Corporate Social Responsibility In India Management Essay

In India, the term corporate social responsibility might be relatively new but the concept is not. It has been there since the earliest times, going back to an age when society itself was in its formative stages. It has been incorporated in various religious laws wherein a part of one’s earnings are donated for the benefit of the poor and community welfare. The Hindus call it ‘dharmardha’, the Muslims ‘zakath’, the Christians ‘tithing’, the Sikhs ‘dashannt’; call it by whatever name you will, the concept has been imbibed in the society from the very beginning. As individuals joined hands to form organizations, the same concept became embedded in the organizations [1] .

In modern business world, in India, Gandhiji was one of the first persons who had foreseen the problem of social responsibility and spelt out his own philosophy to meet the challenge. He was a strong advocate of the ideal of Sarvodaya which meant moral as well as material well-being of all sections of the community [2] . Gandhi’s philosophy of trusteeship is similar to the CSR of the modern business world; the Gandhian notion of trusteeship has been followed by the Tatas and Birlas ever since their inception.

There has been a growing acceptance of the plea that corporations should be responsible to the society. The business enterprise which makes use of the resources of the society and depends on it for its functioning, should contribute to enhance the welfare of the society. Business, being one of the dominant institutions of the present day market-led-economy, wields considerable influence on the resources of the society and plays an important role in the process of socioeconomic and cultural modernization. Being organically linked to the wider socioeconomic and cultural system, it cannot distance itself from its commitment to the society, particularly in a developing country like India [3] .

While talking about corporate social responsibility, socially responsible behaviour comes into play that an individual or a firm has to drive that CSR agenda in that firm. Socially responsible behaviour has been described as “action that goes beyond the legal or regulatory minimum standard with the end of some perceived social good rather than the maximization of profits.” [4]

The issue of corporate social responsibility become commonplace in the business press and among business and political leaders [5] and a body of academic literature has also emerged around it [6] . Indeed, much of the literature on corporate social responsibility has been more descriptive or normative than positivist in tone (e.g., Harvard Business School Press, 2003). Margolis and Walsh (2003) reviewed this literature from 1972 to 2002 and found that socially responsible corporate behavior was treated as the dependent variable only 15 percent of the time (twenty-two studies).

While interest in the causes and consequences of socially responsible corporate actions continues to grow, several issues central to understanding of this phenomenon remain largely unaddressed in the prior literature. Among these are the role that executives play in formulating and implementing socially responsible policies for their firms. It seems reasonable to expect that the executives who have a positive attitude towards socially responsible activities are more likely to champion the activities in the firms they manage. Having these kinds of executives would always lead a firm to implement socially responsible activities.

More specifically, there is a surprising dearth of research on perceptions or attitudes of executives in the academic literature (Narwal and Sharma 2008). Literature shows that only a few empirical studies have been made to assess the perception of executives towards CSR both in global and Indian scenario.

An examination of the attitudes of Malaysian managers and executives towards social responsibility and also the extent of socially responsible activities involved, corporate disclosure, and the factors determining the attitude towards social responsibility has been done by Abdul and Ibrahim (2002). The results showed that involvement by a business in improving its community’s quality of life will also improve long run profitability and that there were significant differences in the attitudes of managers working in banking, telecommunication, manufacturing and construction towards social responsibility. The results also showed that the most influential factor determining the attitude towards social responsibility was family upbringing. The other important factors were traditional beliefs and customs, and common practices in the industry.

In case of Australian corporate managers, Quazi (2003) studied the relationship between the level of education, training status and religiosity and their perception of corporate social responsibility. It was indicated that managerial commitment to CSR is linked with the acquired qualities of education and training rather than their inherent physical maturity (age). Furthermore, modernity reflected in achievement via hard work, rather than mere belief in luck, determines the pattern of managerial perception of CSR. Religious metaphors seem to influence managers’ perception of social commitment suggesting that theology is also an important determinant of the ethical perceptions of Australian corporate managers. These findings have important implications for personnel policies of socially responsive corporations.

The formal adoption of CSR by corporations could be associated with the changing personal values of managers and that there may be an association between different industries, the personal values of the managers who work in them and their commitment to CSR (Hemingway, 2004). Broadly, religious individuals do tend to hold broader conceptions of the social responsibilities of businesses than non-religious individuals. However, this is neither true for all religious groups, nor for all areas of corporate social responsibility (Brammer et al., 2005). Brammer (2007) further examined the impact of employee perceptions of corporate social responsibility in the community, the importance of gender variation is emphasized and suggested that external CSR is positively related to organizational commitment and that the contribution of CSR to organizational commitment is at least as great as job satisfaction.

Literature shows that in India, only a few empirical studies, Singh et al. (1980); Krishna (1992); and Reddy (2006) have been made to assess the state of CSR. The corporate community in India has been under severe criticism for its indifferent attitude towards the problems of the common man. Its actions, by and large, have proved to be inappropriate to the solution of social problems. Singh et al. (1980) examined these criticisms and found that corporate actions are perceived to be predominantly pure profit maximizing followed by calculative behaviour. While studying the attitudes of managers towards corporate social responsibilities, Krishna (1992) concluded that managers in Indian industry are very much favourable to corporate social responsibility. There has been no significant difference in the perception of top and middle level managers on corporate social responsibility. Also, no significant difference is observed in the perception of public and private sector managers on corporate social responsibility.

1.2 The Statement of the Problem

A plethora of research studies, independent commission reports, corporate documentation and global reporting on CSR activities across the world exist. Perhaps the volume of such reports far exceeds the volume of work carried out on any of the organizationally relevant subjects. Despite such phenomenon, there is a lack of uniform consensus among academicians, researchers, practitioners and the Government in general on what constitutes CSR activities, what motivates firms for CSR activities and what are the standard models on CSR practices.

These questions have been answered in scant by few research studies which are being discussed in the succeeding chapters of this study. As such, there is a wider gap existing in understanding CSR programmes of business organizations across the world.

Encouraged by such challenge of addressing the wider gap in researching models of CSR, the present research study is undertaken. A detailed understanding of such gaps can be found in chapter III on review of literature.

Thus, the present study has a five-fold purpose in understanding the new answers of CSR across the world in general and in India in particular. The first purpose of the study is to understand what constitutes the attitude towards CSR held by executives who are directly or indirectly responsible for initiation of CSR activities in their respective companies. At present, studies are sparse on measuring the attitude of managers towards CSR. It is understood in general that attitude is effective on orientation of the executives which reflects their likes and dislikes they have for CSR activities. Second, it is a well established fact that attitude is very fundamental in determining or influencing behaviours in general and actions in specific. CSR initiatives by the firms are influenced by certain attitudes. One such behaviour is called socially responsible behaviour. It is not sufficient to have a good attitude towards CSR by the executives, on the other hand such a good attitude should transcend into certain actions and behaviours by which society in general and certain stakeholders in specific are benefited. Surprisingly, research directions have not sufficiently pointed at such issues. Finally, evidences also show that there is no standard instrument developed so far to measure executives’ attitude towards CSR. On the other hand, there are countless documents exist on accountability issues of CSR. Such documents include Return on Investment reports, Impact Assessment Reports, and Reports to the Government Authorities. However, there seems to be lack of scientific assessment of effectiveness based on the evaluating judgment by the implementers of the CSR and the beneficiaries of the CSR. At both spectra, there exist vast and unexplored gaps.

Thus, this study first addresses adapting a scale on the basis of previous studies for measuring attitude towards CSR held by the executives. This attempt helps further in not only measuring the attitude but aids in exploring the influence of the attitude on various CSR initiatives and quite likely other variables.

Second, the study also attempts to explore to what extent executives are socially responsible in their behaviour. This is done by using a scale to measure such behaviour with the help of the concepts culled from the review of literature. Third, the types of CSR activities being carried out by Indian companies are studied to understand the trends and patterns of such activities. Fourth, the perceived effectiveness of CSR implementation in Indian companies is assessed. Lastly, a model is proposed in this research study. This model includes a set of independent variables (organizational characteristics and personal characteristics of executives influencing their attitude towards CSR) and a set of dependent variables called perceived effectiveness of CSR efforts and the mediating variable called socially responsible behaviour. Fig 1.1 presents the model being proposed and tested.

1.3 The Scope of the Present Study

This study is aimed at an exploration into the attitude of executives towards basic aspects of corporate social responsibility with a view to discovering answers to questions such as:

To what extent executives in Indian industry are having favourable or unfavourable attitude towards corporate social responsibility?

What factors are responsible for acceptance of social responsibility by industry?

What are the areas of priority of social effort?

What are the factors that have influence on the choice of priorities?

Under what conditions will industry be able to undertake and successfully perform social responsibility programs?

Further, the research makes a comparative study of the attitude and responsible behaviour of executives with a view to investigate the influence of the business sector and certain demographic variables on the perceptions of executives. By doing so, it seeks to elicit answers to questions such as:

Is there any significant difference between the attitude towards CSR and responsible behaviour of manufacturing sector executives and service sector executives?

Is there any significant difference between the attitude towards CSR and responsible behaviour among the executives according to their demographic profile?

Do the executives’ attitude and responsible behaviour lead to the overall effectiveness of CSR implementation?

1.4 The Objectives of the Present Study

The overall objective of the study is to present a better understanding concerning the attitude of the executives towards CSR in Indian industry. Further, the socially responsible behaviour and its influence on the overall effectiveness are also to be studied. The specific objectives for this study are,

To examine the effect of business sector on the attitudes of executives towards corporate social responsibility.

To assess the effect of demographic profile of executives on the attitude of executives towards corporate social responsibility.

To examine the effect of business sector on socially responsible behaviour of the executives.

To explore the effect of demographic profile on socially responsible behaviour of the executives.

To examine the association of CSR focus areas and type of business sector.

To study the effect of business sector on effectiveness of CSR programmes.

To examine the effect of demographic profile of executives on effectiveness of CSR initiatives.

To explore the relationships among attitude towards corporate social responsibility, socially responsible behaviour and effectiveness of CSR initiatives.

1.5 Hypotheses

Hypotheses have been formulated from the proposed model. Since the study is exploratory in prime, the hypotheses have been formulated in null form.

H10: Type of business sector does not have significant effect on executives’ attitude towards corporate social responsibility.

H20: Executive demographic profile will not have significant effect on attitude towards corporate social responsibility in relation to:

H20a: Gender; H20b: Education level; H20c: Level of management; H20d: Designation; H20e: Work experience.

H30: Type of business sector does not have significant effect on executives’ socially responsible behavior.

H40: Executive demographic profile will not have significant effect on their socially responsible behavior in relation to:

H40a: Gender; H40b: Education level; H40c: Level of management; H40d: Designation; H40e: Work experience.

H50: Type of business sector will not have association with CSR focus areas and activities in relation to:

H50a: Health; H50b: Environment; H50c: Agriculture/Microfinance; H50d: HIV/AIDS; H50e: Child Care/Disabled/Women Empowerment; H50f: Education; H50g: Rehabilitation & Resettlement; H50h: Community Development; H50i: Disaster Management.

H60: Type of business sector will not have significant effect on effectiveness of corporate social responsibility initiatives.

H70: Executive demographic profile will not have significant effect on effectiveness of corporate social responsibility initiatives in relation to:

H70a: Gender; H70b: Education level; H70c: Level of management; H70d: Designation; H70e: Work experience.

H80: Relationship between attitude towards corporate social responsibility and effectiveness of corporate social responsibility initiatives will not be moderated by socially responsible behaviour.

1.6 Glossary of Basic CSR-Oriented Terms

CSR is an area that has its own specific terminology that can confuse people who are not initiated. Given that so far no widely accepted “guide to terminology” exists, an attempt is made here to present meanings of certain terms used in this study.

Attitude

An attitude is a state of mental readiness, organized through experience, exerting a directive or dynamic influence upon the individual’s response to all objects and situations with which it is related.

Charity

The term charity is used to express the delivery of basic social aid to people in material need (e.g. offering food, clothing, accommodation).

Corporate accountability

It is the ability and willingness of an organization or its representatives to demonstrate the manner in which they handle resources, and the effectiveness of their activities.

Corporate governance

The nature of relations between the management of a company, the supervisory board, shareholders and other players. The administration of a company creates a structure through which the goals of the company are set along with the means to reach them and means of evaluating performance..

Corporate Philanthropy

Support by companies for non-profit organizations or projects through their own philanthropy or corporate foundations. This support can take the form of offering finances, products, material gifts, equipment, information, know-how or even the time of company employees.

Corporate responsibility

The contribution a company can make through responsible business practices to sustainable development.

Corporate social responsibility

This is the overall relationship between a company and all of the other actors concerned-customers, owner-investors, employees, public administration officers, suppliers, competitors, communities, etc. It includes the company’s commitment to pursue its economic activities effectively and responsibly towards society and the environment while taking into account the interests of all actors concerned.

Corporate sustainability

Corporate sustainability is a business approach that creates long-term consumer and employee value by not only creating a “green” strategy aimed towards the natural environment, but taking into consideration every dimension of how a business operates in the social, cultural, and economic environment.

Employee Involvement

This term covers various forms of cooperation between companies and non-profit organizations, which use the interest, time, talent and/or money of employees to the benefit of non-profit activities. This may include employee voluntarism, workplace campaigns, employee donations, matching donations from the company, etc.

Lower level management

The managers at the lowest few levels of the organizational pyramid are classified as lower level management. Typical designation of lower management persons sound like supervisor and junior manager.

Middle level management

It is defined as the group stretching from below division level management down to but not including what may be called in most companies first level supervisory personnel.

Quality of life

Quality of life is the characteristic that makes life desirable. It is a concept related to happiness and suggests that there are objective, widely shared criteria for life quality: freedom amid diverse choices, monopsony in consumption, high preference returns on investment, privacy, role and mobility in harmony with one’s own preferences, security, opportunities for self-development, balanced maintenance of diverse life forms, clean environment etc.

Social auditing.

It is a means to social accountability. It is a commitment to systematic assessment of and reporting on some meaningful, definable domain of the company’s activities that have social impact.

Social benefits

Social benefits represent an addition to the wealth and gain to the society.

Social costs

They represent a debit or diminution of wealth and terms and attributed directly to the firm and thus are left to be borne by the society as a whole.

Social goals

These are concerned with the development of human life and resources in the organization of the economy. The achievement of these goals mean broadening the base of human authority and leadership within the corporate system and increasing the level of imagination, sensitivity, strength and responsibility among people who work in the economic order.

Social Impact

It is the direct or indirect effect of any specific corporate action on society or its individual members.

Social responsibility

It implies rising corporate behavior up to a level where it is at least in congruence with currently prevailing social norms, values and expectation of performance.

Socially responsible behavior

It is the proactive behaviour of a company or individual in a public setting regardless of the behaviour’s legality.

Stakeholder

Any individual, group or entity that directly or indirectly influences or is influenced by the activities of a firm or organization. This includes internally concerned actors (such as employees and their families, unions, volunteers) or external actors (clients, customers, suppliers, owners, donors, financial groups, the local community, politicians, professional and academic organizations, environmental groups, the biosphere, the overall population, etc).

Sustainability

Sustainability is defined as a goal for society as a whole where economic development, environmental impact and quality of life are balanced.

Sustainable Development

Sustainable development is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for future generations.

Top management

It is defined as including only corporate level executives and division top management where divisions have relative autonomy.

Trusteeship doctrine

This doctrine as evolved by Mahatma Gandhi is based on the principle that all people having money or property hold it in trust for society. Society is to be regarded as a donor to the individual and accordingly the latter is required to share part of acquired wealth with the society for mutual benefit. According to this doctrine, business organizations have to be viewed as socioeconomic institutions to be run and owned by trust cooperation with considerably diluted shareholdings.

Values

They are culturally derived normative standards which act as a guide in stating objectives or in the pursuit of goals.

1.7 Proposed Model

There are various models of CSR developed since the last thirty years, and most of them are specifically developed for certain organizations. In this study, a new model of CSR is proposed.

Fig 1.1: Model of CSR

Personal characteristics

Attitude towards CSR

Socially responsible behaviour

Effectiveness of CSR

Organizational characteristics

CSR activities

Business Environment

This model envisages that attitude is influenced by the organizational and personal characteristics of members of that organization. Organizational characteristics include structure, climate, leadership, power, decision making, interpersonal relations, etc. Personal characteristics include age, gender, education, experience, income, religion, caste, etc. Such attitude towards CSR induces socially responsible behaviour in form of planning and implementing various types of CSR activities. Such activities could eventually be judged effective or ineffective.

Attitudes are the affective and cognitive mindset of the executives with reference to the corporate social responsibility. The affective concerns are to what extent the executives have developed likes and dislikes for the concept of CSR over the years. Whereas the cognitive concerns emphasise the knowledge, understanding, reasoning that the executives have developed about CSR during a period of time. Attitudes produce behavioural manifestations. Such manifestations will reveal whether attitudes are positive or negative. Similarly vice versa, the attitudes determine favourable or unfavourable behaviour (Fazio 1986).

Thus, in this study, the proposed model partially studies the relationship between attitude and behaviour. To be more specific, the attitude towards CSR and socially responsible behaviour of the executives are examined for the nature and extent of relationship. Further, the ongoing CSR activities and the effectiveness of CSR implementation are also assessed. Results in this regard are presented in chapter V.

1.8 Disposition

While the table of contents is a guide to what the thesis contains, some explanation is necessary to guide the reader through the seven chapters and enable him/her to quickly identify areas of particular interest. Following is a summary of the disposition used in this thesis.

Chapter 1: The introduction shall lead to main purpose of the study. It begins with explaining the study’s background in order to state the rationale and incentive behind this thesis followed by statement of the problem, scope of the present study, objectives, hypotheses, glossary of CSR terminology, and the proposed model.

Chapter II: In the second chapter, the theoretical framework covers concepts of CSR, socially responsible behaviour and their relationship. First CSR will be defined and its importance will be discussed. The second section will be SRB, its definition and relation with CSR.

Chapter III: A detailed review of research studies on CSR and SRB, synthesis, and summary.

Chapter IV: The methodology and methods used are examined in this section. The data collection and issues such as sample selection, validity, reliability and generalisability are discussed.

Chapter V: The fifth chapter includes data analysis and results consisting of demographic profiles, attitude towards CSR, socially responsible behaviour, CSR programmes, relationship among study variables, and summary.

Chapter VI: In the sixth chapter, discussion and answers to the research questions are provided.

Chapter VII: The final chapter includes conclusions, implications, and suggestions.

1.9 Summary

In this chapter, an attempt had been made to present the importance of the study explaining the study’s background in order to state the rationale and incentive behind this thesis highlighting the attitudes and behaviour of executives towards social responsibility. Further, it also brought to light that the perceptions of executives as an important concept in academic literature have been grossly under-represented either in theory development efforts or in empirical investigations.

The objectives and hypotheses formulated were presented in order to enumerate the directions to the study. A model was also proposed in this research study including a set of independent variables (organizational characteristics, personal characteristics of executives influencing their attitude towards CSR) and a set of dependent variables called perceived effectiveness of CSR and the mediating variable called socially responsible behaviour. A glossary of basic CSR-oriented terms had been presented in order to let people become acquainted with the specific terminology. Finally, the disposition presented gives the readers an opportunity to more easily orientate themselves.

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