ISSNO NO 2322-0147
COMMONWEALTH ASSOCATION FOR
EDUCATION, ADMINISTRATION AND
MANAGEMENT
VOLUME 2
ISSUE 1
JANUARY
2014
A study on Company’s Philosophy and Principles on Corporate
Governance and Corporate Social Responsibility
Excellence International Journal of Education and
Research (Multi- subject journal)
Excellence International Journal Of Education And Research
VOLUME 2
ISSUE 1
ISSN 2322-0147
A study on Company’s Philosophy and Principles on Corporate
Governance and Corporate Social Responsibility
S Ayyappa Naik Nenavath,
M.B.A., M.H.R.M., M.Phil, (Ph.D),
Guest faculty,
Dept of commerce and Business administration,
Acharya Nagarjuna University, Guntu,rA.P,INDIA
Email-Id: ayyappa.naik@gmail.com
Abstract:
Corporate governance: “a set of rules, guidelines, procedures and regulations that helps to run the
company smoothly and taking care of all stakeholders”. Stakeholders: Customers, society, community,
government, promoters, members, workmen, executives, lenders, vendors, bankers, investors, and
etc.Corporate social responsibility is a commitment to improve community well-being through
discretionary business practices and contributions of corporate resources.” Gandhiji mentioned that, “It
is difficult, but not impossible, to conduct strictly honest business”.
Keyword: governance, stakeholders, philosophy, CSR, CG, TBL.
Introduction:
Corporate governance indicates the policies and procedures applied by firms to
attain certain sets of objectives, corporate missions and visions with regard to
stockholders, employees, customers, suppliers and different regulatory agencies and the
community at large. The role of governance is to maximize shareholder's wealth.
Corporate governance depends on managerial performance as well as a consideration of
social responsibility, the socio- cultural-environmental dimension of business procedure,
legal and ethical practices with a focus on customers and other stakeholders of an
organization. Corporate governance is gaining importance among policy makers,
entrepreneurs, business personnel, stakeholders and related organizations. Corporate
governance and corporate social responsibility are interrelated. One technique that is
being increasingly introduced to measure corporate social responsibility of firms is
Triple-Bottom-Line (TBL) accounting. The triple bottom line captures an expanded
spectrum of values and criteria for measuring organizational (and societal) success
and includes information on social, environmental and sustainability matters. Most
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companies in Bangladesh, including both local and multinational companies, do not
provide this form of disclosure.
CG philosophy:

The philosophy is based on the following principles:

Satisfy the spirit of the law and not just the letter of the law. Corporate
governance standards should go beyond the law.

Be transparent and maintain a high degree of disclosure levels. When in doubt,
disclose.

Make a clear distinction between personal conveniences and corporate resources.

Communicate externally, in a truthful manner, about how the

Company is run internally.

Comply with the laws in all the countries in which we operate.

Have a simple and transparent corporate structure driven solely by business needs.

Management is the trustee of the shareholders capital and not the owner.
Company’s Philosophy on Corporate Governance:
Gandhiji mentioned that, “It is difficult, but not impossible, to conduct strictly honest
business”. The significance of the Gandhian concept of “Sarvodaya” in corporate sector.

In order to bridge the gap between haves and have-nots, Indian corporation should
follow the Mahatma’s trusteeship principle.

From each according to his ability to each according to his needs.

Nature has enough for each man’s need but not for anybody’s greed.

Gandhiji’s trusteeship allows the entrepreneur to keep the surplus.

His trusteeship rests on three solid pillars, viz. Ahimsa (non-violence), Samanta
(equality), and Swaraj (self-rule).
1). “If you want to build a million-dollar enterprise, one can take all the shortcuts; but if
you are keen on building a billion-dollar enterprise, there is no other way than to run your
business rightly. Honesty has to be accepted as an axiom, which is the only way to do
business. It gives you the mental and moral strength and the ability to do it the right
way.” N R Narayana Murthy
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2). “If you choose to not participate (in bribery/corruption), you leave behind a fair
amount of business. Corruption post-1991 has not been in awarding licenses but in
awarding contracts, changing terms of contracts and obligations. It is these things which
make you have a non-level playing field. No one compensated you in anyway. Also,
business leaders need to be compassionate about the inequalities that exit and enhance the
quality of life for the not-so privileged.” Rattan Tata, Chairman, Tata Group

The company’s philosophy on CG is founded upon a rich legacy of fair, ethical
and transparent governance practices.

as a global organization the CG practices followed by the Company and its
subsidiaries are compatible with international standards and best practices.

The Company is in full compliance with the requirements of CG under Clause 49
of Listing Agreement with the Indian Stock Exchanges.
The Principles of Governance:
There are eight principles which underpin every system of governance:
Transparency As a principle, Transparency necessitates that information is freely
available and directly accessible to those who will be affected by such decisions and their
enforcement. Transparency is of particular importance to external users of such
information as these users lack the background detail and knowledge available to internal
users of such information. Equally therefore the decisions which are taken and their
enforcement are done in a manner that follows rules and regulations. Transparency
therefore can be seen to be a part of the process of recognition of responsibility on the
part of the organisation for the external effects of its actions and equally part of the
process of redistributing power more equitably to all stakeholders.
Rule of Law
This is a corollary of the transparency principle. It is apparent that good
governance requires a fair framework of rules of operation. Moreover, these rules must
be enforced impartially, without regard for power relationships. Thus the rights of
minorities must be protected. Additionally there must be appeal to an independent body
as a means of conflict resolution, and this right of appeal must be known to all
stakeholders. This would imply of course the protection of human rights but could be
taken also to imply concern for the environment and its protection. This can be to
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national courts, trade associations, and supra-national courts such the European Court of
Human Rights, or to an organisation such as the United Nations. Whatever the body it
needs to be appropriate and not just impartial but also seen to be impartial to all
concerned in order to maintain the creditability to adjudicate disputes.
Global Perspectives on Corporate Governance and CSR Participation:
Although participation by all stakeholders is of course desirable, this is not an
essential principle of good governance. The ability of all to participate if so desired is
however an essential principle. Participation of course includes the freedom of
association and of expression that goes along with this. Depending upon the size and
structure of the organisation, participation can be either direct or through legitimate
intermediate institutions or representatives, as in the case of a national government.
Participation of course would involve everyone, or at least all adults, both male and
female.
Responsiveness:
This is a collorary of the participation principle and the transparency principle.
Responsiveness implies that the governance regulations enable the institutions and
processes of governance to be able to serve all stakeholders within a reasonable
timeframe.
Equity:
This principle involves ensuring that all members of society feel that they have a
stake in it and do not feel excluded from the mainstream. This particularly applies to
ensuring that the views of minorities are taken into account and that the voices of the
most vulnerable in society are heard in decision-making. This requires mechanisms to
ensure that all stakeholder groups have the opportunity to maintain or improve their wellbeing.
Efficiency and Effectiveness:
Efficiency of course implies the transaction cost minimisation referred to earlier
whereas effectiveness must be interpreted in the context of achievement of the desired
purpose. Thus, for effectiveness, it is necessary that the processes and institutions
produce results that meet the needs of the organisation while making the best use of
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resources at their disposal. Naturally this also means sustainable use of natural resources
and the protection of the environment.
Sustainability:
This requires a long-term perspective for sustainable human development and
how to achieve the goals of such development. A growing number of writers Corporate
Governance and Corporate Social Responsibility over the last quarter of a century have
recognised that the activities of an organisation impact upon the external environment.
These other stakeholders have not just an interest in the activities of the organisation but
also a degree of influence over the shaping of those activities. This influence is so
significant that it can be argued that the power and influence of these stakeholders is such
that it amounts to quasi-ownership of the organisation. Central to this is a concern for the
future which has become manifest through the term sustainability. This term
sustainability has become ubiquitous both within the discourse globalisation and within
the discourse of corporate performance. Sustainability is of course a controversial issue
and there are many definitions of what is meant by the term. At the broadest definition
sustainability is concerned with the effect which action taken in the present has upon the
options available in the future (Crowther, 2002). If resources are utilised in the present
then they are no longer available for use in the future, and this is of particular concern if
the resources are finite in quantity. Thus, raw materials of an extractive nature, such as
coal, iron or oil, are finite in quantity and once used are not available for future use. At
some point in the future therefore alternatives will be needed to fulfil the functions
currently provided by these resources. This may be at some point in the relatively distant
future but of more immediate concern is the fact that as resources become depleted then
the cost of acquiring the remaining resources tends to increase, and hence the operational
costs of organizations tend to increase (Aras and Crowther, 2007a). Sustainability
therefore implies that society must use no more of a resource than can be regenerated
(Aras and Crowther, 2007b). This can be defined in terms of the carrying capacity of the
ecosystem (Hawken, 1993) and described with input – output models of resource
consumption.
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Accountability:
Accountability is concerned with an organisation recognizing that its actions
affect the external environment, and therefore assuming responsibility for the effects of
its actions. This concept therefore implies a recognition that the organisation is part of a
wider societal network and has responsibilities to all of that network rather than just to
the owners of the organisation. Alongside this acceptance of responsibility therefore must
be a recognition that those external stakeholders have the power to affect the way in
which those actions of the Similarly once an animal or plant species becomes extinct then
the benefits of that species to the environment can no longer be accrued. In view of the
fact that many pharmaceuticals are currently being developed from plant species still
being discovered this may be significant for the future.
Global Perspectives on Corporate Governance and CSR:
organisation are taken and a role in deciding whether or not such actions can be
justified, and if so at what cost to the organisation and to other stakeholders. It is
inevitable therefore that there is a need for some form of mediation of the different
interests in society in order to be able to reach a broad consensus on what is in the best
interest of the whole community and how this can be achieved. As a general statement we
can state that all organisations and institutions are accountable to those who will be
affected by decisions or actions, and that this must be recognised within the governance
mechanisms. This accountability must extend to all organisations – both governmental
institutions as well those as the private sector and also to civil society organisations –
which must all recognise that they are accountable to the public and to their various
stakeholders. One significant purpose of this is to ensure that any corruption is
eliminated, or at the very least minimised.
Top ten companies in India’s CSR rankings:

Tata Consultancy Services

ITC Ltd

Infosys Technologies

Larsen and Toubro

Reliance Industries

Oil and Natural Gas Corporation
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Indian Oil Corporation

Bharti Airtel

Steel Authority of India Ltd

NMDC Ltd.
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CSR Approaches:
Continental European and the Anglo-Saxon approaches to CSR. And even within Europe
the discussion about CSR is very heterogeneous.
A more common approach to CSR is corporate philanthropy. This includes
monetary donations and aid given to local and non-local nonprofit organizations and
communities, including donations in areas such as the arts, education, housing, health,
social welfare, and the environment, among others, but excluding political contributions
and commercial sponsorship of events. Some organizations do not like a philanthropybased approach as it might not help build on the skills of local populations, whereas
community-based development generally leads to more sustainable development.
Another approach to CSR is to incorporate the CSR strategy directly into the
business strategy of an organization. For instance, procurement of Fair Trade tea and
coffee has been adopted by various businesses including KPMG. Its CSR manager
commented, "Fair trade fits very strongly into our commitment to our communities."
Another approach is garnering increasing corporate responsibility interest. This is
called Creating Shared Value, or CSV. The shared value model is based on the idea that
corporate success and social welfare are interdependent. A business needs a healthy,
educated workforce, sustainable resources and adept government to compete effectively.
For society to thrive, profitable and competitive businesses must be developed and
supported to create income, wealth, tax revenues, and opportunities for philanthropy.
CSV received global attention in the Harvard Business Review article Strategy &
Society: The Link between Competitive Advantage and Corporate Social Responsibility
by Michael E. Porter, a leading authority on competitive strategy and head of the Institute
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for Strategy and Competitiveness at Harvard Business School; and Mark R. Kramer,
Senior Fellow at the Kennedy School at Harvard University and co-founder of FSG
Social Impact Advisors. The article provides insights and relevant examples of
companies that have developed deep linkages between their business strategies and
corporate social responsibility. Many approaches to CSR pit businesses against society,
emphasizing the costs and limitations of compliance with externally imposed social and
environmental standards. CSV acknowledges trade-offs between short-term profitability
and social or environmental goals, but focuses more on the opportunities for competitive
advantage from building a social value proposition into corporate strategy. CSV has a
limitation in that it gives the impression that only two stakeholders are important shareholders and consumers — and belies the multi-stakeholder approach of most CSR
advocates.
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