Business Ethics

TRUSTEESHIP MANAGEMENT
Gandhian Philosophy of Wealth
Management


Trusteeship, as applicable to the
corporate world, refers to the act of
holding and managing resources on
behalf of the stakeholders of the firm.



TRUSTEESHIP MANAGEMENT
Gandhian Philosophy of Wealth
Management

Gandhian Philosophy of wealth management is based on the
Servodaya principles of Truth, Non-Violence and Trusteeship;
wherein class harmony between labour and management
reigns supreme.

According to Gandhiji, managers and proprietors of business
firms are only the trustees of wealth of society.

The idea of trusteeship advocated by Gandhiji, is based on and
has its origin in the Bhagaved Gita-in the principles of
aparigraha (non-possession) and Sambhawa (equalism)
which were ardently followed by Mahatma Gandhi.

Unlike the Utilitarian motto of greatest good of the greatest
number known as Teleology, Gandhijis motto was greatest
good of all.

Gandhijis views on labour
management relations
My ideal is that capital and labour
should supplement and help each
other. They should be a great family
living in unity and harmony; capital not
only looking to the material welfare of
the labourers, but their moral welfare
also-capitalists being trustees of the
welfare of the labouring classes under
them.

Gandhijis views on labour
management relations
Gandhiji assigned a paternalist role to management in
their dealings with labour

Gandhiji considered trade unions to be means of
workmens material and moral development.

He declared that a strike is an inherent right of the
working man for the purpose of securing justice, but
they must be considered a crime immediately the
capitalists accepts the principle of arbitration.

If conflict arises between labour and management, the
weapon proposed by Gandhiji is Satyagraha

Gandhijis principle of Trusteeship
Trusteeship principle is foundation of
philosophy of wealth management

Principles of Trusteeship
No recognition to right to individual property
Resources must be held and utilised for the benefit
of society.
Management is the trustees of the stakeholders
and must work towards optimising stakeholder
value, not merely maximising shareholder value

Gandhijis principle of Trusteeship
In case of industrialist what they produce should
be determine by social necessity with optimal
utilization of scarce resources and not by
personal whims

If workers are to work with harmony and
collaboration with management then that make
workers also co-trustee with the management

Though wealth legally belongs of owners of
business, morally belongs to society and
community

Seven greatest Sins
Politics without principles
Education without character
Commerce without morality
Pleasure without conscience
Wealth without work
Science without humanity
Worship without sacrifice
Indian Corporate Leaders and
Trusteeship
Infosys, particularly from its former CEO and current chief
mentor, Narayana Murthy for creating this company along
with a small group of people (better sharing of wealth in
society), the involvement of employees in the companys
fortunes (through ESOPs) and his contentment with a mere
7% of company stock (he prefers it that way) reflect a
deep-rooted commitment towards trusteeship.

House of the Tatas with their corporatised initiatives for
socio-corporate benefits

WIPRO Cares Foundation, with a targeted corpus of Rs
100 crore for primary education;

Birla foundation with its focus on socio-economic
improvement in the lives of the people touched by the
corporation.

Social & Economic
Responsibilities of Business
Reference books
Representations of Social Responsibility Vol.II
edited by David Crowther/Renu Jatana

Corporate Social Responsibility: Ethical and
Strategic Choice by Jayanta Bhattacharya

Corporate Social Responsibility: Concepts and
Cases - The Indian Experience Edited by C. V.
Baxi and Ajit Prasad

Essentials of Business Environment: K.
Aswathappa

Meaning of CSR


By the term Corporate Social Responsibility
(CSR) what is generally understood is that
business has an obligation to society that
extends beyond its obligation to its
shareholders or owners.
Ten Principles: The Global Compact
Human rights
1. Businesses should support and respect the protection of
internationally proclaimed human rights; and
2. Make sure that they are not complicit in human rights
abuses.

Labor standards
3. Businesses should uphold the freedom of association
and the effective recognition of the right to collective
bargaining;
4. The elimination of all forms of forced and compulsory
labor;
5. The effective abolition of child labor; and
6. The elimination of discrimination in respect of
employment and occupation.
Ten Principles: The Global Compact
Environment
7. Business should support a precautionary approach to
environmental challenges;
8. Undertake initiatives to promote greater
environmental responsibility; and
9. Encourage the development and diffusion of
environmentally friendly technologies.

Anti-Corruption
10. Business should work against all forms of corruption,
including extortion and bribery.


The Global Compact

There are now some 90 Indian companies, which
have signed up to the UN Global Compact.

More than 649 companies globally have signed
the Global Compact

(www.unglobalcompact.org)

Definition of CSR

CSR means operating a business in a manner that
meets or exceeds the ethical, legal, commercial
and public expectations that the society has of
business.

The World Business Council for Sustainable
Development defines CSR as: the continuing
commitment by business to behave ethically and
contribute to economic development while
improving the quality of life of the workforce and
their families as well as of the local community
and society at large.

Key Elements in Definition of CSR
Corporations have responsibilities that go beyond the
production of goods and services at a profit.

These responsibilities involve helping to solve important
social problems. especially those they have helped
create.

Corporations have a broader constituency than
stockholders alone.

Corporations have impacts that go beyond simple
marketplace transactions.

Corporations serve wider range of human values than
can be captured by a sole focus on economic values.
Social Responsibilities of Business
Archie B Carroll
Economic
Responsibility
Legal
Responsibility
Ethical Responsibility
Discretionary
Responsibility
To whom Business Organizations are
responsible?????

Primary Stakeholders

Secondary Stakeholders
Relations between a business firm and its primary
stakeholders
Business firm
(Managers)
Wholesalers
(Retailers)
Creditors
Suppliers
Customers
Stockholders
Employees
(Unions)
Invest
capital
Lend
money
Sell
materials
Buy
products
Distribute
products
Sell
labor
Relations between a business firm and some of its
other (secondary) stakeholders
Business Firm
(Managers)
The
General
Public
Business
Support
Groups
Governments
Social
Activist
Groups
Media
Central/State
and Local
Governments
Local
Communities
Regulation,
taxes
Friendly,
hostile
Social
demands
Image,
publicity
Advice,
research
Positive,
negative
opinion
Jobs,
environment
Social Responsibility Debate:
Arguments in Against
In Friedmans view business has only one social
responsibility and that is to maximize the profits of its
owners. His very famous statement says it all, The
business of business is business.

Distorts allocation of Resources

Business lacks training in social issues, and lacks social
skills necessary to carry out social programs.

Social policy is the jurisdiction of governments, not
business

Increase in business Power


Corporations have too much power

In 1999 the United Nations reported that the worlds
then three richest people-Bill Gates of Microsoft, the
Sultan of Brunei and the Walton family of the Wall Mart
retail chain were worth more than the combined GDP of
the worlds 34 poorest nations.

With great power and size comes
great responsibility.

Social Responsibility Debate:
Arguments in Favor
How Does CSR benefit Business???
Reputation
Loyal Employees
&
Customers
Less Law Suits
Less Media
Harassment
Access to
Capital
Improves
Improves
Productivity
Community
Goodwill
Better
Environment
DIFFERENCE
GOOD
COMPANY

Excellent Products
&
Services
GREAT
COMPANY

Excellent
Products/services
&
Makes the world a better
place
Developments of CSR in India

First Phase :Merchant charity Dates back
to Vedic period Religious and social
ethics

Relief in natural disasters

Dharam Shalas

Drinking water
Developments of CSR in India
Second Phase Trusteeship

Social responsibility was brought into communitys
consciousness goes principally to business leaders like
JRD Tata, Ramakrishna Bajaj, Arvind Mafatlal,
Kasturbhai Lalbhai.

Vinoba Bhave on whom Gandhijis mantle had fallen
wanted businessmen to interest themselves in
humanitarian, educational and other beneficial
social activities and consider business as a social
mission while promoting the trusteeship of wealth
theory of Gandhiji whereby owners and workers
were co-trustees of business for society.
Developments of CSR in India
Third Phase Declaration of social
responsibility

Role of Jaiprakash Narayan

Organized Conferences on responsibilities
of business

Setting up of Fair Trade Practices
Association by Tata, Bajaj and others

Developments of CSR in India

Fourth Phase Managerial Trusteeship

1970s & later realization that continued
profitability depended on involvement
towards development of society

Importance of ethical business practices and
concern for the environment in which the
business operates was also recognized.
Developments of CSR in India
Fifth Phase

Corporate citizenship
Realization that if social development is
neglected, business cannot prosper.
Government alone cannot handle all social
issues.


Traditional drivers for CSR
Values

Strategy

Public Pressure


Present Drivers for CSR

Corporate Social Performance
Stakeholder Management
Corporate Environment Management
Consumer Pressure
Risk Management and Sustainability
Business Ethics
Attracting employees
Personal Values


Significant Drivers of CSR
Why do it???
0%
10%
20%
30%
40%
50%
60%
70%
I
m
a
g
e

B
u
i
l
d
i
n
g
E
m
p
l
o
y
e
e

M
o
r
a
l
P
h
i
l
a
n
t
h
r
o
p
h
y
E
t
h
i
c
s
%


o
f

C
o
m
p
a
n
i
e
s
Social Audit

Gerald Vinten defines social audit as a review to
ensure that an organization gives due
consideration to its social responsibilities to those
both directly and indirectly affected by its
decisions, and that a balance is achieved in its
corporate planning between these aspects and
more traditional business related objectives
Area of Social Responsibility
Respecting Human Rights: not discriminating against caste,
creed, gender, etc

Contributing to socio-economic development

Employee Welfare: which includes the right to organize,
eliminating child labour, non-discrimination, living wage and
social security, training, safety, health and wellbeing, lifelong
learning, empowerment of employees, share ownership schemes
etc.

Consumer Protection: includes right to information, impact of
product on local market, etc

Respect for national sovereignty and local communities by
multinationals.
Areas of Social Responsibility
Participating in academic research.

Share resources with under-privileged communities
e.g., transportation and medical facilities with the
community senior citizens, etc.

Community Investments e.g., companies can invest in
sustainable development Programmes for the community.

Socially Responsible Investments e.g., Investors should
to invest in companies who follow responsible business
practices

Share expertise and knowledge with peers and learn
from others experience.



Areas of Environmental Responsibility
Respect for the Environment

Environmental friendly technologies: investment in eco-
friendly technologies.
Use, conserve and discharge: energy, material and water
in an eco-friendly manner.
Adopt preventive and precautionary measures for
environment pollution control. Educate employees and
the community to take collective, preventive and
precautionary measures to reduce environmental
pollution.
Rectify environmental damage at source: Treat waste
before disposing it.
Bio - diversity preservation
Promote and implement an environmental policy for
sustainable energy and sustainable environment.
Areas of Business Responsibility
Compliance with Tax Laws and other regulations.
Corporate Governance: Transparent Financial Reporting;
Auditing / Verification and Accountability; addressing
customer redressals and grievances.
Invest in developing science and technology.
Foster ethical trade practices
Regulate suppliers CSR practices and distributors CSR
practices. e.g. stop working with suppliers and distributors
who do not follow responsible business practices
Transparent financial reporting : Public financial reports in
newspapers for public information.
Steps to implement CSR
Mainstreaming CSR vision in Articles of Association
Develop a written policy CSR and make it available in the public
domain
Assessment of internal environment
Identification of drivers and barriers to change
Assessment of core competencies of the company
Building in the strategic business case
Assessment of external environment
Legal Context & Development Context
Identification & prioritization of the opportunities for corporate
collaboration
Putting CSR policy in the public domain
Steps to implement CSR

Translating CSR policy into action
Reporting, experience sharing and mutual
learning
External reporting and certification
Why companies do not take up
CSR???

Markets do not reward ethical companies

Lack of clear definition of CSR

Systematic denial of wrong doings

Location of CSR on the periphery of the
corporate structure




Thank You