SPECIAL ISSUE ON CORPORATE GOVERNANCE, CORPORATE SOCIAL RESPONSIBILITY & BUSINESS ETHICS - PART 2

CORPORATE GOVERNANCE

Transformation in Indian Banks Through Corporate Governance-Emerging Challenges & Strategies for a New Gateway

Strengthening the financial sector and improving the functioning of financial markets have been the core objective of the financial sector reforms in India. The significant transformation of the financial system in the country is clearly evident from the changes that have occurred in the financial markets, institutions and products. In 1990, the country witnessed an economic crisis leading to a fast decline in the GDP, a high rate of inflation, adverse BOPs due to a widening gap in the current account deficit and a decline in the foreign exchange reserves. The country had to borrow resources from foreign central banks and other foreign government agencies against the pledge of gold so as to avoid a default on international indebtedness. There were some banking sector deficiencies ahead of the economy, which were adversely affecting the economic growth of our country such as low productivity and profitability, public sector banks were incurring losses year after year, giving poor customer service, using outdated work technology etc. Keeping in mind all these distortions in the economic, financial and banking sectors, the government of India and the RBI thought it was necessary to introduce reforms in the financial and banking sector, so as to promote rapid economic growth and development with stability through the process of globalization, liberalization and privatization in the financial system to make the financial system more competitive and integrated with the world economy through internationalization of financial markets in the world.

Dr.R.K.Uppal
Principal Investigator
UGC Sponsored Major Research Project & Head,Department of Economics
DAV College
Malout,Punjab
rkuppal_mlt@yahoo.com

Corporate Governance And Competitiveness - The Prospects For Global Convergence

The forces of globalization and liberalization have altered the whole market structure and operational behaviour both at the domestic as well as the international level. These waves have resulted in unprecedented changes in the corporate world and have brought an influential impact on the organizational performance. The main outcome is the move towards market economies. The doctrine of liberalization forcefully argues that economic welfare will be improved by freeing private business from regulation by the state. It would stimulate both economic efficiency and growth. Market requires no big administrative apparatus, no central decision making and very little policing other than the provision of a legal system for the enforcement of contracts. Competition has in reality become a discernible force in developing economies. In an increasingly integrated global economy, domestic firms and industries cannot be completely insulated from external competitive pressures. Trade liberalization exposes the business sector to competition from imports, provides access to new technologies and skills from abroad, facilitates the realization of economies of scale in production and stimulates industrial technological activities and competitiveness (Bhalla, 1993 and Wignarja and Taylor, 2003).Global competition is a potent force in ensuring good corporate governance. Corporate governance, which is also the outcome of the new economic policies, has significant impact and contribution towards the stimulation of competitiveness of a firm, industry and nation as a whole. Good corporate governance, complemented by a sound business environment, can strengthen private investment, corporate performance, and economic growth. Corporate governance establishes the relationship among these three groups in determining the direction and performance of the organization (Hunger and Wheelen, 1998).Corporate governance exists at a complex intersection of law, morality, and economic efficiency. The impact of market competition would be greater in firms with efficient governance structure. The substitution effect implies when corporate governance is weak; competition plays an important role as a disciplinary device forcing mangers to improve performance and reduce slack. If competition and corporate governance complements, product market competition might not alone be sufficient to reduce productive inefficiencies in an environment with poor corporate governance.Against this background, the present paper is an endeavour to examine the rationale or relevance of corporate governance in enhancing the organizational competitiveness in the realm of global competition with special reference to developing economies like India.

Corporate Governance In India: Is An Independent Director A Guardian Or A Burden?

The origin of the corporate governance problem lies in the separation of ownership and control in widely held corporations owned by a large number of small and dispersed shareholders who need to delegate the responsibility of running the day to day operations of the corporation to professional managers. Since these shareholders find it costly and lack the incentive to monitor management, managers may behave opportunistically to run the company in their interests rather than the interest of shareholders. The managerial opportunism imposes agency costs manifested in unobservable and often unverifiable actions taken by them such as expanding firm size beyond optimal level, consuming perquisites, or satisfying managerial hubris, all of which increase their private benefits and reduce the value of the firm and also the benefits to the shareholders.The board of directors acts as one of the most important governance mechanisms in aligning the interests of managers and shareholders. The important functions of the board, were laid down in the report on the Financial Aspects of Corporate Governance issued in 1992 by the Cadbury Committee. The committee suggested that the universally accepted principle is that the board of directors act as fiduciaries of shareholders' and other stakeholders' interest to execute various functions of the independent directors.
 

pgarul@rediffmail.com

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility And Corporate Governance: New Dimensions

Today's heightened interest in the role of businesses in society has been promoted by increased sensitivity to, and awareness of environmental and ethical issues. Issues like environmental damage, improper treatment of workers, and faulty production leading to customers' inconvenience or danger, are highlighted in the media. In some nations, government regulations regarding environmental and social issues has increased, and standards and laws are also often set at a supranational level. It forces many corporation's Corporate Social Responsibility (CSR) policy in making decisions. Some consumers have become increasingly sensitive to the CSR performance of the companies from which they buy their goods and services. These trends have contributed to the pressure on companies to operate in an economically, socially and environmentally sustainable way. CSR is the way for remedy and which is the continuing commitment by business to behave ethically and contribute to 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. This holistic approach to business regards organizations as being full partners in their communities, rather than seeing them more narrowly as being primarily to make profits and serve the needs of their shareholders. CSR goes beyond charity and requires that a responsible company takes into full account their impact on all stakeholders and on the environment when making decisions. This requires them to balance the needs of all stakeholders with their need to make a profit, and reward their shareholders adequately. Some nations require CSR reporting, though agreement on meaningful measurements of social and environmental performance is difficult. Many organizations now produce externally, annual reports that cover sustainable development and CSR issues, but the reports vary widely in operations and evaluation methodology.

Dr.R.Ramachandran
Lecturer in Commerce
DDE,Annamalai University
Annamalai nagar
Tamil Nadu

profram@sify.com

Corporate Social Responsibility In The Indian Context

Till the dissolution of the Soviet Union, formally in 1989, in academic and popular discussions, the world used to be divided into three parts the First; Second; and Third worlds. From an economic structure point of view, the First world economies consisted of the market economies, with freedom for entrepreneurs domestically, and relatively free trade in exports and imports. The US, EU and Japan were the main constituents.The Second world was made up of centrally planned and administered economies, with state ownership of enterprises, and limited exports and imports; mainly through bilateral relations. Russia, the East European and Central Asian countries, were the main parts. The Third world consisted of all other countries, mostly in Asia, Africa and Latin America.

Somnath Chatterjee
Lecturer
Durgapur Institute of Management & Science,Durgapur
West Bengal
 

Managerial Perception Of CSR: A Study Of MNCs

What does one perceive from the term business? Most commonly, business is defined as an economic activity undertaken for the purpose of making profits. No doubt, the main criterion to measure the performance of any business is the quantum of its profits. The more the profit, the more successful is perceived the business, so the corporate world is always engaged in the activities that lead to the maximization of their profits. It is obvious that the owners of the business, who provide their funds to be used in business have the right to have some return on their investment and they want the return to be maximum. But the situation becomes critical when the corporate world forgets that there are some other people also associated with the business and are affected by its activities. These people are consumers, employees, creditors, government and society in general which are collectively called stakeholders. The business has some responsibilities towards these stakeholders and this responsibility of business is called corporate social responsibility (CSR).The concept of CSR was visualized during the early part of the twentieth century. Clark (1916) was among the pioneers to observe that if men are responsible for the known results of their actions, business responsibilities must include the known results of business dealings, whether or not law has recognized these. CSR involves a range of concepts, principles, methodologies and a large diversity of empirical analysis. In recent years, the concept of CSR has gained a prominent significance, both in popular media and among academics.

rajindersingh.du@rediffmail.com

mnarwal@rediffmail.com

BUSINESS ETHICS

Business Ethics And Corporate Governance: A Global Perspective

It is only in the recent years that Business Ethics and Corporate Governance have become almost a public issue and have started getting favourable responses from the corporations, government agencies, shareholders, employees, suppliers, customers, competitors, the news media, community residents etc. i.e. the entire society. In fact, business ethics and corporate governance go hand in hand. With the growing strength of consumer movements and rising levels of awareness among stakeholders, corporations are realizing that stakeholders and consumers are no longer indifferent to unethical practices like financial irregularities, tax-evasion, poor quality products and services, non--compliance with environmental issues, and hazardous working conditions. Companies have now begun to integrate ethics into their corporate cultures and concentrate on putting appropriate corporate governance mechanisms in place.“Unethical practices may contribute to immediate gain but always at the cost of future prospects.” (Shastri, 2005). Corporate corruption scandals have increased drastically over the last few years throughout the world. Business Ethics are more forceful, more influential, more effective and even more helpful in corporate governance than the anti-corruption programs; as the Institute Of Business Ethics, UK does rightly have the motto: “Doing Business Ethically …. Makes For Better Business.”
 

China's Quest For Oil In Africa: An Ethical Perspective

Business Ethics (A.C. Fernando, 2001) are applied ethics that studies moral standards and shows how these apply to the systems and organizations involved in business. Business ethics deals with ethics in businesses, dilemmas and conflicts in decision making, accountability and transparency to shareholders/ stakeholders and is consistent with sustainable development. Business in the long term should be sustainable with environmental, social and economic concerns. It has a proven effect on the long term sustainability of modern day businesses. Thus the study of Business ethics is of prime importance in the present business environment. Any ethical issue involves the different stakeholders like the owners, customers, investors, society etc. An ethical dilemma occurs when the interests of any one of these stakeholders is compromised. So, any ethical issue should be analyzed in the light of the above mentioned stakeholders.

Soumyadeep Sinharay
Graduate Student -PGDM(Finance)
Institute of Management Technology
Ghaziabad,Uttar Pradesh

soumyadeep.sinharay@gmail.com