The purpose of business has undergone major change. To make a position in the Market and earn profit lots of Indian companies started implementing the corporate social responsibility (CSR). There are many advantages of using CSR which in return help the organization to build the position in the market and earn profit. The paper focuses on ITC an Indian company who implements CSR by helping the Indian farmers and in return the organization gets the trust and customers thereby growing their business. Further the paper discusses about Enron, its background, how the people in his own organization betrayed him which eventually led to the downfall of the company. This shows how being unethical leads to the debacle of the organization.Keywords: Corporate social responsibility (CSR), Corporate Governance (CG), Enron, Fraud
Corporate Ethics and Social Responsibility in Indian Companies
Corporate social responsibility (CSR) is the most discussed topic in the Indian business market. Some of the Indian organizations have a strong conviction about corporate social responsibility (CSR) while others are totally against it. There are many studies conducted on public aspects of business in India and it was found that most of the Indian companies give first priority to shareholders then to the workers. According to the surveys conducted by the researchers it was seen that the main reason of the business is to make revenue while others said that business should possess social responsibility (Adams, 2002).
The advocates of corporate social responsibility (CSR) argue that Corporate social responsibility (CSR) differentiates the organization from its competitors and can be a source of competitive lead. Other advantage of corporate social responsibility (CSR) include improved financial performance, gaining trust from clients, greater motivation of workforce, better public image and long term sustainability of corporation.
According to survey conducted by Economic times among the top 500 companies in India, India is becoming more responsive by inculcating the concept of corporate social responsibility (CSR). The prominent areas of corporate social responsibility (CSR) are health, education, women empowerment and sports. Many companies have scaled up operations in corporate social responsibility (CSR) and are looking at it as a priority.
Corporate social responsibility (CSR) vision supported by effective action plan, corporate social responsibility (CSR) audit and public reporting would improve the image and credibility of the company. According to research some of the advantages of CSR are when the results of CSR are positive then the employees are satisfied. They get motivated and work more hard to grow and make the company successful. According to the research it was found that the positive impact of CSR helps to gain more customers. People buy again and again and in this way one gains the trust of the customers and help to grow the business. As one gain customers through trust, the organization no longer need to advertise, in return they get more customers through mouth advertising and hence in this way improve their business. If CSR is performed properly the company can reduce the price and this can be achieved by hiring potential staff & running possible risks and liabilities successfully. CSR scheme requires one to be social and interactive. A continuous interaction with other companies and related to business one can build more business opportunities and earn profit and help grow the organization. (David, 2003)
In India all kinds of organizations indulge in some or the other kind of social activities. Small organizations are showing their awareness towards society by promoting advertisement about cancer. For this purpose they are using the celebrities from the Bollywood industry to promote it as most of the general public follows the celebrities. On the other hand the big companies establish school and hospitals for the needy. There are numeral firms in India following CSR practices and spending good amount of revenue on social activities. Few of the businesses namely ITC Ltd, Infosys Technologies Ltd, and Reliance Industries Ltd, Hindustan uniliver Ltd. have a great influence of CSR.
According to the researcher it is argued that ITC has made most important research in community development, social forestry, agriculture and natural resource management and has been one of the important contributors to Prime Minister’s relief fund.
ITC began its CSR activity by propelling a stage called ‘e-Choupal’ by putting PCs with web access in rustic cultivating towns. This application was made to educate the agriculturists by furnishing access to data alongside re-designing the acquisition procedure for horticultural deliver, for example, tobacco, soy, wheat, and other trimming frameworks in the towns of Indian states. ITC connects with the neighborhoods network individuals through their e-Choupal activities with the assistance of setting up internet service in Indian villages. This system can cover a specific number of lands for farmers in nearby towns. Building up a solitary e-Choupal costs the organization a huge amountThis has required some inventive reasoning and generous speculation with respect to ITC because of need of foundation in many towns required for making these stands operational. Power issues were explained by giving force reinforcement through sun oriented boards. Low data transfer capacity issues were dealt with by redesigning BSNL trades with RNS units and the establishment of VSAT hardware. A proper training is provided to the farmers so that they can use the computers by themselves and further help other to learn too. Upon completion of the training they become the head of the institute which is known by the name “Sanchalak”. (Ramaswamy, 2008)
It has helped agriculturists in various ways such as it has expanded their dealing power in terms of cost, making just about a kind of virtual agreeable. Outdated with data about costs, agriculturists can make certain that they are accepting a reasonable cost for their produce. The unnoticed agricuturalist’ access learning of horticultural accepted procedures and logical cultivating methods created through concentrated research through the scheme called by the name Choupal Pradarshan Khet .The framework encourages the organization to have coordinate access with the farmers and furthermore empowers them to get horticulture related data from wanting to the supply of horticultural create. It is additionally investigating paths of association with banks to help agriculturists with simple credit benefit, simple protection office, and comparative different administrations to bring the quality existence of the agriculturists. (Murty, 2010)
Enron appeared to represent the best 21st century organization. Enron started his business in 1985 with two pipeline companies. In 1988, there was a downfall in its electric power markets and the company switched its business to energy broker. This allowed Enron to earn profit through exchanges. This change helped Enron to gain contracts as a result Enron’s products and services evolved and so did the company culture. However, the experiment of deregulation didn’t work well. As a result Enron decided to be a leader in water industry and bought a company in UK. However, Enron was not generating adequate cash flow, while spending extravagantly and eventually blew up.
Enron didn’t start out as an unethical leader at his organization. Since the figures for earnings still left a shortfall in cash, Enron started borrowing the money. In order to not hurt the share price, the schemes were created in such a way that produced funding secretly. As a result unethical culture developed in Enron in which clients, supplies and even colleagues were misguided and exploited to achieve their goal. (Tonge et al., 2003)
Impact on corporate governance affects business ethics. “Skilling the COO of the organization was unsuccessful in implementing practical business plans due to lack of personal knowledge and experience even though he had vision of huge trading enterprise.” Lack of interest in operational management, inadequate spending controls and focus on rapid growth incentivized by compensation schemes created totally dysfunctional organization. This further led to lack of transparency in business.
Enron collapsed as a result of interacting decision process. Personal ambition and greed seemed to overshadow much of their corporate and individual lives. The top executives tried to maximize their individual income by participating in scandalous activities.
As an open organization, Enron was liable to secondary means of administration including market weights, oversight by government controllers, and oversight by private elements including inspectors, value investigators, and FICO assessment offices. So as to continue mollifying the clients to make sure that the organization is in good condition, Enron merchants were compelled to figure high future money streams and low markdown rate on the extended contract with Enron. The contrast between the computed net present price and the initially paid price was viewed as the benefit of Enron. In reality the net present price estimated by Enron did not meet the future long periods of his extended contract. When the organization was in loss, Enron was occupied with an extensive variety of schemes such as generation of energy, the exchanging of power related items and other related things necessary. (Nelson et al.,2008). A considerable series of their conduct was conceivably subject to oversight by the Commodities and Futures Trading Commission (CFTC) or the Federal Energy Administrative Commission (FERC). The CFTC’s essential mission is to guarantee fates and alternatives markets work in an open and successful way, while the FERC manages the interstate transmission what’s more, showcase for vitality items. Arthur Andersen, as inspector yet in addition as specialist to Enron, must be in charge of the two directors and investors since they gave office data has an immediate impact on financial advantages of the two gatherings. Obviously, the administrators and Arthur Andersen cheated on the investors to boost their self advantages.(Gillan & Martin, 2007)
The most important lesson one can take from Enron is that bad top management morality can be enough for creating a self destructive ethical climate. The obsessive focus on driving the share price obscured the lack of basic controls and benchmarks and the progressive dishonesty in generating revenue and earnings figures in order to deceive the stock market led to the management deceiving themselves about the true schemes.
One of the researchers asserts that an emergency discovers what the person in charge values and brings these values to the surface. With each impending crisis, leaders have a chance to speak throughout the organization what the company’s values are. Enron was facing a crisis of how to continue an unusual growth rate. Leaders reacted by shielding a culture that valued productivity, even when it was at the cost of everything else. (Schein, 1985)
From the downfall of Enron one can learn about that sometimes people from the organization tries to destroy the organization. The people who were responsible for the fraud did not think of the organization as whole but focused on how one can be benefited. Enron passed out an annual “rank and yank” scheme where the bottom fifteen percent of producers were let go or fired after a formal evaluation process each year. Associates graded their peers, which caused a great amount of disbelieve and suspicion among staff. Enron’s employee reviews added to the opposition by reviewing work presentation in a public forum and sending the bottom 5% to the redeployment office – dubbed the “office of shame”. One can come to a conclusion that the top members on the management board namely CEO, Chairperson and CFO are mainly responsible for the downfall of Enron. By creating private corporations without in absence of Enron and transferring the money through wrong means resulted in the violation of the rules and tarnished the name of the company. Some of the employees who were secretly working for these members on the board are equally responsible for the loss of the organization. This results in distrust.