International Journal of Innovation, Management and Technology, Vol. 1, No. 5, December 2010 ISSN: 2010-0248
Corporate Governance and Corporate Social Responsibility: The Case of Three Indian Companies Debabrata Chatterjee
Abstract—This study analyzes the corporate governance (CG) practices of three prominent Indian firms, based on four parameters namely, ’Approach to Corporate Governance’, ‘Governance Structure and Practices’, Board Committees’ and corporate social Responsibility Activities. Three companies, namely ITC Ltd., Reliance Industries ltd, and Infosys Technologies ltd., were chosen, as they represent different ownership and control patterns among the private sector companies. The study finds that though the CG practices are exemplary, there exist differences in the way the companies adopt the CG practices.
I. INTRODUCTION CG and Corporate Social Responsibility (CSR) have become buzzwords in the post millennium corporate culture of India. This case describes the CG and CSR practices of the three Indian private companies namely ITC Ltd., Infosys Technologies Ltd., and Reliance Industries Ltd. These three companies were chosen as they represent three distinct categories among the Indian private companies. ITC Ltd is one of the very few Indian companies which does not have an identified promoter and is fully managed by professionals (Though, a foreign company has around 32% stakes in the company, it is not identified as a promoter as it does not control the company). Reliance Industries is at the other end of the spectrum, with one family and their stake is only around 16% (all the shareholding levels were as on march 31, 2007). Hence, a study of CG and CSR practices of these companies will throw light on the differences among the private companies with different management control and shareholding patterns. II. APPROACH TO CORPORATE GOVERNANCE
ITC official believes and propagates ‘commitment beyond the market’. It is also one of the pioneers to put in place a formalized system of Corporate Governance. ITC defines CG as a systematic process by which companies are directed and controlled in order to enhance their wealth generating capacity. This definition reminds one of Milton Friedman who says that businessman should concentrate only on profits and nothing more. However, that is not the case. ITC also believes that the growth process should ensure that these resources are utilized in manner which meets the stakeholder’s aspirations and societal expectations. What the company calls as the development of the ‘triple bottom line’ includes the nurture and regeneration of nation’s economic, ecological and social capital. ITC also seems to believe that CG must simultaneously empower the executive management of the company while ensuring adequate checks and balances. The cornerstones of ITC’s 507
CG philosophy are trusteeship, transparency, empowerment, accountability, control and ethical corporate citizenship. Trusteeship among these is predicted on the responsibility to ensure equity which essentially means that the rights of all the shareholders, large and small are protected. The board of directors has to protect and enhance the shareholders’ value as well as protect the interest of other shareholders. Transparency could mean making appropriate levels and as close to the scene of action asfeasible. Control is meant to prevent the misuse of power and is exercised within a framework of checks and balances. ITC believes unethical corporate citizenship’ because, unethical behavior ultimately corrupts organizational culture and undermine stakeholder value. Reliance is the only private sector fortune 500 Indian companies and whether it is breakup of the empire, a new venture or its cg practices, corporate India are all ears to the latest happenings from this company. Reliance believes that good governance practices stem from the culture and mindset of the organization. Reliance official policy says that the firm...
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