STAKEHOLDER: THEORY AND TYPOLOGY

PROF. ASHISH AGGARWAL

 OUTLINE

 What is a Stakeholder?
 Stakeholder Theory
 Evolution
 Typologies
 Stakeholder Attributes
 Stakeholder Corporation
STAKEHOLDER

 Stake
 A share or interest in a business, situation, or system (Oxford English Dictionary)

 Claim-
 Assertion to a title or right to something

 Stakeholder
 Any individual or group who can affect or get affected by the actions, decisions,
policies, practices or goals of the organisation’ (Freeman, 1984)
STAKEHOLDER THEORY
 Ownership Theory
 Goal of a firm is to maximise returns for its owners/shareholders
 Limited Focus
 No Societal Interest

 Stakeholder Theory
 Firms create value for the Society
 Firms have Broad Vision
 A Range of stakeholders
EVOLUTION OF THE CONCEPT

 Stockholder and
Stakeholder
 Production view
 Managerial view
 Stakeholder view

Source: Carroll and Buchholtz, 2012

STAKEHOLDER VIEW

 Firms operate in
different Environments
 Political
 Social
 Economic
 Technological

 Numerous
Stakeholders interact
in each category

Source: Carroll and Buchholtz, 2012

WHY STAKEHOLDER THEORY IS IMPORTANT?

 Descriptive Value
 Its how companies actually work

 Instrumental Value
 Makes Company more effective

 Normative Value
 Isn’t This the Rights way?
TYPOLOGIES

 Market and Non Market

 Market
 Engage with the company
in economic activities

Source: Lawrence and Weber, 2008

TYPOLOGIES

 Non Market
Stakeholders
 Do not engage in
economic activity but
influence or get
affected by it

Source: Lawrence and Weber, 2008

TYPOLOGIES

 Primary
 Direct Stake
 Investors
 Shareholders
 Managers
 Customers
 Suppliers
 Local communities
TYPOLOGIES

 Secondary
 Do not have direct stake
 Competitors
 Government
 Civic Groups
 Media
TYPOLOGIES

 Core, Strategic and Environmental

 Core
 Very Imp for the Business- Investors

 Strategic
 Important and strategically vital to the company- Suppliers

 Environmental
 Larger Group of stakeholders- Media
STAKEHOLDER NETWORK

 Stakeholders have relations with

the Business but with each
other as well
 So, Stakeholder Network is a
more Real and Useful
representation

Source: Lawrence and Weber, 2008

STAKEHOLDER ATTRIBUTES

 Legitimacy-
Appropriateness of
the stake
 Power- Ability to get
something done
 Urgency- Time
Sensitive/Critical for
Action

Source: Sathyan, 2014

APPROACHES TO STAKEHOLDER ENGAGEMENT

 Strategic Approach- Functional Approach- Stakeholders are important

because they have some functional value or can create problem
 Multi-Fiduciary Approach- Stakeholders need to be taken in trust like
shareholders
 Stakeholder Synthesis Approach- Moral obligation of the company to
engage stakeholders
STAKEHOLDER CORPORATION

 Stakeholder Relationships will Determine success of a Business (Wheeler and

Sillanpaa, 1997)
 Stakeholder Symbiosis- Interdependence of Stakeholders
 Business is about purpose: R. Edward Freeman at TEDxCharlottesville 2013
 https://www.youtube.com/watch?v=7dugfwJthBY
 Thank You!
ashish.aggarwal@iiml.ac.in
STAKEHOLDER ANALYSIS
PROF. ASHISH AGGARWAL
OUTLINE
 Introduction
 Key questions
 Who are our Stakeholders?
 What are their Stakes?
 What are the Opportunities and challenges?
 What Responsibilities does the firm have to its stakeholders?
 What Strategies or Actions should firm take?
 Cases- Hindustan Lever, Coca Cola India, Tata Steel
STAKEHOLDER ANALYSIS

 Identifying Relevant Stakeholders,

Analysing their Stakes and Power and
Designing Appropriate Strategies to
Engage them

http://www.economist.com/node/15954434
KEY QUESTIONS

 Who are our stakeholders?

 What are their Stakes?
 What are the Opportunities and Challenges?
 What Responsibilities does the firm have to its stakeholders?
 What Strategies or Actions should firm take?

Source: Carroll and Buchholtz, 2012

WHO ARE OUR STAKEHOLDERS?

 Past and Present Engagements

 Potential Engagements
 Social Media
 Diversity-Geographical, age groups etc
 Awareness
WHAT ARE THEIR STAKES?

 Legitimacy of Stakes- How Valid are their interests?

 Shareholders, Employees, Corporate Raiders

 Nature- What they want from the organisation?

 Employees
 Stable work Environment
 Fair wages
 Fair Treatment
WHAT ARE THE OPPORTUNITIES AND CHALLENGES?

 Stakeholder Power
 Ability to Effect a change
 Voting Power
 Economic Power
 Political Power
 Legal Power

 Stakeholder Coalition- Similar Interest Groups- NGOs, Labour Unions, Communities

STAKES AND POWER
STAKEHOLDER SALIENCE

 Degree of Legitimacy,
Power and Urgency
defines Salience of a
Stakeholder

Source: Carroll and Buchholtz, 2012

ANALYSE

 Contribution
 Legitimacy
 Willingness
 Influence
 Necessity

Source: www.bsr.org
WHAT RESPONSIBILITIES DOES THE FIRM HAVE TO ITS STAKEHOLDERS?

Responsibilities

Stakeholders Economic Legal Ethical Other

 Economic
 Legal Customers Value for Product Quality and Impacts
money information quantity
 Ethical
 Other

Source: Carroll and Buchholtz, 2012

WHAT STRATEGIES OR ACTIONS SHOULD BE TAKEN?

 Should we Deal with the stakeholders Directly or Indirectly?

 Defend or Be Aggressive?
 Accommodate, Negotiate or Manipulate?
 Single or Mixed Strategy
WHAT STRATEGIES OR ACTIONS SHOULD BE TAKEN?

 Involve
 Monitor
 Defend
 Collaborate

Source: Savage et al. 1991 in Carroll and Buchholtz, 2012

HINDUSTAN UNILEVER LTD

 Our vision
 Unilever is a unique company, with a proud history and a bright future. We have
ambitious plans for sustainable growth and an intense sense of social purpose.
 Our purpose is to make sustainable living commonplace.
 In 2009, we launched The Compass – our strategy for sustainable growth. It sets out our clear
and compelling vision to double the size of the business, while reducing our environmental
footprint This is captured in the Unilever Sustainable Living Plan.
 "We cannot close our eyes to the challenges that the world faces. Business must make an
explicit and positive contribution to addressing them. I’m convinced we can create a more
equitable and sustainable world for all of us by doing so,” says Unilever CEO Paul Polman.
Source: https://www.hul.co.in/about/who-we-are/our-vision/
HINDUSTAN UNILEVER LTD

 Our Priorities and Principles

 Unilever is committed to supporting sustainability and providing our consumers around
the world with the products they need to look good, feel good and get more out of life.
 Five key priorities
 A better future for children
 A healthier future
 A more confident future
 A better future for the planet
 A better future for farming and farmers
 Many of our brands contain ethically and sustainably sourced ingredients that are independently certified
 Among these are Lipton tea, which is accredited by the Rainforest Alliance, and Ben & Jerry’s ice cream, which
includes Fairtrade vanilla and almonds in various flavours

Source: https://www.hul.co.in/about/who-we-are/our-vision/
HINDUSTAN UNILEVER LTD
COCA COLA INDIA

 Our Mission
 To refresh the world...
 To inspire moments of optimism and happiness...
 To create value and make a difference.
 Our Vision
 Our vision serves as the framework for our Roadmap and guides every aspect of our business by
describing what we need to accomplish in order to continue achieving sustainable, quality growth.
 People: Be a great place to work where people are inspired to be the best they can be.
 Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy
people's desires and needs.
Source: http://www.coca-colaindia.com/about-us/mission-vision-and-values
COCA COLA INDIA
 Partners: Nurture a winning network of customers and suppliers, together we
create mutual, enduring value.
 Planet: Be a responsible citizen that makes a difference by helping build and support
sustainable communities.
 Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
 Productivity: Be a highly effective, lean and fast-moving organization.
COCA COLA INDIA
TATA STEEL

 Vision
 We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship through:

 Our People
 Fostering teamwork, nurturing talent, enhancing leadership capability and acting with pace, pride and passion
 Our Offerings
 Becoming the supplier of choice….. and creating value for our customers
 Our Conduct
 Providing a safe workplace, respecting the environment, caring for our communities and
demonstrating high ethical standards
 Our Policies
 Our Innovative Approach

Source: http://www.tatasteel.com/corporate/our-organisation/vision-mission-values/#
TATA STEEL
DIAGEO INDIA LTD (UNITED SPIRITS LTD)

VISION
 To create the best performing, most trusted
and respected consumer products
company in India

 Celebrating Life, Every Day, Everywhere!

Source: http://www.diageoindia.com/usl-brands.aspx
 Thank You!
ashish.aggarwal@iiml.ac.in
STAKEHOLDER ENGAGEMENT
PROF.ASHISH AGGARWAL
 Business is about purpose: R. Edward Freeman at TEDxCharlottesville 2013
 https://www.youtube.com/watch?v=7dugfwJthBY
STAKEHOLDER ENGAGEMENT

 India Currency Symbol Competition

Source: www.Zedge.net
STAKEHOLDER ENGAGEMENT

 Independence Day 2017: US Envoy

Asked Twitter To Help With #Saree
Search

Source: www.ndtv.com
 Stakeholder Engagement
 https://www.youtube.com/watch?v=VHGTsEwbOJY
BENEFITS OF ENGAGING

 License to operate
 They bring their Expertise
 Increase Legitimacy
 Minimising Risk
STAKEHOLDER ENGAGEMENT: INTERNAL EVALUATION

 What are company’s objectives?

 Why to Engage?
 Whom to Engage?
 What is the History?
 Past Approach and Results
 Who will take the Ownership?
 Internal Champions
DESIGNING STRATEGY

 Streamline Stakeholder strategy with company objectives

 Identifying areas of maximum impact
 Resources (People, Costs, Logistics..)
 Past lessons
 Assessing Long Term Value ( Not short term Cost Benefit!)
 Manage Stakeholder Expectations
SWANS & OWANS

Source: http://www.som.cranfield.ac.uk/som/dinamic-content/media/CR%20Stakeholder.pdf
LEVEL OF ENGAGEMENT

 Check In- Maintaining and refining old

communications
 Modifying Communications- New areas of
communications
 Transparency- Stakeholder Feedback
 Modifying Performance- Changes Business
Practices
 Transformative- Changes Business Strategies

Source: www.bsr.org
RESOURCE ESTIMATION

 What level of
Engagement?
 Resource
Estimation
 Plan Adoption

Source: www.bsr.org
PREPARATION & ENGAGEMENT

 Review the list of

Mapped Stakeholders
 Develop Short Term
and Long Term Goals
for Engagement
ENGAGEMENT STRATEGIES

 Inform
 Communicate
 Engage
HOW TO UNDERTAKE ENGAGEMENT?

 Free Discussion on Expectations

 Equal Contribution
 Focussed discussion
 Facilitation
 Cultural Diversity
 Managing conflicts
ACTION PLAN

 Documenting the Actions, Issues and Feedback

 Prepare the Refined Plan
 Communicate the Plan
 Further Revision
COCA-COLA STAKEHOLDERS ENGAGEMENT

 Bottling partners: day-to-day interaction as business partners, joint projects, joint business planning, functional groups on strategic issues, ‘Top-to-Top’
senior management forum, Global Environment Council
 Consumers: consumer hotlines, local websites, plant tours, research, surveys, focus groups
 Customers: regular visits, dedicated account teams, joint business planning, joint value creation initiatives, customer care centres, social media engagement,
surveys
 Communities: community meetings, plant visits, partnerships on common issues, sponsorships, lectures at universities;
 Employees: engagement surveys, senior executive business updates, town hall meetings, employee communications, individual development plans, health and
safety communications programs, community and employee well-being projects, Ethics hotline
 Governments and regulatory authorities: foreign investment advisory councils, recycling and recovery initiatives, chambers of commerce
 Non-governmental organizations (NGOs): dialogue, partnerships on common issues, memberships of business and industry associations
 Shareowners and analysts: annual meeting of shareowners, quarterly earnings reports and webcasts, other investor presentations and webcasts, quarterly
shareowner newsletter, and ongoing dialogue with investors and analysts;
 Suppliers: joint value creation initiatives, annual supplier conference, sustainable sourcing, Supplier Guiding Principles, packaging associations;
 Trade groups and industry and policy organizations:

Source: Coca Cola

STOCKHOLDER RIGHTS AND CORPORATE
GOVERNANCE
PROF. ASHISH AGGARWAL
OUTLINE

 Introduction
 Legal Rights
 Corporate Governance
 Government Oversight
 Stockholder Action
INTRODUCTION

 Case of AIG International

STOCKHOLDER

 Legal owners of the Company

 Decide Company's Policies and Strategic Direction
 Their Interests and Rights are Critical
 Individual and Institutional Stockholders
 Why Do they invest?
 Capital appreciation
 Dividends
 Social Investment
LEGAL RIGHTS OF STOCKHOLDERS

 Receive updated information on company’s performance periodically

 Deciding on Board of Directors
 Participate in Major Policy Decisions
 Receive Dividends
 Legal Action against the company and Executives if their rights are violated
CORPORATE GOVERNANCE

 The process by which a company is controlled and run

 Board of Directors on behalf of all the stakeholders
 Roles and Responsibilities of BoD
 Issue of Compensation
 Liability of Damages ( At WorldCom Investors sued them for $55 million)
GOOD CORPORATE GOVERNANCE

 Open Elections for the Board

 External Directors
 Role separation (Chairman/CEO)
 Evaluation of the Performance of the Board members
 Performance linked compensation
GOVERNMENT OVERSIGHT FOR STOCKHOLDERS

 Ministry of Corporate Affairs

 Indian Companies Act, 2013
 Recognizes the rights of the shareholders and ensures strong co-operation between the company
and the stakeholders
 Accurate disclosure of financial performance, material status, ownership and governance
 One or more women directors are recommended for certain categories
 The Independent Directors
 Appoint an individual or firm as an auditor. The responsibility of the Audit committee has increased
GOVERNMENT OVERSIGHT FOR STOCKHOLDERS

 Security and Exchange Board of India (SEBI)

 SEBI Established in 1992
 “..to protect the interests of investors in securities and to promote the development
of, and to regulate the securities market and for matters connected therewith or
incidental thereto“ (SEBI)
 Capital market Regulator
 Quasi-Legislative, Quasi-Judicial and Quasi-Executive
STOCKHOLDER ACTION

 Networking of institutional Investors- Council of Institutional investors in USA

 Shareholder Lawsuits-
 Nortel Networks of USA had to pay USD 2.4 billion in 2006 to settle two law suits

 Investment Screening- socially responsible investments

 Shareholder Resolutions- Putting pressure on Regulating Agencies
 Satyam Case
 Thank You!
ashish.aggarwal@iiml.ac.in
CONSUMER: AN IMPORTANT STAKEHOLDER

PROF. ASHISH AGGARWAL

CONSUMER IS IMPORTANT!

 Consumer is the reason for existence of a business

 Hence its Rights are Paramount for any business
 Traditionally Consumers have been self responsible for protection of their rights
 Phrase ‘Caveat Emptor’- ‘Let the buyer beware’
DIFFICULT TO WATCH INTERESTS ON YOUR OWN

 With the advent of commercial revolution, Diversity and Complexity of

products have increased
 Products and services are highly specialised
 World of Glamorous Advts and false promises
 Safety Issues
CONSUMER MOVEMENT: GLOBAL

 Collective, Organised Efforts of Consumers to safeguard their interests-

Consumerism
 USA consumerism started in early 1900’s and expanded by late 1990’s
 Consumer Federation of America- 50 million consumers
 Consumer Union
 Consumer International- UK- represents consumer groups from more than100
countries
CONSUMER INTERNATIONAL

 “We believe in a world where everyone has access to safe and sustainable goods and
services. We bring together over 200 member organisations in more than 100
countries to empower and champion the rights of consumers everywhere”

 “We are their voice in international policy-making forums and the global marketplace
to ensure they are treated safely, fairly and honestly. We are resolutely
independent, unconstrained by businesses or political parties.”
CONSUMER MOVEMENT: INDIA

 Consumer Association of India was established in 1959

 Council for Fair Business Practices was formed by leading Industrialists in 1966
 The Indian Consumers Union was established in 1971 -offering legal advice, testing
facilities and awareness
 The Consumer Education and Research Centre was formed in 1978 at Ahmedabad
to guide and protect consumer rights.
 Consumer cooperative societies like- government employee consumer stores
LEGAL ARCHITECTURE

 Agricultural Produce (Grading and Marketing) Act, 1937

 The Drugs and Cosmetics Act, 1940
 The Prevention of Food Adulteration Act, 1959
 The Essential Commodities Act, 1955
 The Packaged Commodities (Regulation) Order, 1979,
 Consumer Protection Act, 1986.
CONSUMER COURTS

 National Consumer Disputes Redressal Commission (NCDRC)

 More than INR10 million

 State Consumer Disputes Redressal Commission (SCDRC)

 Cases less than INR10 million

 District Consumer Disputes Redressal Forum

 Up to 20 lacs
CONSUMER RIGHTS

Right to Safety

 Right to be protected against the marketing of goods and services, which are hazardous to life and property.
 Need to check standards such as ISI,AGMARK, etc

Right to be Informed

 About the quality, quantity, purity, standard and price of goods

Right to Choose

 Right to be assured of satisfactory quality and service at a fair price. It also includes right to basic goods and services
CONSUMER RIGHTS
 Right to be Heard

 Consumer's interests will receive due consideration at appropriate forums.

 Non-political and non-commercial consumer organizations represented at various committees

 Right to Seek Redressal

 Against unfair trade practices and exploitation of consumers.
 It also includes right to fair settlement of the genuine grievances of the consumer

 Right to Consumer Education

 Right to acquire the knowledge and skill to be an informed consumer
Source: Department of Consumer Affairs, Govt of India
BUSINESS RESPONSE

 Consumer Affairs Management

 Voluntary standards
 Quality Control
 Compensations- Product warranties, guaranties, recall
THE CHANGE

 Its Now ‘Caveat Vendor’- ‘Let the Seller take care’!!

 Discussion of Case-Big Fat Liability
 Thank You!
ashish.aggarwal@iiml.ac.in
COMMUNITY AS A STAKEHOLDER
PROF. ASHISH AGGARWAL
 OUTLINE

 Cases
 Vedanta, Coco Cola, Tata Nano, Reliance Jio

 What is Community?
 Business Case for Community Involvement
 Corporate Philanthropy
 Strategic Philanthropy
 Collaborative Partnership
COMMUNITY ISSUES: STERLITE PROTESTS

 10 people got killed in police

firing during a rally demanding
the plant's closure in
Thootukudi, Kerala in May 2018
 Air pollution
 Water pollution
 Supreme court fined 100 crore
fine in 2013
Source: https://www.dnaindia.com/india/report-sterlite-protests-transfer-probe-into-police-firing-
that-killed-13-in-tuticorin-to-cbi-cpim-2621721
COMMUNITY ISSUES

 Tribal in Niyamgiri Protest

Against Vedanta’s Mining Project
 Tribal organisations like Niyamgiri
Suraksha Samity (NSS) and Lok Sangram
Manch (LSM) are opposed to bauxite
mining from Karlapat mines for alumina
refinery of Vedanta at Lanjigarh in
Kalahandi district.

Source: https://thewire.in/25043/supreme-court-must-safeguard-tribal-rights-over-niyamgiri-hills-in-
odisha/
COMMUNITY ISSUES

 Community Protests against

Coca-Cola in Rajasthan , Kerala,
Maharashtra and Uttar Pradesh

Source: https://ohsoethical.tumblr.com/
COMMUNITY ISSUES

 Singur Tata Nano Controversy

 1000 acres of Farmland acquisition

Source: https://www.outlookindia.com/topic/tata-nano/100409
COMMUNITY ISSUES

 ‘Reliance Jio’s 4G rollout

faces protest in Mumbai’
The Hindu Business line, 6th Feb, 2017

Source: http://www.thehindubusinessline.com/info-tech/reliance-jios-4g-rollout-faces-protest-in-
mumbai/article6937635.ece
COMMUNITY

 Refers to Groups in
Company's Area of Local
Influence or other groups
impacted by its business

Source: Lawrence and Weber, 2011

BUSINESS CASE FOR COMMUNITY INVOLVEMENT

 License to Operate
 Avoidance of Conflict
 Social Capital- Norms and Networks that enable collective action
 Legal Requirement- CSR Rules 2014
 Long Term Sustainability
BUSINESS ACTIVITIES FOR COMMUNITY INVOLVEMENT

 Civic Engagement- Active Involvement of Businesses to improve social and economic

condition of communities
 Health, Education
 Asset Building
 Skill Improvement
 Disaster Relief
CORPORATE PHILANTHROPY

 Companies help Communities Directly or through Foundations, NGOs

 Products and Services
 Pfizer gave medicines worth USD 1.68 billion for poor countries in 2007

 Volunteer Time
 Hindustan Lever’s Voluntary Programme

 Cash
STRATEGIC PHILANTHROPY

 Corporate Philanthropy that is directly or indirectly linked to Business Goals and

Objectives
 Strategic Contributions generally focus on the areas
 Increasing Demand- Giving Free Access of Software to Teachers/Institutions
 Increasing Supply- Training students in their Area of Business
 Improving Strategic Environment- Transparency International
 Helping Related Businesses

Source: Adapted from Porter and Kramer, 2002

STRATEGIC PHILANTHROPY

 Key Strategies for Philanthropy

 In Line with the Core Values of the Firm
 Children's IKEA
 McDonalds Homes near Children Hospitals

 Linked to Expertise of the Company

 Google Providing Free advertising Space to Charities
 Intel Providing Free Computer Hardware
STRATEGIC PHILANTHROPY

 Matching with Employee Interests

 Assessing Impact of Philanthropy
 Like any Business Activity Social and Economic Impacts should be assessed
COLLABORATIVE PARTNERSHIP

 Long Term Collaboration between Business, Government, NGOs and

Communities for a Specific Cause
 Education Programme
 Skill Building
 Vocational Training Programmes of ITC

Source: The Hindu

 Thank You!
ashish.aggarwal@iiml.ac.in
GLOBALISATION AND STAKEHOLDER CHALLENGES

PROF. ASHISH AGGARWAL

ADANI GROUP IN AUSTRALIA

 Adani: Thousands turn

out across Australia to
protest against
Carmichael coal mine

Source: http://www.abc.net.au/news/2017-10-07/thousands-protest-adani-mine-across-australia/9026336
ADANI GROUP IN AUSTRALIA

 Media alleged cases of bribery, corruption and environmentally destructive

behaviour by the Adani Group in India.
 Adani is seeking a $900-million loan from taxpayers so it can build the railway
line from the proposed mine site in the Galilee Basin to the Abbot Point coal port.
 “It will affect every single living thing on Earth, that's why people in Melbourne and
Sydney and Canberra and Adelaide and Cairns all care about this mine not going
ahead." Ms O'Shanassy said

Source: http://www.abc.net.au/news/2017-10-07/thousands-protest-adani-mine-across-australia/9026336
BRITISH PETROLEUM SUED FOR $34 BILLION IN USA

 A BP-owned deep sea oil rig exploded

in the Gulf of Mexico killing 11 people.
 60,000 barrels of oil was leaking per day
making it the biggest offshore oil spill in
history
 It took three months to stop leakage
 Company sued for$ 34 billion in US
courts
Source: https://www.therichest.com/rich-list/the-biggest/busted-10-biggest-corporate-fines-ever/
RANBAXY IN USA

 Ranbaxy pleads guilty, to pay $500 million in settlement

 In the civil settlement, Ranbaxy has agreed to pay $350 million to resolve allegations
that drugs from the two Indian plants did not meet specifications and that false claims
were submitted to U.S. government healthcare programs
 In 2008, the FDA banned the company from selling about 30 drugs in the United
States after it found manufacturing deficiencies at facilities in India

Source: https://in.reuters.com/article/ranbaxy-settlement-felony-usa/ranbaxy-pleads-guilty-to-pay-500-mln-in-settlement-
idINDEE94C0DA20130513
GLOBALISATION?

 Expansion of global linkages among nations (UN, 2004)

 Free movement of goods, services and people across the world (ibid)
 Integration of a country's local economic system with international markets and
institutions through economic liberalization, foreign investments and capital flows,
technological exchanges as well as information flows, where the factors of
production are used on a world scale, instead of within the individual state
economies (ibid)
 WHAT ARE WE TALKING ABOUT?

 There are more than 79000 Transnational Corporations (UNCTAD, 2008)

 These control 11% of GDP and employ 82 million workers
 FDI flows were worth $1.75 trillion in 2016 (UNCTAD, 2017)
 Digital TNCs make about 70 per cent of their sales abroad, with only 40 per cent of
their assets based outside their home countries (ibid)
 FDI to transition economies increased to $68 billion in 2016 (ibid)
GLOBALISATION ON STEROIDS

 World Trade Institutions- WTO, WB, IMF

 Social and Political Reforms
 Technological Innovations
 Transport
 Rise of Trans National Corporations
BENEFITS

 Quality Products and Services

 Cost Reduction
 Access to Foreign Investment
 Transfer of Technology
 Transfer of Best Practices
 Reduces Conflicts across Nations
COSTS

 Loss of Jobs at costly location

 Dumping of Low Quality Material
 Impacts local culture, Food habits etc.
 Too Much Resources in the Hands of a Few
 Powerful Corporations Manage Governments in small nations
 Issues of Corruption, Rights etc
ISSUES

 Should a global company working in Saudi Arabia promote equal gender rights?
 Should a company collaborate with Military and Despotic Governments like North
Korea and Myanmar?
 How far companies should get involved in providing basic services not related to its
business?
 What should a business do in case of conflicting ethical values?
BLOOD DIAMONDS AND KIMBERLEY PROCESS

 Diamond Rich African Nations such as Sierra Leone, Angola and DRC had issues
related to violence, human rights, child abuse etc
 Revolutionary United Front (RUF) of Sierra Leone chopped peoples’ hands to scare
them off- (20000 people were mutilated)
 Rebels Groups controlled diamond mines to fund their weapon and resource
supplies
 8% of total world diamonds came from such places
BLOOD DIAMONDS AND KIMBERLEY PROCESS

 International Civil Society groups raised concerns about diamonds from such places
 The De Beers Corporations sold diamonds as a symbol of ‘Love, Beauty and Purity’
 World Diamond Congress banned Diamonds from conflict places in 2000
 In 2003, A certification mechanism- Kimberley Process was started
 Custody of Chains for each Diamond to be verified by National Governments
 By 2009, 74 diamond producing countries adopted the process
 Thank You!
ashish.aggarwal@iiml.ac.in
CORPORATE SOCIAL RESPONSIBILITY

PROF. ASHISH AGGARWAL

A BIT OF HISTORY

 In 1900’s Industrial America,

Tycoons such as Andrew Carnegie
and John Rockfeller felt societal
unease over role of businesses
 Societal Debate on limiting
Corporate Power through
Regulations, Antitrust laws etc

Source: http://indiacsr.in/india-csr-award-winning-five-csr-cartoons/
 A BIT OF HISTORY

 To Keep Government
Regulation away they started
philanthropic activities (Public
libraries, Hospitals etc)
 Gap in provision of social
services such as employment,
job security, health by the Govt
 Business/ leaders started
charitable activities
 Corporate and Individual charity
of corporate leaders have been
a hallmark ever since Source: https://givingusa.org/tag/giving-usa-2018/
A BIT OF HISTORY

 CSR became a serious subject only after Word War II.

 H.R Bowen write a book “ Responsibilities of Businessman’ in 1953
 He described CSR as a middle path between socialism and free capitalism
A BIT OF HISTORY: USA

 Cultural aspects of Individual Freedom and liberties

 Traditional scepticism of state interfering in Business
 Concept of Stewardship
 “ to make money is only half of the task and other half is to use it well’ (Andrew Carnegie in
Gospel of Wealth)
 Religious influence
EUROPE

 Commonality in Christian Philanthropic Values

 No major engagement with CSR until 20th century
 Social welfare state emerged in West Europe and Scandinavia
 More Shared ownership of business rather than Powerful Individuals
EUROPE

 Rise of Industry Associations, labour unions for social welfare

 Emergence of “Implicit CSR”- Expectation from business towards society esp in
Govt directed areas
 Mediterranean CSR (Spain, Italy, Slovenia)- based on values of traditional ‘Agora’
model- voluntary exchanges informed by religious values
ASIA

 Strongly rooted in cultural values and socio- political context

 Japan- Business (Keie)- Kei- Governing the world in harmony with well being of
people, ‘ei’- Ceaseless effort
 India- Business values in Vedas, Arthsahtra
 Chinese- Values from Confucianism, Communism
 CSR work and reporting has increased from 45% of sample companies in 2002 to
96% in 2010 (Moon, 2014).
OTHER PARTS OF THE WORLD

 Internationalisation of US “Explicit’ CSR Model

 Africa- Multinational Corporations brought the idea
 Issues with differential Application at home and there
CSR: USA AND EUROPE

USA Europe
History A century of explicit CSR Recent shift from implicit to
explicit CSR
Ethos Values Stakeholder relations, strategy

Key organisations Company, Standards Company, associations,

partnerships, standards
Key issues Community Environment, Workplace,
Marketplace, Community
Spheres Mainly domestic Domestic and International
Government Away from CSR Engaged in CSR

Source: Moon, 2004

PRINCIPLES

 Charity Principle
 Philanthropic activities

 Stewardship Principle
 Acknowledges interdependence of Business and Society
 Business takes care of Public Interest
 Efficient Resource Utilisation for Benefit of Everyone
CORPORATE SOCIAL RESPONSIBILITY

 ‘C’ refers to policies, practices and impacts of Corporations

 ‘S’ refers to geography and embeddedness in Society
 ‘R’ refers to accountability and responsibility towards Society

Source: Moon, 2014

Thank You!