. My expectations from Thermax : We internalise that our primary obligation is to produce and deliver quality products and services, on time, at fair prices and ploughing back a substantial part of this profit, so that the products and services can be further improved and delivered faster at much lower costs. Through periodic customer surveys and other means we will keep tabs on the satisfaction levels of our customers. Rohinton defined quality in two simple words. He said quality means “We care”. He went on to say “In final analysis. Quality is not just a product, nor it is just a package of services and attributes. Quality is a way of life.”

10. 2 Employees : Thermax will respect all its employees and translated into action means: We will push our employees to perform at their peek, because we believe that people want to give out their best. We value employees and if they are casual we will not shy away to tell them to leave but this only all after we train and invest in our people Though we have hierarchy but we encourage people to speak up and give their honest feedback. Since work involves drudgery, we find ways to of making their work pleasanter. We actively work towards zero accidents through awareness, training and safe manufacturing processes. All recruitment and promotions are based only on merit. At work place we have a “Whistle blower policy” and a sexual harassment redressal policy to safeguard our employees. Our entire reward system will give message it is better to try and fail rather than fail to try.

11. 3. Suppliers : Do we look upon our suppliers as our extension, colleagues and parteners , whose health and vibrancy is very much tied to ours? Our relationship with our is in some way symbiotic and both of us need each other to grow and prosper. Do we value and respect our suppliers and keep all our committments to them or believe that as a big brother we can bully them? Supplier meet is arranged every year to know how they feel about Thermax ? 4. Shareholders and Investors : Thermax will always strive to grow and be profitable, because without this we cannot exist. As a 62% shareholder, I would like Thermax to look upon growth and profit as survival needs and to move far beyond these basic needs. We value our shareholders and investors and will carefulley listen to their suggestions and feedback.

12. 5. Government : Government and business have viewed themselves as adversaries, belonging to different camps. Profit was a dirty word and government distrusted corporates. In turn, corporates flaunted rules and regulations and found ways to get around them If industry thinks that certain rules are not fair, can we , through forums like Ciior MCCI actively work to change them, rather than resort to mere grumbling or finding ways to circumvent them? Thermax help create public awareness about the importance of these rues of pollution control to preserve our earth and help government to find creative ways of enforcing them? 6. Environment and Community : Each division needs to track the full impact of its activities on the environment. Recycling waste water, treating chemical effluents and using energy in an optimum way. Thermax kept 1% of PAT money for community activities

13. 10 Ways To Practise CSR Health 2. Subsidised meals Working Hours Stock options and profit sharing 5. Other services and facilities Corporate giving Sponsorship Adoption Collaboration 10. Helping hand Besides this there may be many methods company can try based on resources and how committed they are to being a good corporate citizens.

14. Models of CSR for Strategy Friedman Model (1962-73) Redmans Model Paul Ackermans Model 1967 Dr. Archie B. Correl Model 1991 Friedman Model (1962-73) : B usinessmen should perform his duty well as he is performing a social as well as moral duty. His model follows that businesses do not have to perform social responsibilities to any other but his shareholders and stockholders. Milton Friedman’s point is that spending shareholders money for social interest makes no sense and thus was against the concept. Redmans Model : called “Environmental integrity and community health model” is very famous amount US corporations. It focuses more on environmental integrity and human health.

15. Paul Ackermans Model 1967 : focuses more on internal policy goals and their relation to these responsibilities . He says, to adopt CSR one can follow six strategies: R ejection strategy, A dversary strategy ,; what will happen if not implemented R esistance strategy ; organizations face resistance to sustainability initiatives, both from the top and bottom.  Understanding why this resistance exists and how to address it effectively  is key to integrating sustainability into the fabric of your company. C ompliance strategy ; CSR policy, CSR team, CSR activities, Declare to board and stakeholders & Follow up A ccommodation strategy ; The accommodative approach to social responsibility is regarded as an ethical issue. Ethical issues are issues where people or organizations can choose to do the “right” or “wrong” thing in a situation. Ethical issues extend far past laws. Laws are designed to give guidance on many issues. Social responsibility takes this a step farther. P roactive strategy ; Proactive corporate social responsibility (CSR) involves business practices adopted voluntarily by firms that go beyond regulatory requirements in order to actively support sustainable economic, social and environmental development, and thereby contribute broadly and positively to society.

16. Dr. Archie B. Correl Model 1991: Carroll’s CSR pyramid is a framework and theory that explains how and why organisations should take social responsibility. The pyramid was developed by  Archie B. Carroll  and highlights the four most important types of responsibility of organisations . These are:

17. Law Vs. Ethics What is Law? Law is the set of rules and regulations created and enforced by the administrative authority of a society/country with the intention of regulating human behaviour for the common good. Ethics  are the moral principles that govern a person’s behaviour or the conducting of an activity. What is Ethics? https://youtu.be/3CwuzdCaYLA

18. Murali , the manager of a hotel, signs a contract with Seema , a singer, to perform twice a week for the next two months. The rate per performance is Rs 2000. One day , Seema absents herself without proffering any reason . Murali cannot condone this behaviour that has caused him personal anguish and loss in his business . He wants to rescind the contract and demands compensation for the suffered loss . Conclusion Ethics is toothless. What would ethics do in such a case when the deed is perpetrated and the damage is done ? Nothing at all! Thus, ethical values are just humble pleas for good behaviour , while the law has the power of enforcement behind it . The stipulated punishments are clear deterrents. Moral persuasion is a balm to the conscience that makes one feel good. The law, on the other hand, makes sure that justice is done to the victim and the perpetrator of the fraud or crime is suitably punished . Solution by law There is a twofold remedy for Murali : (a) Under the Indian Contract Act (Section 75), Seema has clearly violated her contract. Her employer has the right to rescind her contract. (b) Under the same Act the manager is perfectly within his rights to claim the sustained financial loss . Case Study: Ethics Vs. law

19. When business ethics is mentioned, it is assumed that its purpose is to chastise those who are doing business . So now, in the name of ethics, cumbersome laws and regulations have been enacted by the legislature and government machinery, codes by the corporations , directives by the chambers of commerce, recommendations by the nongovernmental agencies , and edicts by the religious leaders . These regulations and several other norms now contribute to the burdens of the businessman. It is no wonder that many businessmen see these as the scourge of a businessman! Sorry Figure

20. Post-conventional The post-conventional level, also known as the principled level, is marked by a growing realization that individuals are separate entities from society, and that the individual's own perspective may take precedence over society's view; individuals may disobey rules inconsistent with their own principles. Post-conventional moralists live by their own ethical principles—principles that typically include such basic human rights as life, liberty, and justice. People who exhibit post-conventional morality view rules as useful but changeable mechanisms—ideally rules can maintain the general social order and protect human rights. 

21. In  Stage five  (social contract driven), the world is viewed as holding different opinions, rights, and values. Such perspectives should be mutually respected as unique to each person or community. Laws are regarded as  social contracts  rather than rigid edicts. This is achieved through  majority decision  and inevitable  compromise.   Democratic government  is ostensibly based on stage five reasoning. In  Stage six  (universal ethical principles driven), moral reasoning is based on  abstract reasoning  using universal ethical principles. This involves an individual imagining what they would do in another's shoes. (Kantian Theory)