Business Ethics and Corporate Governance / Ethics & Governance - ICFAI Solved assignments and papers

 

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Business Ethics and Corporate Governance / Ethics & Governance

 

·       Section 1: Caselets (30 Marks)

·       Read the Caselets and Answer All the Questions

 

Caselet 1 (15 Marks):

Tata Consultancy Services (TCS), one of the world's largest global software and services consulting organizations and India’s first global billion-dollar IT company has received  a number of awards for Corporate Social Responsibility (CSR). Notable among them are the Asian Corporate Social Responsibility Award (Asian CSR) for its community work to support the improvement of education and raise the literacy of Indians in India for the year 2003. TCS has also been selected winner of the ‘Golden Pea** Global Award for Corporate Social Responsibility (Asia) – 2007’ for CSR in the ‘Large Business’ category by the Institute of Directors, the international body of company directors. TCS was conferred the award based on an assessment, by an independent jury, of the company's integration of CSR concerns with corporate functioning, responsiveness to the needs of different stakeholders, and development of innovative partnership models to fulfill social responsibilities.

TCS is in the business of providing consultancy and professional services in the field of information technology (IT), which by its nature of operation has a limited impact on the environment. However, as a responsible corporate citizen, TCS remains committed to continually enhancing its performance through appropriate strategic plans for social responsibility, environmental protection and improvement.

The Asian CSR Awards is Asia’s premier awards program on corporate social responsibility. The Asian CSR Awards program is presented by the Asian Institute of Management's Ramon V. del Rosario, Sr. Center for Corporate Responsibility. The Ramon del Rosario, Sr. Center for Corporate Responsibility is a research and program centre with the mission of developing professional, entrepreneurial and socially responsible leaders and managers.

TCS won the award in the ‘Support and Improvement in Education’ category. This award recognizes the contribution of companies through their endowment or contribution toward improving the level of education of their employees, their community and their nation. TCS set up the Adult Literacy Program (ALP) to help the Indian Government eradicate illiteracy, a major social concern affecting a third of the Indian population comprising of old and young adults.

India’s literacy rate stands at around 65 per cent currently, up from 52 per cent in 1991. At this rate of increase, it would take some 20 to 25 years to clear this problem. With the traditional method of learning to read and write, an illiterate person would take between six months to two years with trained teachers to learn to read and write. In addition, India will also need about 1 million teachers for training.

To accelerate the rate of learning, the ALP uses a TCS-designed Computer Based Functional Literacy Model (CBFLM), an innovative teaching method that uses multimedia software to teach adults to read within 30-45 learning hours-spread over 1 to 1.5 hours sessions, 3 times a week, over a period of 10 to 12 weeks.

The Computer Based Functional Literacy method uses animated graphics patterns for visualization and audio appreciation. By combining graphic patterns of visualization, repetition of sound patterns and language structures and cognition of the meaning, a person is made to read. This CBFL method is implemented using computers and flash cards. Experiments on the ground with CBFL showed that their slogan ‘40 hours to literacy’ was reasonable. This was borne out through experiments in eight Indian languages. Teachers found that they could handle large numbers of students and more batches of learners. Even senior school children could become instructors as the teaching expertise was embedded in the software. The software itself demanded no computer literacy, except some ability to use the ‘mouse’.

The CBFL model helps in reducing the time required for learning, standardizing the quality of education for all people. It also helps in reducing the qualification criteria for instructors thus increasing their numbers, reducing the burden on instructors thus increasing the number of people trained and varying the learning pace to suit individual requirements.

TCS works closely with governments both at the state and district level to develop and deploy CBFL packages in the local language, as a supplement to their programs. To support the use of the CBFL model, TCS also donates computers to the state governments. In just over two years ALP has grown from the concept stage to implementation, benefiting more than 20,000 people in five states.

“Reading is the new civil right. No modern society can function without a literate population and no one can function well in a modern society without being literate,” says S Ramadorai, chief executive officer, TCS. “At TCS, we believe in developing innovative methods using theories of cognition, language and communication to make people literate within the next five years. TCS is committed in using computers and IT as the medium to facilitate the process, monitor administration and manage logistics. Literacy increases awareness and facilitates responsible action. Adult literacy empowers and will be the key in moving the people and country forward.”

The National Knowledge Commission reviewed CBFL and advised NLM to adopt as many technologies and techniques available to spread literacy. TCS has joined hands with NASSCOM, CII, and MSSRF to spread the use of this technology. The technology is being used in jails in several cities to provide inmates with literacy instruction. TCS volunteers also do their bit in spreading its reach. For Urdu, a partnership that has been undertaken with Siasat Daily is flourishing. Tata Steel has been a big experimenter, having done without computers in Jharkhand, and helping create CBFL for Oriya. IIIT Hyderabad and IIT Bombay have shown interest in using this as a base for technologies for supporting education. Discussions are also on with State governments of Andhra Pradesh, Tamil Nadu, Maharashtra, Gujarat, Rajasthan, and Karnataka for spreading literacy.

Not only in India, has CBFL had scope to be used in other countries and languages. On a visit to India, the then First Lady of South Africa, Madame Zanele Mbeki, visited one of the field sites of TCS. She was keen to see if CBFL could be used to address the needs of tribal languages in South Africa and invited TCS to visit them. Their problem was complex for they had no scripts for their tribal languages. A TCS team visited South Africa to standardize their coding in Roman alphabet. This provided a basis for them to effectively implement their own CBFL. TCS is also working towards completing the development of CBFL for Arabic and will be given to UNESCO Egypt and Moroccan government, as a start.

Answer the following Questions:

A. What are the various awards that Tata Consultancy Services (TCS) receive with regard to their efforts in Corporate Social Responsibility (CSR)? (7 Marks)

B. Tata Consultancy Services (TCS) set up the Adult Literacy Program (ALP). What are the reasons for setting up ALP? Discuss the implementation of the program. (8 Marks)

 

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Caselet 2 (15 Marks):

In 1991, Mr. Narayana Swamy, an electronics graduate, started a new business of marketing an external storage device “magic pen” that enables PC users to store and carry 1.5 GB data on the move. This device can be connected to any PC via the USB Port. Initially Swamy purchased a readymade company registration and renamed it Swamy Electronics Limited. Out of the 1000 shares issued Swamy owned 900 shares, and his wife Shaswati owned the remaining 100. Board meetings were never held as per the law. But Swamy and his wife Shaswati signed all the forms as required by the law with the help of an auditor.

At this stage, the board structure was of little importance to Swamy Electronics Limited, since Swamy was the dominant owner- manager and therefore no board meetings were held.

By 1994, Swamy Electronics Limited prospered and its auditor Raj Gopal advised restructuring of the capital. Swamy increased his capital base to 10,000 shares. He offered 5% of these to his employees who looked after production and marketing. Swamy also invited them to join the board in recognition of their contribution to the company’s growth.

As the business grew, Swamy concentrated less on his family and spent most of his time travelling abroad to meet his foreign clients. Eventually, he and Shaswati were divorced. Swamy tried to dilute Shaswati’s 10 percent stake at the time of capital restructuring, but failed.

Swamy then started holding board meetings regularly. He was the Chairman and CEO of the company. He used to meet his two members of the board to discuss the procurement, production and marketing aspects of the company. But he single-handedly took decisions on most of the financial aspects. The board now had three executive directors, which was dominated by Mr. Swamy.

The first annual general meeting was attended by the three executive directors, Shaswati and her lawyer. In the meeting, Shaswati’s lawyer called for the appointment of independent directors to take care of the interests of minority shareholders. Shaswati also questioned the practice of ploughing all profits back into the business without giving dividends to the shareholders.

Swamy wanted his friend Kumar, a Chartered Financial Analyst, to be appointed as a member of the board. Swamy thought that Kumar’s experience would be valuable to the board and at the same time assure the minority shareholders that the board was balanced.

Shaswati was still unhappy about the composition of the board as Swamy, with 80% of the shares, still dominated the board with the help of his friend and non-executive director Kumar.

By 1996 Swamy Electronics was finding it difficult to grow from retained earnings. The company required additional finance to maintain the present growth rate. At that point, the board decided to invite a merchant bank to provide venture capital by way of a convertible loan, secured on the company’s assets and 20 percent equity holding. The bank demanded a seat on the board in return for the loan.

Now the board had 3 executive directors and 2 non-executive directors (Kumar and the bank’s representative). By 1998, the business grew three fold and there were plans to go public. Frasier Inc., a multinational company, which operated from Tokyo, expressed its willingness to acquire Swamy Electronics Limited. The negotiations went on for a month and finally a deal was struck, according to which the MNC would get 60 percent of the equity and the balance will be retained by Swamy. Swamy would still be the CEO of SF Electronics Ltd. (formerly Swamy Electronics Ltd.) and he was also appointed to the board of Frasier Inc., The two executive directors and Shaswati sold their stake to Frasier Inc.

Frasier Inc. appointed new executive directors for the subsidiary who also figured on the board. The vice-president of overseas operations of Frasier Inc., became the new chairman of SF Electronics Limited.

It was a new experience for Swamy - the board meetings were more professional and dominated by the policies of the parent company.

Swamy as a director of the parent company saw that the board of Frasier Inc. had only 5 executive directors on the board of 15. The CEO of Frasier was always kept informed by the board on the various issues related to the functioning of the company.

Back home, Swamy felt that the parent company was diverting funds from SF Electronics Limited to other subsidiaries abroad. Swamy tried to oppose this but was voted-out at the board meeting. Swamy felt that his interests were being overlooked, so he sold out his 40% stake to Frasier and walked out of the company.

Answer the following Questions:

A. Identify the reasons for Shaswati’s unhappiness regarding the composition of the board of directors. (5 Marks)

B. Compare the board structures of Swamy Electronics Limited and Frasier Inc. Do you think the composition of the board impacts its performance? (10 Marks)

 

Section 2: Applied Theory (20 Marks)

Answer any One Question:

1. Discuss the unethical practices, in various areas, that MNCs’ have been accused of engaging in.

(Or)

2. Explain the unethical practices that purchasing managers can be charged with.

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