Module No.

5: Corporate Governance & Corporate Social Responsibility

(12 hours)
5 Corporate Culture - Meaning, Characteristics, Importance, Positive and negative impact of corporate
culture in business, Role of CEOs in shaping business culture. Corporate Governance - Meaning, Scope,
Characteristics, Principles, Benefits, Limitations, Corporate Governance Norms, Changes in Corporate
Governance issues as per Companies Act 2013. Various Committees on Corporate Governance – Board
of Directors, Appointment & Duties; Cadbury Committee, Narasimhan Committee, Narayana Murthy
Committee. CSR: Concept, Scope, Types, CSR Principles & Strategies, Importance of CSR in
contemporary society, Various models of CSR.

Meaning of Corporate Culture: Corporate culture is the collection of values, beliefs, ethics and
attitudes that characterize an organization and guide its practices. To some extent, an organization's
culture can be articulated in its mission statement or vision statement.

Characteristics, Importance of Corporate Culture:

• Corporate culture refers to the beliefs and behaviors that determine how a company's
employees and management interact.
• Corporate culture is also influenced by national cultures and traditions, economic trends,
international trade, company size, and products.
• Corporate cultures, whether shaped intentionally or grown organically, reach to the core of a
company’s ideology and practice, and affect every aspect of a business.

Characteristics of Successful Corporate Cultures

Corporate cultures, whether shaped intentionally or grown organically, reach the core of a company’s
ideology and practice, and affect every aspect of a business, from each employee to customer to public
image. The current awareness of corporate culture is more acute than ever.
The Harvard Business Review identified six important characteristics of successful corporate cultures
in 2015.1 First and foremost is "vision": from a simple mission statement to a corporate manifesto, a
company’s vision is a powerful tool. For example, Google’s modern and infamous slogan: “Don’t Be
Evil” is a compelling corporate vision. Secondly, "values," while a broad concept, embody the
mentalities and perspectives necessary to achieve a company’s vision.
Similarly, "practices" are the tangible methods, guided by ethics, through which a company implements
its values. For example, Netflix emphasizes the importance of knowledge-based, high-achieving
employees and, as such, Netflix pays its employees at the top of their market salary range, rather than
through an earn-your-way-to-the-top philosophy. "People" come next, with companies employing and
recruiting in a way that reflects and enhances their overall culture.
Lastly, "narrative" and "place" are perhaps the most modern characteristics of corporate culture. Having
a powerful narrative or origin story, such as that of Steve Jobs and Apple, is important for growth and
public image. The "place" of business, such as the city of choice and also office design and architecture,
is one of the most cutting-edge advents in contemporary corporate culture.
Importance of Corporate Culture:
Why Is Corporate Culture Important? Corporate culture is important because it can support important
business objectives. Employees, for example, might be attracted to companies whose cultures they
identify with, which in turn can drive employee retention and new talent acquisition.
8 reasons why organizational culture is important
Here are eight reasons why organizational culture is important:
1. Increased employee engagement
2. Decreased turnover
3. Strong brand identity
4. Elevated productivity
5. Transformational power
6. Top performers
7. Effective onboarding
8. Healthy team environment
1. Increased employee engagement
A work environment that possesses organizational culture is driven by purpose and clear expectations.
This motivates and inspires employees to be more engaged in their work duties and interactions with
others. It also leads to high levels of workforce engagement, which drives productivity. Having a strong
connection to an organization and its people creates an atmosphere of positivity that is hard to ignore.
2. Decreased turnover
People who feel valued and respected at a company are less likely to leave it. That's why it's essential
for brands to foster a winning organizational culture that supports their core values and mission
statement. Happy employees mean less turnover, which saves companies time and money in the hiring
process. Companies that achieve a strong culture must take steps to maintain and improve it.
3. Elevated productivity
When employees have the resources and tools they need to succeed, it helps increase productivity and
performance levels overall. Organizational culture impacts the structure of a workplace in ways that
bring people of the same skill set together. Those who share similar backgrounds and skills may work
more quickly together when tackling company projects.
Related: 15 Examples of How to Increase Productivity in the Workplace
4. Strong brand identity
A company's organizational culture represents its public image and reputation. People make
assumptions about businesses based on their interactions within and outside of the company. If it lacks
organizational culture or has a weak image, customers may hesitate to do business with anyone who is
associated with the brand. Businesses with a strong brand identity tend to attract more business and job
candidates with similar values who support their mission.
5. Transformational power
Not all businesses have the power to transform ordinary employees into total brand advocates, but those
with a strong organizational culture do. Companies that recognize their employees' efforts and celebrate
team successes are more likely to notice a change in employees as they experience a sense of
accomplishment.
6. Top performers
Companies that promote community in the workplace are more likely to retain their best employees.
People who are great at their jobs and know the value of their skills commonly leave negative work
environments where they feel undermined and unappreciated. Organizational culture builds a high-
performance culture that strengthens the work of people within the company, resulting in a positive
employee experience overall.
Related: 7 Ways Organizational Culture and Leadership are Connected
7. Effective onboarding
More and more, businesses with an organizational culture are relying on effective onboarding practices
to train new hires. Onboarding practices that include orientation, training and performance management
programs help new employees access the right resources and better transition into their roles. This
promotes employee longevity and loyalty and reduces the amount of frustration some employees
experience when they don't have the information needed to do their job well. Onboarding is a great way
for companies to ensure new hires understand the core values of their business.
8. Healthy team environment
Organizational culture helps improve workflows and guides the decision-making process. It also helps
teams overcome barriers of ambiguity. Team members who are informed and knowledgeable about
certain processes are often more motivated to finish projects. Having a clear culture that unifies
employees and promotes organized work structures helps people work together with purpose .

5 Corporate Culture: Culture affects every aspect of your company, from the public’s perception
of your brand to your employees’ job satisfaction to your bottom line. Because there’s so much at stake,
it’s important that your corporate culture is adaptable and open to improvement – which starts with
being able to articulate just what kind of culture your company has.
While no two cultures are exactly alike (the nuances are too great!), there are defining characteristics
that tend to place organizational cultures into one of five categories, or types, which we’ve outlined
below. Often, the industry of a company will dictate its culture to some degree, but that doesn’t mean
your culture can’t be changed. Thankfully, culture is not static, but rather evolving.
1. Team-first culture - aka “the comrade”
Team-oriented companies hire for culture fit first, skills and experience second.
A company with a team-first culture makes employees’ happiness its top priority. Frequent team
outings, opportunities to provide meaningful feedback, and flexibility to accommodate employees’
family lives are common markers of a team-first culture.
Team-oriented companies hire for culture fit first, skills and experience second. Why? Because they
know happy employees make for happier customers. It’s a great culture for any customer service-
focused company to embody, because employees are more likely to be satisfied with their work and
eager to show their gratitude by going the extra mile for customers.
Possible pitfalls: The larger the company, the more difficult it is to maintain this type of culture. That’s
why having a team member dedicated to cultivating culture is a great strategy for any company.
You may have a team-first culture if:
• Employees are friends with people in other departments
• Your team regularly socialises outside of work
• You receive thoughtful feedback from employees in surveys
• People take pride in their workstations

2. Elite culture - aka “the athlete”

Companies with elite cultures are often out to change the world by untested means.
An elite culture hires only the best because it’s always pushing the envelope and needs employees to
not merely keep up, but lead the way. Innovative and sometimes daring, companies with an elite culture
hire confident, capable, competitive candidates. The result? Fast growth and making big splashes in the
market.
Companies with elite cultures are often out to change the world by untested means. Their customers are
often other businesses that need their products to remain relevant and capable in a new environment—
one often of the elite-cultured company’s creation. (That’s how trailblazing we’re talking.)
Possible pitfalls: Such intensity can lead to competition between employees and people feeling
pressure to always be on. Perks like team outings, peer recognition programs and health initiatives can
combat this.
You may have an elite culture if:
• Employees aren’t afraid to question things that could be improved
• Employees make work their top priority, often working long hours
• Your top talent moves up the ranks quickly
• You have many highly qualified job applicants to choose from

3. Horizontal culture - aka “the free spirit”

Titles don’t mean much in horizontal cultures.
Horizontal culture is common among startups because it makes for a collaborative, everyone-pitch-in
mindset. These typically younger companies have a product or service they’re striving to provide, yet
are more flexible and able to change based on market research or customer feedback. Though a smaller
team size might limit their customer service capabilities, they do whatever they can to keep the customer
happy—their success depends on it.
In a Horizontal culture, communication between the CEO and office assistant typically happens through
conversations across their desks to one another rather than email or memos. This is the experimental
phase, where risks are necessary and every hire must count.
Possible pitfalls: Horizontal cultures can suffer from a lack of direction and accountability. Try to
encourage collaboration while still maintaining clearly defined goals and a knowledge of who’s
primarily responsible for what. Horizontal structure shouldn’t mean no structure.
You may have a horizontal culture if:
• Teammates discuss new product ideas in the break room
• Everybody does a little bit of everything
• The CEO makes his or her own coffee
• You still have to prove your product’s worth to critics

4. Conventional culture - aka “the traditionalist”

Traditional companies have clearly defined hierarchies and are still grappling with the learning curve
for communicating through new mediums.
Companies where a tie and/or slacks are expected are, most likely, of the conventional sort. In fact, any
dress code at all is indicative of a more traditional culture, as are a numbers-focused approach and risk-
averse decision making.
But in recent years, these companies have seen a major shift in how they operate. That’s a direct result
of the digital age, which has brought about new forms of communication through social media and
software as a service (SaaS). Today, traditional companies still have clearly defined hierarchies, yet
many are grappling with the learning curve for communicating through new mediums that can blur
those lines. Facing this challenge can be a big opportunity for learning and growth, as long as it’s not
resisted by management. While new office technology is often low on management’s list of concerns,
more traditional companies are starting to experiment with it as more millennials enter higher-up
positions.
Possible pitfalls: This very cut-and-dry approach leaves little room for inspiration or experimentation,
which can result in a lack of passion or resentment from employees for being micromanaged. Getting
employees to understand the company’s larger mission—and putting more trust in employees to work
toward it—can combat that.
You may have a conventional culture if:
• There are strict guidelines for most departments and roles
• People in different departments generally don’t interact
• Major decisions are left up to the CEO
• Your company corners the market

5. Progressive culture - aka “the nomad”

Uncertainty is the definitive trait of a transitional culture, because employees often don’t know what to
expect next.
Mergers, acquisitions or sudden changes in the market can all contribute to a progressive culture.
Uncertainty is the definitive trait of a progressive culture, because employees often don’t know what to
expect next (see almost every newspaper or magazine ever). “Customers” are often separate from the
company’s audience, because these companies usually have investors or advertisers to answer to.
But it’s not all doom and gloom. A major transition can also be a great chance to get clear on the
company’s shifted goals or mission and answer employees’ most pressing questions. Managing
expectations and addressing rumours that pop up through constant communication are the best things a
company can do to prevent employees from fleeing or cowering. Change can be scary, but it can also
be good, and smart employees know this. They embrace change and see it as an opportunity to make
improvements and try out new ideas. And hopefully, they rally their colleagues to get on board.
Possible pitfalls: Progressive culture can instill fear in employees for obvious reasons. Any change in
management or ownership—even if it’s a good thing for the company—isn’t always a seen as a good
thing. Communication is crucial in easing these fears. It’s also a good opportunity to hear feedback and
concerns from employees and keep top talent engaged.
You may have a progressive culture if:
• Employees talk openly about the competition and possible buyouts
• Your company has a high turnover rate
• Most of your funds come from advertisers, grants or donations
• Changes in the market are impacting your revenue

Positive and negative impact of corporate culture in business:

A strong culture positively impacts your business in more ways than one. In addition
to impacting your revenue, here are five key ways a winning company culture can
affect your business.

1. Attract and keep top talent.

High staff turnover is not only expensive, but it lowers staff morale and can make the job harder for
those who remain. Some studies show that it costs six to nine months salary on average every time a
business replaces a salaried employee. While other studies have shown that it may be even more
expensive than that.
No matter how passionate people are about their careers, if they are not immersed in a healthy,
supportive culture they are more likely to burnout and leave their job.
Take teachers, for example. Many people go into education because they deeply care about teaching
and the students, yet, between 40-50% of teachers quit within their first five years. People can care
about their role, but if they are not in a healthy environment, the chance of them staying long-term is
low.
Investing in culture can be the difference maker. For example, Hyatt Hotels boast high employee
retention among an industry known for its high turnover rates. They attribute their success to employee
development, empowering their employees to solve problems and promoting from within as their keys
to high retention.
Companies that invest in creating healthy culture demonstrate they value their employees. In turn, those
employees will be more likely to stay with the company for a longer period of time. Not to mention, a
strong culture can make you a more attractive employer for top talent.
After all, don’t the best people want to work in a healthy, thriving environment?
2. Improved Productivity.
A strong, healthy culture cultivates a workplace where employees have higher job satisfaction, deeper
employee engagement and ultimately, increased productivity.
Satisfied, engaged employees go above and beyond what is required of them because they are invested
in the work they are doing. This benefits your business. In fact, companies with engaged employees
outperform those without by 202%.
In other words, the secret to getting more work out of your team is NOT by giving them more tasks to
complete. Instead, it’s about creating an environment that allows your employees to do their best work.
3. Employees become advocates.

Employees who love where they work will not hesitate to let others know.
That’s why companies with a strong and thriving culture don’t just have employees, they have amazing
advocates for their brand.
But, employee advocacy isn’t just a great thing for recruitment. It can also have an impact on revenue
generation. According to the National Business Research Institute, a 12% increase in brand advocacy
generates a 2x increase in revenue growth.
Most employees are willing to be advocates for their company – if they have a good experience to talk
about!
One of the best ways to determine if you have a strong company culture is to ask, “Are my employees
telling others about where they work?”
4. You differentiate yourself in the marketplace.
Creating a strong, winning culture leads to better branding. After all, your culture should be the
foundation for your messaging and marketing.
A positive, thriving company culture can become a key point of differentiation for your business, which
can help you stand out amongst a crowded field of competitors. After all, customers and vendors notice
happy and engaged employees.
Essentially, a strong culture can give you a competitive edge that will help you attract clients, partners
and employees.
5. Healthy Team
We spend a third of our day at work, which is a significant amount of time. If all of those hours are
filled with stress from work, it wreaks havoc on your team’s personal health. And that, can have a huge
impact on your business.
High stress levels can lead to unhealthy and unhappy employees, which can cause increased healthcare
costs and lost productivity for your business. In fact, a study shows workplace stress was responsible
for up to $190 billion dollars in U.S. healthcare costs.
Alternatively, when you take the time to emphasize employee wellness as part of your overall culture,
you prove that you care about the people who work for you and that they are more than just a cog in
the machine.

10 Warning Signs of a Negative Corporate Culture

Having a strong corporate culture is an achievable goal for business. Yet, this doesn’t always just
naturally happen. A corporate culture that is enjoyable for employees and enables their best work to be
produced, is something to work on; in this article I’ll discuss 10 warning signs of a negative corporate
culture and the warning signs they give off.

The effect that a negative company culture can have can be huge. Often contributing to increased
employee turnover and decreased motivation. These can then influence their work, aiding in the
production of work that is perhaps not as great as it otherwise could have been.
However, because a strong corporate culture is sometimes an afterthought, many companies fall into
the trap of contributing to a negative corporate culture.
Because the trap of a negative corporate culture looms over every business, precautions must be taken
to ensure they’re not a casualty. So when it comes to warning signs to look for, the good news is, you
don’t have to look too far.
Businesses, management and employees can all employ tactics to ensure they’re working in a good
culture. It’s this foresight that can ensure the longevity of the business, or lack thereof.
Here is a straightforward list of 10 warning signs of a negative corporate culture that you should look
out for.
Poor internal communication
A lack of team spirit in the office can be toxic to a business. This is why it’s no surprise that poor
internal communication is an undeniable sign of a negative culture. However, because your business
aims to create a culture where everyone is friendly and supportive of each other, communication is key.
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Creating an atmosphere where internal communication is free flowing and easy is ideal for culture
creation. When speaking to one another becomes difficult, forced and un-enjoyable, this is where a
problem arises.
To positively influence your corporate culture, ensure the team is able to freely speak their minds. This
can be fostered and easily achieved through the hiring process.
Micromanagement
When under constant scrutiny from management, it can create an atmosphere full of tension. Regardless
that micromanagement doesn’t work, all its good for is slowing down work and ensuring employees
are under unnecessary pressure.
To avoid this, avoid micromanagement. Trust in your hiring process and trust in your employees.
Creating a great company culture is easiest when the tasks are clearly laid out. But allowing the
individual to work autonomously and at a comfortable speed.
Hypercompetition
When it comes to getting work done, competition can be great. In fact, little more beats a bit of friendly
competition between co-workers. Unfortunately, it’s when it turns into unfriendly competition is when
things can begin to drive wedges between employees.
By all means, implementing schemes such as ‘Employee of the Month’ can ensure more of your
employees do their best work. But when competition gets too competitive, things can turn south, fast.

Bad habits
Bad habits can often start from the top. If the management of a company have bad habits when it comes
to work, they can then bleed over to employees believing this is the correct way of going about the
business.
For example, if a manager consistently comes into work late, employees will learn that this is okay to
do. If industry standard practices aren’t taken when performing tasks, employees may soon follow.
Eventually, this will make for an incredibly negative corporate culture.
If this isn’t the case, often bad habits can come about because of a failure to properly manage your
employees.
Focus on profit
Ensuring the company has a good quarter can be important, but solely focussing on the bottom line can
be detrimental to the culture and business all the same. In fact, “companies that don’t have a strong
sense of purpose tend to focus more on the bottom line (69%) and short term results (52%).
Beyond this however, it’s believed that businesses that only focus on profit, leaving no room for
employee engagement, tend to be those that people leave. Its easy to enjoy work when the business puts
in effort for you.

Office gossip
Gossip is negative regardless what environment one is in. When in the office, it can be detrimental to
the atmosphere, causing a shift in the culture and may even constitute bullying and therefore
termination. Office gossip can be hurtful, spiteful and leaves everyone becoming closed off and
guarded. Influencing a negative corporate culture can be easy when gossip starts.
To deal with this, the best thing to do is to speak directly to those in the office effected by it, as well as
those who may be the culprits. Following this, it’s good managerial practice to speak to the office as a
group, also.
Low office engagement
Employee engagement can be one of the reasons an employee chooses to move on. Unfortunately, low
engagement among employees has the potential to be common. Still, to combat against this, can be
easy, all the while breathing new life into the office with a great culture.
The solution? To celebrate birthdays, make time for non-business related chats and maybe get a ping
pong table for good measure.
Lack of empathy
When it comes to human interaction, empathy is important. Yet, when it’s not there, it can appear even
more important. Engaging employees and having empathy for them and their lives is fundamental to
creating relationships as well as culture.
In the working environment it can be as important. For example, understanding and being empathetic
towards co-workers strengths and weaknesses is of value. Know that although something may come
easily to some, it mightn’t come easy to others.
Poor management and leadership
Like ‘Bad habits’, it can often be the management of a company that starts things on a downward
trajectory. From setting a standard of bad habits, to not managing employees properly, the culture can
often be the casualty.
To fix this, ensure the management and leadership of the company are setting the standard and get the
best from the employees.
Office discipline
A corporate culture that lacks discipline makes for a chaotic office space. In addition to this, often it
can allow for unethical behaviour prosper. In many industries, being ethically sound is paramount.
When it comes to finance, health, business, personal well-being and most other industries, being ethical
is a part of life.
So when individuals don’t adhere to these rules, a response needs to be quick. Whether it’s a means of
termination or a consequence not as harsh, management must take action. If this isn’t acted on promptly,
other employees may see this disregarding behaviour go unpunished and opt to partake themselves.
Again, to avoid this, start by hiring the best. Ideally, the best also partake in the ‘best practice’. But if
it’s already underway in your office, your culture may be under attack. Still, this is nothing to fear so
long as action is taken to fix the problem.

Role of CEOs in shaping business culture

Executive leadership is cultural leadership. Our CEOs clearly understand their responsibility to shape
and reinforce the organization's culture to ensure the business thrives in a dynamic marketplace. They
pay attention to articulating and embedding values that promote the adaptation and flexibility.
Every employee in an organisation has a role in creating culture. Culture is something that needs to be
consciously nurtured and shaped. Albeit the CEO is one person, they set the tone for the type of
organisational culture whether they do it intentionally or not. The decisions they make, their habits,
what they focus on, their behaviours all provide guidance for others to follow suit. If the CEO’s
behaviour contradicts the values in the organisation, it very quickly tells employees that the values are
in fact irrelevant. How the CEO engages in all aspects of the company culture can influence how people
feel and how they perform.
When the purpose, vision and culture are aligned and in sync, the company is much more likely to
deliver consistent and profitable growth. Employees are energized, engaged and motivated to do their
best work. They take pride in working for the organization and are brand advocates. In contrast when
a culture is misaligned to the strategic direction of a company, it is much more likely that the
organisation performance is impacted, the energy is low, employees are less engaged and are probably
brand detractors.
The responsibility of organisation culture cannot be delegated. To consciously shape culture in a
meaningful way, it needs to be a strategic priority driven by the CEO. It requires leaders at the top
being fully committed and aligned and it should regularly feature at Board discussions.
There are a few essential ingredients for CEO’s to attend to if they are serious about shaping culture:
1. Be clear on the organisation purpose. Purpose isn’t simply what the business does, it addresses the
‘why’. It’s at the intersection of two fundamental questions: ‘Who are we?’ and ‘What need do we
fulfil in society?’ It defines the reason for existing, it provides clarity and focus that emotively connects
customers and employees to the organisation.
2. Articulate the desired culture. Although culture is an intangible aspect of organisation life, taking
the time to understand it and knowing how it needs to be reshaped to ‘live and breathe’ the purpose and
vision of the organisation is a quantum leap in the right direction.
3. Engage leaders and employees in understanding and shaping the culture. If time is taken to engage
employees, they are more likely to own it and take care of it. Everything from onboarding,
communications, development and engagement of the employee should reflect the desired culture.
4. Define and embed the values and behaviours that bring the culture alive. The values need to be
unique and meaningful to the organisation. The less bland and the more connected to the direction of
the organisation, the more likely that they will stick and guide decision making.
5. Determine the priorities to shape the culture. Attend to these, track measurable progress.
6. Bring the culture alive through story telling. Every day examples of the culture in action reinforces
what is valued and recognised in the organisation. Use both formal and informal networks to spread
the word on the culture you want to shape.
7. And finally, be persistent, patient, push through obstacles and overcome resistors.
Culture change can often take 5+ years, yet the CEO tenure can very often be shorter, leaving employees
feeling that the culture initiative is ‘a project’ that will pass. Boards can safeguard against this by
making sure there is continuity with the incoming CEO and that they will continue the journey of
nurturing and shaping a purposeful culture.
Culture is fundamental to organisation success. Purpose is the driver of culture, and culture is the driver
of organisation outcomes, including the long-term success of the CEO. Establishing a purposeful
culture is the primary vehicle for any CEO to safeguard the long-term health and success of an
organisation and what better way to leave a legacy behind.
‘We cannot change what we are not aware of, and once we are aware, we cannot help but
change’ Sheryl Sandberg, COO Facebook
If you are looking to better understand and shape the culture in your organisation and are interested in
working with a partner that specialises in culture, please get in touch with Astute Consulting
at [email protected]
Astute Consulting is a boutique consultancy firm specialising in people and organisation change. We
enable you to tap into your full potential. Our service offering includes:
– culture review and change
– connecting business and people strategy
– transformation and change
– organization restructures
– optimizing performance and getting the best from people
– executive coaching.

Corporate Governance –
Meaning & Scope: Corporate governance is based on a set of rules, bylaws, policies and procedures to
ensure company accountability. When done correctly, it establishes a framework for attaining a
company's objectives in all spheres of management. It also recognizes the importance of shareholders.
Corporate governance is the combination of rules, processes and laws by which businesses are operated,
regulated and controlled. The term encompasses the internal and external factors that affect the interests
of a company's stakeholders, including shareholders, customers, suppliers, government regulators and
management.
The board of directors or corporate executive board is responsible for creating a framework for
corporate governance that best aligns business conduct with corporate objectives. Good corporate
governance involves establishing principles of security, transparency, equity, compliance, reliance and
accountability.
Characteristics, Principles of Corporate Governance:
Corporate governance is critical for the proper functioning of an organization. Demonstrating good
corporate governance is important for maintaining a company's reputation.
Corporate governance is based on a set of rules, bylaws, policies and procedures to ensure
company accountability. When done correctly, it establishes a framework for attaining a company's
objectives in all spheres of management. It also recognizes the importance of shareholders.
Shareholders elect the company's members of the board, fund company operations and have a direct
say in the operation of the business.
Good governance ensures a company's integrity, overall direction, risk management and success
planning. This, in turn, helps companies stay financially viable and build strong community,
shareholder and investor relations and trust. Demonstrating good corporate governance is often
considered as important as profitability for businesses.
Bad corporate governance can lead to a host of negative outcomes, such as the following:
• failure to reach company goals;
• loss of support from stakeholders and community;
• financial losses; and
• collapse of the company.
Principles of corporate governance
While corporate governance structures may vary, most organizations incorporate the following key
elements:
• Fair and equitable treatment. All shareholders, customers, employees and other
stakeholders should be treated equally and fairly. Part of this is making sure shareholders
are aware of their rights and how to exercise them.
• Accountability. Legal, contractual and social obligations to both shareholders and non-
shareholders must be upheld. Organizations should define a code of conduct for board
members; board committees, such as the audit committee and compensation committee;
and senior executives. New individuals joining those ranks must meet those established
standards.
• Diversity. The board of directors must maintain a commitment to ensure diversity within
corporate governance and the company overall.
• Oversight and management. Board members must also possess the adequate skills
necessary to review management practices.
• Transparency. All corporate governance policies and procedures should be disclosed to
relevant stakeholders. This includes regularly and consistently communicating pertinent
information to employees, customers, investors, vendors and members of the community.
1.Transparency

The more information you have, the more confident you will be. This is the formula that all of the
stakeholders adhere to. Transparency pays off in the corporate sphere as well. Companies who are
transparent about their operations and financials earn the public’s trust, which is priceless. Transparency
is critical at all levels of a company’s operations, particularly at the top management level, where key
decisions and plans are made. Keeping investors and other stakeholders informed helps to foster a sense
of trust and solidarity, which leads to greater valuations and easier access to capital.
2.Accountability

In its most basic form, accountability refers to a willingness or obligation to accept responsibility for
one’s conduct. Accountability is often viewed negatively and misunderstood by those who believe it is
synonymous with the old “Blame Game.” Accountability offers shareholders trust in the company by
ensuring that, in the event of a negative scenario in the company, those responsible are dealt with
appropriately. Accountability develops a system in which everyone is held responsible for their work
and responsibilities. Two major things are held in place by accountability:-
• Ensures that management is answerable to the Board of Directors.
• Ensures the Board of Directors is answerable to the shareholders.
3.Independence is another principle of corporate governance.

Independence is defined as the freedom to make decisions without being constrained or influenced in
any way. This is also something that has been demonstrated to be critical to the proper operation of
organisations. Independence is defined as –
• The ability to maintain one’s composure in the face of negative forces.
• The ability to make unequivocal, solid conclusions on any issue
• The ability to maintain a high level of professionalism and do the right thing for the firm.
It permits the person to operate with integrity and make decisions and develop judgments bearing in
mind the best interests of the stakeholders. This is why firms choose independent directors: to ensure
that no coercion is used and that the director does not have any personal ties to the company, obstructing
his ability to make independent choices.

Benefits & Limitations of Corporate Governance:

In its most fundamental form, corporate governance relates to how a company works. Corporate
governance encompasses a company’s laws, regulations, policies, and practices, as well as how the
company’s internal operations are run. There are certain principles of corporate governance. It is critical
that an entity’s governance ensures the implementation of suitable and relatively transparent policies
and practices that protect the interests of all parties involved. In a world where international corporations
are plentiful, if everything goes wrong, the disaster’s effects will be felt throughout several countries,
some more severely than others.
What is Corporate Governance?
Corporate governance is a framework for directing and controlling corporations. The Board of Directors
has a fiduciary duty to the shareholders and is thus in charge of overseeing the company’s operations
and activities. Corporate governance also serves as a framework for achieving a company’s goals. The
fundamental goal is to make the business run efficiently so that positive results can be achieved and the
stakeholders’ returns can be maximised.
Principles of Corporate Governance
Following are the principles of corporate governance:
1.Transparency

The more information you have, the more confident you will be. This is the formula that all of the
stakeholders adhere to. Transparency pays off in the corporate sphere as well. Companies who are
transparent about their operations and financials earn the public’s trust, which is priceless. Transparency
is critical at all levels of a company’s operations, particularly at the top management level, where key
decisions and plans are made. Keeping investors and other stakeholders informed helps to foster a sense
of trust and solidarity, which leads to greater valuations and easier access to capital.
2.Accountability

In its most basic form, accountability refers to a willingness or obligation to accept responsibility for
one’s conduct. Accountability is often viewed negatively and misunderstood by those who believe it is
synonymous with the old “Blame Game.” Accountability offers shareholders trust in the company by
ensuring that, in the event of a negative scenario in the company, those responsible are dealt with
appropriately. Accountability develops a system in which everyone is held responsible for their work
and responsibilities. Two major things are held in place by accountability:-
• Ensures that management is answerable to the Board of Directors.
• Ensures the Board of Directors is answerable to the shareholders.
3.Independence is another principle of corporate governance.

Independence is defined as the freedom to make decisions without being constrained or influenced in
any way. This is also something that has been demonstrated to be critical to the proper operation of
organisations. Independence is defined as –
• The ability to maintain one’s composure in the face of negative forces.
• The ability to make unequivocal, solid conclusions on any issue
• The ability to maintain a high level of professionalism and do the right thing for the firm.
It permits the person to operate with integrity and make decisions and develop judgments bearing in
mind the best interests of the stakeholders. This is why firms choose independent directors: to ensure
that no coercion is used and that the director does not have any personal ties to the company, obstructing
his ability to make independent choices.
Advantages of Corporate Governance
A good firm can become a great one with effective corporate governance. Leaders in any field are at
the helm of their respective industries due to excellent corporate governance standards.
1.Compliance with laws:

With corporate governance in place, compliance with various laws is simple, as corporate governance
encompasses the rules, regulations, and policies that allow a corporation to stay compliant and operate
without any hassles or legal inconveniences.
2.Less fines and penalties:

As the legal compliance component is taken care of thanks to corporate governance standards,
businesses can save a lot of money on unnecessary fines and compliances and devote those funds to
more important company goals.
3.Better management is an advantage of corporate governance :

With a structure in place for how the entity runs and how it functions on a day-to-day basis, managing
operations and meeting targets becomes a lot easier. Under effective corporate governance principles,
the work environment takes care of itself, creating teamwork, unity, efficiency, and a desire to succeed.
4.Reputation and relationships:

Companies with effective corporate governance are able to recruit investors and external financiers with
relative ease, thanks to their excellent reputation and brand image. Transparency, or the practice of
sharing crucial internal information with stakeholders, is one of the pillars of corporate governance.
This strengthens the entity’s relationship with its stakeholders and sows the seeds of trust between the
company and the general public.
5.Conflicts and deceptions of a lesser magnitude:

Employees are encouraged to be morally mindful in every circumstance they meet by the norms
imposed in the workplace, which eliminates the chance of fraud and conflict between employees.
Disadvantages of Corporate Governance
When it comes to smaller organisations, there may be some complications because the shareholders
may function as directors and managers without any separation. In light of this, the following
conclusions can be drawn:
1.The cost of keeping legally compliant:

Businesses face a slew of regulations that must be adhered to, with each industry attracting its own set
of legislation. Corporate governance ensures legal observance, but it comes at a high cost.
2.Increased costs:

Considering all of the regulations that must be satisfied, the administrative costs for organisations with
corporate governance are quite high. Here are a few documents that must be kept up to date:-
• Sales and purchases of stock.
• Records of legal compliance.
• Annual registration.
3.Maintenance of segregation:

Regardless of the size of the company, all formalities and standards must be followed without exception.
Failure to follow these regulations exposes the company to significant risk, such as “piercing of the
corporate veil,” in which the corporation’s separate legal entity status is disregarded in order to get
insight into what goes on behind closed doors.
4.The principal-agent conflict:

It is usual practice in large organisations to pick a well-known management with a proven track record
to oversee the day-to-day operations of the company. Unfortunately, this can lead to a conflict between
shareholders and managers, as they may have quite different goals and viewpoints. This frequently
results in a clash between the two, impacting the com``pany’s overall capacity to manage operations
smoothly and efficiently.

Corporate Governance Norms:

Eight Codes of Corporate Governance

1. Governance Structure:
All organizations should be headed by an effective board and all the responsibilities and
accountabilities within the organisation should be clearly distinguished.

2. Structure of the Board and its Committees:

The board should consist of appropriate combination of executive directors, independent
directors and non-independent non-executive directors to prevent one individual or a small
group of individuals from dominating the board's decision. The board's size and scale should
be in proportion with the level of diversity of the organisation. Appropriate board committees
may be formed to assist the board in effective performances to fulfil the duties.

3. Director's Appointment Procedure:

There should be a formal, rigorous and transparent process for various activities like
appointments, election, re-election of directors etc. Members for the board should be
appointment on merit basis fulfilling objective criteria which should include skills,
knowledge, experience, and independence for the benefits of the company. The board should
ensure that a formal, rigorous and transparent procedure be in place for planning the
succession of all key officeholders.

4. Directors' duties, remuneration and performance:

Directors should be aware of their legal duties. They must observe and foster high ethical
standards and a strong ethical culture in their organisation. Each director must be able to give
sufficient time to discharge his or her duties effectively. Conflicts of interest should be
disclosed and managed.

The board of members is responsible for the governance of the organisation's information,
information technology and information security. The board, committees and individual
directors should be supplied with informations in a timely manner and in an appropriate form
and quality. The performances of board members should be evaluated and be held
accountable to appropriate stakeholders. The board should be transparent, fair and consistent
in determining the remuneration policy for directors and senior executives.

5. Risk Governance and Internal Control:

The board will be held responsible for risk governance. It must check the development and
execution of a comprehensive and powerful system of risk management and also ensures the
maintenance of a sound internal control system.

6. Reporting with Integrity:

The board must present a fair, balanced and understandable assessment of the performances
and outlook of organization's financial, environmental, social and governance position in its
annual report and on its website.

7. Audit:
All the organizations should consider having an effective and independent internal audit
function that has the respect, confidence and cooperation of both the board and the
management. The board should establish formal and transparent arrangements to appoint
organisation's auditors and maintain an appropriate relationship with them.
8. Relations with Shareholders and other key Stakeholders:
The board should be responsible for ensuring that an appropriate interchange and disclosure
takes place between the organisation, its shareholders and other key stakeholders. The board
should respect the interests of its shareholders and other key stakeholders within the context
of its fundamental purpose.

Regulatory Framework for Corporate Governance in India

1. The Companies Act, 2013

The new Companies Law[4] contains many provisions related to good corporate governance
like Composition of Board of Directors, Admitting Woman Director, Admitting Independent
Director, Directors Training and Evaluation, Constitution of Audit Committee, Internal Audit,
Risk Management Committee, SFIO Purview, Subsidiaries Companies Management,
Compliance center etc.

All such provisions of new Companies Law are instrumental in providing a good Corporate
Governance structure. Few provisions are:

o Section 134:
It mandates to attach a report to every Financial statement by Board of Directors
containing all the details of the matter including the statement containing director's
responsibility.
o Section 177:
It requires Board of Directors of every listed company or any other class of
committee to constitute an Audit Committee. It also provides the manner to constitute
the committee.
o Section 184:
It mandates the Director disclose his interest in any company or companies, body
corporate, firms, or other association of Individuals. The director is required to
disclose any such interest at the first meeting of the board and if there is any change
in the interest, then the first meeting will be held after such change.

2. Securities and Exchange Board of India (SEBI)

SEBI is a regulatory authority established on April 12, 1992 with the main purpose of curbing
the malpractices in the financial market and protecting the interest of its investors. Its main
objective is to regulate the activities of Stock Exchange and to ensure the healthy
development in the financial market. In order to ensure good corporate governance, SEBI
came up with detailed norms of Corporate Governance.

o As per the new rules, the companies are required to get shareholders approval for
RPT (Related Party Transactions)[5], a provision for whistle blower mechanism,
clear mandate to have at least one woman director in the Board and moreover it
elaborated disclosures on pay packages.

o Clause 35B of the Listing Agreement is being amended by the regulatory authority.
Now as per the amended clause, Listed companies are required to provide the option
of e-voting to its shareholders on all proposed or passed general meetings. Those who
do not have access to e-voting facility, they should be entitled to cast their votes in
writing on Postal Ballot[6]. The amended provision was needed so that the provisions
of the listing agreement can be aligned with the provisions of Companies Act, 2013.
By doing so, a closer step is provided to strengthen the Corporate Governance norms
in India with respect to Listed companies.

o Clause 49 of the Listing Agreement was also amended by SEBI in order to strengthen
the Corporate Governance framework for Listed companies in India. The revised
clause forbids the independent directors from being eligible for any kind of stock
option. Whistle blower policy is also added in the revised clause whereby the
directors and employees can report any unethical behavior, any fraud or if there is
violation of Code of Conduct of the company.
With the amended provision, Audit Committee is also enhanced, now it will include
evaluation of risk management system, internal financial control and will keep a
check on inter-corporate loans and investments. The amendment now requires all the
companies to form a policy for the purpose of determination of 'material subsidiaries'
and that will be published online.

3. Standard Listing Agreement of Stock Exchanges

The Listing Agreement is the basic document which is executed between companies and the
Stock Exchange when companies are listed on the stock exchange. The main purposes of the
listing agreement are to ensure that companies are following good corporate governance. The
Stock Exchange on behalf of the Security Exchange Board of India ensures that companies
follow good corporate governance.

The Listing Agreement comprises of 54 clauses stating corporate governance which listed
companies have to follow and in case of failing to such, companies have to face disciplinary
actions, suspension, and delisting of securities. The companies also have to make certain
disclosures and act by the clauses of the agreement.

4. Accounting Standards issued by the ICAI

ICAI stands for Institute of Chartered Accountants of India. It is a statutory body established
by Chartered Accountants Act, 1949. It issues accounting standards for disclosure of financial
information.

o Section 129 of the Companies Act, 2013 states that financial statements of a company
shall comply with the accounting standards notified under section 133 of the Act. It
also states that the financial statement shall give true and fair view of the state of
affairs of the company.

o Section 133 states that Central government may prescribe the accounting standards as
recommended by ICAI. Accounting standards are provided so that good corporate
governance can be ensured in a company. Some accounting standards issued by ICAI
are:

▪ Disclosure of Accounting policies followed in preparation of Financial

statement
▪ Determination of values at which the inventories are carried in a financial
statement,
▪ Cash flow statements for assessing the ability of an enterprise in generating
cash,
▪ Standard to ensure that appropriate measurement bases are applied to
provisions and contingent liability,
▪ Standard prescribing accounting treatment of cost and revenue associated
with construction contracts.

5. Secretarial standards issued by ICSI (Institute of Company Secretaries of India)

It is an autonomous body constituted by the Company Secretaries Act, 1980. It is a body to
regulate and develop the profession of Company Secretaries in India. It issues secretarial
standards as per the provision of the Companies Act,2013.

Section 118(10) of the Companies Act states that every company shall observe secretarial
standards specified by Institute of Company Secretaries of India with respect to General and
Board meetings.

o Secretarial standard-1 on Meeting of the Board seeks to prescribe a set of principles

for conducting meetings of Board of Directors. These principles are equally
applicable to the meetings of committees as well. SS-1 principles are applicable to the
Meeting of Board of Directors of all companies except one person company.

o Secretarial standard-2 prescribes a set of principles for conducting and convening

general meetings. This standard also deals with the procedure for conducting e-voting
and postal ballot. SS-2 is applicable to all types of General meetings of all companies
except one person company incorporated under the act. The principles in SS-2 are
applicable mutatis-mutandis[7] to meetings of creditors and debenture holders.
Moreover, it also prescribes that any meeting of members or creditors or debenture-
holders of a company under the direction of CLB (Company Law Board), NCLT
(National Company Law Tribunal) or any other authority shall be governed by the
provisions of this standard.

Changes in Corporate Governance issues as per Companies Act 2013 .

The Companies Act, 2013 together with the Companies Rules provide a robust framework for Corporate
Governance. The requirements inter alia provide for: Qualifications for Independent Directors along
with the duties and guidelines for professional conduct (Section 149(8) and Schedule IV thereof). Please
refer to the PPT shared.

Various Committees on Corporate Governance – Board of Directors, Appointment &

Duties

Governance is a word that barely existed 30 years ago. Now it is in common use not just in companies
but also in charities, universities, local authorities and National Health Trusts. It has become shorthand
for the way an organization is run, with particular emphasis on its accountability, integrity and risk
management.[i]
Corporate Governance is the system by which companies are directed and controlled. Board of directors
is responsible for the governance of their companies. The shareholders’ role in governance is to appoint
the directors and the auditors and to satisfy themselves that an appropriate governance structure is in its
place. The responsibilities of the board include setting up of the company’s strategic aims, providing
the leadership to put them into effect, supervising the management of the business and reporting to
shareholders on their stewardship. The board’s actions are subject to laws, regulations and the
shareholders in a general meeting.[ii]
OECD Principles on Corporate Governance state that together with guiding corporate strategy, the
board is chiefly responsible for monitoring managerial performance and achieving an adequate return
for shareholders, while preventing conflicts of interest and balancing competing demands on the
corporation.[iii]
Responsibilities cast upon directors are quite onerous and multifarious. The duties of directors are partly
statutory, partly regulatory and partly fiduciary. Board is responsible for direction, control, conduct
management and supervision of the company’s affairs. They have to establish effective corporate
governance procedures and best practices and whistle blower mechanism. Ultimate control and
management vests with the Board.[iv]
BOARD OF DIRECTORS AND BOARD COMMITTEES
Board of Directors:
Before proceeding to the topic, we need to have a basic idea about the Board of Directors.

At the core of corporate governance practices is the Board of Directors which oversees how the
management serves and protects the long term interests of all the stakeholders of the company. The
institution of Board of Directors is based on the premise that a group of trustworthy and respectable
people should look after the interests of the large number of shareholders who are not directly involved
in the management of the company. The position of board of directors is that of trust as the board is
entrusted with the responsibility to act in the best interests of the company.

Board Committees:
Committees appointed by the Board focus on specific areas and take informed decisions within the
framework of delegated authority, and make specific recommendations to the Board on matters in their
areas or purview. All decisions and recommendations of the committees are placed before the Board
for information or for approval.[v]
To enable better and more focused attention on the affairs of the Corporation, the board delegates
particular matters to the committees of the board set up for the purpose. Committees review items in
great detail before it is placed before the Board for its consideration. These committees prepare the
groundwork for decision making and report at the subsequent board meeting.[vi]
VARIOUS COMMITTEES OF THE BOARD
The following are some of the important committees of the Board-

• Audit Committee
• Shareholders Grievance Committee
• Remuneration Committee
• Risk Committee
• Nomination Committee
• Corporate Governance Committee
• Corporate Compliance Committee
• Ethics Committee
We shall deliberate on the functions of all the committees in detail.

AUDIT COMMITTEE
The Audit Committee shall assist the Board of Directors in the oversight of

(1) The integrity of the financial statements of the Company,

(2) The effectiveness of the internal control over financial reporting,

(3) The independent registered public accounting firm’s qualifications and independence,

(4) The performance of the Company’s internal audit function and independent registered public
accounting firms,

(5) The Company’s compliance with legal and regulatory requirements,

(6) The performance of the Company’s compliance function.[vii]

Organization and Membership:
The Committee shall be appointed by the Board and consist of at least three Directors, each of whom
are independent of management and the Company as defined by the Bylaws of the Company, the SEC
and the New York Stock Exchange as well as Clause 49 of the Listing Agreement. Two thirds of the
members shall be independent directors.

All Committee members shall be financially literate, or shall become financially literate within a
reasonable period of time after appointment to the Committee. The Committee shall aspire to have at
least one member who is an “audit committee financial expert” as such term is defined by the SEC.

The Chairman of the Committee shall be an independent director. No Director may serve as a member
of the Committee if such Director serves on the audit committees of more than two other public
companies unless the Board determines that such simultaneous service would not impair such Director’s
ability to serve effectively on the Committee. The Board shall designate one member of the Committee
as its Chairman. Directors will serve the Committee at the pleasure of the Board and for such terms as
the Board may determine. The Committee shall meet at least quarterly and otherwise as the members
of the Committee deem appropriate. Minutes shall be kept of each meeting of the Committee.

Meeting of Audit Committee:

The audit committee shall meet at least thrice a year. One meeting shall be held before finalization of
annual accounts and one every six months. The quorum shall be either two members or one third of the
members of the audit committee, whichever is higher and minimum of two independent directors

Powers of Audit Committee:

The audit committee shall have powers which should include the following:

• To investigate any activity within its terms of reference.

• To seek information from any employee.
• To obtain outside legal or other professional advice.
• To secure attendance of outsiders with relevant expertise, if it considers necessary.
Role of Audit Committee:
The role of the audit committee shall include the following:

• Oversight of the company’s financial reporting process and the disclosure of its
financial information to ensure that the financial statement is correct, sufficient and
credible.
• Recommending the appointment and removal of external auditor, fixation of audit fee
and also approval for payment for any other services.
• Reviewing with management the annual financial statements before submission to the
board, focusing primarily on;
• Any changes in accounting policies and practices.
• Major accounting entries based on exercise of judgment by management.
• Qualifications in draft audit report.
• Significant adjustments arising out of audit.
• The going concern assumption.
• Compliance with accounting standards.
• Compliance with stock exchange and legal requirements concerning financial
statements
• Any related party transactions
• Reviewing with the management, external and internal auditors, the adequacy of
internal control systems.
• Reviewing the adequacy of internal audit function, including the structure of the
internal audit department, staffing and seniority of the official heading the department,
reporting structure coverage and frequency of internal audit.
• Discussion with internal auditors any significant findings and follow up there on.
• Reviewing the findings of any internal investigations by the internal auditors into
matters where there is suspected fraud or irregularity or a failure of internal control
systems of a material nature and reporting the matter to the board.
• Discussion with external auditors before the audit commences about nature and scope
of audit as well as post-audit discussion to ascertain any area of concern.
• Reviewing the company’s financial and risk management policies.
• To look into the reasons for substantial defaults in the payment to the depositors,
debenture holders, shareholders (in case of nonpayment of declared dividends) and
creditors.
Review of information by Audit Committee:
The Audit Committee shall mandatorily review the following information:

• Financial statements and draft audit report, including quarterly / half-yearly financial
information;
• Management discussion and analysis of financial condition and results of operations;
• Reports relating to compliance with laws and to risk management;
• Management letters / letters of internal control weaknesses issued by statutory / internal
auditors; and
• Records of related party transactions
• The appointment, removal and terms of remuneration of the Chief internal auditor shall
be subject to review by the Audit Committee[viii]
SHAREHOLDERS GRIEVANCE COMMITTEE
In terms of Clause 49-IV(G)(iii) of the Listing Agreement, a board committee under the chairmanship
of a non-executive director shall be formed to specifically look into the redressal of shareholder and
investors complaints like transfer of shares, non receipt of balance sheet, non receipt of declared
dividends etc. This committee shall be designated as “Shareholders/ Investors Grievance
Committee”.[ix]
The terms of reference of our Shareholders’/ Investors Grievance Committee are given below:
“To allot the Equity Shares of the Company, and to supervise and ensure:
• Efficient transfer of shares; including review of cases for refusal of transfer
transmission of shares and debentures;
• Redressal of shareholder and investor complaints like transfer of shares, non-receipt of
balance sheet, non-receipt of declared dividends etc;
• Issue of duplicate / split / consolidated share certificates;
• Allotment and listing of shares;
• Review of cases for refusal of transfer / transmission of shares and debentures;
• Reference to statutory and regulatory authorities regarding investor grievances; and to
otherwise ensure proper and timely attendance and redressal of investor queries and
grievances.”[x]
The Shareholders/ Investor Grievances Committee looks into redressal of shareholder and investor
complaints, issue of Duplicate/ Consolidated Share Certificates, Allotment and Listing of shares and
review of cases for refusal of Transfer/ Transmission of shares and debentures and reference to Statutory
and Regulatory Authorities. The scope and functions of the Shareholders/Investor Grievances
Committee are as per Clause 49 of the Listing Agreement.[xi]
REMUNERATION COMMITTEE
The role of a Remuneration Committee is:

• To decide and approve the terms and conditions for appointment of executive directors
and/ or whole time Directors and Remuneration payable to other Directors and matters
related thereto.
• To recommend to the Board, the remuneration packages of the Company’s
Managing/Joint Managing/ Deputy Managing/Whole time / Executive Directors,
including all elements of remuneration package (i.e. salary, benefits, bonuses,
perquisites, commission, incentives, stock options, pension, retirement benefits, details
of fixed component and performance linked incentives along with the performance
criteria, service contracts, notice period, severance fees etc.);
• To be authorized at its duly constituted meeting to determine on behalf of the Board of
Directors and on behalf of the shareholders with agreed terms of reference, the
Company’s policy on specific remuneration packages for Company’s Managing/Joint
Managing/ Deputy Managing/ Whole-time/ Executive Directors, including pension
rights and any compensation payment;
• To implement, supervise and administer any share or stock option scheme of the
Company.[xii]
• to review the overall compensation policy, service agreements and other employment
conditions to Executive Directors and senior executives just below the Board of
Directors and make appropriate recommendations to the Board of Directors;
• to review the overall compensation policy for Non-Executive Directors and
Independent Directors and make appropriate recommendations to the Board of
Directors;
• to make recommendations to the Board of Directors on the increments in the
remuneration of the Directors;
• to assist the Board in developing and evaluating potential candidates for senior
executive positions and to oversee the development of executive succession plans;
• to review and approve on annual basis the corporate goals and objectives with respect
to compensation for the senior executives and make appropriate recommendations to
the Board of Directors;
• to review and make appropriate recommendations to the Board of Directors on an
annual basis the evaluation process and compensation structure for our Company’s
officers just below the level of the Board of Directors;
• to provide oversight of the management’s decisions concerning the performance and
compensation of other officers of our Company; [xiii]
RISK COMMITTEE
The committee comprises a minimum of three independent non-executive directors, as well as the chief
executive and financial director. The chair of the board may not serve as chair of this committee.
Members of the committee are individuals with risk management skills and experience. The
committee’s responsibilities include:

• Review and approve for recommendation to the board a risk management policy and
plan developed by management. The risk policy and plan are reviewed annually.
• Monitor implementation of the risk policy and plan, ensuring an appropriate enterprise-
wide risk management system is in place with adequate and effective processes that
include strategy, ethics, operations, reporting, compliance, IT and sustainability.
• Make recommendations to the board on risk indicators, levels of risk tolerance and
appetite.
• Monitor that risks are reviewed by management, and that management’s responses to
identified risks are within board-approved levels of risk tolerance.
• Ensure risk management assessments are performed regularly by management.
• Issue a formal opinion to the board on the effectiveness of the system and process of
risk management.
• Review reporting on risk management that is to be included in the integrated annual
report.
• Review annually the charters of the group’s significant subsidiary companies’ risk
committees, and their annual assessment of compliance with these charters to establish
if the Naspers committee can rely on the work of these risk committees.
• Perform an annual self-assessment of the effectiveness of the committee, reporting
these indings to the board.[xiv]
NOMINATION COMMITTEE
The primary role of the Nomination Committee of the board is to assist the board by identifying
prospective directors and make recommendations on appointments to the board and the senior most
level of executive management below the board. The committee also clears succession plans for these
levels.[xv] The Nomination Committee is responsible for making recommendations on board
appointments and on maintaining a balance of skills and experience on the board and its committees.
Succession planning for the board is a matter which is devolved primarily to the Nomination
Committee, although the committee’s deliberations are reported to and debated by the full board. The
board itself also regularly reviews more general succession planning for the senior management of the
group.[xvi]
CORPORATE GOVERNANCE COMMITTEE
Together with the audit and compensation committees, the nominating/corporate governance committee
rounds out the three standing committees of a public company’s board of directors. It plays a critical
role in overseeing matters of corporate governance for the board, including formulating and
recommending governance principles and policies. As its name implies, this committee is charged with
enhancing the quality of nominees to the board and ensuring the integrity of the nominating process.
Given the recent focus on board composition and diversity, director elections, and proxy access, the
role of nominating/corporate governance committee is in the spotlight.[xvii]
CORPORATE COMPLIANCE COMMITTEE
The primary Objective of the Compliance Committee is to review, oversee and monitor:

• The company’s compliance with applicable legal and regulatory requirements.

• The company’s policies, programs, and procedures to ensure compliance with relevant
laws, the company’s code of conduct, and other relevant standards
• The company’s efforts to implement legal obligations arising from settlement
agreements and other similar documents
• Perform any other duties as are directed by the board of directors of the company.
The committee’s specific responsibilities in this area include:

• Overseeing the corporate compliance program, including policies and practices

designed to ensure the organization’s compliance with all applicable legal, regulatory,
and ethical requirements.
• Recommending approval of the annual corporate compliance plan and reviewing
processes and procedures for reporting concerns by employees, physicians, vendors,
and others.
• Recommending organizational integrity guidelines and a Code of Conduct.
• Reviewing and reassessing the guidelines and Code of Conduct at least annually[xviii]
ETHICS COMMITTEE
The possible roles for an Ethics Committee are:

• Contribute to the continuing definition of the organization’s ethics and compliance

standards and procedures.
• Assume responsibility for overall compliance with those standards and procedures.
• Oversee the use of due care in delegating discretionary responsibility.
• Communicate the organization’s ethics and compliance standards and procedures,
ensuring the effectiveness of that communication.
• Monitor and audit compliance.
• Oversee enforcement, including the assurance that discipline is uniformly applied.
• Take the steps necessary to ensure that the organization learns from its experiences.
But an ethics committee can do much more. The committee can be charged to meet all seven
requirements for an effective ethics management process. For each of the above arenas of responsibility
there may be several specific roles.[xix]
SIGNIFICANCE OF BOARD COMMITTEES
After a detailed discussion regarding the various functions carried out by each committee and their
lending of crucial assistance to the harmonious functioning of the company is summed up here.

Committees allow the board to –

• handle a greater number of issues with greater efficiency by having experts focus on
specific areas
• develop subject specific expertise on areas such as compliance management, risk
management, financial reporting
• enhance the objectivity and independence of the board’s judgment
Greater specialization and intricacies of modern board work is one of the reasons for increased use of
board committees. The reasons include:

• responsibilities are shared

• more members become involved
• specialized skills of members can be used to best advantage
• inexperienced members gain confidence while serving on matters may be examined in
more detail by a committee
The committees focus accountability to known groups. While the board as a legal unit always retains
responsibility for the work of its committees, the committees because of its focus on the mandate, the
size of the committee being relatively smaller than the board tend to be more effective. However,
committees may dilute governance integrity to the extent that they may obscure the direct board to CEO
accountability and fragment the board’s wholeness. Therefore, it is important that there is clarity of
delegation and it should be ensured that committees are not put between the board and the CEO, either
by giving committees official instructional authority or by allowing them to evaluate performance using
their own criteria.

Cadbury Committee, Narasimhan Committee, Narayana Murthy Committee: [Please refer the
PDF shared for all the committees.]
CSR: Concept, Scope, Types, CSR Principles & Strategies, Importance of CSR in contemporary
society, Various models of CSR.

CSR: Concept, Scope, Types:

Corporate Social Responsibility (CSR) – Scope, Limitations and Social Cost Benefit
Analysis (With Indicators of Social Desirability of a Project)
CSR denotes the way the companies integrate the general, social, environmental and economic
concerns of the society into their own values, strategies and operations in a transparent and
accountable manner and thereby contribute to the creation of wealth and improvement in the standard
of living of the society at large.
The World Business Council for Sustainable Development has described CSR as the business
contribution to sustainable economic development and includes commitment and activities pertaining
to the following topics:
(a) Health and safety
(b) Environmental concerns
(c) Community development
(d) Human rights in relation to labour
(e) Customer satisfaction and fair competition
(f) Accountability and transparency in financial reporting
(g) Maintaining relationship with suppliers
Social responsibility objectives need to be built into corporate strategy of business rather than merely
be statements of good intentions. The concept of CSR extends beyond notions embodied in current
law and it introduces new dimensions and new problems. There is no generally accepted concept of
social responsibility of business enterprises.
The evolution of CSR concept can be summarized as follows:
(a) The first approach originates in classical economic theory as expressed in the hypothesis that the
firm has one and only one objective, which is to maximize profit. By extension, the objective of a
corporation should be to maximize shareholders’ wealth. It is asserted that in striving to attain this
objective, within the constraint of the existing legal and ethical framework, business corporations are
acting in the best interests of the society at large.
(b) The second approach developed in the 1970s, and recognizes the significance of social objectives
in relation to the maximization of profit. In this view, corporate managers should make decisions
which maintain an equitable balance between the claims of shareholders, employees, customers,
suppliers and the general public. The corporation represents, a coalition of interests, and the proper
consideration of the various interests of this coalition is the only way to ensure that the corporation
will attain its long-term profit maximization objective.
(c) The third view regards profit as a means to an end and not as an end in itself. In this view, ‘the
chief executive of a large corporation has the problem of reconciling the demands of employees for
more wages and improved benefit plans, customers for lower prices and greater values, shareholders
for higher dividends and greater capital appreciation; all within a frame work that will be constructive
and acceptable to society’.
Accordingly, organizational decisions should be concerned with the selection of socially responsible
alternatives. Instead of seeking to maximize profit generally, the end result should be satisfactory
level of profit which is compatible with the attainment of a range of social goals. The change from the
second to the third approach to social responsibility is characterized as a move from a concept of the
business corporation based on shareholders’ interest to one which extends the definition of
‘stakeholder’.
The former concept views the business enterprise as being concerned with making profits for its
shareholders and treats the claims of other interested groups, such as customers, employees and
community, as constraints on this objective. The latter concept acknowledges that the business
enterprise has responsibility to all stakeholders, that is, those who stand to gain or lose as a result of
the firm’s activities.
There are a number of common objectives which express the expectations of a large company.
Some of these can be stated as follows:
(a) Rebuilding of public trust and confidence by increased transparency in its financial as well as non-
financial reporting and thereby increasing the shareholder value.
(b) Establishing strong corporate governance practices to enhance the brand reputation of the
company.
(c) Giving adequate support to the health, safety and environment protection policies of the company
both within the manufacturing operations as well as while dealing with outsiders.
(d) Making substantial improvement in its relationship with the labour force thereby showing its
concern for human rights and making it known as an ideal employer.
(e) Contributing to the development of the region and the society around its area of operation.
(f) Addressing the concerns of its various stakeholders in a balanced way so as to maintaining a strong
market position.
The corporate sector will have to integrate the concepts of CSR and sustainability with their business
strategy.
This can be achieved by making certain commitments such as:
(a) By making a quantum shift in their vision statement from profit maximization to social, environ-
mental and economic sustainability.
(b) By adopting sound corporate governance practices both in letter as well as in spirit.
(c) By minimizing the socially and environmentally detrimental impact of their operations.
(d) By creating a conducive atmosphere for the working class and accepting the human rights of the
labour force.
(e) By showing a greater degree of transparency in it’s reporting of both financial as well as non-
financial matters.
(f) By establishing a chain of suppliers having similar CSR values.
Scope of Corporate Social Responsibility:
Ernst and Ernst (1978) identified six areas in which corporate social objectives may be found:
1. Environment:
This area involves the environmental aspects of production, covering pollution control in the conduct
of business operations, prevention or repair of damage to the environment resulting from processing
of natural resources and the conservation of natural resources.
Corporate social objectives are to be found in the abatement of the negative external social effects of
industrial production, and adopting more efficient technologies to minimize the use of irreplaceable
resources and the production of waste.
2. Energy:
This area covers conservation of energy in the conduct of business operations and increasing the
energy efficiency of the company’s products.
3. Fair Business Practices:
This area concerns the relationship of the company to special interest groups.
In particular it deals with:
i. Employment of minorities
ii. Advancement of minorities
iii. Employment of women
iv. Employment of other special interest groups
v. Support for minority businesses
vi. Socially responsible practices abroad.
4. Human Resources:
This area concerns the impact of organizational activities on the people who constitute the human
resources of the organization.
These activities include:
i. Recruiting practices
ii. Training programs
iii. Experience building -job rotation
iv. Job enrichment
v. Wage and salary levels
vi. Fringe benefit plans
vii. Congruence of employee and organizational goals
viii. Mutual trust and confidence
ix. Job security, stability of workforce, layoff and recall practices
x. Transfer and promotion policies
xi. Occupational health
5. Community Development:
This area involves community activities, health-related activities, education and the arts and other
community activity disclosures.
6. Products:
This area concerns the qualitative aspects of the products, for example their utility, life- durability,
safety and serviceability, as well as their effect on pollution. Moreover, it includes customer
satisfaction, truthfulness in advertising, completeness and clarity of labelling and packaging. Many of
these considerations are important already from a marketing point of view. It is clear, however, that
the social responsibility aspect of the product contribution extends beyond what is advantageous from
a marketing angle.
Limitations of Social Reporting and Social Auditing:
Though the importance of social responsibility and reporting is being recognized by many companies
in India, yet its progress and performance is hindered due to the following reasons:
(a) Not Mandatory – Disclosure of social responsibility information is not mandatory for private
sector units. In the case of public sector units also ‘order for social overheads schedule’ does not at all
fulfill the requirements of social audit.
(b) No Standard format – There are not well established concepts, conventions, postulates and axioms
to guide the social accountant in drafting his accounts and reporting.
(c) Lack of clear cut definition of social reporting – Every enterprise adopts different methods for
measuring, reporting and evaluating social responsibility as there is no clear cut definition and
procedure for social reporting.
(d) No cadre of social auditors – There is no separate cadre of social auditors and it is not clear how
and who will conduct such audit.
(e) Auditing social cost and benefit is an intricate function – It is highly doubtful if only accountancy
scholars would be able to perform the stupendous task of identifying and documenting the many sided
social effects of business behaviour and auditing social costs and benefits.
(f) Evaluation – The performance appraisal on social ground is not expected by the business owners.
(g) Lack of objectivity – The collection of data, evaluation of accuracy and objectivity are difficult.
Social Cost Benefit Analysis:
Social Cost Benefit Analysis (SCBA) is a systematic evaluation of an organization’s social
performance as distinguished from its economic performance. It is concerned with the possible
influences on the social quality of life instead of economic quality of life. It analyses all such
activities which have a social or macro impact. The development of an economy not only depends on
the quantum of investment but also on the rational and prudent allocation of resources among various
competing projects.
The technique is most popular for making socially viable decisions of selection or rejection of projects
is based on an analysis of social costs and social benefits of projects. In other words, social cost-
benefit analysis is an important technique of comparing economic alternatives. It is used to determine-
(a) which alternative or choice is socially viable (or most suitable) and (b) which alternative is the
optimal or the best solution.
The need for SCBA arises due to the reason that the criterion used to measure commercial
profitability that guides the capital budgeting in the private sector may not be an appropriate criteria
for public or social investment decisions. Private investors are more interested in minimizing the
private costs and therefore, take into account only those elements which directly affect, their private
gain i.e. private expenses and private benefits.
Both the private benefits and private expenses are valued at prevailing market prices. But the
existence of externalities in benefits and expenses introduces bias in market-price based investment
decisions. The total benefits expected from a project to the society are composed of the private
benefits (internal profit or returns) accruing to owner of the project plus the external benefits (also
known as externalities or spillovers). Thus social benefits or returns equals to internal benefits to the
owner plus the external benefits to the society as whole.
SCBA is a systematic evaluation of an organization’s social performance as distinguished from its
possible inferences on the social quality of life instead of economic quality of life. It analyses all such
activities which have a social or macro impact. The development of an economy not only depends on
the quantum of investment but also on the rational and prudent allocation of resources.
The technique is most popular for making socially viable decisions of selection or rejection of projects
based on an analysis of social cost and social benefits of projects. As an aid to planning, evolution and
decision making, the cost-benefit analysis is a scientific quantitative appraisal of a project to
determine whether the total social benefits of the project justify the total social cost. United Nations
Industrial Development Organization (UNIDO) and Organization of Economic Cooperation and
Development (OECD) have extensively conducted studies on SCBA.
Indicators of Social Desirability of a Project:
A project is also assessed from the social angle in addition to assessment of its commercial viability.
The following social desirability factors will be considered in accept or reject decisions of a project:
i. Employment Potential – The employment potential of a project is looked into. A project with high
employment potential is considered highly desirable.
ii. Foreign Exchange Earnings – A project with potential to earn foreign exchange to the country or an
import substitution project which saves the country’s foreign exchange reserves is highly desirable.
iii. Social Cost-Benefit Analysis – A project with net benefits to the society over the costs to the
society is preferred.
iv. Capital-Output Ratio – If the value of expected output in relation to the capital employed is high,
the project is given priority over the others.
v. Value Added per Unit of Capital – The amount invested in the project should generate the value
addition to the capital employed by earning surplus profits which can be used for further capital
investments to contribute development of the national economy.

Corporate Social Responsibility (CSR) – Definition, Types, CSR Implementation Process and
Benefits and Challenges to CSR Initiatives in India
Corporate Social Responsibility (CSR) is an evolving concept that is yet to command a standard
definition. With an understanding that businesses have a key role of job and wealth creation in a
society, CSR is generally understood to be the way an organization achieves a balance between
economic, environmental, and social imperatives while addressing the expectations of shareholders
and stakeholders.
While businesses try to comply with laws and regulations on these fronts set by legislators and legal
institutions, CSR is often understood as involving private sector commitments and activities that
extend beyond compliance with laws.
It is generally seen as a business contribution towards sustainable development and has been defined
by the Brundtland Commission as ‘development that meets the present needs without compromising
on the ability of future generations to meet their own needs’. It focuses on achieving the integration of
economic, environmental, and social imperatives. In addition, it is often synonymous with certain
features of related concepts such as corporate sustainability, corporate accountability, corporate
responsibility, corporate citizenship, and corporate stewardship.
Many times CSR is motivated by the urge to make a difference by running an organized business,
while being accountable to people and society and balancing their present and future needs, with the
view that beyond fair and just profit, an organization should also give back to society. This is
probably the reason why many companies set aside a percentage of their profits for socially-
meaningful initiatives under the CSR banner. We can define CSR as a way of operating a
business in a manner that meets or excels the ethical, legal, commercial, and public
expectations that a society has of the business.
Definition of CSR:
According to Bowen (1953), CSR is defined as ‘the obligation of businessmen to pursue those policies,
to make those decisions or to follow those lines of action which are desirable in terms of objectives and
values of society’. It is a concept whereby companies voluntarily integrate social and environmental
concerns in their business operations and in their interactions with their stakeholders.
Corporate social responsibility has evolved into a way of corporate life and has become a part of any
corporate performance review. The purview of CSR has also changed into a more inclusive one,
involving all stakeholders, instead of just company management.
According to The World Business Council for Sustainable Development, ‘CSR is the continuing
commitment by business to behave ethically and contribute towards 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’. The European Commission says, ‘Being socially responsible means not only fulfilling
legal expectations, but also going beyond compliance and investing more into human capital, the
environment and relations with stakeholders.’
In the Indian context, CSR became a part of the socialistic pattern of economic growth during early
post-independence period. In 1965, the then Prime Minister of India, Lal Bahadur Shastri, presided over
a national meeting that issued the following declaration on the social responsibilities of business –
‘..[Business has] responsibility to itself, to its customers, workers, shareholders and the community…
every enterprise, no matter how large or small, must, if it is to enjoy confidence and respect, seek
actively to discharge its responsibilities in all directions …and not to one or two groups, such as
shareholders or workers, at the expense of community and consumer. Business must be just and
humane, as well as efficient and dynamic.’
Types of CSR:
CSR can be broadly grouped under four heads, based on the involvement of the following:
1. Community
2. Stakeholders
3. Production processes
4. Employee relations.
1. Community:
The corporate sector involves both the external and internal community. Any business, while
developing a project in a particular location, is regulated by the laws of the land in regard to environment
pollution, fair compensation for the land taken over from the local residents for the project, and
compensation for use of natural resources of the community, such as water, minerals, and vegetation.
There could be initiatives aimed at providing localized rural employment and livelihood opportunities
to empower rural communities. There is also a growing commitment to raising the quality of life and
social well-being by contributing to the basics of life in harmony with nature.
It may be noted here that the CSR activities relate to society on the basis of sustainable development,
which hinges on protection of the environment and a country’s natural resources in relation to corporate
activity. It is also to be noted that the United Nations’ Millennium Development Goals (MDGs) and the
WEHAB (Water, Energy, Health, Agriculture, and Biodiversity) agenda of the UN Secretary General
are key essentials for bringing about a solution to the very basic problems facing society.
Consequently, if corporate actions are to target the fundamental problems facing society in developing
countries, then the components of the MDGs, including water and sanitation, prevention of eradicable
diseases, and other items should be included in the CSR agenda of companies.
Many critics believe that a company should manage only the bottom line, measured purely in financial
terms, as that is what an investor would be interested in. However, business leaders who plan on
evolving long-term strategies have understood the importance of CSR. They have been quick to accept
the new ethos and has identified its potential for triple bottom line benefits, namely economic bottom
line, social bottom line, and environmental bottom line.
A number of companies also adopt the triple bottom line accounting method, expanding the traditional
reporting framework and taking into account environmental and social performance in addition to
financial performance. Triple bottom line accounting is a popular method of accounting for government
businesses and non-profit organizations.
It is a type of accounting that holds companies accountable for more than just financial information.
For example, IBM’s corporate responsibility effort is aligned with their strategic business priorities and
integral to all their relationships—with clients, employees, and communities worldwide, and is reported
in their corporate social responsibility report (2009).
Similarly, Nike’s corporate social responsibility ethos is detailed on its website. Many large corporates
across the globe share these details nowadays. In India, many public sector companies, such as Neyveli
Lignite Corporation, give detailed accounts of their CSR activities.
While examining the CSR activities pursued by companies in India, it can be seen that while improving
the environment, companies find that their business interests are also served. The cost-benefit analysis
shows that they have realized income from the expenditure incurred towards CSR programmes. In fact,
firms are now realizing that CSR is an investment for future growth, as it improves company’s bonds
with the community, which could in turn help it to draw on resources for growth including quality
manpower.
Some traditional manufacturing firms and large industrial houses such as the Tatas and Birlas, public
sector firms, and new generation IT companies have evolved on similar lines. Employee referrals in IT
companies were successful at one point not just due to economic reasons but also because their values
were based on CSR and governance.
In short, CSR, in relation to a community can be treated as the principle of preventive action that
supports a precautionary approach to environmental challenges. It can also contribute to the
preservation of biodiversity, and to equal access to health facilities and basic food, housing, sanitation,
and sufficient safe drinking water.
2. Stakeholders:
The CSR issues in dealing with various stakeholders in the company are as follows:
i. Vendors:
While a company focuses on increasing wealth for shareholders, it must recognize that the main
stakeholders in the corporate sector include shareholders, employees, the surrounding community,
vendors, and consumers. It is important that every stakeholder’s interest be addressed by the company.
In the following paragraphs, the firm’s responsibilities towards consumers and vendors are discussed.
Responsible procurement as a practice is picking up vastly these days. The European nations and the
US are proactively declaring responsible procurement in their purchasing decisions.
Responsible procurement processes ensure that the vendor understands corporate values, and provides
raw materials and components of specifications that promote the quality of the finished product. In
addition, the company makes sure that ethical practices are upheld in materials supply to avoid
adulteration, pilferage, and other malpractices, and that trade practices respect the law of the land in
regard to payment of duties, taxes, etc. These tenants help to treat the vendor as a partner and not as
transaction based relationship.
A research report on ‘Responsible procurement practices in India – an empirical analysis’ done by
Chandrasekaran, Ramasubramaniam, and Christie (2009) examined the integration of responsible
procurement practices of a firm with supply chain management, especially in procurement. In the light
of the development in corporate governance, attention was focused on understanding the main features
of responsible procurement aspects of supply chain management relationships in the global context, and
on exploring the determinants of the inclusion of social and environmental issues.
The main conclusions of the study conducted in India are as follows:
1. Capability has an effect on the responsible procurement score, which implies that higher the role of
the top/middle management employees in procurement practices, more responsible they are likely to
be.
2. Higher the buying frequency, there are higher chances of managers being responsible in their
procurement practices.
3. Firms with significant external pressure tend to be more responsible in procurement practices.
4. Size of the firm is also an important factor for firms to be more responsible in procurement processes.
5. Based on the interaction with respondents, it was found that firm investment, strategic posture, and
supplier relationships are important.
Thus, the study concluded that responsible procurement as a concept becomes more relevant as quality
processes trigger the pace of adoption of a responsible procurement practice. In addition, international
lending institutions have institutionalized a number of such systems through their lending processes.
ii. Customers:
Customers are the king of today’s business. Customer perception of the values and beliefs of the
company and demonstration of its commitment to such principles is important. Firms like to ensure the
right to safety with respect to physical handling, usage and internal consumption, in case of commodities
and items that are to be consumed. There must be a complete disclosure based on statutory needs under
various laws and protection for damages in case of breach of promise and trust.
In contemporary business, there is a need to respect the consumer’s right to education (about the
functionality, limitation, and liability of the product and business) and to privacy. Companies such as
Suzuki Motors in India, Toyota and many others have even gone for product recall and replaced faulty
components or attended to customer complaints to ensure their positioning as a responsible firm.
Demonstration of such commitment has become core to today’s business success.
3. Production Processes:
Production process design may lead to certain undesirable impacts on the local community and other
stakeholders. For example, earlier, cement manufacturing plants would pollute the atmosphere with
their wastes, causing health hazards to people inside and outside their factories. However, stringent
measures on the design of chimneys and other pollution control measures have improved the situation
to a great extent today.
Similarly, there are many occupational hazards that are also a part of production processes. Therefore
the adoption of safety systems and procedures is now becoming a statutory requirement. For example,
in an industrial alcohol plant, a waste called spent wash that is not easily incinerated or absorbed by soil
is generated. In fact, it adversely affects the system if let out on open land or in water. In quarries, the
dust problem is so overwhelming that it can result in silicosis, a pulmonary ailment for those who are
working on site.
Statutorily, the company has to provide safety equipments, adopt safety procedures, and the compliance
in this regard has to be complete. However, it is also important for firms to be proactively engaged with
stakeholders, including the local community. Social responsibility requires the company to periodically
monitor the impact of occupational hazards on employees, proactively, to avoid any deleterious effects.
Certain companies go further to provide dietary supplements to the employees to resist any ill effects
due to work hazards.
CSR in relation to production processes can also be carried out to reduce energy use, limit or alter
material use, reduce water use, save natural resources, efficiently manage emissions, reduce waste, and
recycle recoverable items. There are a number of companies carrying out CSR activities and the reader
is encouraged to check literature on these companies in open sources.
4. Employee Relations:
There are a number of laws and statutory regulations that protect the interest of employees in an
organization. These are common in a socialistic pattern of government and in capitalistic society as
well. What signifies CSR initiatives of a firm towards employees is its ability to voluntarily provide
more than what is expected legally.
CSR in relation to employee rights would include, among other things, respecting and ensuring
employees’ freedom of association, the right to collective bargaining, proactive declaration on abolition
of child labour, non-discrimination of resources on caste, creed and color, and respecting the time and
comfort of employees.
Though there are standard norms for CSR, only the more enlightened employers take care of the families
of the employees by providing health care, education, counselling, and improved living conditions. IT
companies and new-generation companies through their employee engagement activities go a long way
in providing support to employees.
Options to work from home, sabbaticals for higher education or to attend to personal needs, preferences
for women employees during post maternity to choose work options such as flexible hours, suiting their
economic and social need, and encouraging employees to work with the outside community on
sabbatical but with full pay are some examples.
Chambers, E., Chappie, W., Moon, J., and Sullivan, M. (2003) conducted a seven country study of CSR
in South Asia. The extent of CSR penetration in the seven Asian countries showed that the average for
the seven countries (including industrially-advanced Japan) in terms of value was just 41 per cent
compared to say a score of 98 per cent for a developed nation such as the United Kingdom. However,
India had an average CSR penetration of 72 per cent compared to Indonesia’s 24 per cent.
CSR Implementation Process and Benefits:
Usually, the head of CSR, followed by the CEO of the company, is the chief architect and the main
person responsible for the implementation of CSR initiatives across the organization. In the case of
public sector companies, HR departments and administrative departments also get involved in the
implementation of CSR activities.
CSR is the catalyst that brings about a positive social change that is welcome for business, government,
and society at large. Benefits to a company include improved perception about the company’s brands,
tax benefits, and compliance with statutory requirements. Apart from these, other benefits could be a
positive and long-term relationship with communities, improving product-supply management, and
contributing to the prosperity of the region/nation.
Some big corporate houses have their own foundations for CSR-related work. This allows them to focus
exclusively on CSR initiatives and activities, and get involved in genuine social concerns without the
pressure of the business or a company focus intruding on their work. Such independent moves help
them generate funds in order to support activities with a larger fund base. With such independence,
there can also be more transparency in CSR activities.
Challenges to CSR Initiatives in India:
There are a number of challenges a company would face while implementing its CSR activities.
Some of these challenges are as follows:
1. Lack of Community Participation:
Inadequate communication between the company and the community limits the scope of conducting
CSR activities. In addition, due to inadequate knowledge of CSR among communities, coupled with
poor communication, problems escalate. There is a general deterrence to participation by the
community.
2. Narrow Perception of CSR Initiatives:
Many NGOs and government agencies presume that companies involved in CSR activities are only
interested in funds. This de-motivates companies to initiate and implement CSR activities.
3. Transparency Issues:
Challenges may also be caused by the commonly-held view that there may be a lack of transparency on
the part of local implementing agencies, and that they do not make adequate efforts to disclose
information on the progress of social programmes that have been initiated.
In addition, companies and funding agencies are particular that audit mechanisms, impact assessment,
and the utilization of their funds must be well-recorded and shared among stakeholders. Such a
perceived lack of transparency negatively impacts the process of trust-building between companies and
local communities.
4. Need to Build Local Capabilities:
One of the reasons for lack of transparency is inadequate local capabilities. There is a need for building
the capabilities of the local NGOs as there is a serious dearth of trained and efficient organizations that
can effectively contribute to the ongoing CSR activities initiated by companies. This also limits the
ramp up, scope, and size of CSR initiatives. Similarly, there are also challenges with respect to reaching
remote and rural areas, the inability to assess and identify the real needs of the community and work
with the corporate sector to ensure successful implementation of CSR activities.
5. Lack of Consensus on Implementing CSR Issues:
There is a lack of consensus amongst local communities, agencies, government bodies, and companies
while implementing CSR projects. This lack of consensus often results in duplication of activities by
corporate houses in their areas of intervention. This results in a competitive spirit between local
implementing agencies rather than a collaborative approach.
These challenges can be handled by companies by better planning and coordination. Large companies
and trusts are well-geared to draw support and create success through such initiatives. A strategic
analyst must view CSR as a strategy to normalize the environmental factors of business and solicit
harmony through well-intended programmes.
CSR Principles & Strategies, Importance of CSR in contemporary society, Various
models of CSR.
Following are the importance of CSR>
1. Brand Value
A quick look at the top 10 brands in the world would suggest that responsibility is at the core of their
operations. A well-managed CSR program can help increase brand equity, awareness and resonate with
strong values.
Tata Group is India’s most valuable brand at $19.5 billion dollars. People appreciate the company not
only for its high-quality products but also for the activities that they do for the greater good of the
people. The company has exceptional goodwill and the name exudes trust.
2. Increased Sales – Customer Matters
Companies that lead with a purpose are perceived positively by the customers. According to a
study, 88% of the people surveyed would buy products from a responsible company. 85% of the people
said that they would support the company in their community.
Millennials and Generation Z connect with companies having a positive impact on the communities.
This engagement translates into greater sales in today’s highly connected world. This further highlights
the importance of Corporate Social Responsibility projects.
3. Employee Retention and Engagement
There was a time when people looked at their jobs from the bread and butter perspective alone. Today,
employees look for a higher purpose other than their monthly salary.
Employees enjoy working for companies that have a positive public image. CSR initiatives incorporate
volunteering programs which foster values such as empathy and loyalty. This leads to better team-work
and camaraderie among employees. It is a well-known fact that happy employees lead to low attrition.
Godrej Group CSR projects include a volunteering program that helps NGO’s to create sustainable
models. They are also known to run several programs that help protect the environment. This has led to
higher employee satisfaction and a positive image for the company. No wonder it is one of the most
sought after companies to work for in India.
4. Cost Savings
In the past, operating sustainably came at a huge cost to the company. Cost savings as one of the factors
in the importance of CSR would be surprising a few years ago. Responsible companies have found new
technologies that have reduced the operating costs.
Cochin Airport in India is a very good example of sustainable operations leading to cost savings. It is
the first Airport in the world to operate completely on solar power. It has become a pioneer and is
inspiring other airports to go solar and make this world a better place to live in.
5. Poverty Alleviation
India is home to almost 1.4 billion people and the top 1% of its population owns 73% of the wealth. In
spite of the plethora of welfare programs, the gap between the haves and have-nots is one of the steepest
in the world.
The corporate sector’s core competency is the execution of projects. They have the talent and know-
how to ensure maximum impact at minimum cost. CSR programs bring out change at the grassroots
level by harnessing this operational efficiency.
Mahindra and Mahindra’s Nanhi Kali is one of the pioneers when it comes to CSR projects in India. The
World Bank’s 2018 report states that limited educational opportunities for girls and barriers to complete
12 years of education, cost countries between $15 trillion and $30 trillion in lost lifetime productivity
and earnings. Project Nanhi Kali educates girls which not only empowers them but also helps their
families come out of poverty.
6. Risk Management
It is no longer a debate that social and environmental risk affect businesses in a big way. In the long
term, these factors affect the growth strategies and are completely out of its control.

Mumbai incurred a loss of Rs 14,000 crore due to floods from 2005 to 2015 according to a study
conducted by the United States Trade and Development Agency (USTDA) and leading accounting
company KPMG. Environmental and Social factors damage the infrastructure or lead to the loss of
business hours due to absenteeism.
Depleting mangrove cover is one of the biggest reasons for flooding in Mumbai. Bajaj Electricals’ CSR
arm planted 10,000 mangroves by partnering with NGO, United Way Mumbai (UWM) to create
awareness on the importance of mangroves among the youth.