Business Ethics
TRUSTEESHIP MANAGEMENT
Gandhian Philosophy of Wealth
Management
Trusteeship,
as
applicable
to
the
corporate world, refers to the act of
holding and managing resources on
behalf of the stakeholders of the firm.
TRUSTEESHIP
MANAGEMENT
Gandhian
Philosophy
of
Wealth
Management

Gandhian Philosophy of wealth management is based on the
‘Servodaya’ principles of Truth, Non-Violence and Trusteeship;
wherein class harmony between labour and management
reigns supreme.

According to Gandhiji, managers and proprietors of business
firms are only the trustees of wealth of society.

The idea of trusteeship advocated by Gandhiji, is based on and
has its origin in the Bhagaved Gita-in the principles of
‘aparigraha’ (non-possession) and ‘Sambhawa’ (equalism)
which were ardently followed by Mahatma Gandhi.

Unlike the Utilitarian motto of ‘greatest good of the greatest
number’ known as Teleology, Gandhiji’s motto was ‘greatest
good of all’.
Gandhiji’s
views
management relations
on
labour
 My ideal is that capital and labour
should supplement and help each
other. They should be a great family
living in unity and harmony; capital not
only looking to the material welfare of
the labourers, but their moral welfare
also-capitalists being trustees of the
welfare of the labouring classes under
them.
Gandhiji’s
views
management relations
on
labour
 Gandhiji assigned a paternalist role to management in
their dealings with labour
 Gandhiji considered trade unions to be means of
workmen’s material and moral development.
 He declared that a strike is an inherent right of the
working man for the purpose of securing justice, but
they must be considered a crime immediately the
capitalists accepts the principle of arbitration.
 If conflict arises between labour and management, the
weapon proposed by Gandhiji is Satyagraha
Gandhiji’s principle of Trusteeship
 Trusteeship principle is foundation
philosophy of wealth management
of
Principles of Trusteeship
 No recognition to right to individual property
 Resources must be held and utilised for the benefit
of society.
 Management is the trustees of the stakeholders
and must work towards optimising stakeholder
value, not merely maximising shareholder value
Gandhiji’s principle of Trusteeship
 In case of industrialist what they produce should
be determine by social necessity with optimal
utilization of scarce resources and not by
personal whims
 If workers are to work with harmony and
collaboration with management then that make
workers also co-trustee with the management
 Though wealth legally belongs of owners of
business, morally belongs to society and
community
Seven greatest Sins







Politics without principles
Education without character
Commerce without morality
Pleasure without conscience
Wealth without work
Science without humanity
Worship without sacrifice
Indian Corporate Leaders and
Trusteeship

Infosys, particularly from its former CEO and current chief
mentor, Narayana Murthy for creating this company along
with a small group of people (better sharing of wealth in
society), the involvement of employees in the company’s
fortunes (through ESOPs) and his contentment with a mere
7% of company stock (he prefers it that way) reflect a
deep-rooted commitment towards trusteeship.

House of the Tatas with their corporatised initiatives for
socio-corporate benefits

“WIPRO Cares” Foundation, with a targeted corpus of Rs
100 crore for primary education;

Birla foundation with its focus on socio-economic
improvement in the lives of the people touched by the
corporation.
Social & Economic
Responsibilities of Business
Reference books
Representations of Social Responsibility Vol.II
edited by David Crowther/Renu Jatana
Corporate Social Responsibility: Ethical and
Strategic Choice by Jayanta Bhattacharya
Corporate Social Responsibility: Concepts and
Cases - The Indian Experience Edited by C. V.
Baxi and Ajit Prasad
Essentials of
Aswathappa
Business
Environment:
K.
Meaning of CSR
By the term ‘Corporate Social Responsibility’
(CSR) what is generally understood is that
business has an obligation to society that
extends
beyond
its
obligation
to
its
shareholders or owners.
Ten Principles: The Global Compact
Human rights
1.
Businesses should support and respect the protection of
internationally proclaimed human rights; and
2.
Make sure that they are not complicit in human rights
abuses.
Labor standards
3.
Businesses should uphold the freedom of association
and the effective recognition of the right to collective
bargaining;
4.
The elimination of all forms of forced and compulsory
labor;
5.
The effective abolition of child labor; and
6.
The elimination of discrimination in respect of
employment and occupation.
Ten Principles: The Global Compact
Environment
7.
Business should support a precautionary approach to
environmental challenges;
8.
Undertake
initiatives
to
promote
greater
environmental responsibility; and
9.
Encourage the development and diffusion of
environmentally friendly technologies.
Anti-Corruption
10.
Business should work against all forms of corruption,
including extortion and bribery.
The Global Compact
There are now some 90 Indian companies, which
have signed up to the UN Global Compact.
More than 649 companies globally have signed
the Global Compact
(www.unglobalcompact.org)
Definition of CSR
CSR means operating a business in a manner that
meets or exceeds the ethical, legal, commercial
and public expectations that the society has of
business”.
The World Business Council for Sustainable
Development defines CSR as: “the continuing
commitment by business to behave ethically and
contribute to economic development while
improving the quality of life of the workforce and
their families as well as of the local community
and society at large”.
Key Elements in Definition of CSR
Corporations have responsibilities that go beyond the
production of goods and services at a profit.
These responsibilities involve helping to solve important
social problems. especially those they have helped
create.
Corporations have
stockholders alone.
a
broader
constituency
than
Corporations have impacts that go beyond simple
marketplace transactions.
Corporations serve wider range of human values than
can be captured by a sole focus on economic values.
Social Responsibilities of Business –
Archie B Carroll
Economic
Responsibility
Legal
Responsibility
Ethical Responsibility
Discretionary
Responsibility
To whom Business Organizations are
responsible?????
Primary Stakeholders
Secondary Stakeholders
Relations between a business firm and its primary
stakeholders
Employees
(Unions)
Stockholders
Wholesalers
(Retailers)
Distribute
products
Sell
labor
Business firm
Buy
products
Customers
Invest
capital
(Managers)
Lend
money
Sell
materials
Suppliers
Creditors
Relations between a business firm and some of its
other (secondary) stakeholders
The
General
Public
Business
Support
Groups
Local
Communities
Positive,
negative
opinion
Advice,
research
Jobs,
environment
Regulation,
taxes
Business Firm
(Managers)
Friendly,
hostile
Image,
publicity
Media
Central/State
and Local
Governments
Social
demands
Social
Activist
Groups
Governments
Social Responsibility Debate:
Arguments in Against
In Friedman’s view business has only one social
responsibility and that is to maximize the profits of its
owners. His very famous statement says it all, “The
business of business is business.”
Distorts allocation of Resources
Business lacks training in social issues, and lacks social
skills necessary to carry out social programs.
Social policy is the jurisdiction of governments, not
business
Increase in business Power
Social Responsibility Debate:
Arguments in Favor
Corporations have too much power
In 1999 the United Nations reported that the world’s
then three richest people-Bill Gates of Microsoft, the
Sultan of Brunei and the Walton family of the Wall Mart
retail chain were worth more than the combined GDP of
the world’s 34 poorest nations.
“With great power and size comes
great responsibility.”
How Does CSR benefit Business???
Reputation
Less Law Suits
Loyal Employees
&
Customers
Less Media
Harassment
Access to
Capital
Improves
Improves
Productivity
Better
Environment
Community
Goodwill
DIFFERENCE
GOOD
COMPANY
GREAT
COMPANY
Excellent Products
&
Services
Excellent
Products/services
&
Makes the world a better
place
Developments of CSR in India
First Phase :Merchant charity – Dates back
to Vedic period – Religious and social
ethics
Relief in natural disasters
Dharam Shalas
Drinking water
Developments of CSR in India
Second Phase Trusteeship
Social responsibility was brought into community’s
consciousness goes principally to business leaders like
JRD Tata, Ramakrishna Bajaj, Arvind Mafatlal,
Kasturbhai Lalbhai.
Vinoba Bhave on whom Gandhiji’s mantle had fallen
wanted businessmen to interest themselves in
humanitarian, educational
and
other
beneficial
social activities and
consider business as a social
mission while promoting the ‘trusteeship of wealth’
theory of Gandhiji whereby owners and workers
were co-trustees of business for society.
Developments of CSR in India
Third
Phase
responsibility
Declaration
of
social
Role of Jaiprakash Narayan –
Organized Conferences on responsibilities
of business
Setting up of ‘Fair Trade Practices
Association’ by Tata, Bajaj and others
Developments of CSR in India
 Fourth Phase Managerial Trusteeship
 1970s & later – realization that continued
profitability
depended
on
involvement
towards development of society
 Importance of ethical business practices and
concern for the environment in which the
business operates was also recognized.
Developments of CSR in India
Fifth Phase
Corporate citizenship
Realization that if social development is
neglected, business cannot prosper.
Government alone cannot handle all social
issues.
Traditional drivers for CSR
Values
Strategy
Public Pressure
Present Drivers for CSR








Corporate Social Performance
Stakeholder Management
Corporate Environment Management
Consumer Pressure
Risk Management and Sustainability
Business Ethics
Attracting employees
Personal Values
Significant Drivers of CSR
ic
s
op
Ph
i
la
nt
hr
M
ee
oy
pl
Em
Et
h
al
or
in
g
ld
Bu
i
ag
e
hy
70%
60%
50%
40%
30%
20%
10%
0%
Im
% of Com panies
W hy do it???
Social Audit
Gerald Vinten defines social audit as “a review to
ensure
that
an
organization
gives
due
consideration to its social responsibilities to those
both directly and indirectly affected by its
decisions, and that a balance is achieved in its
corporate planning between these aspects and
more traditional business related objectives”
Area of Social Responsibility
Respecting Human Rights: not discriminating against caste,
creed, gender, etc
Contributing to socio-economic development
Employee Welfare: which includes the right to organize,
eliminating child labour, non-discrimination, living wage and
social security, training, safety, health and wellbeing, lifelong
learning, empowerment of employees, share ownership schemes
etc.
Consumer Protection: includes right to information, impact of
product on local market, etc
Respect for national sovereignty and local communities by
multinationals.
Areas of Social Responsibility
Participating in academic research.
Share resources with under-privileged communities
e.g., transportation and medical facilities with the
community senior citizens, etc.
Community Investments e.g., companies can invest in
sustainable development Programmes for the community.
Socially Responsible Investments e.g., Investors should
to invest in companies who follow responsible business
practices
Share expertise and knowledge with peers and learn
from others experience.
Areas of Environmental Responsibility
Respect for the Environment
 Environmental friendly technologies: investment in ecofriendly technologies.
 Use, conserve and discharge: energy, material and water
in an eco-friendly manner.
 Adopt preventive and precautionary measures for
environment pollution control. Educate employees and
the community to take collective, preventive and
precautionary
measures
to
reduce
environmental
pollution.
 Rectify environmental damage at source: Treat waste
before disposing it.
 Bio - diversity preservation
 Promote and implement an environmental policy for
sustainable energy and sustainable environment.
Areas of Business Responsibility
Compliance with Tax Laws and other regulations.
Corporate Governance: Transparent Financial
Auditing / Verification and Accountability;
customer redressals and grievances.
Reporting;
addressing
Invest in developing science and technology.
Foster ethical trade practices
Regulate supplier’s CSR practices and distributor’s CSR
practices. e.g. stop working with suppliers and distributors
who do not follow responsible business practices
Transparent financial reporting : Public financial reports in
newspapers for public information.
Steps to implement CSR
Mainstreaming CSR vision in Articles of Association
Develop a written policy CSR and make it available in the public
domain
Assessment of internal environment
Identification of drivers and barriers to change
Assessment of core competencies of the company
Building in the strategic business case
Assessment of external environment
Legal Context & Development Context
Identification & prioritization of the opportunities for corporate
collaboration
Putting CSR policy in the public domain
Steps to implement CSR
Translating CSR policy into action
Reporting, experience sharing and mutual
learning
External reporting and certification
Why companies do not take up
CSR???
 Markets do not reward ethical companies
 Lack of clear definition of CSR
 Systematic denial of wrong doings
 Location of CSR on the periphery of the
corporate structure
Thank You