ETHICS, BUSINESS AND SOCIETY ETHICS, BUSINESS AND SOCIETY Managing Responsibly Edited by Ananda Das Gupta Copyright © Ananda Das Gupta, 2010 [The copyright of each essay rests with its contributor(s).] All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopy- ing, recording or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2010 by Response Books B1/I-1 Mohan Cooperative Industrial Area Mathura Road, New Delhi 110 044, India SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320, USA SAGE Publications Ltd 1 Oliver’s Yard, 55 City Road London EC1Y 1SP, United Kingdom SAGE Publications Asia-Pacific Pte Ltd 33 Pekin Street #02-01 Far East Square Singapore 048763 Published by Vivek Mehra for SAGE Publications India Pvt Ltd, Photo- typeset in 10.5/12.5 pt Bembo by Diligent Typesetter, Delhi and printed at Chaman Enterprises, New Delhi. Library of Congress Cataloging-in-Publication Data Ethics, business and society: managing responsibly/edited by Ananda Das Gupta. p. cm. 1. Business ethics. 2. Social responsibility of business. 3. Corporate governance. I. Das Gupta, Ananda, 1955– HF5387.E837 658.4’08—dc22 2010 2010008934 ISBN: 978-81-321-0402-5 (PB) The SAGE Team: Reema Singhal, Meena Chakravorty, Anju Saxena and Trinankur Banerjee To my daughter Debarati Contents List of Tables, Figures and Boxes ix List of Abbreviations xi Foreword by S. Prakash Sethi xiii Acknowledgements xv Prologue xvii Section I The Society, Business and Ethics: The Broader Canvas 1. Business Ethics Arabinda Ray 3 2. Governance and Economic Development Bibek Debroy 14 3. Corporate Philanthropy as an Integrated Concept: 37 The Case of the Novartis Foundation for Sustainable Development Klaus M. Leisinger 4. Perspectives on Corporate Social Responsibility (CSR): 62 A Case Study of the Tata Group of Companies D. K. Srivastava 5. Ethical Dimensions in Technical Education— 70 The BITS Experience L. K. Maheshwari 6. XLRI: ‘Renewing the Face of the Earth’ Pingali Venugopal 75 7. Education for a Just, Humane and Equitable Society 81 Dileep Ranjekar 8. Civil Society and Governance Subir Raha 95 Section II Ethics in Business and Corporate Social Responsibility: Towards Horizon 9. CSR for Promoting Stakeholder Engagement 105 Usha Jumani viii Ethics, Business and Society 10. Integrating Environmental Management in Small Industries 128 of India: Towards Socially Responsible Initiatives Ananda Das Gupta 11. Ethics in Science and Technology: Exploring a Select 140 Perspective Parthasarathi Banerjee 12. Indian Model of Leadership Prasad Kaipa 149 13. Governing the Socially Responsible Corporation: 157 A Gandhian Perspective N. Balasubramanian 14. Corporate Governance and the Role of Independent 181 Directors Arindam Banik and Pradip Bhaumik Epilogue 205 About the Editor and the Contributors 207 List of Tables, Figures and Boxes List of Tables 2.1: MDG goals and targets 21 4.1: Assessment levels of CSR activities 67 List of Figures 2.1: Control of corruption and per capita incomes 26 2.2: Rule of law and per capita incomes 27 2.3: Voice and accountability and per capita incomes 27 7.1: Children sitting in slush in the open to write their tests 83 7.2: More than 80 children squeezed tight in a small dark classroom 84 7.3: Participative engaging classroom in rural government school 85 7.4: Collective action for educational initiatives 85 12.1: Igniting the genius within 154 12.2: Leadership process 155 13.1: Sarvodaya and stewardship 172 List of Boxes 3.1: REPSSI—The benchmark in psychosocial support in southern Africa 49 3.2: Providing comprehensive leprosy care—The Indian approach 50 3.3: Strengthening healthcare systems and patients alike—The Access Initiative in rural Mali 55 x Ethics, Business and Society 3.4: ICATT: Computer-based learning programme for health professionals in developing countries 57 6.1: Swavalamban 79 6.2: Parichay 80 13.1: Some do’s and don’ts for Gandhian corporations and directors 175 List of Abbreviations ACGA Asian Governance Association BITS Birla Institute of Technology and Science CLCA Comprehensive Leprosy Case Association CLCP Comprehensive Leprosy Care Project CSR Corporate Social Responsibility CSRC China Securities Regulatory Commission EPIC Election Process Information Collection ERC Expenditure Reforms Commission GCMMF Gujarat Cooperative Milk Marketing Federation GDI Gender-Related Development Index GEM Gender Empowerment Measures HDI Human Development Index HDR Human Development Report HPI Human Poverty Index HRM Human Resource Management IFFCO The Indian Farmers Fertilizer Cooperative Ltd. ILO International Labour Organization IMCI Integrated Management of Childhood Illness MDG Millennium Development Goals MDP Management Development Programme MDT Multi-drug Therapy NFSD Novartis Foundation for Sustainable Development NGO Non-governmental Organization NYSE New York Stock Exchange ODA Official Development Assistance PIL Public Interest Litigation PPP Purchasing Power Parity PSS Psychosocial Support Schemes xii Ethics, Business and Society PSU Public Sector Unit REPSSI The Regional Psychosocial Support Initiative S&T Science and Technology SBU Strategic Business Unit SEBI (The) Security Exchange Board of India SOA Sarbanes-Oxley Act TBEM Tata Business Excellence Model TCCI Tata Council for Community Initiatives UNDP United Nations Development Programme VRS Voluntary Retirement Schemes WCFCG World Council for Corporate Governance WHO World Health Organization WTO World Trade Organization XLRI Xavier Labour Relations Institute Foreword Ethics, Business and Society: Managing Responsibly is an exciting, thought- provoking and challenging book. The organizers of this compendium and the contributing authors have attempted to bridge the gap be- tween conceptual theory and grounded theory, globalization of com- merce and national constraints on its unbridled reach, and between ethical norms of a secularized albeit Western society, and the deeply embedded and overlapping cultural and religious norms of the Indian society. This could not have been an easy task. However, the editors and authors have largely succeeded in meeting this challenge. They have provided a good blending of various approaches to defining ethics and corporate social responsibility (CSR) in the context of public good, and the extent to which corporations can and must balance the competing interests of a company’s direct stakeholders and those who are indirectly impacted—both positively and negatively—by corporate actions. An important part of the book is the inclusion of numerous case studies dealing with ethics and CSR issues of Indian companies, large and small, and civil society organizations. These case studies demonstrate both implicitly and explicitly what is perceived to be a good corporation in the Indian context. This experiential road map is particularly important to scholars and practitioners dealing with CSR issues in other parts of the world. It suggests a more nuanced approach to comparing corporate conduct under different socio-cultural norms and levels of economic growth. I only wish that the editors and authors of this compendium had gone beyond what CSR is and what CSR ought to be. In the changing xiv Ethics, Business and Society world of globalization with its ever shifting balance of power between multinational corporations and nation states, we cannot leave CSR to be defined, measured and considered satisfactory by the corporate leaders themselves without any meaningful input from and account- ability to external stakeholders who are impacted by corporate ac- tions but have little influence on corporate decision-making. Instead, we must ask a more fundamental question, that is, to what extent are companies minimizing negative externalities emanating from their normal business operations, and how are they ameliorating the adverse impact of these externalities on the environment and the people? S. Prakash Sethi, Ph.D. University Distinguished Professor Zicklin School of Business Baruch College CUNY, New York President Sethi International Center for Corporate Accountability, Inc. New York Acknowledgements We look forward to thank all our esteemed contributors, the entire editorial team of SAGE Publishing Group, New Delhi and Ms Reema Singhal, assistant commissioning editor, who, in fact took a serious ini- tiative in materializing this project. I thank my wife Aruna, an emerging scholar of social responsibility of the organizations and my daughter, a scientific aficionado for providing me ample space for working on this project. I pay my regards to Professor S. Prakash Sethi, University Dis- tinguished Professor of City University of New York at Zicklin School of Business and President of the International Centre for Corporate Accountability, located in New York. Prologue Business ethics can be examined from various perspectives, including the perspective of the employee, the commercial enterprise and soci- ety as a whole. Very often, situations arise in which there is conflict between one or more parties, such that serving the interest of one party is a detriment to the other(s). For example, a particular outcome might be good for the employee, whereas it would be bad for the company, society or vice versa. Philosophers and others disagree about the purpose of a business ethic in society. For example, some suggest that the principal purpose of a business is to maximize returns to