Concern for the community is often mistaken for socialism. On the contrary, capitalism thrives only when every citizen is an asset in economic activity and has opportunities to succeed.
STEVEN HAUN will soon be graduating with an undergraduate degree in management information systems from the University of Texas at Austin (UT-Austin). He will join Pariveda Solutions in Dallas, Texas. In response to our discussion on corporate social responsibility he emailed me the following: "They [Pariveda] are a three year old company that prides themselves on team work and helping one another out. In fact, recognising that even the lowest paid employees in the company are within the top 1% of wage-earners on the planet implies that it is important for us to give back to everyone else. Service to the community is not an option but rather a requirement of the company and there is a direct relationship between salary (or more directly location on the organisational ladder) and amount of service hours required. Therefore, the senior partners have to do the most amount of service.
"I went to meet my company executives and new co-workers as part of Habitat for Humanity build day event. Most people drove a Lexus or BMW to the location, I found this somewhat humorous. Anyway, I noticed that I hadn't seen the president of the company since I got there (this was about an hour into the day). I eventually found him, in the rafters of the house hammering away, drenched in sweat only an hour into the day. I thought this was so interesting that this 50+ year old person wasn't telling people what to do. He immediately took initiative and without saying a word had people working with him because he was working harder than anyone else around him. This was a man who people wanted to work for. It was pretty cool to see."
Habitat for Humanity is a non-profit organisation of volunteers engaged in building affordable housing for the needy. This email epitomises corporate social responsibility, even when the firm's main objective is to increase shareholder value. The Pariveda executives are great role models for the new recruits. This corporate activism is sustainable, acceptable, and valuable as a change agent, particularly in the context of India.
Corporate social responsibility has much broader implications for the nation as a whole. It reduces dependency on the government for social change. Most governmental programmes quickly become embroiled in political manipulation, corruption, communal overtones, and bitter infighting. There is a need for public-private partnership with well-defined controls and processes for the best use of resources for social change. Social reforms driven by the community will bring people together, turn the attention of the masses to tasks that benefit society, and reinforce peace and harmony.
In recent times, a number of foundations set up by leading Indian firms, including Infosys, Wipro, Tatas, TVS, and Dr. Reddy's Laboratory, have taken a keen interest in corporate activism to improve healthcare, education, and living conditions, and reduce poverty. These foundations support numerous government primary schools and have developed processes and methodologies for effective change. They support hundreds of non-governmental organisations and have built orphanages, hospitals, and schools.
However, the challenges in India are enormous. Social responsibility should not be limited to large successful corporations; there should be greater participation from most small, medium, and large businesses. The goodwill firms can generate from acts of social responsibility may, in fact, be worth far more to the businesses than the amounts they give. Corporations collectively can make India a better place for every citizen.
Corporate social responsibility is about tradition and culture. Firms can institutionalise voluntarism among employees through appropriate incentives and recognition. Internal performance evaluation of employees could recognise community work. Community work can take many forms: teaching in government schools, supporting NGOs financially, empowering women, cleaning parks, planting trees, volunteering in orphanages, protecting the abused. Many corporations in the U.S. allow employees to write about their community service as part of their annual evaluation report. Even if companies do not reward community activities, at least, the idea that the company cares will have a positive impact.
Corporate social responsibility can be much more than charity. An innovative way to contribute socially is for firms to spend in towns and villages, and to buy products from millions of artisans who are at the bottom of the economic pyramid. Much has been discussed about the Fortune at the Bottom of the Pyramid (Author: C. K. Prahalad), which calls for corporations to design products/services for the enormous population at the bottom of the pyramid. The basic assumption is that this population segment has some disposable income and firms can still make profits on large volume. Why not consider creating wealth at the bottom of the pyramid, which can increase disposable income and buying power? For example, firms can give artisans' products as corporate gifts or use them for interior decoration, which may have socially more redeemable value than current methods. If there are quality issues, then corporations can use their resources to increase quality awareness among artisans. Unfortunately, the above roles to create demand and improve quality rest on the government; however, resources spent for such activity hardly reach the intended beneficiaries.
Further, corporate spending outside large cities can help spread wealth. Large corporations can exploit hundreds of historical places in rural towns and villages for corporate training, conferences, and getaways. Of course, innovative ways are needed to create decent hotels, restaurants, and basic amenities outside major cities. Government has championed building hotels to promote tourism; however, the initiatives are riddled with inefficiencies, poor service, and wasted resources. Private entities with support from several corporations can collectively build facilities on a time-sharing basis that will help invigorate economic activity. It is necessary to create jobs and economic activity in rural communities to uplift the masses. Unless wealthy corporations and individuals spend on goods and services that touch the masses (like artisans' products), economic prosperity for most of the population will remain a dream.
Inculcating corporate social responsibility is also about training young minds and helping future generations organise themselves for greater good. Social responsibility needs to be deeply ingrained from childhood. In the U.S., increasingly admission to elite private and public universities is not only based on academic grades, but also participation in community activities and leadership roles. Social responsibility is about leadership, respect for fellow human beings, and checks and balances. It is not uncommon to find high school students volunteering in community work; in fact, students often accumulate points for school grades. Scholarships are awarded to those who show community leadership and academic performance. Unfortunately, in India, admissions to even some of the best institutions are purely based on performance in entrance exams. Worse, entering the civil services is also about securing high grades in academic subjects. Thus, parents and young minds are focussed intently on examinations and examinations alone. Obviously, the next generation is groomed likewise. To break this cycle, there needs to be a radical change in the incentive structure in the educational system, and admission and hiring process. Consideration must be given not only to grades, but also to leadership roles and societal impact; these may have greater value to corporations and society.
Throughout my schooling not once did I engage in social or charity activity. There were hardly any role models at the faculty level or friends to look beyond classroom/books. My engineering institution in India never promoted societal responsibilities. Contrast this with the UT-Austin, which actively supports and nurtures over 900-plus student-led organisations under the "Student Activities and Leadership Development" (SALD) programme. Likewise, high schools engage with a large number of student-led organisations. While not all these organisations are about social work, many explicitly create awareness of leadership qualities and social responsibility.
Most corporations in the U.S. expect potential employees to be active in the community and to show leadership. Interviewing processes emphasise community work. This encourages students to engage in social activities. At UT-Austin, MBA students raise money and food for local charities, and volunteer to build homes for the poor. Many student groups organise trips to underdeveloped countries for community work. Numerous undergraduate students visit poor neighbourhoods to provide computer education to tackle the digital divide. Of course, one can criticise this as done to bolster their resumes. So what if that is the objective? The net result is significantly beneficial to the community. There is a remarkable community feeling that is developed and nurtured in the school environment, which they carry over to the corporate world.
Every country should embrace the remarkable concept of individuals and businesses forming a partnership to support social causes. In the context of India, such a partnership has enormous potential for strengthening society. Corporate social responsibility and volunteerism have no boundaries and are not constrained by race, colour, or religion. Sadly, concern for the community is often mistaken for socialism. On the contrary, capitalism thrives only when every citizen is an asset in economic activity and has opportunities to succeed. Corporate social responsibility is a culture and unwritten contract with the community. This invisible culture can shape brighter futures for nations.
(The author is Distinguished Teaching Professor, The University of Texas at Austin. He can be contacted at email@example.com.)