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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)
Answer : “In
a free enterprise, the community is not just another stakeholder in business
but is in fact the verypurpose of its existence." - Jamsetji Nusserwanji , Tata Founder, Tata
Group.
"Corporate
Social Responsibility should be in the DNA of every organization. Our processes
should be aligned so as to benefit the society. If society prospers, so shall
the organization..."
- Manoj Chakrava
Corporate Social
Responsibility has always been taken care of by the Tata group. The founder Mr.
Jamshedji Tata used to
grant scholarships for further studies abroad i
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)
Answer : "I
want to be able to read the names ofthe gods before 1 die."
In order to address the
country's low literacy rate, Tata Consultancy Services (TCS), a multinational
information technology and consulting service based in Mumbai, and a subsidiary
of Tata Group, devised the Adult Literacy Programme (ALP) in 2000, to augment
the Government of India's efforts to improve adult literacy. The ALP aims to help learners reach functional
literacy in 50 to 55 hours.
The Adult Literacy
Programme is intended
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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)
Answer : Shaswati may be
unhappy with the number of executive directors on the board. After her divorce
from
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)
Answer : Initially Swamy
electronics started as a family owned company where swamy and his wife held 100
percent stock in the company. The board was constituted to satisfy the Laws and
it functioned as a rubber stamp to ratify the decisions of the board. Thus
Swamy Electronics initially had an all-executive
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.
Answer : Deception,
collusions, swindling… sounds like the plot of a best-selling novel. However,
these terms are quite common in the commercial circles where unethical business
practices can be seen by the dozen. Whether it is a big conglomerate or a small
business, the stakes of outperforming the competition are always high. This
cut-throat struggle for survival and emerging as a winner attracts a lot of
unscrupulous tendencies; this has unfortunately become a part of the system.
The urge to rule the market has made businesses selfish and all-consuming.
However, the obligation to operate responsibly has
(Or)
2. Explain the unethical practices that
purchasing managers can be charged with.
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