Corporate Social Responsibility – Where should it start?
I have been hearing a lot about Corporate Social Responsibility (CSR), that is, a company’s responsibility towards the society. In simple terms it means that a company must manage its role in society as a producer, employer, customer and citizen. I think most of the discussion on the subject centers around a corporations involvement in supporting social causes. Every corporation adopts some social causes and thinks that this is the best way of implementing CSR.
What prompted me to write about this topic was an article I read about ICICI Bank, the largest private Indian bank. It was reported that ICICI was going to establish a ICICI Foundation and fund it with 1% of its profits. Even one of its very senior executive was going to head this foundation. But let us try to reconcile what ICICI does in actual practice. Various cases have been reported where ICICI Bank has been involved in causing pain and suffering to its customers who had taken loan from it because of its illegal practice of hiring goons to recover money. If I am not mistaken, one of thier customers even committed suicide because of the threats of recovery agents hired by ICICI.
Now I find the above very illogical. First, ICICI Bank wants to make more money and adopts aggressive selling tactics to palm off loans. When they can’t pay the monthly instalments, ICICI sends recovery goons to collect the dues. The illegal methods adopted by these recovery agency results in pain and suffering to its customers. On the other side, ICICI decides that it needs to donate money for social causes. Now as a producer, doesn’t the bank have a responsibility towards its customers?
Lets also consider what Airtel does. It bills its customers for services not ordered by the customer and then donates the money for social causes through its foundation. This is how they exercise their responsibility as a producer.
Lets look at how comapnies are discharging their responsibility as an employer. Today, companies are putting so much pressure on their employees that practically everybody I know of is working late. Employees of companies that have 5 day working week are also working of Saturdays. This is creating health problems for employees. Why are companies putting so much pressure on their employees? Simple, they want to make more money. So first they create health problems and then they donate money to build hospitals through their foundations. I read an email of a senior Infosys executive telling employees that they should not work late. My suggestion to this gentlemen is that he should make sure that the offices are closed on time so that nobody can work late and the problem will be solved. He should know that the employees have no choice but to work late because of work pressures. Will he close office at 5pm. Will he walk his talk. I doubt it. Reasons are obvious.
What about the Times of India Group? It runs a rich foundation to support social causes. But how does it make money? It passes off “bias-paid-for-news” as “unbiased news” thereby deceiving all its readers. It sells news through its subsidiary MediaNet. Recently, there have been a number of articles about TOI buying stakes in various small companies and then using its publications to promote these companies without disclosing its vested interest. It is almost a certainty that some people may invest in these companies based on articles printed in Times Group Publication and end up losing money as well as their mential well-being.
Why do they want to do such a thing? Of course, to make more and more money (as if they don’t have enough already)and then donate money through their foundation, maybe to build mental hospitals for those who turn mental when they lose money in the stock market.
It is obvious that the business world has misunderstood what CSR means and where it should start. I think if every business takes care of its immediate stakeholders like customers, employees and vendors, I doubt if they would need to need to establish foundations.
I will explain the above with my example. I run a small company. First, as a producer I try very hard to keep my customers happy. I do not bill them for anything that they have not asked for. I make sure that they get “value for money” and sometimes even more. As a customer, I pay my vendors on time. I do not put unnecessary pressure on my vendors. If they mistake, I even work with them to resolve the same in a fair manner. What about as an employer? As far as my employees are concerned, I truly believe that charity begins at home. I have never refused anybody leave. We do not work very late to make more money but we do work late sometimes to complete customer’s work. I also take care of my employees in times of difficulty without their even asking for it.
So if everybody takes care of its immediate direct stakeholders like employees, customers and vendors, I think the need for CSR will almost disappear. This could have a domino’s effect. Every employee, customer and vendor has a family. In addition, some of your customers and practically every vendors would have employees, vendors and customers and the chain reaction could emcompass the whole society. Also, I am sure you will agree that this is better way to implement CSR than causing pain to your employees, customers and vendors so as to make more money and then donating a part of this money for social causes.
Hey, am I thinking logically?
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Comments
Hi!
More on this subject. It was reported in the newspapers that Anil Ambani’s company Reliance Energy sold Rs. 731.60 crores worth of equipment to BSES (another Reliance Company) for Rs. 1233.56 crores, a mark-up of almost 70%. The only problem with this is that BSES is the power distribution company that distributes power to the people of Delhi. What else? Now Reliance Energy makes more money at the expense of people of Delhi because BSES is promised guaranteed return on the capital employed. People of Delhi would have to pay for the return that BSES would demand on the extra Rs. 500 croes that they have made on the deal for a long time to come. On one hand, people of Delhi do not get power. While on the other hand they will have to pay more resulting in hardship for millions of families.
Of course, I am sure that Anil Ambani will allocate 1% of his profits (just like ICICI) to CSR activities, the beneficiaries of which could be the people of Delhi. For instance, he could set up hospitals to provide free care to people stressed out or who have become mentally depressed because of high eletricity bills.
By the way, the justification given by BSES Chairman, Lalit Jalan is that the matter was approved by the Board of Directors. My question is how independents are board of directors. Second, it is reasonable for them to take a 70% margin? Is it conscionable (is the spelling Ok?)?
Avinash Narula
http://www.management-talk.com
Here one example of ICICI Bank.When I reback my home loan. Then they calculated interest for 30 days for febraury month also. Then I asked them, they told me to send it to my head office. It is less amount in single. But overall it will become more. And also for credit cards also they are doing like that. They are earning like this and with this amount they can spent on CSR activities. This is not a coorect method.
Hi!
Today, I read in the newspapers that Airtel, Vodafone and Idea cellular are being investigated by MRTP commission for forming a cartel. All three of them increased their local call rates from Rs. 1.0o to Rs. 1.20 a minute on the same day. With different cost structures, isn’t it surprising that the three companies increased their price to the same level on the same day. The three operators also increased their SMS rate also by the same amount on the same day. By the way, three of them combined together control 60% of the market. You don’t have to be a rocket scientist to figure out that the three companies conspired to cheat the customers to make more profits.
After making money by cheating customers, they start CSR activities. Does this make sense? I would prefer that they make money in an honest manner and stop their CSR activities.
Sometimes I wonder how much more money can people like Sunil Mittal or Aditya Birla want? They already have so much that a number of their generations can a luxurious life without working.
Avinash Narula
http://www.management-talk.com
Hi!
Here is a very interesting example that supports my point that companies need to review what CSR means to them.
Because of inflation and cost pressures, manufacturers are trying to fool their customers in an innovative manner. Companies have really started believing that innovation is the key to success. Now since they do not want to increase their prices as that may result in lower sales,companies are holding the prices but have reduced the weights/quantity of the product that they were supplying before. Why? Because they feel that the customer will not get to know that the weight/quantity supplied has reduced by say 5% as who reads the fine print on the packaging. Now customer is buying the product that he is buying 100gms of Good Day biscuits for Rs. 10 whereas unknowingly he is buying only 92 gms.
There are well known brands and big companies involved in theis scam. Here are some names. Maggi noodles, Red Label tea, Britannia Marie Gold, Sunfeast pasta, 50-50 biscuits, Nestle Everyday dairy Whitener, Lizol, Lifebuoy, Kellogs, Kwality, Wheel just to name a few.
Do you know some of these companies have massive CSR programs. On one hand, they are cheating their customers. On the other hand,they want to help these very people that they are cheating through their CSR programs.
Avinash Narula
http://www.management-training1.com
Hi,
I reached this blog while reasearching CSR initiatives by Banks.I am working in SBI & was trying to compare the CSR activities therein with some of other Banks.Your article is thought provoking & gives me a theme to persue further.
Bye
Here is something for Rajesh (who left a comment recently) and others to chew on.
Front page headline in Hindustan Times – Delhi on July 5, 2008, “Recovery goons barge into exec’s home in Mumbai” to recover Rs. 5400 from Anwar Ansari whose cheque had bounced. Guess which bank was involved. You guessed it ICICI. Also, it was reported that ICICI bad debts had increased.
Well, you can say what new? ICICI has been doing this for a long time. Guys I have bad news for somebody and it can be you. As mentioned in my earlier post, Nachiket Mor has finally become the President of ICICI Foundation for Inclusive Growth and is reported to be giving a shape of ICICI’s CEO & MD Mr. KV kamath’s idea of increasing the incomes of low income households.
Now I am afraid for these low income households. Imagine the plight of these people if they are unable to return the loans that ICICI may force them to take. I think it would be advisable for Mr Mor to hire some lawyers as part of its CSR activities so that these low income households get some legal help when ICICI goons invade their privacy and barge into their homes.
We are all aware that some people have made a success out of what is called micro finance. But I am not sure, where this venture of ICICI will end up. ICICI could not handle the middle income group and as such they have practically wound up their retail operations. Its a wonder they think that they can make a sustainable business out of low income households. Abhishek Bachan, as brand ambassador of Idea Telecom, would certainly say, “what an Idea?” to this idea of ICICI.
I wish I had the means to warn all the low income households to run in the opposite direction when they see an ICICI representative.
popat on 26 aug 08
csr is ot required in any organisation if employees perform their duties with a spiritual touch.
I found your article on CSR on target. The R is has been reduced to RESPONSE rather than RESPONSIBILITY; atonement for misdeeds rather than a way of behavior.
I offer the following link to “the tele.graam” the news bulletin of our company infraSys – on page 4 of 4 – CSR is defined as our company sees it.
sincerely
sudhakar
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This is an interesting post.The CSR approach is a wonderful gesture towards building long term relationships with clients and customers. It heralds a much awaited change in the overtly profit-oriented corporate arena.
Here’s an article on the same issue which I came across: http://www.ovlg.com/blog/corporate-social-responsibility-in-debt-relief-industry/
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Hi!
Here are couple of examples to support my point. Just a few days back, a friend/client of mine who is a struggling (remember this word) entreprenuer in Greater Noida. He alongwith his partner started a autoparts manufacturing unit a couple of years back came to visit me. He told me about the painful situation of his quality manager whose wife is on dialysis. Because of his wife’s situation, the quality manager is barely able to attend office 2 days a month. Now this friend of mine are struggling in every respect especially in terms of cash flows and profits. But he has not given the quality manager the pink slip. He says “The man is already paying Rs. 25,000 a month on dialysis. How can I turn him out? I will support him as much as I can.” Now I think this is what CSR is and this is where it should start.
By the way, this morning I read in Hindustan Times, about a person, Rangnath of Aurangabad, who had taken a loan from HDFC bank and who was driven to suicide because of harassment by bank officials and the goons hired by them. What is amazing is that the loanee committed the suicide after the bank officials refused to accept the payment he went to make towards his due installments.
Do you think that HDFC bank will also start contributing 1% of its profits towards its CSR obligation or will it start a foundation like other businesses? Which do you think is a better way to fulfill one’s CSR responsibilities?
Avinash Narula
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