Values, ethics and corporate social responsibility

VALUES, ETHICS AND CORPORATE SOCIAL RESPONSIBILITY 1

Dr. Sachin. S. Vernekar,

Bharati Vidyapeeth University Institute of Management and Entrepreneurship Development, Pune 2

Dr. K. Venkat Subramanian

Dr. Venkat and Associates Management Consultant

Abstract Organisations exist for the human society, even though their primary goal is to make profits.

With newer technologies, and new needs for products coming up, the responsibility of corporations to follow ethical values is taking them to hitherto unknown frontiers. As research throws up new products for new uses, it may not also completely reveal the after effects.

Growing pollutants in the air, deforestation, chemicals released in the rivers are all threatening the very existence of mankind.

The corporate world is also perplexed in adopting technologies with sustainability. Whatever one manufacturer seems to have some undesired influence on the ecosystems of the world. What an organisation can do at this juncture is to bring in transparency in their activities and at the sam time, do what they can to the society, a repayment of a debt, which they give to the society for using the society’s resources, and a way of expressing gratitude.

Ethics and value systems are imbibed in the words of wisdom enshrined in any religion, and even the corporate social responsibility has been addressed in the Vedas and epics to a great extent. One need to look at some of these principles, to run modern corporations of todays which have to function in a complex environment and caugh up between the profits, social responsibility, product liability and new needs of customers.

This article looks at the w3asy companies can benefit from these words of wisdom and also how companies can get direct and indirect benefits by proving to be forerunners in sustainable development. The methodology used is by drawing references from books and articles, on ethical behaviour and drawing parallels to some of the current organizations.

ARTICLE The inheritance of value systems: ' Pari chin marto dravinam mamanyad, Ritasya pahta namasa vivaset, Uta svena kratuna sam vedat Shreyansam dakshm manasa jagribhyat' - Rigveda

Meaning "Let a man think well on the wealth, and strive to win it by the path of law and by worship, and let him take counsel with his own inner wisdom, grasp with spirit still greater ability."

It is a clear message on the ethics and value system from the Rig Veda, to be followed in the business. Every businessman runs his organization for profits, but when he takes the advice of his inner self, he gets even greater ability to achieve even higher goals.

Every country, every race, every religion has inherited human values and have been adopting them to the modern world of materialism.

All of us are well aware of our responsibilities as a citizen of our country. As Indians we have the personal pride of being a part of the world's largest democracy. Similarly, every country has something good in their systems and culture to be proud of.

We know keep our surroundings clean and we move with our neighbors, our friends, well wishes, and our relatives. We keep cordial relationships with them and conduct ourselves in a manner that the society respects us and we earn a respectable place and image in the society for ourselves..

We are fair in dealing with our children, our parents and relatives, and to our friends. We have in mind their welfare and help them in whatever way we would. Of course, at the same time, we have our own goals also, to generate income for our family and we do that in earnest spirit. Still, we are highly conscious about our social status and social goals.

All these as we do as individuals. Can these principles be followed in running organizations?

Would this apply to the corporate sector?

The corporate, as we all know has a specific objective for making profits. In that case, would all the responsibilities of an individual be applicable to the corporate? Is it logical to extend these individual principles to the corporate sector as well?

The organization's goal is to make profits, and is well conceived so, and in the process, they contribute to the economic growth of the nation and to the society at large, by employing people, which is a process that naturally happens when a value addition is done. Is there anything more than that we could expect from the organizations? In the business process, they can only employ a few persons and they will probably also create jobs in the service sectors for a larger number of persons. Would this not be good enough? What else one could expect from a corporate that is

primarily engaged in making profits? Why should one expect a society-oriented attitude from the corporate sector? There are a number of reasons.

The vision of the organization . The raw materials required for organizations be it products or services, , or any other resource that they require are not company's own property. Either they are hired,, or the companies pay for the transportation. For example, none actually owns the coalfields, but the company producing the electricity out of coal only transports the coal from beneath the earth's surface and converts to electricity and distribute to the citizens. That is, the companies are doing the value addition only without even paying the raw material cost.

Nature has not given possession of any her resources to any particular person or a company to use for their business purposes and profitability. All the natural resources belong to the whole humanity and hence no one or no country can stake a claim to the resources on an ownership basis.

Since the corporate use the resources that belong to the society, is it not expected that they have a responsibility to contribute to the welfare of the society, who are the real owners.

If a company is using a particular fuel for its production, what right would it have to leave the pollutants in the air harming the people residing in the surrounding areas, who are a part of the real owners of the fuel that is being used by the company. Can a company using the society's raw materials and resources, be allowed to waste them in inefficient processes? Should the society not expect the corporate to follow ethical systems in their operations, when they use the society's materials and human resources?

Here the vision of the organization comes into focus. A good corporate will have the social goals, prohibiting them to pollute the atmosphere, and using energy to the optimum manner for value addition, take care of the environment and also act as a catalyst in the social development processes.

A corporate has responsibilities, not only to its promoters, employees, and stakeholders but also to the public, who have allowed the enterprise to use their owned resources for the benefit of all concerned. Ethical enterprises accept this fact and act in a manner to the benefits of the society.

The top men manning the organizations will have to necessarily follow a saintly approach to their business and devise the best strategies taking all precautions that their products and services do not in any way harmful to the interests of the society in which they function.

The corporate sector's customers are also part of the society in which they live. So the industry cannot turn a blind eye to the customers' requirements of social welfare and social health.

Ethics in business: Ethics and values are adapted to the social needs. If one has to follow the idealism, probably it would be well impossible for anyone to do any business. Because every technology that unfolds also brings with it a good amount of non-reversible side effects. Be it refrigerators, or television sets, or mobiles, or automobiles, there are the health hazards and side effects that go with any technology. If we have to have products with almost no health hazards, then all of us probably will have to live in jungles using only what Mother Nature provides. But everyone is striving for attaining wealth and in the process, wants speed, comfort etc and is prepared to pay for these products.

The consumer wants these products and in all fairness, has evaluated the positive and negative aspects of the usage, before he has decided to buy. Is it expected that the corporate would take responsibility for the hazard this equipment might pose? Is it possible even for the corporate to judge the long-term effects these products can create for the consumer?

Nuclear ships are built. They are built for a specific purpose, may be for a commercial liner, or a Defence liner. The ethics of building these cannot be questioned. If we need to question the same, we need to even question as to why there are armies and Defence forces, since they also use these vessels. They are there for protecting the people from fear, and provide social security etc. At some stage these ships are to be scrapped and are being sent to ship breaking yards. The remnant radiation here, poses a health hazard to the people engaged in the breaking yards. They are small time workers earning a livelihood and their daily bread. Now, the question is should we stop building nuclear ships? That is going to affect thousands of people working in the production facilities and their families. So where do we draw the line?

Pharma companies research with new drugs. After necessary clinical trails they are administered to patients. During clinical trials some negative observations may be coming to light. At this point, the company themselves, may be unaware of the seriousness of these findings. It may decide that they may not be serious enough. But once it is marketed, and doctors have started prescribing, somewhere some question arises about the side effects. How could a company know the repercussions at the clinical trial stages about the seriousness of these issues?

The company with its all-good intentions is making these medicines to benefit the poor. It is a well know fact that aspirin, after a long number of years being used by the public, has been finally decided to induce certain side effects. This obviously has not been known to the

manufacturers who have been producing them for years. Or research at that would not have pointed out to these possibilities of reaction in-patients.

Here is an interesting news item that appeared in The Hindu DT. 4th June 2004. The excerpts are: The pharmaceutical giant GlaxoSmithKline is facing fraud charges in the United States for allegedly concealing information that its leading antidepressant caused suicidal behaviour among children and teenagers during clinical trials. The civil law suit claims that the company suppressed the results of at least four different studies that showed the drug, called Paxil in the U.S. and Seroxat in the UK., at best was no more effective than a placebo and at worst was harmful. In 2002 alone, more than 2 million prescriptions were written for the American children equivalent to $ 55 million in sales. An internal co. Document from 1998, cited that the company would have 'to effectively manage the dissemination of these data in order to minimize any potential negative impact'. In the U.K. public pressure led the drug regulator, the U.K. Medicines and Healthcare regulatory agency to set up a review of Seroxat and other antidepressants in its class.

A co. spokesman said, 'we have acted responsibly in the conduct of clinical studies in pediatric patients and the dissemination of information of the results The pediatric studies have been made available to the FDA and regulatory agencies worldwide. He said that the data had been published in medical journals and presented at scientific conferences -Guardian, 2004 Without going into the merits and demerits and with out prejudice, the question is whether at a clinical trial stage, all the possible side effects can be studied. All said and done, clinical trials are also like any research methodology, and are an estimate of the universe mean.

What a company can be expected in such circumstances is to be only sure that they have done what they can even emotionally think off. Because the pharma companies are dealing with the lives of human beings, the ethical practices they follow are more closely on scrutiny.

Product of emotional nature, such as pharma, education, etc. need to be more transparent to the society, since they make products and services of emotional nature. The top men not only in these organizations, but also in all organizations should be wedded to the ethical and cultural values of mankind to be alert to the changing social circumstances.

The important question here is who decides what is ethics? Is it the government, or is it the society, or is it the organization's responsibility?

A practical way would be that given the knowledge of companies about the possible negative effects, are they taking all the precautions before they set out to make products? If the people who are running the organisation, are socially sensitive and sensitive to the ethical needs and

values, it is definite that they would have tried to imagine every possible situations and taken all possible precautions, within their limits to ensure that products that they produce for the mankind, are meeting the ethical values for which they have committed themselves.

Another interesting news item, appeared in one of the newspapers. It is about a person who has not been using any shaving cream from the beginning and finding out that one does not need any shaving cream, if the practice is adopted from the beginning. That sounds interesting and if every one becomes aware of these, and after a few years, all the companies that have been making millions of dollars would have to close down, which will result in thousands of people being thrown out of their jobs, and being deprived of their earnings. If this is proved scientifically, what should be the ethical line that these companies making shaving creams, and soaps etc, have to take? Are they also aware of this possibility that they have been manufacturing a product that could probably serve no purpose?

Well, here also, if they have not known this, and still firmly believe that the product that they make is definitely serving a purpose, they would be still within the ethical value system.

The saintly approach to business and the influence of religion in business: We have seen from some of the above examples that even if we are ethical to our conscience, circumstances and technology may not be at our side. We could only clear our conscience and behave transparently to our stakeholders. That is to say, to follow a saintly approach to the business.

Religions whichever, have always preached human values and saintly approach to life. But they were not also against materialism for a normal human being who has to live in this material world. Religion can positively revive the human values and ethics and form the basis for a good corporate.

In many of the factories in India, it is quite possible that you find a temple inside the premises. In U.K., the British Government in 1994 incorporated the teaching of religion in books, to infuse the human values in education. In the good old days in India the temples have been instrumental in imparting religious education to children, so that they grew up to be good citizens who could land up in the organizations to run them.

The temples were a center point in a society to infuse values and ethics from childhood. The temple premises was designed as a place, where people can gather, and listen to scholars and imbibe the ethical values as the scholars would explain from Vedas and Upanishads etc.

The whole society was transformed to be following a saintly attitude, and that has made good citizens who governed the organizations and the country. Unfortunately today such institutions have to also change themselves for survival and are loosing its primary role for which they were

intended. They are just becoming the place of worship only and not the centers of learning. The learning has shifted to many other commercial enterprises, imparting education.

Today, it may be unthinkable of such a system of closeness of society, since the materialism have driven people apart and the existence of a integrated society is not there any more. We need to depend upon other sources to give us the sense of oneness and teach us the ethics and value systems that the religion wanted us to learn. Many of the Vedas, ancient literatures are able to throw modern management ideas on ethical value systems.

Some of Thiruvalluvar's (the Tamil saint poet) have talked even, about how governments should be run to the benefit of people and they have talked about good governance.

Many of Vivekananda's sayings can be related to the modern day business.

Swami Vivekananda foresaw that a combination of western efficiency and dynamism with Indian spiritual values would create the future leaders of India. To Shri Haridas Beharidas Desai, the Dewan of Junagadh, he wrote in 1894: "The fact that our isolation from all the other nations of the world is the cause of our degeneration and its only remedy is getting back into the current of the rest of the world. Motion is the sign of life" Does that look like the 'liberalization and Globalization' talk that we hear more often today?

He also said: ' I have come to this conclusion that…with all their faults, the Hindus are head and shoulders above all other nations in morality and spirituality and that with proper care and attempt and struggle of all her disinterested sons by combining some of the active and heroic elements of the west with calm virtues of the Hindus, there will come a type of men far superior to any that have ever been in the world."

These words look more modern than one would imagine even today after so many years.

Here he is talking about the combination of the western efficiency with the spiritual values of the Hindu religion.

Prophet Muhammad said 'a perfect Muslim is he, from whose tongue and hands, mankind is safe". A beautiful piece of advice to the top people in the corporate world, to ensure that mankind is safe in their hands. Prophet Muhammad also said: "When you speak, speak the truth, perform when you promise, discharge your trust, commit not fornication; be chaste, have no impure desires; withhold your hands from striking and from taking that which is unlawful and bad. He also said 'actions will be judged by intentions" Are these not words of wisdom meant for good corporate Governance?

Let us take the definition of Total Quality Management by Prof. Ishikawa. We will find a lot of similarities in his definition and in what is said about business in Religious epics.

He said, 'companies exist in a society for the purpose of satisfying people in that society. This is the reason for their existence and should be their primary goal. Management, which recognizes this and works on this principle, is Total quality management. Those companies, which ignore these realities cannot, last for very long.

Prof. Ishikawa did not talk here about product quality, instead he has talked about the personal qualities of those who are in the top management of organizations., since TQM has to start from the top only. TQM is also a saintly approach to the business process, as professed by Prof.

Ishikawa. TQM also talks about individual values one has to have in business organizations, namely, self-control, respect to others and intellectual honesty, which are the basic values all the epics and ancient Vedas dwell upon extensively.

The Mundaka Upanishad (Hindu Veda) says 'Dwe Vidya Veditavye, para cha, eva. Apara cha." Meaning We must have two kinds of knowledge, because tradition verifies it: the knowledge of internal excellence and external excellence. To put in other words, the spirit must lead matter and vice versa. That is the conscience should be the one to decide the actions. This is the same principle of TQM, which states that the individuals running the organizations must be guided by internal principles like self-control, intellectual honesty and respect to others, and these should decide the actions of the individual in the organizations.

The conscience keeper for the companies are the top management, and if they believe that the conscience should be the one to decide the actions, then they would be clear on their business strategy and will take actions accordingly The ethical values that an organization follows are the total responsibility of the top persons who are running the organization. Because all others tend to follow the actions of the leaders.

The Gita says, 'whatever the greatest men of society do, other imitate. Whatever the great ones prove by their actions, others follow unconditionally. The leaders in organizations are the top management team. Their values systems only will flow down to the different levels in the organization. Hence, it is the saintly approach that the leaders can follow will infuse such culture in the organization.

The Honda motors Japan is well known for their business ethics. The founder Suichiro Honda, has given a company philosophy, which is still the cementing factor for their managers to be united in their business ethics, even when he is not there now in this world.

He said," philosophy without actions is worthless, action without philosophy is a lethal weapon."

He insisted that there must be a philosophy behind every action. This is similar to what Mundaka Upanishad is saying that the inner conscience should decide the actions.

The similarities are eye openers to understand the role of religion and philosophy to guide the actions of corporates.

Social responsibility of the corporate To be a good corporate citizen, the organization pays the due taxes to the government without fail, since the government is that of the people,, not only fulfills its obligations to the stakeholders, but also extends its activities , to the local area that they belong to and extends its social activities to more areas as and when they can afford to.

Some examples are very evident in India. Tisco and Telco, units of the Tata group, had set up their plants in Jamshedpur, a very backward area when they established. The group has also evinced keen interest in developing the area surrounding their main plant in Jamshedpur. Further this group is known have hospitals, and institutions for the social benefit.

Apart from developing Jamshedpur, as a comfortable living area, they have also extended their welfare services tot he nearby villages, providing medical aid, educational facilities etc. A good example of a responsible and honorable corporate citizen. Not only that they kept on establishing such social institutions as and when they grew and today these institutions have a national presence.

The image of Tatas is highly visible everywhere, and the local people welcome any move by the corporate for expansion of there manufacturing activities also. Tatas in India have been also running a number of hospitals for the benefit of the society. They also employ physically handicapped persons to a certain percentage of the labour force, provided they fulfill their job requirements.

Birla Group, known for their culture, has built a number of renowned temples and educational institutions, as their social obligation, in India. And the religious principles guide them in their business endeavors.

Any organization, having a social responsibility has the advantage of improving their corporate image in the society better than others, which is evident from the examples of Tata group and

Birla group in India. These organizations, are looked upon as institutions which are fair and just to the society. The society keeps faith in such organisations.

One of the recent examples how the Tata group benefited from a good social image is the relaunch of the Indica, passenger car. Initially they launched the Indica, which had its own problems and could not get the customer acceptance. It is extremely difficult to relaunch models in the automobile market. Not many car companies, even those who have been in the automobile manufacturing for many many years can think of even a relaunch of a specific model. Tatas, after necessary modifications came back to the market with a new version Indica V2, where the performance was found to be acceptable to the users. It was the social image of Tata at work Customers did not mind experimenting with the new relaunched Tata Indica. This happened because Tata is a household name in India, and has a good image of a fair company. And this trust made people to buy the relaunched Indica, which has been doing well from then. It was the social image that Tata is a trustworthy company, and is seen as an organization with ethical behaviour, that made this possible.

A number of organization abroad have also realised these even earlier and have taken their vision to such heights that they are actually there in the business only for the society. Microsoft having grown as such a large organization, has shown keen interest in the prevention of AIDS in the developing countries. Above all, the society is not the concern of only individual, or the government for that matter. When everyone in the society, has a role to play for the upliftment of the society, the corporate cannot deny this responsibility.

A good corporate citizen, pays the dues to the Government, pays to the stakeholder, the returns for their investments, and pays to the society, being the true owners of resources that they use..

What if not?

What happens when the corporate governance does not bother about its social responsibility?

Those were the times when we could drink river water, which used to be fresh and fit for drinking. But now most of our rivers are polluted and the same industry sector which polluted the rivers are now providing the bottled water at a price! We are paying a heavy price for the pollution that we created in the surrounding air, in terms of the illness caused by the pollution and terms of the medical expenses incurred by the citizens or the state.

Ozone layer depletion, global warming and atmospheric pollution, all are the concerns of the corporate, since the major responsibility of creating these problems lie with the industry. Of course, it is unavoidable making automobiles and refrigerators, since the customer wants them for their economic activities and their personal comfort. The industry has to provide these goods.

However, it must also to ensure that the technology that is being used is compatible with the

environment and also sustainable. Here the onus of establishing this would lie with the organization and has to be done with transparency. Every technology has its bad effects by the side. But it should not lead the mankind to a suicidal path. Hence the corporate philosophy must take into account the social causes and responsibilities. Let us hope that more and more realization would take place in the industry and corporations about their social responsibilities to the benefit of mankind.

What we need now?

We need professional managers who can understand the society's requirements. We need managers who have beliefs in the ethics and value systems. We need managers who can understand their social responsibility. We need managers who are committed to give to the society what they want and at the same time maintaining transparency in their process. We need managers who can boldly say the after effects of the consumers using their products. We need managers who are upright in their approach to social problems. We need managers with a social conscience.

This is no different from the requirements of what Prof. Ishikawa, where he described the TQM organization. The value system that Prof. Ishikawa has recommended and what the religions say are the same. It is about human values.

The human value system, the ethics will stay on forever, irrespective of companies coming and vanishing. It is better to be on the winning side rather than on the loosing side. Those companies who are on the ethical path would win finally and will last much more than others.

Let us wish that there would be more companies with a heart, which is beating for the society!

References and Bibliography:: Values and ethics for organisations by S.K. Chakraborty, Oxford India paperbacks Thus spake Prophet Muhammad , Sri Ramakrishna Math, Chennai, India Perars of wisdom - Swami Vivekananda- The Ramakrishna Mission Institute of Culture, India Indian ethos for management - by Swami Jitatmananda, Shri Ramakrishna Ashrama, Rajkot