Dear Mr. Suresh:
I hesitated to write on CSR and ISR as my comments might be misunderstood unless I write them with great care. But finally, I decided to express my views. Here we go.
I do business counseling as a volunteer counselor with an organization called SCORE (www.score.org). We help people who plan to start small businesses and those who want to grow their businesses. While cautioning the entrepreneur that they are different from their businesses, I use certain analogies. In life people produce children who are given an identity (a name). Although they are our children, they are not us. We do not own their property. We do not act for them unless we are authorized to do so. When we act for them, we have to specifically state that fact so that others understand that we are acting in that capacity and not in our own.
Similarly, in the case of a company, an entrepreneur creates a corporate body (call it a company, a corporation or a business). It is given a separate identity. In the US, each state gives a registration number for a business and the federal government gives a Tax ID or EIN (Employer Identification Number). When we are empowered to act for the business or corporation, we have to state that we are acting in that capacity. The accounts for the business have to be kept separate and distinct from our private accounts. The corporation has its own rules and our role in the corporation is also defined either by articles of incorporation or registration or charter or some other defining document.
Just as we have in our lives, the corporation (company or business) has a life. Just as parents have expectations for the children the founders have expectations for the corporation. We never know when our end comes up. Similarly, a corporation does not know when its end comes up. Of course, we expect to live for ever (100 years plus) and a corporation expects to live for ever, grow, and prosper.
When several individuals get together in some grouping, it is called the society. The whole world is a society. India is a society. People associate in some form and make rules for mutual responsibilities, rights, and conduct (or behaviors). When we are born, we are helpless and the society protects us. Actually, society tells its members that the new-born has certain rights; security and freedom from hunger and thirst are some of them. This protection is perhaps an animal instinct. Cats, elephants, monkeys, birds, tigers, and all animals protect their offspring. As we grow, the society’s rules give us some more nourishment and protection. In return, we are expected to repay the society with the responsibilities we get as members of the society. In fact, we never signed an agreement with the society as we did not know how to read, understand, or sign an agreement as newborns.
As members of the society, we get rights to live and make a living. In return, the society asks us to pay taxes so that it (the society) can take care of the next generation of newborns. Society expects us to take more direct responsibility for those whom we procreate and bring into this society. Ever since we left the jungles and got civilized, we created individual property rights. As an offshoot of civilization, we create more bodies and lay down rules for them. Villages, towns, cities, districts, states, and the country are some of the bodies we created and gave them some rules of behavior. These bodies have rights and responsibilities. Since these bodies are inanimate and cannot think for themselves, we created officers that act for them to preserve their rights and discharge their responsibilities.
Just as parents have a responsibility to nourish their young children to productive adulthood, these governmental bodies have responsibilities to nourish their disadvantaged and make them into contributors to the national economy. These bodies also have the responsibilities to ensure that the environment is protected, resources are preserved, and social justice is served so that we leave the planet in a better shape than that which we inherited.
Our right to private property led to the invention of money. We receive the use of it when we were young even though we do not understand what it meant. Our parents used their money to educate us, and equip us with knowledge and skills. We use these acquired skills to make a living, make money, and save it for our old age and for our progeny. Call it the trick of nature or the Lord’s maya, we do not know when we will die and how much money we will need in our old age. No society or government in the world has guaranteed its citizens a life of their desired comfort. Hence, we try to save a lot of money for our old age. Another quirk of civilization is that there are different styles of living and our yearning (or greed!) for more comforts in life pushes us to make and save lot of money.
Therefore, we invest our money in businesses and we band together and form businesses or companies. As shareholders, we elect a board of directors and give them a charter to make more money (return) using the money (investment) we gave them initially. Consequently, in the simplest of terms, the mission of a business is to make money and more money for us the shareholders. Corporate officers’ first responsibility is to generate a high return on investment (ROI) for the shareholders. As stated earlier, a corporation is created as a separate entity and the country or state where it is situated, located, or conducts its affairs, the government requires it to exhibit certain behaviors. It is given certain rights and it is expected to discharge certain obligations. A corporation pays taxes as its first obligation to society. It produces goods and services that are in demand by other members of the society and charges prices that the market of consumers is willing to pay.
Certain societies have allowed free markets and capitalist systems, which merely mean certain (defined) rights are bestowed on corporations and specific responsibilities are imposed on them by the society. If a corporation does not appropriate greater rights than are granted by the society and if it discharges its responsibilities, it is a good corporate citizen. Since laws and regulations can be imperfect, society may enunciate values for corporations, as well as individuals and governments to adhere to.
Governments are also bodies created by people through elections. Elected officials are bestowed certain powers and responsibilities by written constitutions and laws of the land made under the framework of the constitution. They are also given finances in the form of powers to collect taxes from citizens and businesses. In theory, a society runs smoothly based on rights and responsibilities given to individuals, corporate bodies, and the government(s). The government, the corporations, and individuals together share social responsibility. If the individuals and corporations play their lawful roles, it is the government’s responsibility to nurture the weak to strength in the society.
The above argument works fine in theory. In practice however, there are many deficiencies. Universally, governments fail in their mission of protecting the weak and planning for the overall and lasting good of the society. Corporate executives wield more power than was intended to be given to them by the shareholders. For example, all the annual profits are not distributed as dividends and letting the shareholders decide for themselves what to do with their returns. Companies retain profits and the executives get to determine what to do with their financial power. As described earlier, driven by financial uncertainty or by human greed, individuals, especially those in power, accumulate more money than they will probably need during their times of distress. The poor and the powerless people become helpless like little orphans. Thus, we are forced to talk about corporate social responsibility (CSR) and individual social responsibility (ISR).
The society is already asking companies to return a part of their profit to the society. They are called taxes, a variety of taxes to be given to a body called the government representing the society. The society also taxes individuals on their incomes (wages, salaries, interest, dividend, and awards) again through the government. Unfortunately, governments fail in many respects. Firstly, they do not realize that they are elected or selected by the society to represent its broader and long term interests. Secondly, governments have neither an understanding of their responsibilities nor the limitations on their rights and privileges. Hence, they do not lay down strategies and fail to undertake long term planning for the overall good of all that make up the society. Finally, the governments lost the habit of consultations with the three constituent groups of the society.
Currently, since corporations retain large amounts of cash and its indiscriminate use (e.g. in lobbying with governments), they appear to gain leverages that are not rightfully theirs. I believe that corporate social responsibility (CSR) can be seen in terms of corporations obeying laws of the society and ceding power, especially financial capability, to shareholders. As corporations do not vote for governments, their role is otherwise actually limited.
Vested with voting powers, individuals elect the governments and endowed with cash to invest, they elect the corporate boards. Hence Individual Social Responsibility (ISR) is paramount to the welfare of the society. Individuals should hold governments and corporate bodies accountable to their defined responsibilities constantly and continually. If they succeed in this aspect, individuals need not look for additional definitions for ISR. But if individuals fail in their scrutiny of the other two bodies, then they will add charity, philanthropy, and generosity as additional and optional responsibilities to the suite called ISR.
Individuals have several roles and they have to play them according to the rights and responsibilities of those roles. But the virtues are common and contribute to a healthy, harmonious, and prosperous society.
Sincerely,
Som Karamchetty
| < Prev |
|---|
