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For CSR’s own sake

While CSR is becoming popular with corporates, the initiative is mostly relegated to the HR department, with no active participation from senior managers, reports BS Srinivasalu Reddy.

business Updated: Jan 23, 2008 23:58 IST
BS Srinivasalu Reddy

Corporate social responsibility, or CSR, much-discussed and more widely adopted today by the corporate world than before, is gaining attention. The question is, is it merely a smart corporate branding exercise or is there more depth in its adoption?

Suresh Sundaresan, the Chase Manhattan Bank Professor of Economics and Finance at Columbia University, USA, believes that while its adoption is increasing, CSR is still not permeating as a corporate initiative with senior managers and executives. Instead, “often it has been delegated to the HR department, aloof from top managements.”

He adds, “There was a study in the UK on how integrated CSR is with corporate governance and corporate objectives, and how much of regular monitoring mechanisms exist in its execution. It was found that not too many companies have top executives involved in CSR initiatives.”

Probably true in India too. Sundaresan points out that individual initiatives at the corporate helm can create a tremendous amount of energy for CSR. For the US, he takes Warren Buffet as a prime example: “As he is the majority shareholder in Berkshire Hathway, problems pertaining to CSR vision or its implementation did not crop up. The company is a stellar performer and Buffet had given away most of his wealth ($35 billion) in charity last year, leaving behind a reasonable amount for his family.”

In India too, similar examples can be quoted. “Azim Premji, who owns Wipro, has developed his own model of paying back the society. To put it simply, for a single shareholding owner, it is easy to decide and implement his CSR vision,” says Sundaresan. He also points to Infosys and how vision at the top has dictated the company’s CSR initiatives.

So does that mean that CSR works best with ownership or majority individual- stakeholder companies?

“My colleague Geoffrey Heal argues that majority stakeholding creates enlightened self interest, and make the owner act as a responsible citizen. As such, he hires the best people and follow best practices, earning respect from the government and other constituents,” Sundaresan states.

He points to the Tata group as having CSR initiatives as a part of its charter. “Long before CSR became a norm elsewhere in the world, Tatas had practiced it. Two-thirds of its dividends go to charities and trusts, with whom the shareholding vests.”

He recalls the day 40 Columbia University MBA students visited Taj Mahal Hotel in Mumbai and were awaiting vice chairman R.K. Krishna Kumar’s address. He came 40 minutes late and said that he was in an emergency board meeting to decide a relief package for the Tsunami-hit people in different countries. This happened on the second day of the Tsunami.

Beyond emergency relief initiatives, however, this kind of an organised, chartered commitment is not common and certainly not a norm in India. “Outside India,” says Sundaresan, “the concept has taken strides. Ford, for example, has professional managers running its CSR programmes for several decades. But the same is not true with Europe, where family-ownership is still high. However, as companies grow in size, there is no choice but to go for professional managers to handle CSR.”

And how can CSR be made to become a part of the larger agenda with more widespread, effective implementation? “The regulators and the government play a critical role, making regulations and legislations in such a way that they bring in the desired behaviour in companies. Compensation for violations should be stringent. For example, Dow Chemicals was found guilty of polluting the environment. When drawn to the courts, it had to shell out billions of dollars in penalties. Also, institutional investors, who buy into a company and sit on its board, should make sure that it follows CSR and corporate governance principles.”