Volume 2 January 2012 ISSN No. 2231 – 1904 Issue 1 SANKALPA

SANKALPA

Journal of Management & Research Sankalpa: Journal of Management & Research aims at debating and bringing out the intricacies of Management

perspectives and concepts, path-breaking theories and applications with much needed skills for the benefit of

teachers, students, managers and leaders in university, college, business, industry, government and non-government

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Shri Mahavira Jaina Vidyalaya Education FoundationC K Shah Vijapurwala Institute of Management, Vadodara, India

SANKALPA

19152015

January 2012 â ISSN No. 2231 – 1904Volume 2 Issue 1

I am very much delighted that SMJV’sCKSV Institute of

management is bringing out bi-annual ‘SANKALPA’ Journal of management &

Research in Jan 2012.

I have the honour to vist your institute twice and felt that it

has been very active in the field of research, coordination with other

organizations and organizing national level seminars for sharing of global

knowledge with the academicians & students & their future upgradation of

knowledge. I have gone through your first issue of ‘SANKALPA’ it was

excellent.

I wish that your research activities go beyond country

boundaries with pride & honour.

with regards.

Sankalpa : ♣ Volume 2 ♣ Issue 1 ♣ January 2012Journal of Management & Research II

Dr. Pukhraj MarooI.A.S.

Principal Secretary

Govt. of Madhya Pradesh

Labour DepartmentMantralaya, Vallabh Bhavan, Bhopal - 462 004

Message

IIISankalpa : ♣ Volume 2 ♣ Issue 1 ♣ January 2012Journal of Management & Research

Dear Reader

Almost everything is experiencing volatility: Petro-Prices, Currency, Economy, Education, Health,

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Under the circumstances, our esteemed universities, many of which offer age-old courses and obsolete syllabi, and turnout

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21st Century Universities should be learner-centric, offering courses that enable students to find and fit into work or job

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I am glad to share that our 97 year old Trust Shri Mahavira Jaina Vidyalaya, Mumbai has decided to set up a university at an

investment of about Rs 200 Crore over next few years.

The good news at our institute level is, Business India's Best B-School Survey in November 2011 awards CKSVIM 'A+' in All

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My sincere thanks and best wishes to one and all…

From the Desk of Editor-in-Chief

My Vision of a 21st Century University

Dr Rajesh KhajuriaDirector

Email : [email protected]

Sankalpa : ♣ Volume 2 ♣ Issue 1 ♣ January 2012Journal of Management & Research IV

SANKALPA

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APPEAL TO THE AUTHORS AND CONTRIBUTORS

The present issue (Volume 2, No. 1) is theJanuary-2012 issue,

which contains research papers/ articles in the areas of

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through their 'Reporting' in the form of research papers/ articles,

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“O Varuna, O Mitra, you Govern every man and are the wise thinkers; You are the Rulers, Nourish our Thoughts.”

- Veda, The most ancient Indian philosophy scripture

Table of Contents (Jan 2012, Volume 2, Issue 1)

1. Efficiency of Co-operative Banks: Employee and Customer perspective.................................................................01

- Kaushal A. Bhatt & Prof. Kinjal Bhatt

2. An Empirical Study of Measuring Retail Store Image..............................................................................................13

- Dr. Vipul Patel

3. Balancing Emotional Intelligence to Enlighten Transformational Leadership............................................................21

- Dr. Shalini Srivastava

4. Micro Finance: An effective tool for inclusive growth (With Special Reference to Madhya Pradesh).......................26

- Dr. Shobna Bajpai Maroo

5. Consumer behaviour towards branded apparels....................................................................................................32

- Dr. Prasanta Chatterjee Biswas

6. Unique Identification Number (UID) project in India: An “AADHAAR” for every Indian..............................................37

- Gaurav Nagori

7. Book review – 'The monk who sold his Ferrari' by Robin Sharma..........................................................................40

- Piyush D. Chadarava

8. Embedding Knowledge Culture in Organization-With Case-study of Tata Steel........................................................42

- Hiral Gandhi

9. Comparison of Private Life Insurance Companies- An application of DEA...............................................................49

- Rachana Tejani

10. Impact of FII's on Indian Stock Market..................................................................................................................56

- Dr. Sampada Kapse & Hitendra Lachhwani

11. Technology Application in Banking.......................................................................................................................64

- Richa Pandit & Devina Upadhyay

12. The key role of Strategic Human Resource in promoting Corporate Governance....................................................70

- Dr. S. Chinnam Reddy & Prof. Swapna Viswanathan

M A N A G E M E N T A N D F I N A N C E

Sankalpa : ♣ Volume 2 ♣ Issue 1 ♣ January 2012Journal of Management & Research V

B U S I N E S S E T H I C S A N D C O R P O R A T E G O V E R N A N C E

Sankalpa : ♣ Volume 2 ♣ Issue 1 ♣ January 2012Journal of Management & Research VI

13. A Conceptual perspective on role and relevance of HR in sustaining & refurbishing CG ........................................75

- Vijit Chaturvedi

14.

Heena Bharadia & Bhavik Panchasara

15. ............................................................................................................88

- Shiv Nath Sinha

16.

- Hemali Tanna

17.

- Dr. Mamta Brahmbhatt &

18. ...............................................................105

- Dinesh Kapadia

19.

- Dr. Tripat Kaur & Ashiya Anjum Shaikh

20.

- Pratik B. Mehta & Pawan K. Gangwar

21. ..............................................................................115

- Dr.Bijal Amin & Prashant Amin

22.

- Subhash Yadav

23.

- Dr. Vaishali Trivedi

24.

- Prof. Lalit Chande

4 Guidelines for Authors and Contributors.............................................................................................................132

4 Author Guidelines for writing Case Study............................................................................................................133

4 Advertisement Tariff and Subscription Rate........................................................................................................135

Corporate Governance and Board Composition Diversities in Indian Companies : An Analytical Study....................81

-

Are boardrooms still elusive for women?

Equator principles : Can banks ensure eco-friendly economic development? ........................................................94

Ethics in B-School Curriculum : A Study on attitudes of B-schools' Directors affiliated to GTU.............................100

Dr. Narayan Baser

Ethics from Patanjali Yoga Sutra and its Relevance in Corporate World

Corporate Social Responsibility : Case study of Hindustan Unilever Ltd...............................................................108

The Baby Business : One Sperm Donor, Multiple Offspring..................................................................................113

Business meta-ethics: Can corporation have a conscience?

Case on Spirituality at work : Muni Sewa Ashram, Goraj ....................................................................................120

An Insight into Whistle-blowing as an anti-corruption tool...................................................................................124

Why the business or industry people tempted towards unethical or corruption practices reluctantly.....................129

1

Efficiency of Co-operative Banks:Employee and Customer perspective

Mr. Kaushal A. Bhatt : Assistant Professor, Shri J. V. Institute of Management Studies, Jamnagar. E-mail : [email protected]

Prof. Kinjal Bhatt : Sr. Lecturer, Shri. S. V. E. T. Commerce and BBA college, Jamnagar. E-mail : [email protected]

Abstract

Banking in India has finally come of age. Urban Co-operative

Banks (UCBs) are an important part of the financial system in

India. It is, therefore, necessary that the UCBs emerge as a sound

and healthy network of jointly owned, democratically controlled,

and ethically managed banking institutions providing need based

quality banking services, essentially to the middle and lower

middle classes and marginalized sections of the society.

The present research study has been carried out with an objective

to get some insights about the efficiency of co-operative banks in

comparison to other banks.

The introductory part of the study focuses on theoretical

framework of 'efficiency' and 'Co-operative' banks, per se. While,

second part of research study is based on the analysis of

questionnaires. The research study covers the employee

efficiency in co-operative banks of Jamnagar city and customer

preference towards it. Here the type of data used in this research

study is primary and research design used is Experimental

research.

From this research study, it can be concluded that from the point

of view of employee efficiency, the Nawanagar Co-operative Bank

is found to be most efficient. From the point of view of customer

satisfaction the customers of NCBL are most satisfied with the

current operational efficiency of the banks. It can be

recommended that cooperative banks of Jamnagar city need

technological upgradation and use of e-Banking facilities to

provide more efficient services to the customers.

Co-operative banks

An important segment of the organized sector of the Indian

banking system is represented by a group of financial institutions

collectively called co-operative banks.

The co-operative banking system is much smaller than the

commercial banking system. At the end of March, 2009, the net

total credit outstanding of commercial banks (with the

commercial sector) was Rs. 48,000 crores. In comparison, the

net credit outstanding of the co-operative banking system was

about Rs. 9,000 crores of the commercial bank credit

outstanding.

The true importance of the co-operative credit system lies in its

geographical coverage – in giving credit outlets, spread over the

entire country, located in villages, and easily accessible to units

they are supposed to serve – and in the structure of higher

financing agencies in the form of central co-operative banks and

state co-operative banks and land development banks for

providing long – term credit for agriculture.

Meaning of efficiency

Efficiency is the state or quality of being efficient and having

in performance. It is the accomplishment of, or

ability to accomplish a job with a minimum expenditure of time

and effort. Efficiency is defined as the extent to which an

organisation or programme maintains a particular level with

fewer resources or increases the level of services it produces

with a less than proportionate increase in the resources used

Efficiency models

• Operational efficiency model

There is a vast literature on models for benchmarking operational

efficiency of bank branches. The literature, broadly speaking,

adopts either a production approach or an intermediation

approach. In the former case the branch is considered as a

“factory” delivering services to its clients in the form of

transactions. Benchmarking models examine how well different

branches combine their resources (personnel, computers, space

etc) to support the largest possible number of transactions. The

intermediation approach considers various types of costs as the

inputs, and those are combined to support the largest possible

number of revenue generating accounts. Sherman and Gold

(1985) motivate most of the research on the production

approach, and Berger, Leusner, and Mingo (1994) proposed the

intermediation model. The model described here does not differ

in any essential way from other production models in the

literature.

• Model inputs

The model uses two broad sets of inputs. One set captures the

resources used by the branch. The second set of inputs includes

the number of accounts in different account categories. This

information, while typically viewed as an output of a branch, is

considered here as an input since it reflects the micro-

competency

SMJV's CKSV Institute of Management, Vadodara, India

Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012


environment. In particular, it reflects the steady state market

conditions for the particular branch. The clientele structure is

tightly linked to a specific branch, and it changes very slowly with

time. Hence, for the purpose of a static analysis this information

is part of the operating environment of the branch.

• Model outputs

The output of the model is the total amount of work produced by

the branch in order to support the given client base. Work is the

time expended in processing all transactions that take place at

each branch during each day. The type and number of tasks

required to complete a transaction are typically known through a

work measurement system, and an accurate estimate of the

“standard” time spent on each transaction is obtained from this

system.

• Quality efficiency model

The importance of achieving high levels of quality has been

discussed extensively in the literature, especially when dealing

with the service industry, e.g., Zeithamel, Parasuraman and Berry

(1990). Service Quality (SQ) is considered by many as the key to

gaining competitive advantage, and its importance for the

Banking industry, in particular, has been documented in Roth and

Van Der Velde (1991, 1992). It is difficult to find today a bank that

has not initiated some kind of service quality improvement

program.

Research methodology

Statement of the problem

The problem statement in this research study is “Efficiency of co-

operative banks: customer and employee perspective”.

Scope of research study

The research study “Efficiency of co-operative banks: customer

and employee perspective”, has been carried out with an

objective to get some insights about the efficiency of co-

operative banks in comparison to other banks. The scope of this

study is limited to the co-operative banks of Jamnagar city only.

This research study includes the following cooperative banks:

• The Nawanagar Cooperative Bank Ltd. (NCBL)

• The Commercial Cooperative Bank (CCBL).

• The Rajkot Nagarik Sahakari Bank Ltd. (RNSB)

• The Jamnagar District Cooperative Bank Ltd. (JDCB)

• The Jamnagar Peoples Cooperative Bank Ltd. (JPCB)

• Raj Bank (RB)

• The Jamnagar Mahila Sahakari Bank Ltd. (JMSBL)

• The Vardhman Cooperative Bank Ltd. (VCB)

Universe and sample size of the study

The universe of this study is the employees and customers of all

co-operative banks of Jamnagar city. This research study

includes all cooperative banks of Jamnagar city. This research

study contains a sample size of 100 customers of co-operative

banks and 50 employees working in co-operative banks

Objectives of research study

Primary Objective of the Research Study

To check Operating Efficiency of Co-operative banks at local

level.

Other Objectives

• To provide an overview of the current state of co-operative

banking.

• To offer insights into the issues faced by co-operative banks.

• To check the purpose of co-operative banks and how they

deliver on this.

• To describe the future challenges facing co-operative banks.

• To analyse whether the cooperative banks provide efficient

services to the customers in comparison to private banks.

• To offer insights regarding the efficiency of cooperative banks

at the time of credit crunch.

• To assess employee and managerial performance in relation

to cooperative banks.

• To study the perception of customers regarding cooperative

banks.

Significance of research study

The role of Research in several fields of applied economics,

whether related to business or to the economy as a whole, has

greatly increased in modern times.

The Significance of our Research study is as follows:

• As this research study analyses the employee efficiency,

correct steps can be taken for further improvement.

• In this competitive age, efficiency is most important.

Therefore, through this research study the management of

Co-Operative banks can be made aware to improve their

performance.

• Cooperative Banks are emerging segment of the Banking

sector. The Urban cooperative banking system has witnessed

phenomenal growth during the last one and half decades.

Therefore, it is necessary to study the efficiency of these

banks as they are competitive to nationalized and private

banks at local level.

Limitations of study

• Research study is conducted in the Jamnagar city only for

study purpose. So, it provides an idea of the cooperative

banks and the customer's preference towards them for that

particular region only.

• Sample size in our research is 100 customer respondents

and 50 employee respondents of cooperative banks which

may be too small.

• Scope of the report is limited to 8 cooperative banks of

Jamnagar city only.

2 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012

• Biasness may be found amongst the employee respondents, so as to protect the image of cooperative banks.

Data analysis and interpretation

Employee perspective

TABLE 1 : Employee's view regarding the attitude of management towards them (Bank-wise distribution)

(Source: Structured questionnaire)

Analysis

Table 1 shows the attitude of management towards their employees in different selected co-operative banks.

It can be interpreted that most of the employees have a view that, their management is co-operative towards them. Some of them also

have the view that management is friendly towards them but least in having a professional attitude towards them.

Out of 17 employees of Nawanagar bank, 12 of them think that attitude is cooperative. Out of 5 employees of Vardhman bank, 3 of them

think that attitude is friendly.

Hypothesis using two- way Anova

Setting of Null Hypothesis (Ho)

There is no significant difference among the employees within various co operative banks and their view regarding attitude of

Management.

Setting of Alternate Hypothesis (H1)

There is significant difference among the employees within various co operative banks and their view regarding attitude of

Management.

Anova Table 1

(5 % level of significance)

In Anova Table 1, for Rows F (Calculated) value is 1.34 which is smaller than F (Tabulated) value which is 2.49. Therefore the Null

hypothesis has been accepted which means that there is no significant difference among the employees within various co-operative

banks and their view regarding attitude of Management. But for columns F (Calculated) value is 6.69 which is greater than F (Tabulated)

value 3.07. Therefore the Ho is rejected which means that there is significant difference among the employees within various co


3

Name of the Bank Professional Friendly Co-operativeNon-

operative co

NCBL

CCBL

JDCB

RB

RNSB

JPCB

VCB

JMSBL

2

0

1

1

0

0

1

0

3

1

0

2

0

0

3

1

12

9

2

0

4

5

1

2

0

0

0

0

0

0

0

0

42.375 7 6.053571 1.339921 2.487578

90.625

3 30.20833 6.68643

3.072467

94.875

21 4.517857

227.875 31

Source of Variation SS DF F F Crit

Rows(Bank)

Columns(Attitude)

Error

Total

MS


operative banks and their view regarding attitude of Management

Table 2 :


Analysis

Table 2 shows 50% of the employee respondents hold the view that they are satisfied with the leadership qualities of their leader, while

34% of them have the view that they are highly satisfied. Least of them i.e. 8 employees are of the view that they are somewhat satisfied

by the leadership qualities.


Setting of Hypothesis (Ho):

There is no significant difference among the employees within various co-operative banks and their view regarding leadership qualities

of their leader.

Setting of Alternate Hypothesis (H1):

There is significant difference among the employees within various co operative banks and their view regarding leadership qualities of

their leader.

Anova Table 2


In the Anova Table 2, F (Calculated) value is smaller than F (Tabulated) value 2.49. Therefore Ho is accepted which means that there is

no significant difference among the employees within various co operative banks and their view regarding leadership qualities of their

leader. But for columns F (Calculated) value is 3.63 which is greater than F (Tabulated) value 3.07, therefore Ho is rejected which means

that there is significant difference among the employees within various co operative banks and their view regarding leadership qualities

of their leader.

Are the employees satisfied with the leadership qualities of their leaders? (Bank- wise distribution)


4

Name of the BankHighly

satisfiedSomewhat satisfied

Not satisfied

1

0

0

0

0

0

0

0

2

0

1

0

4

0

1

0

Satisfied

10

3 2

3

0

2

3

2

4 7 0

0

0

3

1

1

NCBL

CCBL

JDCB

RB

RNSB

JPCB

VCB

JMSBL

42.375 6.053571 1.642973

40.125 13.375 3.630048

77.375 3.684524

159.875

7 2.487578

3

3.072467

21

31


Rows(Bank)

Columns(Leadership quality)

Error

Total

MS


Table 3 :


Analysis

Table 3 interprets the Non-financial Incentives provided by the different Cooperative Banks.

Here, most of the employee respondents have totally opposite view that they are sometimes provided with Non Financial Incentives.

Out of the 10 employee respondents of the Commercial Cooperative bank, 8 are of the view that they are sometimes provided with the

non financial incentives.

Whereas all the employee respondents of The Rajkot Nagarik Sahakari Bank hold an opinion that they are always provided with the Non-

financial incentives.

32% of the employee respondents hold the view that they are never provided with the Non-financial Incentives.



There is no significant difference among the employees within various co-operative banks and their view regarding non-financial

incentives provided by the bank.


There is significant difference among the employees within various co-operative banks and their view regarding non-financial

incentives provided by the bank.

Anova Table 3


Here, in Anova Table 3, the F (Calculated) value is smaller for both Rows and Columns. Therefore, the null hypothesis for both within and

between the various co-operative banks and Financial Assistance provided to them is not significant

Does the bank provide them with the non financial incentives? (Bank-wise distribution)


5

Name of the Bank

NCBL

CCBL

JDCB

RB

RNSB

JPCB

VCB

JMSBL

Always

3

0

0

0

4

0

0

1

Sometimes

11

8

0

0

0

5

0

2

Never

3

2

3 3

0

0

5

0

56.5 8.071429 0.982609 2.764199

20.33333 10.16667 1.237681 3.738892

115 8.214286

191.8333

7

2

14

23


Rows(Bank)

Columns(Non Financial Incentive)

Error

Total

MS



6

Table 4 :


Analysis

Table 4 interprets the satisfaction of employees regarding the efficiency of the Co-operative banks.

92% of the employee respondents are satisfied with the current efficiency of the banks which shows that co-operative banks are

efficient enough to compare with other banks.



There is no significant difference among the employees within various co operative banks and their view regarding current efficiency of

the bank.


There is significant difference among the employees within various co operative banks and their view regarding current efficiency of the

bank.

Anova Table 4


Over here, in Anova Table 4, F (Calculated) value for Rows is 1.27 which is smaller than F (Tabulated) value 3.79. Therefore the Ho has

been accepted which means that there is no significant difference among the employees within various co-operative banks and their

view regarding current efficiency of the bank. But for Columns, F (Calculated) value is 11.56 which is greater than F (Tabulated) is 5.59

therefore Ho is rejected which means that there is significant difference among the employees within various co operative banks and

their view regarding current efficiency of the bank.

Are the employees satisfied with current efficiency of the bank? (Bank-wise distribution)

Name of the Bank

NCBL

CCBL

JDCB

RB

RNSB

JPCB

VCB

JMSBL

2

0

2

0

0

0

0

0

Yes No

15

10

3

4

5

5

3

1

F CritFMSDFSSSource of Variation

Rows(Bank)

Columns (Efficiency)

Error

Total

3.787044

5.591448

1.269663

11.5618

12.10714

110.25

9.535714

7

1

7

15

84.75

110.25

66.75

261.75


Data analysis and interpretation

Customer perspective

Table 5 : Is bank liquid enough to pay off their funds whenever required? (Bank-wise distribution)


Analysis

Liquidity is an important indicator of the efficiency of the banks.

As per the customers, Co-operative Banks of Jamnagar city have enough liquidity to pay off their funds whenever required. Out of 44

customers of NCBL, 41 are of the view that their bank is always liquid, as seen in Table 5. Whereas some of the customers i.e. 19 out of

100 are also of the view that their bank is liquid at certain times. But only one customer holds the view that the bank is never liquid.



There is no significant difference among the customers within various co operative banks and their view regarding bank liquidity.


There is significant difference among the customers within various co operative banks and their view regarding bank liquidity.

Anova Table 5


In Anova Table 5, for Rows the F (calculated) value is 1.03 which is smaller than the F (tabulated) value which is 2.76. Therefore, the null

Hypothesis has been accepted which means there is no significant difference among various customers within the various banks and

their view regarding bank liquidity. While foe columns (calculated) value is 3.23, which means that Ho is accepted.


7

Name of the Bank

NCBL

CCBL

JDCB

RB

RNSB

JPCB

VCB

JMSBL

Always Sometimes Never

41 0

6

1

3

0

3

0

5

0

19

0

3

0

0 0

3

10

2

1

0

0

3

0


Rows(Bank)

Columns(Liquidity)

Error

Total

479.3333 7 68.47619 1.031471 2.764199

428.5833 2 214.2917 3.227921 3.738892

929.4167 14 66.3869

1837.333 23


Table 6 :


Analysis

The Table 6 shows the time taken by different Co-operative banks to sanction the loan; more is the efficiency of the bank.

From among the 33 customers who have availed the loan facility, 24 customers hold the view that their respective banks can sanction

the loan in less than 15 days. Whereas only 8 customers say that their bank can sanction the loan within 15-30 days. And only 1

customer is of the view that bank sanctions the loan in more than 30 days



There is no significant difference among the customers within various co operative banks and the customer view regarding the time

taken to sanction the loan.


There is significant difference among the customers within various co operative banks and the customer view regarding the time taken

to sanction the loan.

Anova Table 6


As in Anova Table 6, for Rows the F (Calculated) value is 1.42 which is smaller than the F (Tabulated) value 2.76. Therefore, the null

hypothesis has been accepted which means there is no significant difference among the customers within various co operative banks

and the loan facilities availed by them. While for columns, F (Calculated) value is 4.30 which is greater than the F (Tabulated) value 3.74

so, Ho is rejected and H1 is accepted, which means there is significant difference among the customers within various co operative

In how much time does the bank sanction the loan? (Bank-wise distribution)


8

Name of the Bank

NCBL

CCBL

JDCB

RB

RNSB

JPCB

VCB

JMSBL

Less than 15 days

15-30 days

8

1 0

3

1

9

2

0

1

3

1

0

0

2

1

0

1

0

0

0

0

0

0

More than 30 days

0


Rows(Bank)

Error

Total

40.29167 7 5.755952 1.424153 2.764199

Columns(Sanction) 34.75 2 17.375 4.298969 3.738892

56.58333 14 4.041667

131.625 23



9

banks and the loan facilities availed by them.

Table 7 :


Analysis

Table 7 interprets that from among the 100 customer respondents, 78% of them view that employees of their respected banks are

always efficient to complete their given task on time. But 22% of the customers hold the view that their employees are not always

efficient to complete their given task on time.



There is no significant difference among the customers within various co operative banks and their view regarding employee efficiency.


There is significant difference among the customers within various co operative banks and their view regarding employee efficiency.

Anova Table 7


In the Anova Table 7, F (calculated) value is 0.93 which is smaller than F (tabulated) which is 2.76. Therefore, the null hypothesis has

been accepted, which means there is no significant difference among the customers within various co operative banks and their view

regarding employee efficiency. In the same way for columns F (calculated) value is 2.73 which is smaller than F (tabulated) value 3.74,

which means that the null hypothesis is accepted.

Are the employees efficient enough to complete their given task in time? (Bank -wise distribution)

NeverName of the Bank

NCBL

CCBL

JDCB

RB

RNSB

JPCB

VCB

JMSBL

0

0 0

0

0

0

0

0

Always

42

5

2 4

5

18

2

0

Sometimes

2

12 3

0

0

1

4

0


Rows(Bank)

Error

Total

Columns(Employee Efficiency)

479.3333 7 68.47619 0.925652 2.764199

404.3333 2

202.1667 2.732861 3.738892

1035.667 14

73.97619

1919.333 23


Table 8 :

(Source : Structured questionnaire)

Analysis

Operational efficiency of the bank is the best way to judge the overall efficiency of the bank.

From among the 44 customer respondents of NCBL, 34 of them views that bank is operationally efficient. But the customer respondents

of Jamnagar peoples bank are of the view that their bank is always operationally efficient. (As seen in Table 8)

Out of 17 customers of Commercial Cooperative bank,11 are of the view that their bank is not always operationally efficient in

comparison to other banks


Setting of Hypothesis (Ho) :

There is no significant difference among the customers within various co-operative banks and their view regarding operational

efficiency of the banks

Setting of Alternate Hypothesis (H1) :

There is significant difference among the customers within various co-operative banks and their view regarding operational efficiency

of the banks

Anova Table 8


The Anova Table 8 interprets that F (calculated) value is 1.57 which is smaller than F (tabulated) which is 2.76. Therefore, the Null

hypothesis has been accepted which means that there is no significant difference among the customers within various co operative

banks and their view regarding operational efficiency of the banks.

Are the banks operationally efficient? (Bank-wise distribution)


10

34 10

6 11

2

3

4

0

5

0

19

0

3 3

0 0

NeverName of the Bank

NCBL

CCBL

JDCB

RB

RNSB

JPCB

VCB

JMSBL

0

0 0

0

0

0

0

0

Always

Sometimes


Rows(Bank)

Error

Total

Columns(Operationally Efficiency)

7

2

14

23

479.3333 68.47619 1.573089 2.764199

340.5833 170.2917 3.912074 3.738892

609.4167 43.52976

1429.333



11

While for Columns, F (calculated) value is 3.91 which is greater than F (tabulated) value 3.74 which means that there is significant

difference among the customers within various co operative banks and their view regarding operational efficiency of the banks

Research findings

From this research study, the following points are analyzed

• As per the employee perspective, the attitude of Management towards them in cooperative banks is found to be co-operative.

• Most of the employees of co-operative banks hold the opinion that they are provided with financial assistance other than salary.

• Majority of the employees of cooperative banks, have a view that they are sometimes provided with Non-financial incentives.

• It was found that most of the employees of co-operative banks always get moral support from their management.

• This research study indicates that as per employee perspective, cooperative banks are currently efficient but for further

improvement suggestions are also provided by them.

• As per the demographic profile of employees, it was found that 80% of the employees working in cooperative banks belong to the

age group of more than 30 years.

• It was analyzed that majority of the customer respondents of co-operative banks prefer to hold savings and current account in

banks.

• According to customer perspective, most of the customers hold a view that co-operative banks are always liquid; this indicates the

efficiency of the banks.

• Majority of the customers of co-operative banks do not prefer loan facilities provided by the bank. But those who prefer loan

facilities are of the view that banks sanction the loan in short period.

• As per customer perspective, the attitude of employees towards them was found to be co-operative and friendly.

• As per customer view, the co-operative banks are efficient and competitive to private banks at local level.

• It was found that the customers are satisfied with the services provided by different cooperative banks.

• Majority of the customers of cooperative banks i.e. 76% belong to business group

Recommendations

The following recommendations can be made from the structured questionnaire

• The cooperative banks of Jamnagar city need technological upgradation to improve their efficiency

• In this competitive age, it is recommended that e-Banking facilities such as online transfer, etc should be provided by the

cooperative banks.

• The cooperative banks should recruit employees having post graduate degree or degree in banking sector, which affects the

efficiency of the banks.

• The employee satisfaction level is very important to detect efficiency of the banks. Therefore, the cooperative banks should provide

more non-financial incentives to increase the efficiency of the employees

Conclusion

From this research study, it can be concluded that from the point of view of employee efficiency, the Nawanagar Cooperative Bank is

found to be most efficient as compared to other cooperative banks. It can also be concluded that the employee satisfaction level of

commercial cooperative bank is the highest. From the point of view of customer satisfaction the customers of NCBL are most satisfied

with the current operational efficiency of the banks. From this Research study, it can be concluded that from the various selected Co-

Operative banks of Jamnagar city, the Nawanagar Co-Operative bank Ltd. have found to be the most efficient among other Co-Operative

banks. It is so as it provides the facilities which are not provided by most of the other Co-Operative banks. Finally it can be concluded

that people of Jamnagar city prefer Co-Operative banks as they are competitive to private banks at local level.

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399-416.

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90, No.1, pp. 39-47

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16, pp. 447-458


13

An Empirical Study of Measuring Retail Store Image

Dr. Vipul Patel : Faculty in the area of Marketing, V.M.Patel Institute of Management, Ganpat University, Kherva, Mehsana.

E-mail: [email protected]

Abstract

An important element to the retail strategy is the store image; the

total sum of customers' perceptions about a store. Store image is

an important component of a consumer's store choice and use of

a store environment. So developing a strong, positive image has

become essential to the maintenance of sustained competitive

advantage. This paper presents the findings of a survey based on

responses from 200 customers of a retail store, located in the

major city of North Gujarat, India, selling apparel. The basic

objective of the paper was to examine the principal dimensions

involved in store image. A confirmatory factor analysis was used

to measure the image dimensions of the store. Six dimensions of

the retail store image were captured in this study: physical

characteristics, pricing policies, product range, customer

service, character of the store and store reputation.

This paper provides both researchers and retailers with a better

insight and understanding of the consumer perceptions about the

retail store image.

Key Words : Store Image, Customer Perceptions, Confirmatory

Factor Analysis

An Empirical Study of Measuring Retail Store Image

The retailing sector in India has undergone significant

transformation in the past 10 years and is gradually inching its

way towards becoming the next boom industry in India. In this era

of retail revolution, a consumer has availability of various brand

choices and is constantly facing the decision of what brands to

buy and from where to buy. As consumers are confronted with

more choices than ever before it is inevitable that making the right

store choice can rather be confusing or even intimidating.

Consumers subsequently make use of a few evaluative criteria

when considering a retail store to shop. An important criterion

that consumer uses when selecting a retail store is the store

image: overall impression or perception of a store. Store image is

a critical component in store choice and store loyalty (Thomson

and Chain, 1998). As retailers have to attract consumers to get to

the sales, they need to ensure that the store image is most

positive for the customers. It means that consumers'

expectations with regard to the store image must be

accomplished. Developing, maintaining and communicating a

strong, positive image has become essential to the maintenance

of sustained competitive advantage (Birtwistle and Shearer,

2001). Retailers spend a great deal of time and money on store

environments to create images that offer them a competitive

advantage in a crowded marketplace. This paper explores the

principal dimensions involved in customer perception of store

image.

Objectives

The main objective of this study is to measure the image of the

store in consumer mind, identifying the dimensions used by the

respondents to evaluate a retail store image.

This research paper is divided into three major sections. First, we

discuss the theoretical background and previous research that

has been conducted in the area of retail store image

measurement. Although there has been a dearth of such type of

studies in the Indian context, theoretical exploration can be based

on international studies carried out in other countries. Second,

we present the research methodology adopted to measure the

image of store. Finally, we provide a general discussion of the

findings, as well as limitations of the study and directions for

future research.

Literature Review

The concept of retail store image first came of interest when

Pierre Martineau (1958) described the 'personality of the retail

store.' Stores project a 'personality' to consumers through their

design features, employees, merchandising strategy, etc.

(Kasulis and Lusch, 1981). Martineau (1958) defined store

image as “the way in which the store is defined in the shopper's

mind, partly by its functional qualities and partly by an aura of

psychological attributes”. The functional qualities include such

factors as location, size, and store hours, while the psychological

attributes include attractiveness of store decor, friendliness of

employees, level of store service, etc. Keaveney and Hunt (1992)

describe retail store image as an overall impression of a store as

perceived by consumers, while Bloemer and Schroder (2002)

defined the store image as the sum of all the stores' attributes, in

the way perceived by the consumer, through his or her experience




with the store. Oxenfeld (1974) argues that store image is a

concept which is “more than the sum of its parts… it represents

interaction among characteristics and includes extraneous

elements…, it has some emotional content…a combination of

factual and emotional material.” A generally acceptable definition

of store image is an individual's cognitions and emotions that are

inferred from perceptions or memory inputs that are attached to a

particular store and which represent what that store signifies to

an individual (cf. Brangman et al., 2002).

From previous studies it is clear that store image is not a one

dimensional construct but seems to be composed of different

dimensions, each with its own importance (Brangman et al.,

2002). Over the years different authors have distinguished

different store attributes or characteristics that are part of the

overall image towards the store. Table I highlights the various

dimensions comprised of store image.

Table I: Store image dimensions and attributes

Lindquist (1974) concludes that store image is a complex

concept which is difficult to explore and manage, given that it is

created by a combination of both tangible (functional) and

intangible (psychological) factors. The interplay of these tangible

and intangible elements and the customers' overall interpretation

of them, based upon previous knowledge and experiences, are

widely accepted to determine store image (Hirschman, 1981;

Mazursky and Jacoby, 1986).

Martineau (1958) described store image partly by its functional

qualities and partly by an aura of psychological attributes

(Martineau, 1958). A review of store image studies by Lindquist

(1974) categorises store image components into nine key

attribute dimensions, namely, merchandise, service, clientele,

physical facilities, convenience, promotion, store ambience,

institutional factors as well as post-transaction satisfaction.

Dickson and Albaum (1977) developed twenty nine bi-polar

items to measure consumers' images of retail stores. According

to them, a consumer's image of a retail store encompasses

attitudes towards retail prices, products, store layout and

facilities, service and personnel, promotion and “others”.

Based on the work of Zimmer and Golden (1988), Monalis et al.

(1994) developed a 23 item store image scale and claim that

store image consists of the three dimensions: a general store

attribute dimension, an appearance dimension and a

salesperson/service dimension.

In this study, six broad dimensions of retail store image have been

identified from previous research and validated through

confirmatory factor analysis. These six dimensions are physical

characteristics, pricing policy, product range, customer service,

character and store reputation. Each of these store image

dimensions is briefly discussed in light of theoretical explanations

and prior research findings.

Methodology

Research Instrument

To measure the retail store image, a survey instrument in the form

of structured questionnaire, is developed. The questionnaire is

divided into two parts. The first section is designed to collect the

respondents' profile including age, gender, monthly income, and

occupation. Second section of the questionnaire consisted of

twenty four statements to measure the store image. These were

adopted from the study of Burt and Encinas (2000). All of these

were five point Likert-type scales in which respondents were

asked to indicate their level of agreement/disagreement (1 =

strongly disagree to 5 = strongly agree).

Sample

This study's target population was defined as active mall

shoppers. Data was collected from a famous retail store located

in Mehsana city of North Gujarat, India. The retail store chosen for

the study was one of the big and popular stores of the city, selling

apparel. Data was collected via an interviewer administered

questionnaire. Questionnaire was hand carried and personally

explained to respondents by the interviewers. A trained

interviewer randomly intercepted shoppers outside the retail

14

Promotion

Sales promotions, product displays, advertising programmes, symbols and colours

Store atmosphere

Lay-out of store without respect to convenience, External and internal décor of store, Congestion, Prestige of store, Congeniality

Institutional factors Conservative or modern projection of store, reputation and reliability

Post-Transaction Satisfaction

Returns and adjustments of products

Dimensions

Attributes

Merchandise

Services

Clientele

Physical Facilities

Convenience

Quality, assortment, styling or fashion, guarantees and price

Staff service, ease of return, credit and delivery service

Social class appeal, self image congruency and store personnel

Location of the store, parking facilities

Layout and Architecture


store and requested participation in the study. The interviewer waited until a respondent filled out the questionnaire, then collected the

questionnaire.

Demographic Profile of the Sample

A total of 200 respondents participated in the survey. Selected demographic characteristics of the sample including gender, age,

education, marital status and monthly family income, are presented in Table II.

The sample consisted of 47 percent of male and 53 percent of female respondents. Respondents were mostly between the ages of 21

and 30 years (58.5%). 57.5 percent of the respondents were single. Almost 86 percent of the respondents had at least bachelor degree.

Almost 58 percent of the respondents reported that their family income was more than Rs. 20,000.

Table II: Demographic Characteristics of the Sample


15

Variables Frequency %

Gender Male

Female

94

106

47

53

Age Under 11

11-20 Yrs

21-30 Yrs

31-40 Yrs

41-50 Yrs

Above 50 Yrs

18

117

40

23

2

09.0

58.5

20.0

11.5

01.0

Education Lower than secondary school

Secondary School or equivalent

Bachelor degree

Master degree

Doctoral degree

Others…

4

27

90

73

2

4

02.0

13.5

45.0

36.5

01.0

02.0

Marital Status

Single

Married

115

85

57.5

42.5

Monthly Family Income

Less than Rs.10,000

Rs.10,000 to Rs.20,000

Rs.20,000 to Rs.30,000

Rs.30,000 to Rs.40,000

More than Rs.40,000

34

50

64

40

12

17.0

25.0

32.0

20.0

06.0


Measuring Reliability and Validity of the Scales

Confirmatory Factor Analysis (CFA) was selected to refine and validate the measurement scales. CFA seeks to determine if the number

of factors and the loadings of measured variables on them conform to what is expected on the basis of pre-established theory. Given the

fact that the proposed model was based on logic, previous empirical research and theoretical findings, the CFA approach was

considered the most appropriate method to statistically confirm the proposed dimensions of retail store image. CFA tests were run to

test the reliability and validity of the constructs used in the study.

Reliability of the Scale

Measures of variables should have reliability in order to draw valid inferences from the research. Cronbach's alpha (or coefficient alpha)

is the most commonly used measure to judge the internal reliability of factors or constructs. Hair et al (1998, p.118) suggest that the

generally agreed upon the lower limit for Cronbach's alpha is 0.70. Table III shows the calculation of Cronbach's alpha for each measure

used in this research. From the Table III, it can be seen that the value of alpha for each constructs is above the cutoff value of 0.7,

indicating good internal reliability of the constructs.

Validity of the Scales

Validity is the ability of a measure to measure what it is supposed to measure (Zikmund, 2007, p.302). Convergent validity can be

assessed by examining the factor loadings of the measures on their respective constructs (Anderson & Gerbing, 1998). Factor

loadings of all the items should be quite high (above 0.5, Hair et al., 2003, p.112) and significant. In this study three items having factor

loadings less than 0.5 are deleted. After deleting these low factor loading items, CFA was performed again. The factor loadings of all the

retained items are shown in Table III. The factor loadings are above cut off value of 0.5 and significant at 0.05. Convergent validity is

also evaluated through an examination of the significance of the t-values. Items which have a t-value greater than 1.96 can be

considered significant at 0.05 (Anderson & Gerbing, 1988). From the table it can be seen that t-value of every item exceeded the 1.96

value (refer Table III); hence, all of the measurement items satisfied the convergent validity test.

Convergent validity can also be determined by calculating the average variance extracted (AVE) value of the construct. Hair et al. (2000)

suggest this value to be higher than 0.50.

Following formula can be used to calculate average variance extracted (Hair et al, 2003, p.624).

*Indicator measurement error can be calculated as 1- (standardized loading) 2

Table III shows the calculation of AVE for each construct. All the values exceed the recommended level of 0.5. In addition to these, a

principal measure used in assessing the measurement model is the composite reliability of each construct. A commonly used

threshold value for acceptable reliability is 0.70 (Hair et al., 2003, p.612).

Following formula can be used to calculate composite reliability (Hair et al, 2003, p.624).

*Indicator measurement error can be calculated as 1- (standardized loading) 2


16

Average

Variance

Extracted

(AVE)

Sum of squared standardized loadings

Sum of squared

standardized loadings

Sum of indicator

measurement error

=

+

Composite

Reliability

2(Sum of standardized loadings)

Sum of

Loadings

Standardized

Sum of indicator

measurement error

=

+

2


Table III shows the calculation of composite reliability for each construct. All the values exceed the recommended level of 0.70.

Table III : Results of Confirmatory Factor Analysis


17

0.796 0.794 0.494

Constructs Factor Loading t valueCronbach’s Alpha

Construct Reliability

Variance Extracted

6.624

8.880

9.013

0.819

0.818 0.529PhysicalCharacteristics

Items

The store is clean and tidy

The store decor is attractive

The store layout makes shopping easy

The store atmosphere is excellent

Pricing Policy The prices charged are fair

Prices are low compared to similar stores

You get good value for your money

The relationship between price and quality is good

0.722

0.629

0.642

0.819

0.707

0.711

0.738

0.753

7.755

7.904

9.128

The store carries a wide selection of different kindsof products

The products stocked are of a good quality

The merchandise is fashionable

[Store Name] is a reliable brand*

Product Range 0.769

0.764

0.784

9.651

9.774

0.814 0.816

0.596

Customer service Store personnel are kind and helpful

Salespeople have a good knowledge of the products

The store operates an easy return policy*

The store offers a high levelof customer service

0.737

0.742

0.717

8.398

8.273

0.775

0.776 0.536

Character

[Store Name] projects a conservative image

[Store Name] has a clear British appeal

[Store Name] serves the middle class

[Store Name] is a world class retailer*

0.834

0.827

0.785

11.804

11.416

0.856 0.856 0.665



18

For evaluating the discriminant validity, Holmes-Smith (2001) recommended that the average extracted variance of the two constructs

must exceed the square of their correlation to satisfy the test. To test the discriminant validity for the proposed measurement models,

the average variance extracted and the square correlation for every possible pair of factors were calculated. The results, presented in

Table IV, showed that the average variance extracted for each pair of latent variables was greater than the squared correlation for the

same pair, indicating discriminant validity of the constructs.

Table IV : DISCRIMINANT VALIDITY TEST OUTCOMES

Model Fit

After conducting the validity and reliability tests for all of the shopping motivation factors, it is also necessary to demonstrate the overall

fit of the measurement model. Several fit indexes likes the ratio of chi-square to degrees of freedom, the Goodness-of-Fit index (GFI),

Adjusted GFI (AGFI), the Normed Fit Index (NFI), Tucker-Lewis Index (TLI), Incremental Fit Index (IFI), and the Relative Fit Index (RFI),

Comparative Fit Index (CFI), and Root Mean Square Error of Approximation (RMSEA) were used to quantify the model fit. As shown in

Table V, the results of the confirmatory factor analysis demonstrated a moderate fit of the measurement model on the basis of a number

of fit statistics.

Store reputation

[Store Name] transmits a image reliable

You have total confidence in [Store Name]

You find [Store Name] totally trustworthy

[Store Name] will never let you down

0.703

0.854

0.799

10.533

10.075

0.854 0.858 0.603

0.742 9.456

Physical Characteristics

Pricing Policy

Product Range

Customer Service

Character

Store Reputation

0.511 0.562 0.532 0.597 0.566

0.035 0.545 0.515 0.579 0.548

0.170 0.005 0.566 0.630 0.599

0.158 0.002 0.114 0.600 0.569

0.024 0.003

0.034

0.039

0.634

Physical Characteristics

Pricing Policy

Product Range

Customer Service

Character

Store Reputation 0.008 0.007 0.119 0.114 0.06



19

Table V : Model Fit

CONCLUSIONS

Nowadays, a good image is a competitive advantage that is considered increasingly more important in this competitive environment. A

positive store image may generate consumer loyalty and can act as a natural entry barrier to other competitors. In the present study, an

attempt is made to study the image of store, selling apparel and located in Mehsana city of North Gujarat. Six dimensions of store image

identified through literature review are confirmed in this study. These dimensions are physical characteristics, pricing policy, product

range, customer service, reputation of the store and character of the store. As organized retailing develops in India, it is important to the

retailers to understand the image of their store in the consumer mind. This study will help them to understand the concept of store image

and various dimensions of store image. This will help them in crafting the retail strategy as per the store image perceived by the

customers.

Finally, the limitation of the study and scope for further study are discussed in the following section. This study confirmed the store

image dimensions identified by Burt and Encinas (2000). There may be other dimensions of the store image present. Further research

may be conducted to explore the same. The study measured the image of the store selling apparel and located in Mehsana city of

Gujarat, India. The results of the same, if conducted for the store selling other product category and in other part of the county may vary.

The results cannot be generalized to the other segments of consumers. A contribution of future researches would be the empirical

verification of the dimensions that other consumer segments use to evaluate stores image, such as: housewives, elderly people, and

professionals, among others, in order to verify the results validity for these other segments. Further research may be conduced to

explore the store image of the various retail formats like supermarket, hypermarkets, specialty stores, etc.

Bibliography

1. Birtwistle, Grete and Shearer, Linda (2001), “Consumer Perception of Five UK Fashion Retailers,” Journal of Fashion

Marketing and Management, Vol. 5(1), pp.9-18.

2. Burt, Steve and Encinas, J.C (2000), “The Role of Store Image in Retail Internationalization”, International Marketing Review,

Vol. 17 (4/5), pp. 433-453.

Fit Indexes

Ratio of chi - square to degrees of freedom

Goodness-of-fit index (GFI)

Adjusted GFI (AGFI)

Normed fit index (NFI)

Tucker-Lewis Index (TLI)

Incremental Fit Index (IFI)

Relative Fit Index (RFI)

Comparative Fit Index (CFI)

Root Mean Square Error of Approximation (RMSEA)

1.307

0.905

0.873

0.875

0.960

0.968

0.849

0.967

0.039



20

3. Bloemer, Josée and Schroder, Gaby O (2002), “Store Satisfaction and Store Loyalty Explained by Customer and Store Related

Factors”, Journal of Consumer Satisfaction, Dissatisfaction and Complaining Behavior, Vol.15 (1), pp. 68-80.

4. Dickson, J. and Albaum, G. (1977), “A Method of Developing Tailor-made Semantic Differentials for Specific Marketing Content

Areas”, Journal of Marketing Research, Vol. 14 (1), pp. 87-91.

5. Hair, J.F., Anderson, R.E., Tatham, R.L. & Black, W.C. (2003). Multivariate Data Analysis, Pearson Education, Delhi, 5e.

6. Hawari, Mohammed Al, Hartley, Nicole and Ward, Tony (2005), “Measuring Banks' Automated Service Quality: A Confirmatory

Factor Analysis Approach,” Marketing Bulletin, Vol. 16, Article 1.

7. Hirschman, E. (1981), “Retail Research and Theory”', in Enis, B.M. and Roering, K.J. (Eds), Review of Marketing, American

Marketing Association, Chicago, IL.

8. Kasulis, J.J. and Lusch, R.F., (1981), “Validating the Retail Store Image Concept”, Journal of the Academy of Marketing Science,

Vol. 9 (4), pp. 419 -435.

9. Keaveney, S.M. and Hunt, K.A. (1992), “Conceptualization and Operationalization of Retail Store Image: A Case of Rival Middle-

Level Theories'', Journal of The Academy of Marketing Science, Vol. 20 (2), pp. 165-75.

10. Lindquist, J.D. (1974), “Meaning of Image: A Survey of Empirical and Hypothetical Evidence,” Journal of Retailing, Vol.50 (4), pp.

29-38.

11. Martineau, P. (1958), ̀ `The personality of the retail store'', Harvard Business Review, Vol. 36, January/February, pp. 47-55.

12. Mazursky, D. and Jacoby, J. (1986), “Exploring the Development of Store Images,” Journal of Retailing, Vol. 62 (2), pp. 145-65.

13. Manolis, C., Keep, W.W., Joyce, M.L. and Lambert, D.R. (1994), “Testing the Underlying Structure of a Store Image Scale”,

Educational and Psychological Measurement, Vol. 54 (3), pp. 628-45.

14. Oxenfeld, A.R. (1974), “Developing a Favorable Price-Quality Image'', Journal of Retailing, Vol. 50 (4), pp. 8-14

15. Thomson, K.E and Chen, Y.L (1998), “Retail Store Image: A Means-end Approach,” Journal of Marketing Practice: Applied

Marketing Science, Vol. 4 (6), pp. 161-173.

16. Zimmer, M.R. and Golden, L.L. (1988), “Impressions of Retail Stores: A Content Analysis of Consumer Images”', Journal of

Retailing, Vol. 64 (3), pp. 265-93.


21

Balancing Emotional Intelligence to Enlighten Transformational Leadership

Dr. Shalini Srivastava : Associate Professor, Jaipuria Institute of Management, Noida. E-mail: [email protected]

Abstract

“…The success of the organizational changes is dependent on

leadership. As difficult as organizational change can be,

leadership change is exponentially more challenging. Leadership

often is the slowest to change in response to environmental and

organizational demands.” In this age of knowledge workers,

intellectual capital, connecting learning across the organization

and leveraging human capital, act of Emotional Intelligence

provides us a major clue to competitiveness. Most societies and

that includes business organizations, are caught between two

conflicting needs: one for managers to maintain the balance for

operations and one for leaders to create new approaches and

imagine new areas to explore. One might well ask why there is a

conflict. Can't both managers and leaders exist in the same

society? ...or even better, can't the same person be both, a

manager and a leader? A bureaucratic society, which breeds

managers, may stifle young leaders who need mentors and

emotional interchange to develop. Effective management of

organizations and human resources is facing enormous

challenges. Organizations are downsizing, reengineering

themselves to compete in the global market and facing an

explosion of available information (Luthans, 1998). Max

Messmer (1999), CEO of Robert Half, said in a recent survey of

150 executives from some of the nation's largest companies, that

leadership skills were identified as the most important assets of

managers. The present paper is an examination of how Emotional

Intelligence (EI) affects a manager's ability to make effective

decisions so as to be regarded as an effective leader. It discusses

about the importance of specific emotional attributes needed by a

leader to make qualitative and effective decisions.

Introduction

Ever since the publication of Daniel Goleman's first book on the

topic in 1995, emotional intelligence has become one of the

hottest buzzwords in corporate world. For instance, when the

Harvard Business Review published an article on the topic two

years ago, it attracted a higher percentage of readers than any

other article published in that periodical in the last 40 years. When

the CEO of Johnson & Johnson read that article, he was so

impressed that he had copies sent out to the 400 top executives in

the company worldwide.

Emotional intelligence is defined as a person's self-awareness,

self-confidence, self-control, commitment and integrity, and a

person's ability to communicate, influence, initiate change and

accept change (Goleman, 1998). Studies have shown that

emotional intelligence impacts a leader's ability to be effective

(Goleman, 1998). Goleman identified the five 'domains' of EQ as:

1. Knowing your emotions.

2. Managing your own emotions.

3. Motivating you.

4. Recognizing and understanding other people's emotions.

5. Managing relationships, i.e., managing the emotions of

others

Three of the most important aspects of emotional intelligence for

a leader's ability to make effective decisions are self-awareness,

communication and influence, and commitment and integrity.

Managers who do not develop their emotional intelligence have

difficulty in building good relationships with peers, subordinates,

superiors and clients (Goleman, 1998).

Emotional Intelligence embraces and draws from numerous other

branches of behavioural, emotional and communications

theories, such as NLP (Neuro-Linguistic Programming),

Transactional Analysis, and empathy. By developing our

Emotional Intelligence in these areas and the five EQ domains we

can become more productive and successful at what we do, and

help others to be more productive and successful too. The

process and outcomes of Emotional Intelligence development

also contain many elements known to reduce stress for

individuals and organizations, by decreasing conflict, improving

relationships and understanding, and increasing stability,

continuity and harmony.

Leadership

Leadership is a legacy that prepares others to carry on with

courage, determination and the ability to see the larger picture.

True leadership is the ability to be a catalyst for change, to inspire

and persuade people to follow the righteous path. Empowering

one's followers rather than controlling them is the hallmark of a

true leader. What makes a person a leader is still debated, but

according to Warren Bennis (1994) all leaders seem to share




some common traits. The first is a guiding vision or purpose. A

leader has a clear idea of what she or he wants to do

professionally and personally, and will pursue the goal regardless

of the setbacks. The second characteristic is passion or

enthusiasm and the ability to communicate that passion to

others. Third, is integrity, consisting of three ingredients: self-

knowledge, candor and maturity. Self-knowledge is knowing

one's strengths and weaknesses. Candor is being honest with

yourself and is the key to knowing yourself. Maturity is the result

of the lessons learned through following, while observing others,

learning to be dedicated, and working with others. It is being

truthful and never servile. The last two traits go hand in hand:

curiosity and daring. A leader wants to learn as much as possible

and is willing to take risks.

“Emotional Intelligence has an enormous impact in the

Workplace…”

In a new book, 'Working with E.I.” (Bantam), Goleman focuses on

the need for E.I at work, an area often concerned more head than

heart. Not only do the bosses and corporate need high need of

E.I., but every people-oriented job demands it too. Goleman says

cognitive skills 'get you in the door' of a company, but emotional

skills helps you thrive once you are hired. For some time we have

recognized the importance of these components of emotional

intelligence to those who go about their 'work' on the sporting

field and intuitively we have understood their importance in the

more traditional workplace. However, it has only been in recent

times that strong empirical evidence has been gathered which

highlight the enormous impact high emotional intelligence can

have in the workplace. Researchers have gathered data from

hundreds of companies and thousands of executives measuring

the impor tance of individual emotional intelligence

competencies, as well as the clusters of emotional intelligence

competencies that make up each domain. Goleman's own

findings are typical. When he compared star performers with

average performers in senior leadership positions, he found that

nearly 90% of the difference in their profiles was attributable to

emotional intelligence factors.

“EI is the sine qua non of leadership…”

Bosses and leaders in particular need a high EQ because they

represent the organization to the public, they interact with the

highest number of people within and outside the organization and

they set the tone for employee morale, says Goleman.

'E.I. affects just everything you do at work,' says Goleman. Even

when you work in a solitary setting, how well you work has a lot to

do with how well you discipline and motivate yourself. As Mr.

Goleman wrote in the Harvard Business Review 1998, 'It's not

that IQ and technical skills are irrelevant. They do matter, but

mainly as threshold capabilities, that are they are entry-level

requirements for executive positions. My research, along with

other studies, clearly shows that emotional intelligence is the sine

qua non of leadership.' If the ultimate leader does not champion

the effort, it won't be perceived as important .If it's not perceived

as important, it's not likely to get done. Emotional Intelligence

does not fit the classic historical models of leadership. The latter

are usually associated with great figures of military history and

conjure up charismatic and sometimes despotic images.

However, people often use the same language for leadership

today - bold, brave and tough with a strong sense of purpose and

resolve. However, this does not fit today's needs, because:

• today's workforce does not accept the autocratic style often

adopted by leaders following historical models of leadership.

• leadership has had to evolve to match a growing sense of

democracy and independence in the workforce

• employees now have far more options and choices than the

foot soldiers of yesterday

Leaders now need to manage and lead an “empowered”

workforce and go beyond the consultative, co-operative and

democratic styles of today. These new demands include:

• consultation and involvement – but leaders still get criticised

for not having and communicating a compelling vision and

purpose

• autonomy and freedom – but leaders are still expected to take

full responsibility when things go wrong

• opportunities for growth, challenge and glory - but leaders

must be on hand to coach and mentor us so that we develop

our potential

• inclusion and team spirit – but we still want our leaders to

give us individual recognition and acknowledgement.

A Leader with Emotional Intelligence

These findings are consistent with Patricia Pitcher's (1999)

description of a company led by one CEO with high emotional

intelligence that was succeeded by a CEO without emotional

intelligence. She began with a description of the high emotional

intelligence CEO (the artist) who took over a medium-sized

company. He had a vision to build the company into a global

corporation "operating in general and life insurance, banking,

trust and investments services" (p. 32) spanning the world. This

dream of his was during the time when most people believed

banking and insurance would never meet. After 15 years, the

company was worth $20 billion dollars and was an integrated

service company in Europe, Asia and North America. The CEO's

colleagues described him as a warm, generous, people-oriented,

imaginative, daring and funny person. Patricia Pitcher explains

the generous, people-oriented attributes helped him attract and

keep great colleagues and investors. His emotional and inspiring

traits allowed his enthusiasm to spread. The visionary, daring,

intuitive and unpredictable qualities helped him to keep focused


on the goal, avoid short-term gratifications and achieve his goal.

His open-mindedness helped the company and himself to

develop and retain different kinds of people. This ensured new

ideas and fresh approaches to problem solving. The CEO

surrounded himself with the best talent he could find. He

decentralized the power structure allowing his talented staff to

express themselves in their own way. He sat on the independent

boards and asked questions, but did not interfere with his staff.

The other executives included artists and six craftsmen. The

craftsmen were described as being well balanced, trustworthy,

reasonable, sensible and realistic. They were complementary to

the artists. These craftsmen knew what worked and what did not.

They understood that people made mistakes, but they learned

from them, and if you drove out error, you drove out innovation.

These people dealt with the day-to-day operations. There were

six other people in the company whom Pitcher calls the

technocrats. These people were described as being "intense,

determined, uncompromising, hardheaded, cerebral and

analytical." They were often called "brilliant, stiff and distant." (p.

32) Their interpersonal relationships lacked depth, and they

misread the people around them. She described the technocrats

as people who thought they were "realistic and sensible, even

imaginative, but no one else did" (p. 32). Technocrats erred in

their judgments of others, markets and situations. They did not

learn from the mistakes because they thought others were at

fault. Those who made errors would be fired. The article goes on

to describe what happened when the CEO felt it was time for him

to leave and let 'fresh air' into the company.

A Leader without Emotional Intelligence

In 1980 the company leadership was given to the second-in-

command, a technocrat. This leader was analytical,

uncompromising and brilliant. Patricia Pitcher believes such a

person would find decentralization a sloppy way of doing

business. So, the new CEO started to centralize the decision-

making processes. He created a new head office that replaced the

subsidiaries' authority. All of the craftsmen and artists running the

subsidiaries were gradually fired and replaced by 'competent

professionals' or technocrats by 1992. Within three years the

"organization was dead." If the 'professionals' where so brilliant,

what caused the company to fail?

Pitcher suggests that the company failed because "If you [do not

have] respect for the emotional qualities that come in the

imaginative package, you drive out the peculiar vision of an Artist.

If you equate experienced with outmoded or old-fashioned, you

drive out the Craftsman, who inspires the loyalty and the

dedication, and who knows what making widgets is all about. If

you fire people for making one mistake, nobody's going to go out

on a limb to make any…Innovation stops! An organization

without loyalty, dedication, skill and dreams can go downhill very


23Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012

fast" (p. 33). She points out that running a modern company

requires "all kinds of perspectives – even the cerebral, analytical

and uncompromising. The Artists and Craftsmen can live with

those different perspectives, but the Technocrat cannot" (p. 33).

What does this perspective reveal about the relationship between

emotional intelligence and leadership effectiveness?

To answer the question, an examination of the influence of

emotional intelligence on the two leaders is required. The first

Chief Executive Officer demonstrated most of the attributes

associated with emotional intelligence. Accurate self-

assessment (self-awareness) was demonstrated by his ability to

know his limits and his strengths. He surrounded himself with

people who had abilities he did not, e.g. the craftsmen, other

artists and technocrats. Daring to follow his dream demonstrated

self-confidence (self-awareness) and innovation (self-

regulation), aspects of emotional intelligence (Goleman, 1998).

His openness to new ideas, decentralization of power and his

constant learning (shown by asking questions at board meetings

and listening to the responses), demonstrated empathy.

Empathy is being aware of the feelings of others, their concerns

and needs. It can be broken down into seeking understanding,

development of others' abilities, leveraging diversity to allow new

ideas and opportunities to be heard, and being politically aware of

a team's needs and power structure (Goleman, 1998). The CEO's

social skill, another aspect of emotional intelligence, was

demonstrated by cultivating relationships with investors,

colleagues, and his employees. These aspects lead to trust

which is the second most important characteristic of emotional

intelligence (Cooper, 1997).

Trustworthiness is an important element in a leader's makeup as

shown in the previously described study. Without trust, much

time and effort is spent on non-productive activities because

leaders feel compelled to draw up procedures in great detail, even

for simple transactions (Copper, 1997). Innovation will stop when

subordinates do not trust the leaders. Creativity will vanish if the

sense of trust in an organization is lost and if people are

preoccupied with protecting their backs. (Cooper, 1997). The

second CEO probably lost the trust of his employees as a result of

his lack of emotional intelligence. Because the new CEO was not

aware of how his actions and emotions were affecting others, he

could be considered to be lacking in emotional intelligence

(Ryback, 1998). Pitcher said that he blamed others for problems

and did not look at the situational forces people were reacting to.

In order for the technocratic leader to be able to see the situation

realistically he must be aware of his own influence on the

situation and the motives of others involved. According to

Manfred F R Kets de Vries "to be able to decipher these deeper

motives-to tease out the emotional, cognitive, and experiential

components…requires the capacity to "listen with the third ear…

an awareness about our own feelings, the knowledge and skill to



handle those feelings, and an appreciation of emotions in other

people (empathy)" (1999, p. 752). Mike Miller's (1999) opinion is

that many managers fail because they are too rigid and have poor

relationships. As a consequence they are unable to adapt to

changes in the business environment, organization, culture, work

processes, and technology. Managers unable to receive or

respond to feedback are unable to determine how they need to

change their approach to leading others. This will alienate the

people they work with by "being overly harsh in their criticisms,

manipulative, insensitive, unethical, and untrustworthy. They

cling to autocratic, outdated methods of direction and control.

These managers demonstrate clearly that being technically

talented is not enough to drive success" (Miller, 1999, p. 25).

It is apparent the second CEO was ignoring how his emotions

influenced his actions in favor of an analytical or autocratic

approach to management. Without emotional intelligence, the

technocrat CEO was limited in his ability to influence people in a

positive way, e.g. he did not help people to develop their potential.

Being able to influence people is an important part of being an

effective leader. It is easy to assign a project. It is another matter

to persuade a colleague or superior to change his or her mind

about a policy decision (Church, Waclawski, 1999). Clearly the

major difference between the first and second CEOs was the level

of emotional intelligence shown by each.

An example of how emotional intelligence is used to express

leadership is in the book "Seven Habits of Highly Effective People"

by Stephen R. Covey (1989). According to Covey the effect of

developing the first three habits significantly increases self-

confidence. You will come to know yourself in a deeper, more

meaningful way. Understanding of one's nature, deepest set of

values and unique contribution capacity becomes clearer. This is

the foundation of emotional intelligence as defined by Daniel

Goleman – self-awareness. It is also the building of motivational

ability. Covey continues, saying that as the first three habits

continue to be developed, one's sense of identity, integrity,

controls and inner-directedness will increase. There will be an

increase in caring about what others think of themselves and their

relationship to you. This is the development of the self-regulation

and empathy aspects of emotional intelligence. The next three

habits describe the social skills of emotional intelligence. They

help a person to heal and rebuild important relationships. Good

relationships will improve, becoming more solid, more creative

and more adventuresome. The seventh habit is developing one's

self through the use of the first six habits. It is taking the time to

reflect or further develop self-awareness.

Conclusion

The paper suggests that managers who don't feel a responsibility

to others, can't handle stress, are unaware of their own emotions,

lack the ability to understand others, or erupt into anger easily, are

viewed as likely to derail due to problems dealing with other

people. High scores from direct reports on Difficulty Changing or

Adapting were related to EQ-i scores on stress tolerance, and

impulse control. Managers who resist change and growth, as

high scores on this derailment factor imply, may be plainly visible

to direct reports. Self-Awareness is key to leadership

development and is a skill to handling stress. The more accurately

we can identify and monitor our emotional upsets, the faster we

can recover. Self-awareness can be developed through the

practice of seeking on-going feedback. Ask supervisors and co-

workers who know you well for honest feedback on how your

behavior is impacting them. Use opportunities to self-reflect

upon adversity – business failures, demotions, missed

promotions, unchallenging jobs, and personal trauma. Consider

what you learned as a result of these hardships. Participate in a

leadership development program that features self-awareness

and reflection and ask for feedback on a multilateral assessment.

The ability to demonstrate yourself as a cooperative, contributing

and constructive member of the group, is critical for long-term

career success. Consider managing an inexperienced work team

or employees who are resistant. Think about what you can do to

contribute positively to group and organizational goals through

new job assignments, existing jobs, role models or coaches. If

maintaining self-control is a developmental area for you, consider

leading a task force or project team made up of diverse members,

taking calls on a customer hot line, negotiating a high profile case,

or representing your organization to the media or influential

outsiders. Seek a job assignment such as a project or task force

headed by someone known for his or her high sense of integrity

and crisis management strength.

A leader has to have emotional intelligence to align personal and

subordinate goals to accomplish company goals. James A.

Belasco and Ralph C Stayer (1993) suggest four responsibilities

a leader must implement at all levels of an organization. First,

transfer ownership for work to the people who do the work.

Second, create the environment where the transfer of ownership

can take place, where each person wants to be responsible for his

or her own performance. This entails painting a clear picture of

what the company believes great performance is, for the

company and each person; focusing individuals on the few great

performance factors; developing in each person the desire to be

responsible for his or her performance; aligning organization

systems and structures to send a clear message as to what is

necessary for great performance; engaging each individual's

heart, mind and hands in the business; and energizing people

around the business focus. Third, develop individual capability

and competence. Fourth, create conditions in the organization

that challenge every person to continually learn, including him or

herself. These four principals align personal and company goals

through emotional intelligence.



Bibliography

1. Goleman, D. (1998). Working with emotional intelligence. New York, NY:Bantam Books.

2. Ruderman, M. N., Hannum, K., Leslie, J.B., & Steed, J.L. (2001). Leadership skills and EmotionalIintelligence (Unpublished

manuscript).

3. Bennis, W. (1994) On Becoming A Leader. New York : Addison Wesley.

4. Caudron, S. (1999). What Emotional Intelligence Is…and Isn't. Workforce, 78, p 62.

5. Copper, R.K. (1997) Applying Emotional Intelligence in the Workplace. Training & Development, 51 (12), 31-38.

6. Covey, S.R. (1989) The 7 Habits of Highly Effective People. Simon & Schuster, New York: Fireside Book.

7. Goleman, D. (1995) Emotional Intelligence: Why It Can Matter More Than IQ. New York: Bantam Books.

8. Goleman, D. (1998) Working with Emotional Intelligence. New York: Bantam Books.

9. Goleman, D, (1998) What Makes a Leader. Harvard Business Review. November-December, pp. 93-102.

10. Luthans, F. (1998) Organizational Behavior. Boston, MA. McGraw-Hill.

11. Ryback, D (1998) Putting Emotional Intelligence to Work: Successful Leadership is More Than IQ. Boston: Butterwork-Heinemann.

26

Micro Finance: An effective tool for inclusive growth (With Special Reference to Madhya Pradesh)

Dr. Shobna Bajpai Maroo: Principal, Sarojini Naidu Govt. Girls P.G., Autonomous College, Bhopal (M.P)

Abstract

By inclusive growth we mean that growth process which benefits

all sections, all sectors and all regions of the economy, though not

uniformly. It is broad-based growth. How inclusive growth can be

achieved in India is a very complex issue, depending upon a

variety of factors - the most important being financial inclusion. If

the financial sector is to contribute more to inclusive growth, it

must reach out to more people. In this context policy approaches

like micro-finance has emerged as the most effective tool for

promoting faster and more inclusive growth and helps in reducing

poverty by providing a regular source of livelihood in a significant

manner The micro-finance sector in India is at the threshold of

massive expansion. There is a need to strength all the existing

mechanisms of micro credit delivery such as the SHG-Bank

Linkage programme, the PACs, the MFIs and also bringing in new

agencies such as the post-offices to the micro-finance sector.

However, the SHG- Bank Linkage programme is a potent initiative

for delivering financial services to the poor in a sustainable

manner.

The main objective of the present study is to analyse and review

the SHG-Bank linkage programme in the state of Madhya Pradesh

which is one of the 13 identified priority states which account for

about 70 percent of the rural poor population.

Introduction

Mere high rate of growth of GDP would have little meaning to the

poor and the disadvantaged unless there is a visible improvement

in their income-levels, living standards and working conditions.

Hence there is emphasis on inclusive growth in the 11th Five Year

Plan and efforts are made to devise programmes and plans that

address the felt needs of the poor with the objective of reducing

poverty and unemployment. By inclusive growth we mean that

growth process which benefits all sections, all sectors and all

regions of the economy, though not uniformly. It is broad-based

growth. Policy approaches like micro-finance has emerged as the

most effective tool for promoting faster and more inclusive

growth. This helps poor people to have access to savings, credit,

insurance and other financial services so that they are able to

cope up with every day demands more resiliently and confidently.

The National Sample Survey - 59th Round (2003) estimates

reveal a disappointing fact that out of total cultivator households

only 27% have received credit from formal sources and 22% from

informal sources. It means the remaining 51%, mostly marginal

farmers have virtually no access to credit. The credit requirement

of the poor in India has been estimated to be around Rs. 50,000

crore per annum. Against this requirement, the credit outstanding

of the poor with the formal banking sector is stated to be Rs. 5000

crore or ten percent of the total demand. The importance of

microfinance lies in the fact that the formal banking sector has not

lived up to its social responsibility of meeting the financial needs

of the poor. Most of the benefits of the so called extensive banking

sector have gone to the relatively better-off people, around 66% of

large farmers have a deposit account and 44% have access to

credit. There are only 17 credit accounts and 54 saving accounts

per 100 persons till June 2007. So there is an urgent need for

extending banking and financial services to every part of the

country for achieving the goal of inclusive growth.

Micro finance is a step towards inclusive growth via financial

inclusion as it is seen as provision of financial services to

mostly low-income people, especially the poor and In fact,

micro-finance is a step towards inclusive growth via financial

inclusion as it the very poor who are without any tangible assets.

Access to finance at reasonable interest rates has become one of

the essential pre-conditions, though not a sufficient condition for

achieving the goal of inclusive growth. Successful experiments

outside India such as the Grameen Bank of Bangladesh

demonstrated how small groups of poor women could become

successful entrepreneurs through a combination of small

savings and micro finance. Various NGOs and Self-Help Groups

in different parts of the country have also demonstrated that

micro finance could be a powerful tool for alleviating poverty and

for achieving the objective of inclusive growth.

SHG - BANK LINKAGE PROGRAMME

The SHG-Bank Linkage programme initiated by National Bank for

Agricultural and Rural Development (NABARD) in 1992 continues

to be the predominant micro-finance model in the country. It is a

proven method of financial inclusion, providing unbanked rural

poor with access to formal financial services from the existing

banking infrastructure in a cost effective and sustainable manner




with the help of self-help groups (SHGs). Self-Help groups comprise of members from a homogeneous class of the poorest of the poor,

coming together for addressing their common problems. They are encouraged to make voluntary thrift on a regular basis and make use

of this pooled resource to make small interest bearing loan to their members. In the process, they also imbibe the essentials of financial

intermediation including prioritisation of needs, setting terms and conditions, account keeping and financial discipline. Recognizing

their importance, both the Reserve Bank and NABARD have been spearheading the promotion and linkage of SHGs to the banking

system by initiating proactive policies and systems. NABARD has been extending refinance support to the banking system and

promotional grant support to NGOs and developing capacity building outreach of various partners.

The SHG- Bank Linkage programme is now considered by the banking system as a commercial proposition, with advantages of lower

transaction costs and higher coverage of rural clientele by the bank branches. The programme has been growing rapidly as the number

of SHGs financed increased to more than 34 lakhs on 31st March, 2008 and the outstanding portfolio under SHG-Bank linkage

programme is to the tune of Rs. 10,644 crores with 16.11 million total client outreach. The notable features of the programme are the

active participation of women (90%) and timely loan repayment (about 95%).

Linkage models of Micro-Finance in India

The linkage between the Self-Help Groups and the bank is expected to be of symbolic in nature. The linkage concept is based on

savings-linked credit. There are three distinct linkage models of micro-finance which are currently being followed in India. Under Model-

l, banks themselves take up the work of forming and nurturing the groups, opening their saving accounts and providing them bank

loans. Up to March 2005, 21 per cent of the total number of SHGs financed were in this category.

Under Model-ll, SHGs are formed by NGOs and formal agencies but directly financed by banks. This model continues to have a Lion's

share, with 72 per cent of SHGs financed up to March 2005 falling under this category.

Under Model-lll, SHGs are financed by banks using NGOs and other agencies as financial intermediaries. In areas where the formal

banking system faces constraints, the NGOs are encouraged to approach a suitable bank for bulk loan assistance. The share of

cumulative number of SHGs linked under this model up to end of March 2005 continued to be relatively small at 7 per cent. Model-wise

position of Linkage of SHGs in India is shown in Table-I.

(Source : Annual Report, NABARD 2004-05)

There is uneven geographical distribution of SHGs in India because SHGs are mostly concentrated in Southern States. Andhra Pradesh

alone has 30.5 percent of the total SHGs in the country. However, NABARD has taken up intensification of the SHG-Bank linkage

programme in 13 identified priority states which account for about 70 percent of the rural poor population, viz., Uttar Pradesh, Orissa,

West Bengal, Madhya Pradesh, Maharashtra, Gujarat, Rajasthan, Chhattisgarh, Jharkhand, Bihar, Uttaranchal, Assam and Himachal

27

Table 1: SHG- Bank Linkage Model Wise Position (2004- 2005) (In Rs.million)

Region No. of SHGs Bank Loan No. of SHGs Bank Loan No. of SHGs Bank Loan No. of SHGs Bank Loan

Northern

9623

241.61

76,383

2152.54 12

1.03

86,018

2395.18

North-eastern

26674

893.34

5198

102.54 2366

23.73

34238

1019.61

Model ISHG formed and

financed by banks

ModelII SHG formed by formal agencies & NGOs but directly financed by banks

ModelIII SHGs

financed by banks through NGOS

Total

Eastern

112861

1827.59

120,174

2829.59

32593

525.88

265628

5183.06

Central

46106

1186.85

146159

3733.93

5100

93.78

197365

5014.56

Western

33928

1055.39

56364

1656.06

5974

239.32

96266

2950.77

Southern

114179

4921.42

753971

44818.88

70791

2681.12

938941

52421.42

Total

343371

10,126.20

1,158,249

55293.54

116836

3564.86

1,618,456

68,984.60

Percentage

21

15

72

80

7

5

100

100



28

Pradesh. The year 2006-07 witnessed the spread of the SHG-Bank linkage programme in poor regions of the country indicating a

marked shift from its initial concentration in the southern region. Consequently, the share of cumulative SHGs credit linked in Southern

States declined to 54% in 2006-07 from 71% in 2000-01 and that of non-southern regions rose from 29 % to 48% 2006-07.

Table II: Region-wise Spread of SHG-Bank Linkage Programme in India (Rs. in lakh)

(Source : NABARD Annual Report 2007-08)

Micro Finance in MP : An overview

The state of Madhya Pradesh is a late comer on the SHG-Bank linkage map and also remained a slow starter. An awakening is now seen

in the state with banks recognizing micro-finance initiatives as effective tool to cater the credit needs of the poor. This is quite evident by

the fact that the NABARD has been propagating, promoting, and financing the SHG-Bank linkage programme since 1992.The micro

finance activity in Madhya Pradesh, at present, covers more than 3.81 lakhs SHGs formed by different organizations such as

government departments, NGOs, banks and NABARD. The agency-wise number of SHGs formed in the state is shown in Table-III.

Table – III: Agency-wise number of SHGs in Madhya Pradesh (2007-08)

(Source: NABARD State Focus Paper-Madhya Pradesh (2009-10)

Although credit linkage of SHGs has been gradually increasing over the years, the progress is not keeping pace with the number of

SHGs formed in the state. The number of SHGs credit linked under SHG-Bank linkage programme in the state increased from 1622

groups in 1999-2000 with bank loan of Rs 448.42 lakh to 83336 SHGs with bank loan of Rs. 29768 lakh in 2007-08 (Table- IV).

Region

Cumulative Growth in SHGs Credit Linked

2000-01

Cumulative

2006-07

Cumulative

Northern

4,001

9,012

48,921

1,182,018

North-Eastern

160

477

29,237

91.754

Eastern

11,057 22,252

1,31,530

5,25,881

Central 3,631 28,851 64,814 3,32,729

Western

6,911

15,543

1,04,193

2,70,447

Southern 1,09,218 1,87690 3,07,713 15,22,144

Total

1,40,198 2,63,825

6,86.408

29,24,973

Agency No. of SHGs

Zila Panchayat 192096

Rajiv Gandhi Watershed Mission

11130

Mahila Bal Vikas 77463

Padhana Badhana Andolan 63488

NGOs/Banks/FCs/IRVs 37674

Total

381851



29

Table- IV: Growth of SHGs linked to Bank Credit 1999-2000 to 2007-2008

(Source : NABARD State Focus Paper-Madhya Pradesh (2009-10))

It is observed from Table-IV that more than 90 percent of SHGs were formed by women during the present decade. In 2007-08, all

SHGs were women-groups, indicating better women empowerment in the state. These SHGs were credit-linked by 18 Commercial

Banks (CBs), 19 Regional Rural Banks (RRBs), and 21 Cooperative banks –DCCBs spread over 50 districts in Madya Pradesh

Table – V: Number of SHGs Credit-linked through Bank Loans ( 2005-06)

(Source: NABARD Annual Report (2006-07))

During 2005-06, more than 1600 branches of commercial banks had linkages with 24048 SHGs in Madhya Pradesh. All the 19 RRBs

operating in the state have participated in the SHG-bank linkage programme. Till March 2005, RRBs had credit linked 17678 SHGs and

provided them bank loans to the tune of Rs 34.89 crore. Apart from government departments, around 120 NGOs are involved in SHG

promotion in 28 districts of the state. The number of SHGs credit-linked in the state has increased from 74 SHGs with bank loans of Rs

14.34 lakh in 1997-98 to 45105 SHGs involving bank loan of Rs 10968.74 lakh in 2004-05.

Moreover, the spread of SHGs is not uniform throughout the state. Although, all the 50 districts of MP have been covered under the SHG-

Year No. of SHGs linked to bank credit Bank Loan

( Rs. in lakh ) Women Group Other Groups Total

1999 -2000 1,476 146 1,622 448.42

2000 -01 1,946 344 2,290 427.56

2001 -02 3,255 814 4,069 683.19

2002 -03 6,192 1,098 7,290 1,515.33

2003 -04 10,286 1,538 11,824 2,928.75

2004 -05 15,667 2,343 18,010 4,965.49

2005 -06 10,457 1,563 12,020 5,069.86

2006 -07 12,574 1,213 13,787 4,992.30

2007 -08 12,424 nil 12,424 8,737.10

Total 74,277 9,059 83,336 29,768.00

Agency Number of

Participating

Banks

Number of

Participating

Branches

Number of SHGs Credit-linked

Amount of Bank Loan(Rs.in lakh)

CBs 18 1633 24048 6658.02

RRBs 19 1025 17678 3488.97

DCCBs 21 706 3379 821.75

Total 58 3364 45105 10968.74



30

Bank linkage programme, there is wide disparity across different regions. It is observed from Table- VI that the Malwa region with 52 per

cent credit linkage of SHGs has performed far better than other regions like northern (11 per cent), eastern (12 per cent), central (12 per

cent), and Mahakaushal (13 percent).

Table – VI: Region-wise Spread of SHG-Bank Linkage Programme in MP (2007-2008)

(Source: NABARD State Focus Paper-Madhya Pradesh (2009-10))

NABARD continued to play the role of a facilitator in scaling-up the programme through various measures such as widening spatial

distribution of the programme on a district-wise basis, training and capacity building of NGOs, banks, farmer clubs and individual rural

volunteers. Besides this, NABARD has taken many initiatives in order to spread the SHG concept in MP and provided financial support

to Selp-Help Promoting Institutions (SHPI). NABARD has been providing grant assistance, on a selective basis, to NGOs for formation

of quality groups and their credit linkage with banks. So far, 69 NGOs have been sanctioned grant assistance of Rs. 216.78 lakh for

promotion and credit linkage of 10620 SHGs in 27 districts of MP. Besides NGOs, Regional Rural Banks and co-operatives are also

functioning as SHPI. Four RRBs viz. Jhabua-Dhar, Narmada-Malwa, Chambal-Gwalior and Madhya Bharat have been sanctioned grant

assistance of Rs12.07 lakh for formation and credit linkage of 1800 SHGs. These RRBs have so far formed 1640 SHGs credit linkage of

776 SHGs. District Credit Cooperative Banks in three districts, viz., Mandsaur, Shajapur and Ratlam, have been sanctioned grant

assistance of Rs. 14.50 lakh for formation, nurturing and credit linkage of 1750 SHGs. 11 Farmers' Clubs (10 sponsored by Sharda

RRB and 1 sponsored by Bank of Maharashtra) were provided grant assistance of Rs.0.30 lakh for formation of 120 SHGs and credit

linking of SHGs. Further 10 farmers' clubs were sponsored by Narmada Malwa Grameen Bank for formation and credit linkage of 100

SHGs.

Conclusion and suggestions

The micro-finance sector in India is at the threshold of massive expansion. However, the sector faces a large number of major issues

which need to be addressed so that a congenial environment is created for the continued growth of the sector. There is a need to

Region No. of

Districts

Districts No. of SHGs

credit linked

Percentage

Share in Total

Malwa 14 Shajapur,Uijain,Indore,Dewas,

Khandwa,Burhanpur,Khargo

ne,Barwani,Dhar,Jhabua,Ratl

am,Neemuch, Alirajpur and

Mandsaur

42822 52

Central 8 Bhopal,Sehore,Raisen,Vidisha,

Rajgarh, Hoshangabad, Harda

and Betul

10297 12

Northern 8 Bhind, Morena, Gwalior,

Shivpuri,Sheopur,Ashoknagar,

Datia and Guna

9268 11

Eastern 12 Sagar,Tikamgarh,Chhatarpur,

Damoh, Panna, Satna, Rewa,

Sidhi,Shahdol,Umaria, Singroli

and Anuppur

9868 12

Mahakaushal 8 Balaghat, Mandla, Dindori,

Jabalpur,Katni, Narsimhapur,

Seoni, Chhindwara

11081 13

Total 50 83336 100.00



31

strengthen all the existing mechanisms of micro-credit delivery

such as the SHG-Bank Linkage programme, the PACs, the MFIs

and also bringing in new agencies such as the post-offices to the

micro-finance sector. However, the SHG-Bank Linkage

programme is a potent initiative for delivering financial services to

the poor in a sustainable manner.

Presence of large number of SHGs in the State highlights the need

for creation of right awareness about conceptual and operational

aspects of microfinance approach among banks, NGOs,

government officials and others concerned. Massive

geographical spread of SHG movement (without dilution in

quality aspects) needs commensurate capacity building of all the

partners. Capacity building of SHGs at regular intervals ensures

their quality and sustainability. The capacity building intervention

would focus on training and capacity building of field level

functionaries of government departments, banks, NGOs as well

as members or leaders of SHGs.

Any strategy for up scaling the SHG movement in the State

requires consensus and whole-hearted support from all partner

agencies as to the modalities of implementation. Experience of

other states which made rapid progress in this field proved that

state governments' commitment holds the key to success. Being

the major SHG promoting agency, the State Government may

bring about uniformity in operational guidelines for all the line

departments in formation and nurturing of the groups,

encompassing the best practices in SHGs. Besides this, Rural

Development Department at the State level and Zilla Panchayat at

the District level may be suitability advised to act as nodal

department for collection and dissemination of data relating to

SHGs. Grading of the existing SHGs may be undertaken in a time-

bound manner and details of good working SHGs may be

furnished to the concerned bank branches. This will facilitate the

banks to extend credit to SHGs without any difficulties.

For achieving the goal of inclusive growth in the state, it is

necessary to adopt a more aggressive linkage plan, through

better synergy of interventions and involvement of various

partner agencies. The SHGs are mainly being formed by various

government agencies such as Zilla Panchayats, Women and

Child Welfare Department, Rajiv Gandhi Mission for Watershed

Development and Literacy, etc. under various programmes,

notable among them being the Swarnajayanti Grameen

Swarojgar Yojna. With a view to ensuring the right direction and

appropriate momentum to the linkage programme, it is imperative

to have an effective monitoring and evaluation mechanism at all

levels. NABARD has been issuing guidelines from time to time in

this direction.

Banks are expected to lend atleast 10 percent of their net bank

credit to weaker sections of the society. The list of the

beneficiaries under this group largely refers to the poor and

excluded section. Banks need to understand the market and

develop products suited to the clients. They need to develop data

sets to evolve risk assessment models for proper rating and

pricing. Financial inclusion has to be viewed as a business

strategy for growth and banks need to position themselves

accordingly. Banks need to redesign their business strategies to

incorporate specific plans to promote financial inclusion of low-

income group treating it both a business opportunity as well as

corporate social responsibility.

It is observed that the real benefit does not percolate to the needy

people because of lack of proper planning and identification of

problem. So it is suggested that problematic areas and problems

of the people should be identified and accordingly, development

programme should be initiated. Awareness and action plan of the

programme should be communicated to the people, so that they

can take interest in its implementation. Otherwise lack of

motivation and information about the programme make the

scheme partial failure and finally leads to wastage of time and

money. So before starting any programme, people should be fully

informed, motivated and prepared for it.

Further, improvements in rural connectivity, through roads,

power and telecom, can ensure greater penetration by the

financial system into remote areas and provide safe and efficient

financial services to large segments of the financially excluded

and in the areas where banking services are not easily available,

there is need to explore other alternative avenues.

Bibliography

1. George N.D. (2008) “Micro Finance-Issues and Strategies”,

Yojna, Vol. 52,pp 41-43.

2. Jain A and Khare M.,(2010) “Inclusiveness of Banking

System in India-In Retrospect and Prospect”ed. Rural Credit

in the Era of Globalisation, Madhav Books, Gurgaon, Haryana

pp 404-419

3. Madhya Pradesh Human Development Report (2007)-Oxford

University Press New Delhi, pp 103-106.

4. NABARD (2009-10) “Role of Informal Credit Delivery

System” State Focus Paper- Madhya Pradesh, pp 147-156.

5. Rasure, K.A., (2007) “Micro Finance-A Tool for Women

Empowerment”, 90th Indian Economic Association Annual

Conference Volume, pp 560-561.

6. Reddy, Y.B. (2005) “Micro-Finance: Reserve Bank's

Approach” RBI Bulletin Vol.49 No.9, pp 845-846.

7. Sarmah E. and Bordolo B. (2009) “Rural Credit in India: Policy

Insights”, Kurukshetra, Vol. 57 No. 4 pp 26-28.

8. Shylendra H.S. (2008) “Role of Self Help Groups”, Yojna

Vol.52 pp 25-28.

9. Singh, S.R.(2007),“Micro-Finance: Scope and Linkages with

Faster And Inclusive Growth”, 90th Indian Economic

Association Annual Conference Volume, pp 550-559.


32

Consumer behavior towards branded apparels

Dr. Prasanta Chatterjee Biswas : Assistant Professor, J.V.I.M.S M.B.A Institute, Jamnagar. E-mail : [email protected]

Abstract

Marketers should not forget that India is a young country and

these young Indians believe in building their own fashion

statement based on their comfort and fitting rather than adopting

what is displayed on the shelves and in advertisement. In order to

successfully exploit this potential, branded clothes

manufacturers need to be cognizant of customer's evaluation of

and attitude towards branded vs. unbranded apparel. Within the

current marketing environment, competition between products

and services is becoming increasingly tough. In order to face the

onslaught of competition, branding was introduced by

companies as a marketing strategy to differentiate a number of

homogenous products including clothing. With so many players

present today in the Indian apparel industry – both branded and

unbranded - it has become imperative for marketers in this

industry to have a clear understanding of Indian customer's

evaluation of clothing.

Indian clothing market managed to hold on despite the economic

recession and grew in high double digits for most of the clothing

and footwear market subsectors such as men's wear, women's

wear and children's wear. The domestic demand for clothing and

footwear market in India was helped by the impressive growth in

organized retailing that was fast expanding into Indian tier two

cities as well. The growth in clothing and footwear was driven by

a young population with higher disposable incomes residing in

urban and semi-urban India.

The present study primarily focuses on how consumers evaluate

branded clothes visa- visa unbranded clothes based on factors

like price, quality, variety etc.The current paper will begin with a

discussion of the theoretical background of the study. The

following sections present, successively, the objectives of the

study, research design, sample of the study, analysis of research

findings, conclusion and implications, and end with the

limitations of the study.

Introduction and History- Textile & Apparel Industry

The textile industry is one of the oldest industries in India. It has

played an important role in generating foreign exchange reserves

and creating employment opportunities. The concept of

readymade garments is relatively new for the Indians.

Traditionally, Indians preferred dresses stitched by local tailors,

who had tailoring units in townships or cities and catered

exclusively to local demand. The growing fashion consciousness

during the 1980s and the convenience offered by ready-to-wear

garments were largely responsible for the development of the

branded apparel industry in India. Other factors which

contributed to its growth were: greater purchasing power in the

hands of the youth, access to fashion trends outside the country,

and the superior quality of fabrics. (icmrindia.org). The textile and

apparel industry is one of the leading segments of the Indian

economy and the largest source of foreign exchange earnings for

India. This industry accounts for 4 percent of the Gross Domestic

Product (GDP), 20 percent of industrial output, and slightly more

than 30 percent of export earnings. The textile and apparel

industry employs about 38 million people, making it the largest

source of industrial employment in India. The 1990s witnessed a

drastic change in the overall economic environment of the

country. The period was characterized by liberal trade and new

investment policies. The effect of liberalized polices was seen in

the clothing industry as well. In 2001-02, the domestic apparel

market was estimated at Rs 431 billion, of which the readymade

garments business was estimated at Rs. 298.5 billion. The

branded apparel market accounted for Rs.90 billion of this

Rs.298.5 billion market. In other words, Rs.208.5 billion market

still remains to be tapped. The major players in the branded

apparel market are Madura Garments (part of Indian Rayon),

Raymond, Bombay Dyeing, Arvind Mills, Pantaloons, Zodiac and

Acme Clothing.

Indian clothing market managed to hold on despite the economic

recession and grew in high double digits for most of the clothing

and footwear market subsectors such as men's wear, women's

wear and children's wear. The domestic demand for clothing and

footwear market in India was helped by the impressive growth in

organized retailing that was fast expanding into Indian tier two

cities as well. The growth in clothing and footwear was driven by

a young population with higher disposable incomes residing in

urban and semi-urban India. Despite the recession impacting the

Western countries, the Indian Gross Domestic Product (GDP)

managed to grow around 6.5% in 2008 and this immensely

helped the clothing and footwear market to stay on growth




trajectory. Rising income levels and demand from young

population helps market to grow. Women's wear, children wear

and accessories grows at fast pace. The most important factor

driving the demand for clothing and accessories in India was the

demand for traditionally ignored sectors such as women's wear,

children wear and clothing accessories. Demand for women and

children wear grew due to increased number of working woman

who had financial independence and demanded easy to carry

clothes that fit well. A lot of existing brands launched western

style wear for working women in the review period as the demand

for western outfits for women grew at a fast pace in India.

Demand for children's wear grew due to increased availability of

children's wear brands and the impact of television advertising on

children. Increased retailing space helps private labels to

dominate. The market for clothing and footwear remained

fragmented with many players operating and none having a

market value share in double digits. Private labels also grew as

they provided the people with the right price points and were

cheaper than other regular brands. Also, the recession urged

people to look at best value deals and private labels grew as they

claimed to provide best quality at cheaper prices. The retailing

chains such as Pantaloons, Megamart, Spencers and Lifestyle,

all had their private labels selling alongside other branded clothes

in their stores. Factors such as rising per capita income, exposure

to international trends, rising retailing chains and increasingly

financially independent women and an exploding youth

population are expected to drive the Indian clothing and footwear

market in the forecast period. Styling is likely to become

increasingly important as people become fashion conscious and

are likely to be willing to pay more for good style. Quality and

comfort are other two factors that are likely to help marketers to

hold its own in the increasingly competitive Indian clothing and

footwear market.

The Indian apparel industry plays an important role in generating

foreign exchange reserves and creating employment

opportunities. India is the sixth largest exporter of readymade

garments in the world with apparel worth 9.7 billion dollars

exported from the country in 2007-08 (Jairam, 2009). The

concept of readymade garments is relatively new for the Indians.

Traditionally, Indians preferred dresses stitched by local tailors,

who had tailoring units in townships or cities and catered

exclusively to local demand. The growing fashion consciousness

during the 1980s and the convenience offered by ready-to-wear

garments were largely responsible for the development of the

branded apparel industry in India.

The 1990s witnessed a drastic change in the overall economic

environment of the country. The period was characterized by

liberal trade and new investment policies. The effect of liberalized

policies was seen in the clothing industry as well. In 2001-02, the

domestic apparel market was estimated at Rs 431 billion, of

which the readymade garments business was estimated at Rs.

298.5 billion. The branded apparel market accounted for Rs.90

billion of this Rs.298.5 billion market (icmrindia.org). India's

domestic market for clothing, textiles and fashion accessories is

currently worth Rs. 113,500 crore as per the India Retail Report

2007 estimates. Nearly 19% of this market is organized. Of the

total market size of Rs. 113,500 crore, menswear takes up 32 per

cent, followed by women's wear at 29 per cent, kids wear at 13

per cent, uniforms at 8 per cent, unisex apparel at 7 per cent and

non – apparel fashion accessories at 11 per cent (India Retail

Report 2007). Thus, it can be seen that a huge chunk of the

market is still dominated by unbranded clothing and remains to be

tapped by branded apparel manufacturers.

According to "CII-Ernst and Young Textile and Apparel Report-

2007-India In the Global Textiles Ecosystem.", the Indian

domestic and export markets for textile and apparel are expected

to grow at 6.5 per cent and 12 per cent Compounded Annual

Growth Rate (CAGR), respectively. The growth in the domestic

market is driven by favourable demographic factors, rise in

disposable incomes and a shift towards branded apparel. The

growth in exports is expected because of International retailers

looking at India as the best alternative to China of sourcing of

apparel. India has emerged the third most attractive market

destination for apparel retailers, according to a new study by

global management consulting firm A.T. Kearney. India comes

after Brazil and China in the A.T. Kearney Retail Apparel Index,

which looks at ten drivers, including apparel consumption and

clothing imports/exports, to rank the top 30 emerging markets for

retail apparel investments. “In India, apparel is the second largest

retail category, representing 10 percent of the $37 billion retail

market. It is expected to grow 12-15 percent per year,” said

Hemant Kalbag, principal of Consumer Industries & Retail

Practice, A.T. Kearney India. “The top seven apparel companies”

accounts for less than 10 percent of the total apparel retail market

in India and Indian consumers tend to be more loyal to a specific

retailer than to an apparel brand. The result is a thriving private

label apparel market,” the study said. “Like many developed

countries, apparel retail in India is driven by sales promotion,” it

added. In order to successfully exploit this potential, branded

clothes manufacturers need to be cognizant of customer's

evaluation of and attitude towards branded vs. unbranded

apparel.

Consumer Behaviour

Consumer Behaviour can be defined as the decision-making

process and physical activity involved in acquiring, evaluating,

using and disposing of goods and services. This definition clearly

brings out that it is not just the buying of goods/services that

receives attention in consumer behaviour but, the process starts

much before the goods have been acquired or bought. A process




of buying starts in the minds of the consumer, which leads to the

finding of alternatives between products that can be acquired with

their relative advantages and disadvantages. This leads to

internal and external research. Then follows a process of

decision-making for purchase and using the goods, and then the

post purchase behaviour which is also very important, because it

gives a clue to the marketers whether his product has been a

success or not.

Hypothesis

1. H : Consumer behavior towards QUALITY is independent of 0

gender.

H : Consumer behavior towards QUALITY is not independent 1

of gender.

Here ÷2 = 1.6077 .Here, the degree of freedom = (c-1) (r-1) =

1. The tabulated value of ÷2 for 1 degree of freedom at 5 percent

level of significance is 3.841. Hence the null hypothesis is

accepted i.e. consumer behaviour towards quality is independent

of gender.

2. H : Consumer behaviour towards STYLE is independent of 0

gender.

H : Consumer behaviour towards STYLE is not independent of 1

gender.

Here ÷2 = 0.9637 Here, the degree of freedom = (c-1) (r-1) = 2.

The tabulated value of ÷2 for 2 degrees of freedom at 5 percent


accepted i.e. consumer behaviour towards style is independent

of gender.

3. H : Consumer behaviour towards COMFORT is independent 0

of gender.

H : Consumer behaviour towards COMFORT is not 1

independent of gender.

Group

Strongly Agree (%)

Agree(%) Total(%)

Male 30(32.9)

40(37.1) 70

Female 17(14.1) 13(15.9) 30

Total 47 53 100

Neither Agreenor Disagree (%)

17(16.1) 46(45.5) 7(8.4)

6(6.9) 19(19.5) 5(3.6)

23 65 12

Group

Strongly Agree (%)

Total(%)

Male

70

Female 30

Total 100

Agree (%)

Here ÷2 = 7.8144 Here, the degree of freedom = (c-1) (r-1) = 1

The tabulated value of ÷2 for 1 degree of freedom at 5 percent


rejected i.e. consumer behaviour towards comfort is not


4. H : Consumer behaviour towards PRICE is independent of 0

gender.

H : Consumer behaviour towards PRICE is not independent of 1

gender.

Here ÷2 = 0.6046 Here the degree of freedom = (c-1) (r-1) = 2


level of significance is 5.991. Hence, the null hypothesis is

accepted i.e. consumer behaviour towards price is independent

of gender.

5. H : Consumer behaviour towards DESIGN is independent of 0

gender.

H : Consumer behaviour towards DESIGN is not independent 1

of gender.




accepted i.e. consumer behaviour towards design is



Group

Strongly Agree (%)

Total(%)

Male

70

Female 30

Total 100

Agree (%)

21(21) 33(33.6) 16(15.4)

9(9) 15(14.4) 6(6.6)

30 48 22

23(22.4) 41(39.9) 6(7.7)

9(9.6) 16(17.1) 5(3.3)

32 57 11


Group

Strongly Agree (%)

Total(%)

Male

70

Female 30

Total 100

Agree (%)

30(36.4) 40(33.6)

22(15.6) 8(14.4)

52 48

Group

Strongly Agree (%)

Agree(%) Total(%)

Male

70

Female 30

Total 100



6. H : Consumer behaviour towards UNIQUENESS is 0


H : Consumer behaviour towards UNIQUENESS is not 1


Here ÷2 = 7.502 Here, degree of freedom = (c-1) (r-1) = 2 The

tabulated value of ÷2 for 2 degrees of freedom at 5 percent level of

significance is 5.991. Hence, the null hypothesis is rejected i.e.

consumer behaviour towards uniqueness is not independent of

gender.

7. H : Consumer behaviour towards STORE IMAGE is 0


H : Consumer behaviour towards STORE IMAGE is not 1




level of significance is 3.841. Hence, the null hypothesis is

accepted i.e. consumer behaviour towards store image is


8. H : Consumer behaviour towards VARIETY is independent of 0

gender.

H : Consumer behaviour towards VARIETY is not independent 1

of gender.

Here ÷2 = 0.0077 Here, the degree of freedom = (c-1) (r-1) = 1



accepted i.e. consumer behaviour towards variety is independent

of gender.

GroupStrongly

Agree (%)Agree(%) Total(%)

Male 70

Female 30

Total 100

35(36.4) 35(33.6)

17(15.6) 13(14.4)

52 48

32(32.2) 38(37.8)

14(13.8) 16(16.2)

46 54

GroupStrongly

Agree (%)Agree(%) Total(%)

Male 70

Female 30

Total 100

Findings

• 32% of the individuals frequently go for purchasing branded

apparel, among them 9% go when there are some special

offers, discount or sales promotion offers in unbranded

apparel.

• Respondents feel that the right type of branded apparel can

be bought from their exclusive branded showrooms and so

40% of individuals purchase the branded clothes from the

exclusive branded showrooms. On the other hand among

them 1% respondents purchase from other shops.

• Manufacturers of branded clothes know that if they want to fit

their brand in the consumer's mind, they have to do it in a

creative way which is best possible through advertisements

as 45% of respondents come to know about their branded

apparel from the various types of advertisement through

billboards , whereas 3% respondents come to know from

some other sources of information.

• Customer loyalty has become a very fickle term in today's

highly competitive and volatile market. The finding reveals

that almost 54% of the respondents are not loyal towards the

brand they purchase.

• Research reveals that 61% of the consumers are brand

switchers. Consumers may prefer one brand over another if

they perceive the brand as having high value (quality) and

matching with their self-image (fitting) more closely.

• 47% consumers spend approximately Rs.500 to Rs.1500 of

amount on branded clothes on an average monthly basis and

51% consumers spend around 1 – 2 hours approximately on

purchasing branded apparels from their favourite stores

monthly.

• 68% consumers mostly purchase essential branded clothes

for everyday wear, work or sports or office wears.

• Almost 46% consumers go for shopping either with their

family or spouse. Thus these people have an impact on

consumers buying behavior.

Conclusion

The Indian apparel industry is growing by leaps and bounds.

Though highly lucrative, there is stiff competition in the market

with both branded and unbranded clothes manufacturers vying

for a share of the pie. Knowledge of customer perception and

evaluation of branded clothes vs. unbranded clothes offers

valuable information on how products of different companies are

accepted in the market. In today's market, where branding is

becoming important, for unbranded clothes manufactures the

present study provides knowledge about areas where their

clothes are falling short of branded clothes in the customers

eyes. An understanding of the factors is important in case they

want to successfully compete with branded clothes. If unbranded

apparel manufacturers can consistently provide value to

10(16.1) 35(32.9) 25

13(6.9) 12(14.1) 5

23 47 30


Group

Strongly Agree (%)

Total(%)

Male

70

Female 30

Total 100

Agree (%)



customers on factors rated high by customers and even if it is low on status symbol, there is a high possibility for them to establish

themselves as an acceptable brand, not of that high a repute which a branded apparel enjoys but still good enough to raise their profit

margin considerably. On the other hand, it is a matter of concern to branded apparel manufacturers as lack of a great deal of difference in

the perception of customers regarding branded vs. unbranded clothes indicates the possibility of a shift of customers to other branded

clothes or also to unbranded clothes, if they perceive that they are not getting what a branded product promises in comparison to an

unbranded product. Unless and until there is a clear cut advantage of going for branded clothes in comparison to unbranded clothes,

Indian customers will not develop an affinity for branded clothes given their propensity to look for a high value proposition in everything

they purchase.

Bibliography

1. Auty, S. & Elliott, R. (1998), “Fashion involvement, self-monitoring and the meaning of brands”, Journal of Product and Brand

Management.

2. Blery, E.K., Gilbert, D. (2006), "Factors Influencing Customer Retention in Mobile Telephony: A Greek Study", Transformations in

Business & Economics, 5(2).

3. CII-Ernst and Young Textile and Apparel Report-2007

4. Indian Retail Report 2007, Availabe at: www.indiaretailing.com/retail-report.asp, Accessed on 05-03-2009

5. Jairam (2009), “Indian textile, apparel industry now part of global supply chain”, Businesswire India

6. Keller, K. L. (2003), “Strategic brand management”

7. O?Cass, A. (2000), “An assessment of consumers “ product, purchase decision, advertising and consumption involvement in

fashion clothing”, Journal of Economic Psychology.

8. O?Cass, A. and Lim, K. (2002), “Understanding the younger Singaporean consumers? views of Western and Eastern brands”,

Asia Pacific Journal of Marketing and Logistics.

9. Research Methodology by C.R. Kothari

10. Zeithaml, V. (1988), “Consumers perceptions of price, quality, and value: a means-end and synthesis of the evidence", Journal

of Marketing

11. www.ibef.com

12. www.ssrn.com

37

Unique Identification Number (UID)project in India: An “AADHAAR” for every Indian.

Gaurav Nagori : MBA-II (Fin) Student, C K Shah Vijapurwala Institute of Management, Vadodara. E-mail: [email protected]

Introduction

As India is growing and becoming more technology-driven

country, it has started the concept of providing a unique

identification to each and every Indian residing in India.

In 2009, India decided to have Unique Identification (UID) for its

citizens and hence launched the UID programme in the country by

creating the Unique Identity Authority of India (UIDAI) on 27th

January 2009. The Government of India has undertaken an

initiative called “Aadhaar” to provide unique identification

numbers to all residents of the nation. In the last twenty years,

India has undergone an enormous transformation of its

economic and regulatory structures. Policy reforms in this period

have led to the increasing maturity of our markets, as well as

healthy regulation. The emphasis on de-licensing,

entrepreneurship, the use of technology and decentralization of

governance to the state and local level have in particular, shifted

India from a restrictive, limited access society to a more

empowered, open access economy, where people are able to

access resources and services more easily and effectively. But

despite these efforts, access to finance has remained scarce in

rural India, and for the poorest residents in the country.

Why UID?

The Unique Identification number (UID), which identifies

individuals uniquely on the basis of their demographic

information and biometrics will give individuals the means to

clearly establish their identity to public and private agencies

across the country. It will also create an opportunity to address

the existing limitations in system. The UID can help poor residents

easily establish their identity to banks. As a result, banks will be

able to scale up their branch-less banking deployments and reach

out to a wider population at lower cost. An efficient, cost effective

payment solution is a dire necessity for promoting financial

inclusion. The UID number and the accompanying authentication

mechanism coupled with rudimentary technology application

can provide the desired solution. India has a multitude of

government agencies working and each agency has laid out their

own versions of identifying its citizens. As such we have

multitude of identity cards in India like driving license, voting ID

card, PAN card, etc. Using these different identities persons with

malafide intentions can generate multiple bank accounts and take

farming loan at low interest rate from multiple agencies, corner

more than allocated ration using multiple ration cards, and

misuse the government resources by manipulating the

government machinery due to lack of a unique way of

identification. Hence, all these identity cards don't provide single

identity and can be duplicated. This is one of the major reasons

why the benefits of the government schemes for its citizens do

not reach the intended users. It is the unique identity crisis that

most of the multi-lateral donor agencies do not fund the schemes

aimed at the poor as they are not sure whether the intended user

will derive the benefits from the scheme. Many of the multilateral

agencies are increasingly putting pressure on the government to

implement a unique way of identification and replace indirect

subsidy by direct financial assistance to the users. The UID will

provide the single identity solution to every Indian and will be

accepted everywhere in India. 'Aadhaar' is a 12-digit unique

number which the Unique Identification Authority of India (UIDAI)

will issue for all residents in India. The Unique Identification

Number (UID), which identifies individuals uniquely on the basis

of their demographic information and biometrics will give

individuals the means to clearly establish their identity to public

and private agencies across the country. It will also create an

opportunity to address the existing limitations in system. The UID

can help poor residents easily establish their identity to banks. As

a result, banks will be able to scale up their branch-less banking

deployments and reach out to a wider population at lower cost.

Its launch in India

UIDAI launched 'Aadhaar' program in the tribal village, Tembhli, in

Shahada, Nandurbar, Maharashtra on 29th September 2010. The

program was inaugurated by Prime Minister, Manmohan Singh

along with UPA chairperson Sonia Gandhi. The first resident to

receive an 'Aadhaar' was Rajana Sonawane of Tembhli village.

Benefits

'Aadhaar' will become the single source of identity verification.

Residents would be spared the hassle of repeatedly providing

supporting identity documents each time they wish to access

services such as obtaining a bank account, passport, driving

license and so on. By providing a clear proof of identity, 'Aadhaar'

will also facilitate entry for poor and underprivileged residents into

the formal banking system and the opportunity to avail services



(Source: www.uidai.gov.in, UID Mission)Project costOne estimate of the cost to completelyroll-outNational IDs to allIndian residents above the age of 18 has been placed at 1,50,000crore (US$33.45 billion). A different estimate puts it at US$ 6billion. A sum of 100 crore (US$22.3 million) was approved in the2009-2010union budget to fund the agency for its first year ofexistence. UID has received a huge boost with Mr PranabMukherjee, Minister of Finance, allocating 1,900 crore(US$423.7 million) to the Unique Identification Authority of India(UIDAI) for2010-11.Initial estimates project that the initiative willcreate 100,000 new jobs in the country, and businessopportunities worth 6,500 crore (US$1.45 billion) in the firstphase of implementation, over three years. Thus this project willprovide good job opportunities to many Indians.ChallengesUID comes with many challenges which are affecting thepopularity of the UID. First challenge is about use of biometrics. Many experts have argued that biometrics system may face theproblem while matching the fingerprints. There is no informationavailable which tells that biometrics is error free technology.Moreover there is problem of gummy fingers and latent fingerprinting by which users can bypass the verification process.


provided by the government and the private sector. The UID willlink a person's Passport Number, Driving License, PAN card,Bank Accounts, Address, Voter ID, etc. and all this informationwill be checked through a database. This will help the governmentto monitor and keep rigorous check on the defaulters. Moreover itwill become convenient to the citizens to have single identity,which will be accepted all over the India without any problems.They will now able to open the bank account, can get the LPGconnection, can vote and can do numerous work with the single'Aadhaar' (UID). It provides immense benefits from a mechanismthat uniquely identifies a person, and ensures instant identityverification. The need to prove identity only once will bring downtransaction costs for the poor. A clear identity number would alsotransform the delivery of social welfare programs by makingthem more inclusive of communities now cut off from suchbenefits due to their lack of identification. It would enable thegovernment to shift from indirect to direct benefits, and helpverify whether the intended beneficiaries actually receivefunds/subsidies. This will result in significant savings to the stateexchequer. The UID will make it possible to open a bank accountin India with no supporting documents, thus expanding 'financialinclusion'; the UID will make it easier to obtain a mobile telephoneconnection than at present; the UID will ensure that the PublicDistribution System (PDS) in India will cease to be wasteful; theUID will eliminate corruption from the National Rural EmploymentGuarantee Scheme (NREGS); the UID will help ensure andmonitor attendance of teachers in schools. Overall, the UIDproject is presented as a òtechnology-basedsolution” that willchange the face of governance in India.

1How does the 'Aadhaar' work ?The UID number will be stored in a centralized database andlinked to the basic demographics and biometric information –photograph, ten fingerprints and iris – of each individual. It iseasily verifiable in an online, cost-effectiveway. So also, it isunique and robust enough to eliminate the large number ofduplicate and fake identities in government and privatedatabases. The random number generated will be devoid of any classification based on caste, creed, religion and geography.Many countries have already implemented similar UniqueIdentification exercise for their citizens successfully. UID helpsthe government to keep the track of their citizens and it can easilyidentify the illegal migrants. Moreover it helps the Government totransfer the economical/social benefits to the citizens effectively.Few Countries to name, who have implemented their UIDsuccessfully: USA (Social Security Number), People's Republicof China, Republic of China (Taiwan), Singapore (NationalRegistration Identity Card [NRIC]), Hong Kong, Indonesia, Iran,Islamic Republic of Iran, Israel, Macau, Malaysia (IdentificationCard number [IC]), South Korea (Resident's RegistrationNumber), Thailand, Turkey.




Second problem comes with the privacy. The information collected may be leaked and unauthorized persons/firms may use the

personal information of users.

Third problem comes with database. The UID will have to maintain the necessary information of 1.2 billion citizens in the database with

the security. This is a big challenge for the UID Authority. Also they have to link the UID with other identity cars like passports, election

card which will increase the workload of the database. Also it is necessary to provide the UID information to all the Government

departments in much secured way so that every citizens can take the benefits of UID.

Fourth problem comes with the implementation procedure. It is a great challenge to the authority to roll out 1.2 billion cards on time and

with accuracy. The authority has to check the misuse and duplication of UID as well.6/7Perceived Issues

Critics question whether the project can have as big an impact as its backers promise, given that identity fraud is but one contributor to

India's development struggles. The civil liberties groups complain that the government is collecting too much personal information

without sufficient safeguards. The technology requires transferring large amounts of data between the hinterland and an urban

database, leading some to question whether the system will succumb to India's rickety Internet infrastructure. When a question was

raised in the Lok Sabha about abandoning of UID projects in other countries like United States of America, United Kingdom, Australia,

China, Pakistan, Canada and Germany, the response stated that “A number of countries have various forms of identity systems based

on the country-specific needs. The motivation and rationale for identity systems in different countries are specific to the country and

cannot be generalized. The UID project in India has been envisioned to provide a unique identity to every resident of India which will be

the foundation for better delivery of public services and targeted subsidies. The project has a basis in the developmental agenda of

promoting more inclusive growth. UIDAI will not enforce any of the organizations or government departments to make the usage of UID

mandatory and hence, all the other existing identity cards (e.g., PAN, Ration Card, etc.) will continue in parallel, even after the identity of

a particular resident is proved. In order to understand the opportunities and risks of the project, the feasibility of the project has been

evaluated from four different aspects: benefits as perceived and claimed by UIDAI, cost of the project, technological feasibility, and

adoption (acceptance) of the service.

Conclusion

The UID project is a very vital initiative taken by the government as it is a good thing that every Indian will get a unique identification. But

the authorities will have to be careful while its implementation, as this project is on large scale and if even care is not given at every stage

then this project may see the downfall. The challenges have to dealt with extreme care and solutions to various problems have to be

sought out in such a way that it can overcome the barriers foreseen in the UID project. The overall exercise needs to be planned

meticulously based on concrete evidences and the efforts and outcomes of the project clearly mapped. Also, the perceived benefits of

such a scheme need to be well quantified in terms of its value and impact on the society as well as its capacity to generate revenue or

save cost. The feasibility of the claimed benefits and their impact needs to be thoroughly evaluated in consultation with the respective

stakeholders. As the UID is very important for every citizen, it becomes the duty of every Indian to take part in this mammoth project and

collaborate with the authority in proper roll out of the cards. The authority has to talk and collaborate with all the stakeholders of the UID

so that the project can be implemented with the highest accuracy, security and can reach to each and every Indian residing in India.

(I would like to extend my thanks to Ms Neelu Nakra (Asst. Professor, CKSVIM) for her guidance and kind support).

Bibliography

1. www.uidai.gov.in

2. NDTV (2010, December 2, 2010). "UID, NREGA on a Collision Course?" Retrieved March 9, 2011,from

http://www.ndtv.com/video/player/news/uid-nrega-on-a-collisioncourse/ 179184?trendingnow?tab=comments

3. Pandit, A (2010, November 29, 2010). "UID gives Identity, Bank Account to 27 Homeless," The Times of India,

retrieved from h t tp : / / t imesof ind ia . ind ia t imes .com/c i ty /de lh i / -U ID - g ives iden t i t y - bank-accoun t - to -27-

homeless/articleshow/7007753.cms

4. PTI (2010, December 21, 2010). "'Aadhaar' Number to Act as Valid Document to Open Bank Account," The Hindu, retrieved

from http://www.thehindu.com/news/national/article967952.ece

5. The Hindu (2009, September 13, 2009). "Unique ID will Enable More Effective Public Deliver," retrieved from

http://www.thehindu.com/opinion/interview/article19518.ece

6. http://online.wsj.com/article/SB10001424052748704652104575493490951809322.html

7. http://timesofindia.indiatimes.com/home/opinion/edit-page/Solving-The-Identity- Problem/articleshow/6996221.cms.

40

Book review – 'The monk who sold his Ferrari' by Robin Sharma

Piyush D. Chadarava : Assistant Professor, D.L. Tilala College of Management Studies, Rajkot. E-mail: [email protected]

The Wake up Call

'The monk who sold his Ferrari' is a tale, which provides an

approach to living a simple life with greater balance, strength,

courage and abundance of joy. The fable format is a refreshing

change from the tiresome listing of all the good things we could

do for ourselves, but do not. It makes the message being

conveyed linger in our minds. Although most of the principles

dealt with can be found in countless other books on self-help and

spirituality, there is a difference in the way Sharma has put the

things together.

This well crafted story by Robin S Sharma is the tale of Julian

Mantle, a lawyer, brought face to face with a spiritual crisis.

Julian's spark of life begins to flicker. He embarks on a life-

changing odyssey and discovers the ancient culture of India.

During this journey he learns to value time as the most important

commodity and how to cherish relationships, develop joyful

thoughts and live fully, one day at a time. The thirteen chapters are

meticulously planned and flow seamlessly from one to the next.

Julian Mantle, a very successful lawyer was the epitome of

success. He had achieved everything most of us could ever want:

professional success with a seven figure income, a grand

mansion in a neighborhood inhabited by celebrities, a private jet,

a summer home on a tropical island and his prized possession a

shiny red Ferrari parked in the center of his driveway. Suddenly he

had to come terms with the unexpected effects of his unbalanced

lifestyle.

John, who is a friend as well as co-worker of Julian, narrates the

story. He begins by describing Julian's flamboyant lifestyle, his

exaggerated courtroom theatrics, which regularly made the front

pages of newspapers and his late night visits to the city's finest

restaurants with sexy young models. Julian Mantle, the great

lawyer, collapses in the courtroom, sweating and shivering. His

obsession with work has caused this heart attack. In the last few

years, Julian had worked day and night without caring about his

mental and physical health. That helped him become a very rich

and successful lawyer but took a toll on his health and mental

state. At fifty-three he looked seventy and had lost his sense of

humor. Julian refused to meet any of his friends and colleagues at

the hospital. One fine day he quit his law firm and took off without

saying where he was heading.

Three years passed without any news from Julian. One day he

paid a visit to his friend and former colleague John, who was now

a cynical older lawyer. But Julian, in the past three years, had been

miraculously transformed into a healthy man with physical vitality

and spiritual strength. Following his heart attack Julian Mantle

had sold all his property (Yes, his Ferrari too) and left for India.

The author tells us about Julian's Indian odyssey, how he met the

sages of Sivana who had a life changing effect on him. Julian

Mantle shares his story of transformation, his secrets of a happy

and fulfilling life with his friend John. Julian describes Sivana- a

small place located in the Himalayas, the land of rose covered

huts, placid blue waters with white lotuses floating, youth and

vitality, beautiful glowing faces, fresh and exotic fruits. He tells

John about the sages of Sivana who knew all secrets of how to

live life happily and how to fulfill one's dreams and reach one's

destiny.

Julian relates his experiences with Yogi Raman, the leader of the

sages of Sivana and the person who taught Julian his secrets of a

happy and fulfilling life. He narrates to John the fable that

contained the seven virtues for a life abundant with inner peace,

joy and a wealth of spiritual gifts. He tells John the techniques that

he learned from Yogi Raman on how to master our minds with

simple techniques like “the heart of rose technique” and “the

secret of lake technique”. He tells John how to cultivate the mind

and how to use setbacks for expanding knowledge of the self.

He talks about setting and following our own purpose and

teaches John the ancient art of self-leadership with techniques

such as 'do the things you fear' and 'the 5 step method for

attaining goals'. He waxes eloquent about the value of self-

discipline and respect for time. He describes techniques such as

'the ancient rule of 20' and 'the vow of silence'. He teaches how to

focus on the priorities and thereby maintain a balance and

simplify life. He gives examples that prove that willpower is the

essential virtue of a fully actualized life. Julian teaches John the

virtue of selflessness in serving others. He asks John to embrace

the present and live in the present - “Now”, never to sacrifice

happiness for achievements and to savor the journey of life and

live each day as his last one. At the end he asks John to spread

these secrets for the benefit of other people. Embracing John like

the brother he never had, Julian leaves.



The ConceptsThe core of the book is the Seven Virtues of Enlightened Learning,which Mantle reveals one by one. Now, although the bookpresents them as actual Virtues learned from Himalayan gurus,it's important to remember as you read that these are made up bythe author — actually, he pulled them from other sources and putthem together :



VIRTUE SYMBOL

02. Follow Your Purpose The Towering Lighthouse

01. Master your mind The Magnificent Garden

03. Practice Kaizen The Sumo Wrestler

04. Live with Discipline The Pink Wire Cable

05. Respect Your Time The Gold Stopwatch

06. Selflessly Serve Others The Fragrant Rose

07. Embrace the Present The Path of Diamonds

ConclusionFor the reader who might be in the rat race for material success and money, this book might be food for thought. But the messageis a trifle too clichéd and the lectures too pedantic for the readerwho is more or less conversant with the principles and insightsgarnered by Julian Mantle from the sages of Sivana. Thepresentation in the form of a story redeems the book to someextent. The book might perhaps be more satisfactory for readerswho are unfamiliar with and hungry for oriental wisdom. All in all,a book of wisdom.

Bibliography1. Sharma Robin – (First Edition,2007) ,The Monk sold his

Ferrari, Jaico Publishing House, Mumbai pp.1-196

42

Embedding Knowledge Culture in Organization- With Case study of Tata Steel

Hiral Gandhi : Asst. Professor, C K Shah Vijapurwala Institute of Management, Vadodara. Email: [email protected]

Abstract

With the world becoming a global hub, knowledge dissemination

has become indispensible among the various stake holders of the

society, at the national and international level. It has enabled

dynamic and fast interaction between individuals, groups and

nations. The shift from the industrial economy (where

commercial products were the main business focus) to

knowledge economy (where service and expertise are the main

business outcomes) is the driver for the drastic change in the

nature of work. Rapid advances in technology, the growing

importance of international business, and increased recognition

of individual needs and expectations, demand higher

coordination of the available resources and expertise to get the

best output. The concept of knowledge management is an

important way of effectively deploying the resources and

expertise in organizations. Knowledge management (KM)

focuses on the people and culture of an organization, on

processes or methods to find, create, capture and share

knowledge as well as on technology to store and assimilate

knowledge for making it accessible for the people which allow

them to work together even if they are not located together. People

are the most vital element in a KM system and generation of new

knowledge is one of its most valuable by-products. For an

effective functioning of KM system, the people involved must be

cooperative and willing to share and re-use existing knowledge

and to generate new knowledge for the betterment of the

organization. This can be possible by developing proper

'Knowledge Culture' in the system, where each and every

individual recognizes and accepts knowledge sharing as a

desirable behavior.

My approach in this paper is threefold.

• Understanding the Knowledge Management Process: HR & IT

perspective

• Identifying the barriers

• Embedding knowledge culture in the organization

• The case study of 'Tata Steel’

Keywords : Knowledge Management, Knowledge Culture, Tata

Steel.

Knowledge Management : An emerging concept

Organizations have experienced many changes which has shifted

the industry from 'industrial economy' to 'business economy' with

tremendous advancement in technology. The focus is shifted

from products to the services which have encouraged greater

recognition of knowledge held within an organization with an

effective knowledge management. It is based on the recognition

that the knowledge held by individuals is a valuable commodity in

an organization. Each person possesses a unique knowledge set,

drawn from experiences and various sources. Organizations are

therefore keen to embrace better and more efficient ways of

managing their intellectual assets using electronic processes, so

that the expertise of staff can be shared with others, and recorded

for future reference as required. The increasing recognition of the

commercial value of employee expertise has stimulated

organizations of all sizes and complexity to adopt many of the

principles and concepts of knowledge management. The culture

within the organization influences the success of knowledge

management. Knowledge management is pervasive in nature.

Recently many of the fields have started contributing to KM

research; these include Business Administration, Information

System, Library, Information Science, Media, Public Health, and

Public Policy. Many large companies have adopted Knowledge

Management as a part of their internal business strategies.

Several consulting firms are in the market to advice and provide

the strategies to the organizations for an effective deployment of

the available resources. As a consequence, an organization can

reduce the redundant work as well as training time for new

employees. It can share and retain the intellectual capital of their

employees and KM system facilitates the organization to adapt to

changing environment and market.

Knowledge Process : HR & IT perspective

Knowledge is a treasure, but practice is the key to it. The power of

knowledge is no more ignorant by the companies. Many

companies nowadays are leveraging their efforts to increase their

intellectual assets to sustain their position in this competitive

environment. Thus the main focus of the organization has shifted

to the implementation of the formal structure for managing

intellectual capital with KM processes. “Knowledge management




itself is a simple idea, but implementing a knowledge system can bedifficultó-Artes. Knowledge firms require effective alignment ofstrategic, operational and individual activities. The organizational structure influences this alignment, as it directs the work flow ofvarious groups which ultimately encourage innovation in the decision making and communication process. Human ResourceManagement contribute to KM by providing strong influential database about the culture, the work roles, performance analysis andreview, incentive and compensation plans and so on. When the employee as well as structure and system get integrated throughcommitment and information technology, it creates the system of business intelligence as a driver of knowledge management in theorganization. A combination of IT and HRM will help in building the culture of commitment for sharing and applying their knowledge forthe improvement of system.

Figure 1 : Model of Knowledge Management Process

Business Intelligence and Manpower interface in Knowledge ManagementSuccess of knowledge Management mainly depends on two factors:• Development and Implementation of quality Business Intelligent System for capturing data faster and more accurately• Retention of quality Human Resource Management System in organization for creating the culture of sharing the knowledge across

the enterprise.

Business Intelligence in KMIntegration of Two technologies has been central in improving the quantitative and qualitative value of the knowledge available todecision makers: business intelligence and knowledge management. Business Intelligence (BI) refers to computer-basedtechniquesused in spotting, digging-out,and analyzing business data. It provides all historical, current and predictive views of business




operations. The quality of data recorded through the information technology architecture is the base for the knowledge management

system to be effective. Historically it was difficult to achieve and use high level of data quality for taking important business decisions.

But now companies are making increment in knowledge management budget for developing sophisticated databases and data

warehouses, known as Business Intelligence System (BIS), where employee's tacit knowledge can be captured and processed to build

corporate usable knowledge. The knowledge managers need to be careful about the basic knowledge based data quality landscape i.e.

Standardization, Redundancy, Verification and Enhancement. For successful knowledge management system, our BIS should be able

to capture the tacit knowledge and create new knowledge through enhancement technology.

Human Resource Management in KM

Though an organization is having an effective Business Management System, yet it is the manpower to operate it. If the human resource

of the organization is not willing to share the information then an effective BIS will be of no use. The motivation to contribute in the

knowledge management system depends on their commitment toward the organization. The research shows that the critical Success

Factors for Knowledge Management are classified into four factors: People, Process, Technology and Culture of the organization. A

majority of the organizations following knowledge management concept are finding it easier to implement on the part of technology and

the process in the system but there is great challenge for human resource managers on the part of creating and sustaining the culture of

commitment among the people of organization. Thus, the fundamental role of HRM in KM can be the creation and maintenance of a

receptive and committed knowledge community.

Organizational Culture : Barriers to Knowledge Management

Organizational Culture describes the collective perception, beliefs and values of employees in the workplace. Today many organizations

are following Knowledge Management Technologies for an effective knowledge sharing. But the recent journals and magazines shows

that organizations are facing some problems in adopting KM technologies due to the following barriers existing in the organization, like:

• Organizational Structural Barriers • Technical Barriers

• Management Barriers • Cultural Barriers

My approach in this paper is focusing only on organizational cultural barrier; so that we can develop an effective organizational culture,

known as 'Knowledge Culture'.

Powerful influence for creating 'Knowledge Culture' is the people with whom one interacts frequently. An effective organizational culture

demands uniform values across their various work groups. The organizations having weak cultures may experience a range of

subcultures. All of these operate independently & make it more difficult to build collective practices and processes in the system.

There are various factors responsible for the weak organizational Knowledge Culture as follows :

• Less involvement of management with their employees.

• Low level of information sharing leads to less participation and less involvement.

• Undefined Values, Mission, unclear roles and higher expectations of management.

• Insufficient capacity building tools like competency assessment tools

• Insufficient interaction among team members or with peers

• Individual barriers like loss of power, fear from revelation, illusion of reward deprivation, and so on

• Social barriers like language, bureaucracy and hierarchy, incoherent paradigms

• Conflict of motives

All such barriers often prevent effective knowledge sharing, thus identification and elimination of such barriers is required for effective

implementation of KM system. Although some of these can be removed completely but some of them will still remain. To minimize the

effect of such remaining barriers we need to develop an appropriate knowledge Culture in the organization.

Development of Knowledge Culture : Methodology

The culture within the organization influences the success of knowledge management. A knowledge culture operates from a number of

key principles, including recognition of the strategic value of the knowledge, encouragement and rewarding system for sharing the

knowledge, organizational infrastructure and human resource practices to facilitate various activities and the like.

It is very rare for a firm to have a single uniform culture, as every person is having certain behavioral norm and inherent values. Many

organizations are finding it difficult to shift from traditional culture to collectivist culture which can build up common understanding

among employees. Many factors are responsible for such reluctance like actual values, operational priorities, systems and processes,

which may not be getting matched with the existing culture. For creating knowledge – intensive communities, strong alignment for

Core Values Team Interaction Enacted Values Structural Support

KNOWLEDGE CULTURE

Core Values Team Interaction Enacted Values Structural Support

KNOWLEDGE CULTURE knowledge sharing across all levels of management is required for ensuring that the cultural values like encouragement, tolerance,

collaboration and trust are well supported. It is increasingly being recognized that human resource management need to be integrated

into the establishment of effective strategies for creating “Collaborative Knowledge Culture”.

Implicit values of collaborative knowledge cultures are as following:

• Working together is seen as a core activity

• Learning is incorporated into the work community and practice

• New ideas are welcomed and explored

• People prefer to work together

• Innovative ideas and solutions are developed through combined efforts

• Openness, honesty and concern for others is encouraged

• Beat practices should be shared within the companies' internal as well as external network

• Employees are kept informed of events, issues and innovations

• Knowledge sharing is actively encouraged by supervisors and leaders

As knowledge management is a value driven process, relying on shared knowledge, collaboration and trust, development of knowledge

culture is a lengthy process.

Figure 2 : Knowledge Management Facilitators

(Source: Knowledge Management, Shelda Debowski, Ch. 4, Pg. 87)

We are required to change the employee attitude to gain employee acceptance and as well as we are required to sustain the knowledge

sharing culture in the organizations. It demands a range of strategies for enactment of the values inherent in the knowledge

management system. Any cultural developmental process need to be based on the existing culture of the organization. To understand

the existing culture of the system, we are required to analyze existing organizational patterns, attitudes and behaviors. Such

Organizational Diagnosis is vital component for the development of knowledge culture. We can use a range of question to explore the

existing culture focusing on organizational context, workforce, organizational knowledge philosophy, knowledge cohesion and conflict.

Following are some of the potential questions we can ask to explore the existing organizational culture.

• How is the company positioned with respect to its competitors?

• Is organizational structure encouraging knowledge sharing?

• Does organization have well advanced Business Intelligence Systems? Do they enable knowledge capture and sharing?

• Are knowledge management experts currently promoting the sharing of knowledge?

• Are they interested in contributing to the change process?

• What is the current value system? And is it compatible with a knowledge intensive community?

• Do the groups have a strong culture of working together and sharing traditions, stories and expertise?

• Is knowledge recouped from particular teams or individuals?

• Are decisions made after scrutiny of all available sources, or are they based on only partial information?

The organizational diagnosis enables a clear picture of the knowledge culture to emerge. By analyzing such questions we can identify

the factors which are not supporting KM system in the organization as well as we can understand the intensity of knowledge sharing

among various work groups. To convert those non-facilitating factors into the facilitative ones, we can use program management

technique: the planning and implementation of strategies designed to encourage changes. This is an effective tool to create purposeful

development of culture which can be supported by majority of the stakeholders in a positive manner.



Core Values Enacted ValuesStructural Support Team Interaction

KNOWLEDGE CULTURE



Enhancement Programs for ImplementationThe knowledge management implementation process is required to operate from a range of broad principles as following :Communicating the program intentions and Progress• Develop an information/knowledge management survey• Identify the gap between the current and desired organizational culture• Communicate the gap to the people for their involvement and contribution.• Develop constant and consistent communication methodologies to keep people excited and informed and to reduces uncertaintyPilot Testing• Find an opportunity to apply KM principles and practices in a small pilot• show the benefit and support will soon follow• respect for your efforts will follow your ability to improve the existing environment• Show the return on investment in quantitative or qualitative terms in areas of increased productivity, increased capacity, and time

savings.Accommodating difference within the knowledge culture• Encouragement of the adaptive behavior in knowledge intensive communities• Leverage the efforts made by the knowledge experts who have been trying to organize and share their information/contents• Build a comprehensive taxonomy and migration plan for an moving current information into new taxonomy• Build digital communities of practice to keep your core knowledge champions and mentors engagedSupporting planned cultural interventions• Knowledge champions may need to be provided with time release so they can give their full support to the initiatives.• Planned intervention are preferable by the contributors to shift the focus of the proposed cultural change and to integrate their own

existing preferences• Conduct knowledge management awareness seminars addressing issues of "Knowledge is power”• Develop incentive methodologies to encourage quality contribution of information/contentOnce we successfully implement the knowledge culture into the system, the chances of slippage are always there if the organizationdoes not actively sustain the knowledge culture which has been established.For embedding sustainability in a high-performance knowledge management program, nurturing of knowledge-sharingculture isrequired. This can be done by creating a new work environment where knowledge and information sharing is highly valued. Theliterature study and the case study of TATA STEEL have enabled me to summarize some of the critical success factors or the pillars ofsustainable knowledge culture as follows :PeopleThis pillar deals with the "softer aspect" of KM or organizational culture. It is used to classify a company as a learning organization or asone with low levels of engagement in knowledge sharing or as being compliance driven.ProcessThis pillar seeks to identify the process by which the organization conducts the following steps; capturing, codifying, transferring andusing knowledge. This applies to both "explicit" as well as "tacit" knowledge.TechnologyThis pillar is aimed at identifying how an organization integrates all its knowledge resources, especially knowledge generated fromoperational processes using technology.

Case study of Tata Steel

Company profile

The Power of KnowledgeManaging a global workforce and setting global benchmarks is primarily about managing diversity. In a process of inclusive growth,every person contributes to the blueprint of the future and is truly committed to the stated objectives. And one of the key requisites forsuccessful diversity management is a shared vision in which theyre-definedthe performance parameters with various dimensions tocreate the benchmark for value creation. Total commitment to the ethical business practices and a people oriented vision is the mainmotto of the company.



Cultural awareness

At Tata Steel, there is a continuous effort of staying in touch with employees to ensure that there is the right culture to engage them in

consistent performance improvement. There are well-established and effective arrangements at each business location for transparent

communication and consultation with Works Councils and Trade Union representatives. Further, the Company has always registered

steady quality improvement and productivity enhancement through dedicated efforts of the Company's Performance Improvement

teams, focused on technical best practice transfer and the value of knowledge networks.Towards the well-being of employees Tata

Steel has put into practice many initiatives, events and programs that have helped to create not only an enduring loyalty amongst

employees but also enabled them to have a more fulfilled life.

Believing that a happy workforce is a productive workforce, Tata Steel has always extended its support to the cause of employee welfare

and development thereby ensuring an enriched life for its entire people.

Tata Maturity Model for knowledge discovery and flow

Nineteen ninety nine, the last year of the last millennium, the world in a panic over the Y2K bug threatened the

world to crash years of hard work and billions of dollars worth of investment. And that was the year when

Tata Steel entered into the journey of Knowledge Management. In the same year Tata Steel set up a central

KM group which was in charge of defining the requirements and processes that would enable the capture

and sharing of knowledge across the organization. The KM group led the efforts that saw communication

channels created across and within the company's multi-layered hierarchical structure and was also

instrumental in including 'contribution to KM' as a part of the annual employee performance and BSC

reviews. These steps pushed people to participate in the KM program and a year later, a KM web portal was

launched.

The KM program at Tata Steel had three key elements.

1. The first focused on the people aspect. The company developed a sophisticated network to ensure employee participation across

functions and geographies. The knowledge sharing culture was reinforced through reward and recognition mechanisms.

2. The second element focused on building processes that would route the knowledge from and to appropriate functions, thereby

spreading the knowledge movement as well as deepening its impact.

3. The third element focused on the use of technology. The company mapped the knowledge creation processes as well as the

products and services that emerged from those processes into an integrated system that could be used by every individual in the

organization. Technology allowed Tata Steel to scale up its KM efforts beyond measure. The Tata Steel KM model has evolved into a

robust framework that rests upon these three critical factors; people, processes and technology.

The model effectively captures and spreads new ideas and know-how, channelizes these into a well developed network of processes

and enables action on these ideas in a way that extracts maximum value and minimizes waste. The rigorous execution of the model has

helped the company win the Most Admired Knowledge Enterprise (MAKE) Asia award from 2003 to 2008. However, as other

companies sought to emulate the same model, it was clear that the biggest challenge would lie in adapting the model to diverse needs

and environments.

Knowledge Maturity Model

Creating a KM framework for the group is a monumental task. It needs careful study and analysis of the way the companies are run and

the way KM models have been applied inside and outside the group. As the Tata Steel experience showed, the three-element approach

translates into the following key principles:

• Focus on the people who generate the knowledge and those that use it

• Develop processes that are flexible and open to multiple users

• Use technology that can be integrated with ease

Technology ties up processes and people together in the knowledge matrix. It also plays an important role in integrating the various IT

systems across the company such as CRM, ERP etc. It needs to be secured, scalable and easy to use.

Apart from these three principles, the Tata group also identified the key challenges that companies would have to deal with to build a

stable KM framework. The challenges were :

• Stemming the loss of knowledge due to a large superannuating workforce in established companies

• Managing knowledge leaks due to high attrition rates in companies from new and more competitive industries

• Integrating knowledge across geographical borders, languages and processes through a secure but flexible system

Believing that a happy w o r k f o r c e i s a productive workforce, Tata Steel has always extended its support to the cause of employee w e l f a r e a n d development thereby ensuring an enriched life for its entire people.



The challenges were daunting but there were also a slew of opportunities waiting to be exploited. These were :• Potential to leverage domain knowledge across Tata companies• Move knowledge from process driven companies to new companies• Develop new processes in companies wanting to establish a KM system

TATA KMM FrameworkIn order to build a knowledge framework for the Tata group it was essential to incorporate the learning from successful KM programs atTata Steel and Tata Consultancy Services (TCS) and at the same time address the challenges and opportunities within the group. Sowhile the three elements of people, processes and technology were essential ingredients, there was a need to factor in other elementssuch as: organizational needs, scope of the KM programme and a tracking and measurement system for the entire KM programme. Theadditional elements made the programme more effective.

Scope : This element operates on two dimensions. The first addresses the level of deployment of the KM programme in terms of thenumber of units, locations and businesses that would come under its ambit. The second dimension identifies the stakeholders thatneed to be addressed and those that have been covered. For instance, the 'stakeholder' dimension of scope of the KM framework wouldhelp companies determine whether the programs should address only employees or whether it should capture the knowledge thatresides on the interfaces of the business, with respect to dealings with customers, suppliers and partners. In the case of Indian Hotels,the framework captured customer knowledge while for Tata Motors, it captured partner and supplier knowledge. By incorporating thescope element, companies were able to develop a strong internal knowledge base.

Organizational need : This element seeks to address whether the KM programme aligns itself with changing organizational needs. Thisis becoming increasingly important especially since the group is continuously exploring new markets, acquiring companies in differentgeographies and addressing markets at the bottom of the pyramid. It is also critical at a time when organizations and the markets theyoperate in are changing so rapidly. For example, in the late nineties, most companies were pursuing cost leadership and cost reductionstrategies and the KM programme was tailored to meet the requisite needs. However with companies now pursuing internationalizationstrategies, the KM process needs to facilitate these. For instance, the KM framework must be able to integrate networks acrossgeographies and carry out transfer and implementation of best practices from one network to another.

ResultsAll programs need supportive feedback mechanisms. This provides a check, helps keep thebalance and allows for continuous improvement in the methods used. An important thing to do isto study how the KM programme benefits the organization in terms of reduced costs, improvedprofitability, and faster cycle times. For example companies using IT as a backbone for the KMprogramme, will measure metrics such as number of hits on the intranet, number of problemssolved through collaborative networks and such others. The KM framework as defined by theseprinciples and objectives places the Tata group at an advantage, especially as it acquires anincreasingly large international presence. Knowledge is considered to be the greatestdifferentiator between good and great companies

Bibliography1. http://articles.techrepublic.com.com/5100-10878_11-1035739.html2. Knowledge Management, Global Perspective, Ch. 10, Pg.135-1433. http://www.waset.org/journals/waset/v27/v27-53.pdf4. http://lide.uhk.cz/fim/ucitel/buresvl1/publications/CulturalBarriers.pdf5. http://www.eknowledgecenter.com/articles/1006/1006.htm6. http://www.kimcofino.com/blog/2010/03/20/creating-a-culture-of-collaboration-through-technology-integration/7. Knowledge Management, Shelda Debowski, Ch. 4, Pg.90-1008. http://www.tataquality.com/ui/APage.aspx?SectionId=0212091827235996099. www.tataquality.com/Common/DownloadFile.aspx?

49

Comparison of Private Life Insurance Companies- An application of DEA

Rachana Tejani: Research Scholar, Singhania University. Email: [email protected]

(This paper secured First Position in GTU's first Finance Conference held on 26-27th Aug, 2011 at AMA, Ahmedabad)

Abstract

Today there are 24 general insurance companies and 23 life

insurance companies operating in the country. The insurance

sector is a huge one and is growing swiftly at 15-20%. Group new

business underwritten as at September 2010 being 14399.64 cr

premium collected and 22728948 lives insured and individual

new business underwritten as on same date being 10933949 no.

of policies and 22447.82 cr premium collected. It becomes a

matter of concern how this money is utilized by the insurance

companies and whether it is generating enough returns for the

company. Are the insurance companies working efficiently?

Which companies are the most efficient? Answer to these

questions forms the crux of this paper.

Data envelopment analysis (DEA) provides and excellent way of

analyzing the efficiency of insurance industry. The paper first

describes the life insurance industry in India followed with the

meaning and utility of data envelopment analysis. The third

section of the paper reviews the efficiency of the insurance sector

in the global and Indian scenario. The last section analyses the

efficiency of the selected private sector life insurance companies

in India followed with the discussion of analysis and conclusion

drawn on the basis of the same. Fourteen private sector life

insurance companies are analyzed over a period of 5 years

ranging 2005-2010. Further, Mann-Whitney U test is used to

examine the effect of size, market share and integration with bank

network on the efficiency of the insurance companies.

Keywords : (Data Envelopment Analysis, private sector life

insurance industry, technical efficiency.)

Introduction

In India Life Insurance sector was opened up in the year 2000.

Since 2000 we have seen private life insurance companies are

entering into the market. Sector is opened up for private player but

still the upper cap for foreign investment in any life insurance

company is kept at 26%. Hence foreign players are required to

form joint venture to enter Indian Life Insurance market. Life

insurance penetration in India is just 4%, new players are entering

into the market and reducing market share of Life Insurance

Corporation of India indicates that the competition is going to

increase among private players. Only 8 life insurance companies

have booked profit after tax in the financial year 2009-10 so we

cannot decide efficiency of life insurance companies on the basis

of its PAT. Efficiency needs to be determined for these companies

so that regulatory body can frame policies to decide on future

direction of life insurance industry. Managers are also required to

know about the industry best practices to compete in the market.

In the current study we have measured the efficiency of 14 private

sector life insurance companies in India over a period of 2005-

2010. Objective is to identify efficient insurance company and

considering the efficient company as a benchmark to define

strategy for other companies to be efficient. This study tries to

establish reference for the industry to study and plan competitive

strategy.

Life Insurance Industry in India

The history of the Indian insurance sector dates back to 1818,

when the Oriental Life Insurance Company was formed in

Kolkata. A new era began in the Indian insurance sector, with the

passing of the Life Insurance Act of 1912. The Indian Insurance

Companies Act was passed in 1928. The formation of the

Malhotra Committee in 1993 initiated reforms in the Indian

insurance sector. Second round of reforms in the Insurance

sector were initiated with the passing of the IRDA Bill in

Parliament in December 1999. The IRDA since its incorporation

as a statutory body in April 2000 has fastidiously stuck to its

schedule of framing regulations and registering the private sector

insurance companies. Since being set up as an independent

statutory body the IRDA has put in a framework of globally

compatible regulations.

As Indians grow richer and save more for retirement, the share of

the Indian life insurance industry has increased in world markets.

India's ranking among life insurance markets has risen from

number 10 last year to 9th position, displacing Taiwan. When life

insurance industry was opened for competition in 2000, India

ranked number 20 among life insurance markets and accounted

for a mere 0.5% of the world premium. Ten years on, the share

has improved to 2.45%, overtaking developed markets such as

Spain, Netherlands, Switzerland, Sweden, Belgium, Ireland,

Finland, South Africa, Australia and Canada.




India has grown at 25 per cent CAGR since the market opened up

for private players in 2000. This impressive growth in the market

has been driven by fundamental factors like liberalization, global

economic boom, young population, growing middle class, rising

income levels and customer awareness. The measure of

insurance penetration (percentage of insurance premium to GDP)

and density (the ratio of premium to population - per capita

premium) reflects the level of development of insurance sector in

a country. Since opening up of Indian insurance sector for private

participation, India has reported increase in both of them. But, the

increase has been almost entirely contributed by the life

insurance sector. An interesting aspect of the life insurance

business in India is that it has grown significantly faster than the

gross domestic product. The level of insurance penetration in

India at 4.6% is double the insurance penetration levels in China

(2.3%). The report shows that adjusted for inflation, India's life

insurance industry grew 10% to Rs 2,73,604 crore.

When it comes to non-life insurance, where premium is paid

purely of protection (health, auto and property), India ranks 26th

and its share of world insurance market is 0.46%.

Meaning and utility of DEA

DEA is a multi-factor productivity analysis model for measuring

the relative efficiencies of a homogenous set of decision making

units (DMUs). It is a non-parametric approach developed by

Charnes et al (1978) and further extended by Banker et al (1984).

The method constructs a frontier based on actual data. Firms on

the frontier are efficient, while firms off the efficiency frontier are

inefficient. Efficiency is measured as the ratio of weighted outputs

(virtual output) to weighted inputs (virtual input) and considers

the values between zero and one. An efficient firm does not

necessarily produce the maximum level of output given the set of

inputs. Further, efficiency means that the firm is a “best practice”

firm in the taken sample. The DEA model has certain specific

advantages such as, it is a methodology directed to frontier rather

than central tendencies. This model is able to identify any

apparent slack in input used or output produced and provides

insight on possibilities for increasing output and/or conserving

input in order for an inefficient decision-making unit to become

efficient. And it also takes care of uncovering relationships, which

remain hidden for other methodologies, and allows to rank

decision-making units (DMUs) according to their technical

efficiency scores and to single out the driving forces for

inefficiencies. Varadi et al (2006).

“Efficiency” is defined as Technical Efficiency (TE) in this study,

which is the product of Pure Technical Efficiency (PTE) and Scale

Efficiency (SE). Pure Technical Efficiency reflects the efficiency

of the resource allocation and the management. Scale efficiency

indicates the effect of scale: small companies may not assemble

the production or obtain the synergy, while many big companies

often move slowly and do not show the harmony. Consequently,

the scale can also affect the efficiency of a DMU.

The DEA index can be calculated in several ways. In this study, the

researcher has estimated an input oriented, technical efficient

(TE) DEA index, assuming insurer aim to achieve higher output by

using fewer inputs. The overall efficiencies of insurers are

obtained when the constant-returns-to-scale assumption is

made. That is, when it is assumed that the performance of an

insurer continues to increase as long as the insurer continues to

increase inputs. The variable return to scale (VRS) dissects

technical efficiency into two different components: pure technical

efficiency and scale efficiency. Scale efficiency of a firm can be

computed by taking ratio of the firm's overall efficiency to its pure

technical efficiency.

Throughout the study the researcher has considered awareness

of DEA model on part of the reader and has not gone into the

depth of explaining DEA model in the current study.

Review of efficiency of Insurance Sector in the global and

Indian scenario

Fukuyama (1997) investigated productive efficiency and

productivity performances of 25 Japanese life insurance

companies from 1988-93 and concluded that both differ from

time to time across the two ownership types – mutual and stock

under different economic conditions of expansion and recession.

Mahlberg and Url (1998), studied Austrian insurance companies

during 1992-1996 by means of DEA. The results indicate higher

efficiency scores for the variable returns to scale (VRS) case

compared to the assumption of constant returns to scale (CRS).

This outcome is mainly due to the large number of fully efficient

firms under VRS. Under VRS the average efficiency score is

about 75 percentage points, indicating that the average firm has a

potential for cost cutting of around 25 percentage points. Under

CRS the potential for efficiency gains is even larger and fluctuates

between 44 and 60 percentage points.

Chen and Wong (2004) studied the solvency of general and life

insurance companies in Asia during 1994-1999. The factors that

significantly affect life insurers' financial health are firm size,

change in asset mix, investment performance, and change in

product mix, but the last three factors are more applicable to

Japan. Also, the financial health of insurance companies in

Singapore seems to be significantly weakened by the Asian

Financial Crisis. As the insurance industry in different Asian

economies is at different stages of development, they require

different regulatory guidelines.

Barros et al. (2005) estimates changes in total productivity,

breaking this down into technically efficient change and

technological change by means of DEA applied to a sample of

insurance companies operating in the Portuguese market for the

period 1995-2001. The paper seeks out those best practices that




will lead to improved performance in the market. The companies

are then ranked according to their change in total productivity,

concluding that some companies experienced productivity

growth while others experienced reduction.

Tone and Sahoo (2005) examined the performance of LIC using

DEA from 1982-83 to 2000-2001 using agent's commission,

labour cost, debt and equity capital as input variables and losses

as the claims settled including claims written back and the ratio of

liquid assets to liabilities as the output variables. Results suggest

a significant variability in overall and scale efficiencies over the 19

year study period. More importantly, there has been a downward

trend in performance, measured in terms of cost efficiency, since

1994–1995. This decline is due to the huge initial fixed cost of

modernizing their operations. A significant increase in cost

efficiency in 2000–2001 suggests that LIC may be beginning to

benefit from such modernization, which will stand them in good

stead in terms of future competition.

Hwang and Kao (2006) adopted two stage DEA to measure the

performance of 24 Non-Life insurance companies in Taiwan. The

study measured the marketability in first stage and profitability in

the second stage. The results show that each non-life insurance

company performs differently at different production stages.

Barros and Obijiaku (2007) evaluated the performance of

Nigerian insurance companies, using DEA from 2001 to 2005,

combining operational and financial variables. The study revealed

that bank network-managed insurance companies are found to

have higher efficiency scores than those that are not managed

within a bank network. Large insurance companies and

companies with higher market share tend to be more efficient

than their counterparts.

Huang (2007) evaluated the efficiency of China's insurance

industry for period 1999-2004 using stochastic frontier analysis.

The results show that for cost efficiency, life insurance industry,

non-state-owned companies and foreign companies are superior

to the property insurance industry, state owned companies and

domestic companies respectively. But for the profit efficiency,

while the life insurance industry still surpasses the property

insurance industry, the state-owned companies and domestic

companies are better than their counterparts.

Eling and Luhnen (2008) had conducted study on efficiency of

insurance industry during 2002-2006 by cross country

comparison adopting DEA. Study including 3,555 insurance

companies from 34 countries revealed Denmark and Japan have

most efficient insurance companies, whereas Philippines has the

lowest efficiency. It has been found that there is positive

relationship between capitalization and efficiency. This study

provides international growth advantage to a firm which is

relatively efficient in efficient market.

Zanghieri (2009) estimated cost and profit frontiers, using a

sample of European insurance companies for 1997-2006. The

characteristics of the national markets are found to play a

significant role in explaining cost and profit efficiency: in

particular a better quality of regulation tends to reduce and

stabilise costs. Moreover, life and non life insurance businesses

differ substantially in what drives technical efficiency. In the life

industry large firms tend to be relatively less efficient.

Sinha and Chaterjee (2009) studied the cost efficiency of life

insurance companies in India during 2002-03 and 2006-07 using

the new cost efficiency approach suggested by Tone. Input

variables considered for the study were operating expense and

commission expense whereas benefits paid to the customers

and premium mobilized by the company were the output

variables. The results suggest an upward trend in cost efficiency

for first three years. However, the trend was reversed for the last

two years.

Owusu-Ansah et al. (2010) evaluated the performance of

Ghanaian general insurance companies for 2002-2007 using

DEA. The study uses Debt capital, Equity capital and

Management expenses as inputs that are used by insurers to

produce premium, claims and investment income. It was

observed that Ghanaian general insurers operated at an average

overall efficiency of 68%, technical efficiency of 87% and scale

efficiency of 78%. It was further observed that insurers with

higher dimension and market shares tend to have higher

efficiencies; implying that general insurers could increase their

efficiencies by trying to increase among other things their

dimension and market shares.

Ajlouni and Tobaishat (2010), examines the technical efficiency

of Jordanian insurance companies during 2000-2006 using DEA.

The inputs variables used to measure efficiency are: technical

reserves, equity, borrowings, and operating expenses. While the

outputs include: premium and investment income. The results

reveal that insurers' efficiency is increased over the study period

which is reflected in appreciation of their stock prices.

Ahmed et al. (2011) examined the impact of firm level

characteristics (size, leverage, tangibility, risk, growth, liquidity

and age) on performance of listed life insurance companies of

Pakistan from 2001 to 2007. The results of Ordinary Least

Square (OLS) regression analysis indicate that size, risk and

leverage are important determinants of performance while ROA

has statistically insignificant relationship with growth,

profitability, age and liquidity.

Zhi and Hu (2011) analyzed the efficiency of life insurance

companies in the Mainland and Taiwan areas. Findings revealed

that efficiency is significantly affected by environmental factors,

showing that institutional reform does matter for improving the

efficiency of financial institutions. Also debt equity has a

significant effect to increase efficiency, indicating that increases

in the market share and financial leverage ratio help promote

efficiency; ownership types have different advantageous effects



on different inputs; the years since establishment have no significant effects on efficiency, indicating that the younger mainland Chinese

life insurance companies do not have disadvantages because it is in an open and competitive market environment.

Analysis of efficiency of Life Insurance Companies in private sector in India using DEA

In India 23 life insurance companies are there with dominance of public sector which is Life Insurance Corporation of India. LIC of India

enjoys not less than 70% market share for all the years considered for study. For this reason LIC is excluded in the study to avoid

biasedness. From remaining 22 private sector life insurance companies, study includes 14 companies which were registered with

IRDA as on 31st March 2005. The researcher has considered the time frame of 5 financial years from year 2005-06 to 2009-10. Data is

collected from public disclosure of life insurance companies, IRDA website, and annual report of IRDA. Selection of input and output

variable for current study is based on literature review and availability of data. 5 variables are used for the study.

Input 1 - Operating Expenses - includes employee remuneration, traveling expenses, stationary, communication expenses,

advertisement and publicity, interest & bank charges and distribution charges etc.

Input 2 - Commission Expenses - Salary is paid to the employees of the organization but the advisors, brokers and bancasurance are

being paid commission. This is a crucial component of any insurance company.

Input 3 - Total Investment - includes fund invested for life funds, pension & annuities fund and unit linked plans.

Output 1- Net Premium - Like sales revenue is important in any other industry, premium is equally important for life insurance

companies. The input variables Commission expenses and operating expenses are spent to generate premium. Market share of any

insurance company is determined on the basis of premium that it has been able to generate.

Output 2 - Net increase in liabilities - First is net increase in premium. Net increase in net liabilities is taken from L 24 form of public

disclosure. This is liability that company has generated due to its business.

Table: 1 Average Relative Efficiency of Private Sector Life insurance Companies from 2005-2006 to 2009-2010

Average Relative Efficiency of Life Insurance companies

Birla Sun Life Insurance

Aviva Life Insurance

Bajaj Allianz Life Insurance

HDFC Standard Life Insurance

ICICI Prudential Life Insurance

ING Vysya Life Insurance

Kotak Mahindra Old Mutual Life Insurance

Max New York Life Insurance

Met Life Insurance

Reliance Life Insurance

Shriram Life Insurance

Tata Aig Life Insurance

Sahara India Life Insurance

SBI Life Insurance

Average

CRSTE : Technical Efficiency, VRSTE: Pure Technical Efficiency, Scale: Scale Efficiency

0.7734 0.7798 0.991

0.728

0.921

0.8806

0.742

1

0.886

0.9824

0.921

0.994

1 1 1

0.6884

0.9068

0.7114

0.6516

0.8814

0.725

0.6826

0.5856

1

0.7954 0.8642 0.9256

1 1

1

0.7292

0.9268

0.7438

0.7334

0.8862

0.9758

0.6958

0.948

0.9766

0.9522

0.8884

0.9942

0.7438

0.9814

0.5856

DMU CRSTE VRSTE SCALE



Findings

• It can be observed that Indian private life insurers operated at an average overall efficiency of 80%, technical efficiency of 86% and

scale efficiency of 93%. There is room for improvement of the overall, technical and scale efficiencies of the insurers since the

average efficiencies for the period were observed to be less than 100%.

• It is observed that the scale efficiency scores are higher than the overall and pure technical efficiency scores. This means that Indian

life insurers are managed with relatively less managerial skills and scale of operation is not a source of inefficiency.

• The mean of technical efficiency score tends to increase year by year. Numerically the sample means are 0.727, 0.764, 0.772, 0.898

and 0.816 from 2005-06 to 2009-10. This increasing trend indicates that the efficiency of life insurance companies as a whole has

increased.

• Most private sector life insurance in India is of increasing return to scale indicating that there is huge potential left in this companies to

expand their operations. India has penetration of just 4% that indicates that there is ample opportunity for all insurance companies to

grow.

• SBI Life Insurance and ICICI Prudential Life insurance are the only two insurance companies which have been efficient for all the years

be it CRSTE scores or VRSTE score.

Table : 2 Ranking of Life Insurers according to their Efficiency Score

their

• Technical efficiency and pure technical efficiency of Birla Sun Life, Aviva, ING Vysya, Max New York and Tata AIG is below the industry

standard. But the interesting aspect is that these DMU's have been able to achieve scale efficiency which is higher than the industry

standard. This shows that the company's technical efficiency has deteriorated much because of pure technical efficiency. Thus

resource allocation and management ability needs to be improved. All the companies except Bajaj Allianz had increasing returns to

scale during the last 3 years of the study. Bajaj Allianz has got pure technical efficiency score 1 which means company management

Ranking of Life Insurance according to Efficiency Score

Birla Sun Life Insurance

Aviva Life Insurance

Bajaj Allianz Life Insurance

HDFC Standard Life Insurance

ICICI Prudential Life Insurance

ING Vysya Life Insurance

Kotak Mahindra Old Mutual Life Insurance

Max New York Life Insurance

Met Life Insurance

Reliance Life Insurance

Shriram Life Insurance

Tata Aig Life Insurance

Sahara India Life Insurance

SBI Life Insurance

7 9 5

8 11 6

3 2 11

6 8 4

1 2 1

11 13 10

4 6 8

10 10 9

13 12 12

5 7 3

9 5 13

12 14 7

14 2 14

1 2 1

DMU CRSTE VRSTE SCALE



has done good job so far. Its decreasing returns to scale indicate

that the company has less potential to grow.

• HDFC Standard Life Insurance has been efficient only once in

the five years but the insurer has shown relatively good efficiency

score which ranges between 0.70 to 0.895 for all the years in

which the insurer is inefficient. It has potential to grow as it has

increasing returns to scale. Insurer has been inefficient in

allocation of resources and managerial aspect.

• Inefficiency of Shriram and Sahara Life Insurance is due to

scale and not because of managerial inefficiency. Sahara India

Life Insurance has been inefficient for all years as per the CRSTE

scores but it has been efficient for all years as per the VRSTE

scores. Their pure technical efficiency score clearly states that

the management of company has performed well and

inefficiency is due to scale that is magnitude of their business.

Scale inefficiency with increasing return to scale indicates that

this insurance company has potential to become a competitive

player of life insurance industry.

• Kotak Mahindra Old Mutual Life Insurance is an efficient DMU

for year 2005-06 and 2006-07 but in the subsequent years the

insurer has been inefficient. Efficiency score of Reliance Life

Insurance are near to that of Kotak Mahindra Old Mutual Life

Insurance.

• All other insurance companies are inefficient compared to SBI

and ICICI. Hence it is recommended that all inefficient firms

should carefully study the mode of operation of these two

insurers to become efficient. It can be said that only SBI Life

Insurance and ICICI Life Insurance have been efficient in utilising

their inputs to generate outputs. Inefficiency of life insurance

companies are majorly because of managerial ability and

resource allocation. Both are controllable variables. Managers of

inefficient life insurance companies should focus on their

managerial ability.

Efficiency by type of insurer

After getting the efficiency scores of private sector Life insurance

companies we test the below hypothesis. The Mann Whitney U

test for the non parametric analysis of DEA values is adopted. The

constant return to scale efficiency scores are chosen, because

this score gives the overall efficiency score.

H0: There is no difference between efficiency score of life

insurance companies having bank network and life insurance

companies not having bank network. (Only 4 - ICICI, HDFC, SBI

and ING out of 14 banks are integrated with bank network.)

H0: There is no difference between efficiency score of large life

insurance companies and small life insurance companies.

(Companies having their average capital more than 735 are

considered to be large company)

H0: There is no difference between efficiency score of life

insurance companies having large market share and life

insurance companies having small market share. (Companies

having market share – based on premium generated- more than

5% is considered having higher market share)

From hypotheses tests we can conclude that there is no

difference in the efficiency score of the life insurance companies

having bank network and life insurance companies not having

bank network. This is because almost all the life insurance

companies are in agreement with different banks to sell their

insurance product though bancassurance. So in this case the

success of Life Insurance Company is depending upon the ability

of insurance company to utilize this network in generating leads

and converting them into sale. We accept the null hypothesis that

there is no significance difference between small insurance

companies and large insurance companies. From this we can

infer that the equity capital of life insurance companies has no

impact on the efficiency of the company. Life insurance

companies with large market share are more efficient than life

insurance companies with small market share.

Conclusion

In this study we have analyzed technical efficiency of private

sector life insurance companies between 2005-06 and 2009-10.

This analysis is based on DEA model that allows for the

incorporation of multiple inputs and outputs determining relative

efficiency. This information will benefit regulators and managers,

for they can get useful evidence and insights from the DEA

analysis. Efficiency has improved over the study period. SBI and

ICICI Life Insurance are only companies which have been efficient

for all the years of the study. Inefficient life insurance companies

can refer to these companies and accordingly can improve their

efficiency. In inefficient life insurance companies inefficiency is

caused by managerial inefficiency and less due to scale

inefficiency. From our analysis we can conclude that the life

insurance industry has huge potential to grow because almost all

the companies have increasing returns to scale. Hence if at this

stage investments are made then return on this investment will be

more than the investment made.

From hypotheses tests we can conclude that there is no

difference in the efficiency score of the life insurance companies

having bank network and those not having bank network. There is

no difference in the efficiency of small and large insurance

companies. Life insurance companies with large market share

are more efficient than life insurance companies with small

market share.

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56

Impact of FII's on Indian Stock Market

Dr. Sampada Kapse: Associate Professor & Program Coordinator,Tolani Institute of Management Studies, Adipur. Email: [email protected]

Hitendra Lachhwani: Faculty & Corporate Relations Manager, Tolani Institute of Management Studies, Adipur. Email: [email protected]

(This paper secured Second Position in GTU's first Finance Conference held on 26-27th Aug, 2011 at AMA, Ahmedabad)

Abstract

It's a general belief that Foreign Institutional Investments (FII's)

has widespread effect on Indian Stock Market. FII's are

considered to have tremendous power to determine & decide the

direction of Indian stock market. The aim of this paper is to

examine the relationship between the FIIs equity investment

pattern and Indian stock indices (Sensex & Nifty) & also to

analyze the impact of FIIs equity investment on specific industrial

sector (Auto, Bankex, IT, FMCG & Oil & Gas). Daily net equity

investment of FIIs and daily closing of different Indian stock

indices such as Sensex, Nifty, BSE IT, Auto, Oil & Gas, FMCG and

Bankex for the period Jan 2001-Jan 2011 are considered. The

paper employs Pearson product-moment correlation coefficient,

test stationary of data using ADF Unit root test & co-integration

based on Engel-Granger framework. The results are interesting

and contradict some of the findings found elsewhere. FIIs are

positively correlated with Indian stock indices but when

researcher regressed FII (Stationary time series) with different

Indian stock indices (non stationary time series) the possibility of

spurious relationship was test for co integration and no co

integration was found in FII and all sample indices. Engel Granger

Causality test was conducted at appropriate lagged value using

VAR lag of Gretl. Bilateral causality between FII ? BSE_IT,

unidirectional causality FII → Sensex, FII → BSE_Auto index & FII

→ BSE_FMCG index & BSE_Oil & Gas index → FII, and

independence between FII ? Nifty & FII ? Bankex Index was

found using SHAZAM software.

Introduction

FII (Foreign institutional investment) means investments made by

an individual investors or companies in foreign countries.

Pension funds, mutual Funds, insurance companies, investment

trusts, banks, university funds, endowments, foundations, and

charitable trusts are eligible to get registered as FIIs in India. Apart

from these, entities proposing to invest on behalf of broad based

funds are also eligible to be registered as FIIs. These comprise

Asset Management Companies, Institutional Portfolio Managers,

Trustees, and Power of Attorney Holders.

India, after the crisis & a major setback due to balance of payment

deficit in 1991, was left with no option but to open up in the global

economy. It was time to develop the nascent capital market and

raise funds through non debt capital inflow. India allowed FIIs in

domestic market since 1992. FIIs flow to Indian Capital market

skyrocketed from US $0.18 million (net, monthly) in January

1993 to approx US$400 millions in immediate next year.

International diversification of portfolio has become the key today

considering the economy of developed countries where parking

money in banks seems to fetch literally no returns; on the

contrary you have to pay to keep your money in the bank. This has

made Institutional Investors from the world to look Indian stock

market a lucrative option which on an average gives them 10-

15% return. India has been witnessing a surge in FII activity since

the opening of its capital markets. Owing to its high growth

potential, India has become a favourite destination for FII activity.

FIIs, convinced of India's economic progress and strong

corporate earnings, are continuously investing in the country.

FII Activity – Recent Developments

• Fast GDP growth has made India a preferred destination for

foreign investors post 2008 financial crisis. In 2010 itself,

India attracted nearly US$ 30 billion of net foreign inflows,

which was just under 50 per cent of all inflows into emerging

Asian markets, excluding China.

• In the first six months of 2011, overseas investors infused

around Rs 17,000 crore (US$3.82 billion) into the Indian

market, including stocks and bonds. In the same period, FIIs

made investments of Rs 9,948 crore (US$2.23 billion) in the

debt market, with investments in stocks being Rs 2,670 crore

(US$ 599.79 million)

• The number of FIIs registered with SEBI increased from 1,718

as of December 31, 2010, to 1,730 as of July, 2011.

Moreover, the number of registered sub-accounts has risen

from 5,503 in December 31, 2010 to 5,898 currently

The relationship between FIIs and India Stock markets has drawn

much attention of economists, investors, technical analysts, for

theoretical and empirical reasons, because they both play crucial

roles in influencing the development of a country's economy.

Relationship between FIIs & Indian Stock markets has frequently

been utilized in predicting the future trends of stock market

movements & returns for investors. Now the question arises that

whether Indian Stock Market is responsible for FIIs investment or

FIIs investment makes Indian Stock Market Lucrative?




Lots of debate & research has taken place on FII & Volatility of

Indian Stock Market. Dr. Tanupa (2007) found that FII flows were

caused by rather than causing the national stock market returns.

Narendra et al. (2011) found a positive correlation between stock

market and FII's that Sensex follows the investment behavior of

FII's, but there were some exception seen in year 2005 and 2008.

Paramita et al. (2002) suggest that though FII flows to and from

India are significantly affected by return in the domestic equity

market; the latter is not significantly influenced by variation in

these flows. Moreover Bansal A (2009) found that the correlation

between FIIs investments and market volatility has been low. It

means volatility in Indian market is not the function of FIIs

investment flows. There may be some other reasons which

induced the volatility in Indian market over the time.

Many times analyst blames the FIIs for volatility whenever the

Indian Stock market crash. Policy makers are concerned for

factors that affect the foreign flow to India, & its impact on Indian

Stock Market volatility.

Investors are also concerned about the impact of FIIs on

domestic market.

With the objective to address these concerns researchers have

selected this topic. In the present paper, researchers look at the

impact of FIIs on the Indian stock market. Section II consists of

previous literature available on the behavior of the stock market

due to the entry of FIIs. Section III introduces the data and the

methodology. Section IV presents outcomes of the study which is

followed by conclusions of the paper in Section V

Section II

Review of Literature

Chakrabarti (2001) found that FIIs net inflow is correlated with

the returns on the equity market and that FIIs inflow are more

likely to be the effect than the cause on the returns. He used

monthly data to examine the nature and cause of FIIs net inflow in

Indian equity market during 1993-99 periods & used statistical

tools such as correlation, regression and Granger causality tests.

Paramita et al. (2002) after statistically analysing the data from

January 1999 to May 2002, suggest that though FII flows to and

from India are significantly affected by return in the domestic

equity market, the latter is not significantly influenced by variation

in these flows.

Batra (2003) found that there was strong evidence that FIIs have

positive feedback investors and trend chasers at the aggregate

level on daily basis. However there was no evidence of positive

feedback trading on a monthly basis. She used daily & monthly

data on FIIs equity purchases and sales and equity returns on the

BSE Sensex.

Rai et al. (2003) found using monthly data (1994-2002) that the

equity returns was main driving force for FII investment and was

significant at all levels. They further studied the impact of news on

FII flows and found that the FIIs react more (sell heavily) to bad

news than to good news.

Kumar, S.S.S. (2007) in his study of role of Institutional Investors

in Indian Stock Market, found that the forecasts of FII activity

using mutual fund activity can be improved where as the reverse

are not possible. This is a little bit surprising as well as interesting

to note that the Indian mutual funds are leading the pack and are

giving direction to the market and even Flls are following their

direction, probably, because of the larger size of the funds under

the management of the mutual funds and hence the statistics are

showing accordingly.

N P Tripathy (2007) found that there is a unidirectional causal

relationship between net FII investment and stock market (which

means changes in stock return effect the FIIs net investment). He

also found by using VAR model based on stationary time series

and impulse response analysis that shocks in stock return and

market capitalization impact net FII investment in the expected

direction over a short horizon. He used monthly time series data

from SEBI Bulletin for period of three years from June 2002 to

June 2005.

Dr. Tanupa (2007) found that FII flows were caused by rather than

causing the national stock market returns in her empirical

investigation of the direction of causation between FII flows to

India and Indian stock market returns over the time period April

1997- March 2005.

Bansal A (2009) in his study on “Foreign Institutional Investor's

Impact on Stock Prices in India” found the correlation between

FIIs investments and market volatility has been low. It means

volatility in Indian market is not the function of FIIs investment

flows. There may be some other reasons which induced the

volatility in Indian market over the time.

Narendra et al. (2011) using yearly data from 2000 to 2009,

found a positive correlation between stock market and FII's, that

Sensex follows the investment behavior of FII's, but there were

some exception seen in year 2005 and 2008.The net foreign

institutional investment, thus implying that the market

informational efficiency hypothesis can be rejected for BSE

Sensitive Index with respect to the FII. It also shows that positive

or negative movement of FII's leads to a major change/shift in the

sentiments of domestic or related investors in market. The paper

also compared the FIIs turnover with different groups of share and

the positive correlation was found in FII turnover and A group

share turnover, which emphasis the fact that FII are attracted

towards A group share and any movement in this group is been

closely monitored and reacted upon by FIIs.

Dr. A Gupta (2011) used daily data from April 2006 to Feb 2011

and found by using Granger Causality Test that FIIs purchase and

sell, by taking leads through the movement of stock market. That

is to say those FIIs are feedback traders.




Section III :

The objective of this paper is to examine the relationship between

the FIIs equity investment pattern and Indian stock indices and

also to analyze the impact of FIIs equity investment on specific

industrial sector (Auto, Bankex, IT, FMCG & Oil & Gas).

The required time series daily data have been collected for the

period of ten years from 1st Jan 2001 to 31st Jan 2011.

Researchers have selected BSE Sensex, Nifty, to see the overall

impact of FIIs on Indian stock market. Various sectorial indices

were selected like, Bankex, Oil and Gas, FMCG, IT and Auto to see

the impact of FIIs on respective industries. Daily closing values

are taken for the respective indices for the analysis from BSE

website. (www.bseindia.com). Daily net flows (i.e. gross

purchases –gross sales) by foreign investors have been taken for

the period of 10 years. The data is obtained from Capital Market

Website (www.capitalmarket.com)

For Correlation following hypothesis were set.

H0 Sensex does not rise with the increase in FII's investment.

Ha Sensex rises with the increase in FII's investment.

H0 Nifty does not rise with the increase in FII's investment.

Ha Nifty rises with the increase in FII's investment.

H0 Auto index does not rise with the increase in FII's investment.

Ha Auto index rises with the increase in FII's investment.

H0 Bankex does not rise with the increase in FII's investment.

Ha Bankex rises with the increase in FII's investment.

H0 IT index does not rise with the increase in FII's investment.

Ha IT index rises with the increase in FII's investment.

H0 FMCG index does not rise with the increase in FII's

investment.

Ha FMCG index rises with the increase in FII's investment.

H0 Oil and Gas index does not rise with the increase in FII's

investment.

Ha Oil and Gas index rises with the increase in FII's investment.

Stationarity of the FII net investment, Sensex, Nifty, Bankex, Oil

and gas, FMCG, IT and Auto were tested by conducting ADF test

by using Gretl software. After testing for unit root and making the

data stationary at first difference researchers applied correlation

to test the relationship between the FII inflows and the stock

market behavior. Researchers also checked the impact of FIIs on

the various sectors of Indian stock market. The paper could not

employ co-integration on Engel-Granger framework. Co

integration can be applied between two non stationary time series

but since the FIIs time series was stationary co integration test

could not take place. Researchers have done Granger Causality

test using SHAZAM software on FII vis a vis Sensex, Nifty, IT,

Auto, Oil & Gas, Bankex & FMCG by taking VAR lags using Gretl

software.

Stationarity Test

Empirical work based on time series data assumes that the

underlying time series is stationary. Data series is said to be

Data sources and Methodology stationary if its mean and variance are constant over time and the

value of covariance between two time periods depends only on

the distance or lag between the two time periods and not on the

actual time at which the covariance is computed Gujrati (1995)

The DF unit root test is based on the following three regression

forms:

The hypothesis for unit test is:

In the present paper stationarity of all time series were tested by

conducting ADF-GLS test. The results of FII confirm that the

series is stationary. Other series of bankex, oil and gas, FMCG, IT

and auto are to be confirmed as nonstationary. Researchers

employed ADF-GLS test with trend since certain trend is spotted

which can be clearly visible through graphs. (Refer graphs no. 2,

4, 6, 8, 10, 12 and 14 at level for the respective indices.) If series

found non stationary at level ADF is employed on the first

difference of the series.

Results and discussion

In the case of FIIs net investment time series, mean and variance

seems to be constant in visual presentations through graphs,

which indicates the presence of stationarity in time series. In

addition to the graphs ADF is also performed to check the

stationarity of the time series. (Table 1)

The ADF test results in Table 1 clearly show that all the variables

except FII net investment are not stationary at the 10%, 5%, 2.5%

and 1% level of significance; however, ADF statistics reject the

null hypothesis of nonstationarity at 10%, 5%, 2.5 % and 1% level

of significance after the variables have been first differentiated.

(Table 2)

After employing the ADF test and making the series stationary

(refer graph no. 3, 5,7,9,11,13 and 15 after first difference for the

respective indices), Pearson bivariate correlation test has been

conducted between FII investment and different indices to

determine whether the two variables move together.

(Table 3) shows the correlation coefficients between different

indexes and FIIs investment.

Foreign Institutional investment and Overall Indian market is

showing positive correlation. FIIs and all sectorial indices are also

Without Constant and Trend

?Yt

= δYt-1

+ ut

With Constant

?Yt = α + δYt-1 + ut

With Constant and Trend

?Yt = α + βT + δYt-1 + ut



positively correlated. Though the correlation of coefficient is not

very high in all variables, it is significant in the population. Results

clearly show that, FII investments have impact on Indian capital

market.

Engel - Granger Co integration Test

In order to find out the relationship between FIIs & Indian Stock

Market Indices, researchers employ the regression equation

which helped us to meet the objective of predicting the Indian

Stock Market Indices on the basis of FIIs activity. Since from the

unit root analysis we found out that only FIIs data is stationary and

rest all Stock Indices are non stationary, there are chances of

spurious regression equation. In order to check whether the

regression is spurious or not, we performed Engel-Granger (EG)

Co integration test. In this test first we regress one time series on

another time series and then the error term (ut) is checked for the

unit root test. If unit root does not exist in error term (ut), the time

series are considered to be co integrated and the regression is

valid and not spurious.

To perform co-integration test, time series must be non-

stationary and in our findings FIIs comes out to be stationary at

level which rejects the applicability of co-integration test. So, we

can't predict anything about long term relationship between

Sensex, Nifty, other sectorial indices and FIIs on the basis of co-

integration test.

The Granger Causality Test

With the Engel-Granger Co integration Test, researcher will be

able to find that two time series follow a long-term relationship but

that does not talk about causation effect or direction of effect. In

regressions involving time series data, the situation may be

somewhat different because,

…time does not run backward. That is, if event A happens before

event B, then it is possible that A is causing B. However, it is not

possible that B is causing A. In other words, events in the past can

cause events to happen today. Future events cannot.

In order to check see that FII “causes” the Sensex (FII → Sensex)

or is it the Sensex that causes FII, where the arrow points to the

direction of causality. Please note that in this case we will take

actual data of FIIs and 1st difference data of SENSEX which will

make both the data stationary. The Granger causality test

assumes that the information relevant to the prediction of the

respective variables, FII & Sensex, is contained solely in the times

series data on these variables. The test involves estimating the

following pair of regressions:

Equation 1 postulates that FII is related to past values of itself as

well as Sensex, and Equation 2 postulate a similar behavior of

Sensex.

Accordingly, Equation of FII's vis a vis NIFTY, BSE IT, BSE AUTO,

BSE OIL & GAS, FMCG & BANKEX were made and Causality of

above four type were been checked.

Granger Causality Test Results

Researchers took FIIs monthly data and 1st difference monthly

data of Sensex and accordingly for first difference data was taken

of all the other Indices in order to make the comparisons of two

stationary time series as a requirement of Granger Causality Test.

VAR lag test was applied using Gretl and appropriate lags were

been selected on the basis of AIC, BIC & HQC results. The best

(that is, minimized) values of the respective information criteria,

AIC = Akaike criterion, BIC = Schwartz Bayesian criterion and

HQC = Hannan-Quinn criterion were considered for lag

selection. Below (Table 4) summarises the results of Granger

Causality.

Researchers came across interesting results

Independence causality was observed between FII & Nifty & FII &

Bankex Index, Unidirectional causality was observed from FII to

Sensex, FII to BSE_Auto index & FII to BSE_FMCG index i.e. FII

movements cause same direction movements in Sensex,

BSE_Auto & BSE_FMCG index. But movement in Sensex or

BSE_Auto index or BSE_FMCG index does not cause any effect in

(Equation 1)

(Equation 2)

n n

FIIt

= Σ αi SENSEXt-1

+ = Σ β FIIt-1 + u1t

i = 1

j = 1

n n

SENSEXt = Σ λi SENSEXt-1 + = Σ δ FIIt-1 + u1t

i = 1 j = 1

FIIt = Σ αi SENSEXt-1 + = Σ β FIIt-1 + u1t (Equation 3)

i = 1

j = 1

n

n

SENSEXt

= Σ λi SENSEXt-1

+ = Σ δ FIIt-1 + u1t (Equation 4)

i = 1

j = 1

n

n

FIIt

= Σ αi BSE_ITt-1

+ = Σ β FIIt-1 + u1t (Equation 5)

i = 1

j = 1

n

n

BSE_ITt

= Σ λi BSE_ITt-1

+ = Σ δ FIIt-1 + u1t (Equation 6)

i = 1

j = 1

n

n

FIIt = Σ αi BSE_AUTOt-1 + = Σ β FIIt-1 + u1t (Equation 7)

i = 1 j = 1

n n

BSE_AUTOt = Σ λi BSE_AUTOt-1 + = Σ δ FIIt-1 + u1t (Equation 8)

i = 1 j = 1

n n

FIIt = Σ αi BSE_OIL&GASt-1 + = Σ β FIIt-1 + u1t (Equation 9)

i = 1 j = 1

n n

BSE_OIL&GASt = Σ λi BSE_OIL&GASt-1 + = Σ δ FIIt-1 + u1t (Equation 10)

i = 1 j = 1

n n

FIIt = Σ αi BSE_FMCGt-1 + = Σ β FIIt-1 + u1t (Equation 11)



movement of FII. BSE_IT & FII are bilateral causality, i.e. change in

movement of one variable causes change in movement of other

variable, which confirms the general understanding too that if IT

shares goes up since they are blue chips FII ought to start

investing in it. Interestingly there is unidirectional causality from

BSE_Oil & Gas index to FII.

Conclusion and limitations

Researchers examined the impact of FII investment on Indian

stock market. All the data series were tested for stationarity and

FII investment was found to be stationary at level. All other indices

series are first differentiated to make them stationary. Further with

the help of Pearson correlation checked the impact of FIIs on the

stock market. Researchers found a positive correlation between

FII's and Sensex, FII's and nifty. FII's and all other indices follow

the investment behavior of FII's. So we can reject the entire null

hypothesis and conclude that Indian markets as well as all the

important sectors rise with the increase in FII's investment.

Correlation test can be seen as first indication for the existence of

interdependency among time series. The correlation coefficients

between FIIs net investment and various indices are not very high

so there was a need to be further verified for the direction of

influence by the Granger causality test and for long-term

movements among the variables, by the co-integration. To

perform co-integration test, time series must be non-stationary

and in our findings FIIs comes out to be stationary at level which

rejects the applicability of co-integration test. So, we can't predict

anything about long term relationship between Sensex, Nifty,

other sectorial indices and FIIs on the basis of co-integration test.

Researcher examined the causal relationship of FII with six set of

variables i.e. Sensex, nifty, BSE IT, Auto, FMCG, Oil and Gas and

Bankex. FII data was found to be stationary at level but we had to

differentiate other series to make them stationary for Granger

test. Different versions of Granger causality models were

employed for investigating direction of causation. Independence

causality was observed between FII ? Nifty & FII ? Bankex

Index, Unidirectional causality was observed from FII → Sensex,

FII → BSE_Auto index & FII → BSE_FMCG index. BSE_IT ? FII

are bilateral causality. Interestingly there is unidirectional

causality from BSE_Oil & Gas index →FII.

Previous studies used quite old data for FIIs, when the volume of

FII was comparatively less. In almost all research they used

monthly time series for analysis so the present paper gains more

relevance. Still researchers understand the following limitations

to the current research; the present study doesn't account for

ARCH/GARCH effect present in most of monthly financial time

series data. Granger test is very sensitive to the number of lags

used in the analysis. Our conclusions may change if we introduce

different lags. In vector autoregressive model including more

variables may be little more robust since many factors will have

impact on stock market rather than only FII.

Bibliography

1. Batra, A. (Sept. 2003). The dynamics of foreign portfolio

inflows and equity returns in india. Indian Council for

Research on International Economic Relations.

2. Chakrabarti, R. (Oct. - Dec. 2001). FII Flows to India: Nature

and Causes. Money & Finance , pp. 62-82.

3. Chakraborty, D. T. (Vol.11, No. 1, June 2007). Foreign

Institutional Investment Flows and Indian Stock Market

Returns . A Cause and Effect Relationship Study. Indian

Accounting Review , pp-35 to 48.

4. Coondoo, S. B. (July–Dec. 2004). The Impact of FII

Regulations in India- A Time-Series Intervention Analysis of

Equity Flows. Money & Finance , pp. 54-83.

5. Dutt, N. S. (Issue 68 (2011)). Foreign Institutional Investment

in Indian Capital Market: A Study of Last One Decade.

International Research Journal of Finance and Economics ,

pp.103-116.

6. Gupta, D. A. (Vol.2, Issue 2, April.2011). Does the Stock

Market rise or fall due to FIIs in India? Researchers World -

Journal of Arts, Science & Commerce , pp.99-107.

7. Kaur, H. (Vol. 29, No.4, Oct.–Dec. 2004). Time Varying

Volatility in the Indian Stock Market. Vikalpa , pp. 25-42.

8. Khan Masood Ahmad, S. A. (Vol.11, No.8, Sep. 2005). An

Empirical Investigation of FIIs' Role in the Indian Equity

Market: A Firm Level Analysis. Applied Finance , pp. 21-33.

9. Mohd. Aamir Khan, R. S. (Issue 40 (2010)). Investigation of

Causality between FIIs' Investment and Stock Market

Returns. International Research Journal of Finance and

Economics , pp. 100-112.

10. Nair, P. T. (Vol.12, No.4, April 2006). Determinants of FII

Investment Inflow to India. Applied Finance , pp. 5-20.

11. Omkarnath, A. N. (Vol.12, No.2, Feb. 2006). Do Institutional

Investors Destabilize the Indian Stock Market? Applied

Finance , pp. 52-65.

12. Paramita Mukherjee, S. B. (April–Sept. 2002). Foreign

Institutional Investment in the Indian Equity Market-An

Analysis of Daily Flows during January 1999-May 2002.

Money & Finance , pp. 21-51.

13. Pasricha, A. B. (Vol.1, No. 2, October 2009). Foreign

Institutional Investor's Impact on Stock Prices in India.

Journal of Academic Research in Economics , pp. 181-189.

14. Ramanaiah, M. (2007). Foreign Institutional Investors and

Indian Stock Market.

15. Sen, S. S. (Vol.17, No.1, Jan. 2011). Relationship Between

Sensex and Some Selected Stock Price Indices of the Asia

Pacific Region. Applied Finance , pp. 43-53.

16. Sundaram, K. (2009). Investigating causal relationship

between stock return with respect to exchange rate and FII:

evidence from India.



Annexure

Table 1: Test of Stationarity

(Inference from the study)

Level of significance 10% 5% 2.5% 1%

Critical values: - 2.57 -2.89 -3.15 -3.48

Table 2: ADF- First differentiated

(Inference from the study)

Level of significance 10% 5% 2.5% 1%

Critical values: - 2.57 -2.89 -3.15 -3.48

Variable

FII investment

Nifty

Sensex

BSE IT

BSE Auto

BSE Oil and Gas

FMCG

Bankex

Sample size T statistics

2470 -22.6615

2470 -1.90268

2470 -1.85098

2470

-1.14805

2470

-1.27204

2470 -2.35425

2470 -1.22063

2224 -2.46155

Variable

Sample size T statistics

Nifty

Sensex

BSE IT

BSE Auto

BSE Oil and Gas

FMCG

Bankex

2469

2469

2469

2469

2469

2469

2223

-33.5995

-34.731

-31.7926

-33.0181

-33.2789

-31.8128

-31.3643



Table 3 : Correlations

** Correlation is significant at the 0.01 level (2-tailed).

fii_INVESTMENT

d_NIFTY d_SENSEX d_BSE_IT d_BSE_AUTO d_BSE_OIL_G d_FMCG d_BANKEX

.337(**)

.000

2225

fii_INVESTMENT

Pearson CorrelationSig.(2-tailed)N

1 .352(**) .353(**) .211(**) .332(**) .275(**) .216(**)

.000 .000 .000 .000 .000 .000

2472 2471 2471 2471 2471 2471 2471

.848(**)

.000

2225

d_NIFTY


.352(**)

1

.975(**)

.670(**)

.769(**)

.888(**)

.684(**)

.000 .000 .000 .000 .000 .000

2471 2471 2471 2471 2471 2471 2471

.852(**)

.000

d_SENSEX


.353(**)

.975(**)

1

.677(**)

.754(**)

.860(**)

.673(**)

.000 .000 .000 .000 .000 .000

22252471 2471 2471 2471 2471 2471 2471

.516(**)

.000

2225

d_BSE_IT


.211(**)

.670(**)

.677(**)

1

.507(**)

.488(**)

.464(**)

.000 .000 .000 .000 .000 .000

2471 2471 2471 2471 2471 2471 2471

.655(**)

.000

2225

d_BSE_AUTO


.332(**)

.769(**)

.754(**)

.507(**)

1

.617(**)

.592(**)

.000 .000 .000 .000 .000 .000

2471 2471 2471 2471 2471 2471 2471

.706(**)

.000

2225

d_BSE_OIL_G


.275(**)

.888(**)

.860(**)

.488(**)

.617(**)

1

.541(**)

.000

.000

.000

.000

.000

.000

2471 2471 2471 2471 2471 2471 2471

.535(**)

.000

2225

d_FMCG


.216(**)

.684(**)

.673(**)

.464(**)

.592(**)

.541(**)

1

.000

.000

.000

.000

.000

.000

2471 2471 2471 2471 2471 2471 2471

2225

d_BANKEX

Pearson CorrelationSig. (2-tailed)N

.337(**)

.848(**)

.852(**)

.516(**)

.655(**)

.706(**)

.535(**)

1

.000

.000

.000

.000

.000

.000

.000

2225

2225

2225

2225

2225

2225

2225



Table 4: Granger Causality Results

Note: P value significant at 5%

CAUSALITY DIRECTION (HYPOTHESIS)

NIFTY does not Granger Cause FII

FII does not Granger Cause NIFTY

SENSEX does not Granger Cause FII

FII does not Granger Cause SENSEX

BSE_IT does not Granger Cause FII

FII does not Granger Cause BSE_IT

BSE_AUTO does not Granger Cause FII

FII does not Granger Cause BSE_AUTO

BSE_OILNGAS does not Granger Cause FII

FII does not Granger Cause BSE_OILNGAS

BSE_FMCG does not Granger Cause FII

FII does not Granger Cause BSE_FMCG

BSE_BANKEX does not Granger Cause FII

FII does not Granger Cause BSE_BANKEX

T VALUE

0.42

1.31

1.56

2.37

12.76

21.4

2.07

4.44

3.35

1.7

0.89

4.3

0.91

1.96

P VALUE

0.5167

0.2554

0.1182

0.0112

0.0005

0.0000

0.0535

0.0003

0.0005

0.0817

0.4468

0.0065

0.5141

0.0609

AT LAG

1

1

12

12

1

1

7

7

12

12

3

3

8

8

RESULTS

Do not Reject

Do not Reject

Do not Reject

Reject

Reject

Reject

Do not Reject

Reject

Reject

Do not Reject

Do not Reject

Reject

Do not Reject

Do not Reject

64

Technology Application in Banking

Ms. Richa Pandit : Faculty, Chimanbhai Patel Institute of Management & Research, Ahmedabad. Email : [email protected]

Ms. Devina Upadhyay : Chimanbhai Patel Institute of Management & Research, Ahmedabad. Email :

(This paper secured Third Position in GTU's first Finance Conference held on 26-27th Aug, 2011 at AMA, Ahmedabad)

[email protected]

Abstract

Daniel (1999) defines electronic banking as the delivery of banks'

information and services by banks to customers via different

delivery platforms that can be used with different terminal

devices such as a personal computer and a mobile phone with

browser or desktop software, telephone or digital television.

Electronic banking also commonly known as internet banking or

e-banking. Liao et al. (2003) suggest that Consumer perceptions

of transaction security, transaction accuracy, user friendliness,

and network speeds are the critical factors for success in Internet

banking. Technology is the surest and most appropriate way of

bringing inclusion in respect of any product and/or service. (Dr K

Chakrabarty, Deputy Governor, RBI).

Technology application in banking is a form of self service

technology. The numbers of customers adopting it, but most of

them are reluctant to provide sensitive personal information to

websites because they do not trust e-banking security. This paper

investigates the factors which are affecting the acceptance of e-

banking services among customers and also indicates level of

concern regarding security and privacy issues in Indian context.

By using non-probability convenience sampling a survey of 200

residents of Ahmedabad was carried out using a structured

questionnaire on internet banking. Analysis was carried out

using Simple percentage, Anova and Mann-Whitney U-test. This

paper is intent to reveal the characteristics of the internet banking

user in Ahmedabad & find out whether there is a significant

difference in the perception of security & privacy / trust

/innovativeness / familiarity / awareness among different age

group and educational qualification of the people or not.

Keywords: Internet Banking, Perception, Demographic Variables.

Introduction

For a traditional, conservative and protected industry, the banking

industry in India has seen more than its fair share of changes

during the past decade. The twin forces of deregulation and

globalization have transformed this industry beyond recognition.

The power of technology has fuelled this change and made

profound impact on the banking business. In fact, technology has

unsettled the business model and is redefining the banking

business. From being an enabler of business improvement. IT is

gradually emerging as a driver and key differentiator of business

performance and competitive superiority. Technology plays an

important role in satisfying business requirement abroad. In other

words, without a sound base of technology, going global is just

not possible.

Technology in Indian banks is presently catching up fast with the

developments around the world and the gap between the Indian

banks and their counter parts in the technologically advanced

countries is gradually narrowing down. Rather the Indian banks

seem to be in an advantageous position. Devoid of customer and

complex legacy systems, these banks have the opportunity to put

technological systems into place today and bring themselves

quickly at par with their global counterparts.

E-banking nowadays is the common trend here in our country. No

more falling in line in banks, no more waiting tons of hours in the

bank, no more days and weeks of waiting. All can be done with

one card, one gadget. It's easy, it works, and most importantly,

people like it. But still, some people are having a hard time using

this kind of technology mostly people who are used to do things

the old traditional way. With the use of advertising, people are

now motivated to use E-banking because again, it eliminates the

hassle encountered when using the old process of banking.

E-Banking is defined as the automated delivery of new and

traditional banking products and services directly to customers

through electronic, interactive communication channels. E-

Banking includes the systems that enable financial institution

customers, individuals or corporate to access accounts, transact

business, or obtain information on financial products and

services through a public or private network, like internet or

mobile phone. Internet banking (also referred as e-banking) is

changing the banking industry and is having the major effects on

banking relationships. Banking is now no longer confined to the

branches where one has to approach the branch in person to

withdraw cash or deposit a cheque or request a statement of

accounts. In true Internet banking, any inquiry or transaction is

processed online without any reference to the branch (anywhere

banking) at any time. Providing Internet banking is increasingly

becoming a "need to have" than a "nice to have" service. The net

banking, thus, now is more of a norm rather than an exception in




many developed countries due to the fact that it is the cheapest

way of providing banking services.

Literature Review

The concept of electronic banking has been defined in many

ways (e.g. Daniel, 1999). According to Karjaluoto (2002)

electronic banking is a construct that consists of several

distribution channels. Daniel (1999) defines electronic banking

as the delivery of banks' information and services by banks to

customers via different delivery platforms that can be used with

different terminal devices such as a personal computer and a

mobile phone with browser or desktop software, telephone or

digital television. Electronic banking also commonly known as

internet banking or e-banking. Internet Banking, defined as ''the

delivery of banking services through the open-access computer

network (the internet) directly to customers' home or private

address''. (Lau, 1997) has experienced phenomenal growth in

recent years. In 2006, Pew Internet and American Life Project

reported that nearly half of internet users in the United States – 63

million adults – bank online (Fox and Beier, 2006). In many ways,

e-banking is not unlike traditional payment, inquiry, and

information processing system, differing only in that it utilizes a

different delivery channel.

Any decision to adopt e-banking is normally influenced by a

number of factors. Liao et al. (2008) stress that the success in

Internet banking will be achieved with tailored financial products

and services that fulfill customer' wants, preferences and quality

expectations. Mattila (2001) concedes that customer

satisfaction is a key to success in Internet banking and banks will

use different media to customize products and services to fit

customers' specific needs in the future. Liao et al. (2003) suggest

that consumer perceptions of transaction security, transaction

accuracy, user friendliness and network speed are the critical

factors for success in Internet banking.

Electronic banking is offering its customers with a wide range of

services: Customers are able to interact with their banking

accounts as well as make financial transactions from virtually

anywhere without time restrictions. Adult customers are

changing their existing pattern of use of traditional banking and

switch over advanced self-service technology (Curran and

Meuter, 2007). Liao and Cheung (2002) stated that willingness to

use Internet banking depends on the expectations of accuracy,

security, network speed, user-friendliness, user involvement, and

convenience.

Methodology

Objectives

• Find many factors like security & privacy, trust,

innovativeness, familiarity, awareness level increase the

acceptance of e banking services among customers

• To know the perception of customers towards E-Banking.

• Future trends of E-Banking.

Primary data

Present study has been restricted to time period and done only in

Ahmedabad. A survey of 200 people has been conducted who

are the regular user of E-banking services. It includes customers

like Students, Private employees, government employees,

businessmen, and others. who uses ATM, Internet banking,

mobile banking, and telephone banking, sms alerts for ease of

transaction.

Secondary data

The data has been collected from various journals & websites.

Analysis & interpretation

Figure 1: Frequency of visiting Bank branch

Figure 2 : Use of Telephone banking ( in times )

Figure 3 : Use of ATM (in times)

Figure 4 : Use of Mobile Banking


50

00

50

0

112

38 32

18

1 to 4 4 to 8 more than 128 to 12

Frequency of Visiting Bank Branch

No.

of

resp

oden

ts

00

50

00

50

0

304

1 to 4 4 to 8 > 128 to 12

Use of Telephone Banking (in times)

No.

of

resp

oden

ts

7 4

Never

155

80

60

40

20

01 to 4 4 to 8 > 128 to 12

No.

of

resp

oden

ts

Never

2

72

33 27

66

Use of ATM (in times)

200

150

100

50

0No.

of

resp

oden

ts

Yes

Use of Mobile Banking

No

Level of significance = 0.05

Interpretation

From the ANOVA table we have found that there is a significant

difference in the perception of all the factors (security and

privacy /trust/innovativeness /familiarity / awareness) among

different educational qualification group of people.

As per the occupation

H0: There is no significant difference in the perception of security

& privacy /trust

/innovativeness /familiarity /awareness among people from

different occupational background.

H1: There is a significant difference in the perception of security &

privacy /trust

/innovativeness /familiarity /awareness among people from

different occupational background.

Table 3


Interpretation


difference in the perception of trust/innovativeness / awareness

among the people from different occupational group.

While there is no significant difference in the perception of

security and privacy & familiarity among the people from different

occupational group.

As per gender


& privacy / trust / innovativeness / awareness towards gender.

H1: There is a significant difference in the perception of security &

privacy / trust /

innovativeness / awareness towards gender.

Table: 4

Interpretation

From Figure 1 to 4, we can conclude that:

• Most of the respondents visit the bank 1 to 4 times per month.

• Most of the respondents have never used telephone banking.

• Most of the respondents use ATM 1 to 4 times per month.

• Most of the respondents are not using mobile banking.

As per different age group


and privacy/trust

/innovativeness /familiarity /awareness among different age

group people.

H1: There is a significant difference in the perception of security

and privacy/trust

/innovativeness /familiarity /awareness among different age

group people.

Table 1

Level of significance= 0.05

Interpretation


difference in the perception of all the factors (security and

privacy /trust/innovativeness /familiarity / awareness) among

different age group people.

As per education qualification


and privacy/trust

/innovativeness /familiarity /awareness among different

educational qualification group of the people.

H1: There is a significant difference in the perception of security

and privacy/trust /innovativeness /familiarity /awareness among

different educational qualification group of the people.

Table: 2



Sr.No. Factors Significant value

1

security and privacy

0.118

2

trust

0.001

3

innovativeness

0.000

4

familiarity

0.755

5 awareness 0.043


1


0.000

2

trust

0.000

3

innovativeness

0.336

4

familiarity

0.067

5 awareness 0.002


1


0.000

2

trust

0.000

3

innovativeness

0.000

4

familiarity

0.000

5 awareness 0.000


1


0.000

2

trust

0.000

3

innovativeness

0.000

4

familiarity

0.006

5 awareness 0.000

Figure 8

Figure 9

From the graphs (Figure 5 to 9) we can say that as the age group

increases the perception of security and privacy/ trust/

innovativeness / familiarities /awareness to wards e-banking

decreases.

Figure 10

Figure 11



Interpretation

From the above Mann-Whitney U test we can conclude that there

is a gender wise significant difference in the perception of

security & privacy, trust and awareness

For innovativeness and familiarity there is no gender wise

significant difference.

Figure 5

Figure 6

Figure 7

Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012 67

3.750

3.500

3.250

3.000

2.750

18 - 30

Age Group

Mea

n of

Sec

urity

30 - 42 42 - 54 54 - 66 66 +

4.000

3.500

3.000

2.500

2.000

18 - 30

Age Group

Mea

n of

Tru

st

30 - 42 42 - 54 54 - 66 66 +

3.200

3.000

2.800

2.600

2.400

2.200

2.000

18 - 30

Age Group

Mea

n of

Inno

vativ

enes

s

30 - 42 42 - 54 54 - 66 66 +

3.750

3.500

3.260

3.000

2.750

18 - 30

Age Group

Mea

n of

Fam

iliar

ity

30 - 42 42 - 54 54 - 66 66 +

18 - 30

Age Group

30 - 42 42 - 54 54 - 66 66 +

3.500

3.250

3.000

2.750

2.500

Mea

n of

Aw

aren

ess

3.800

3.600

3.400

3.200

3.000

2.800

2.600

Under Matriculate

Education Qualification

Mea

n of

Sec

urity

SSC HSC Graduation Post Graduation

3.500

3.250

3.000

2.750

2.500

Mea

n of

Tru

st

Under Matriculate



Figure 12

Figure 13

Figure 14

From the graphs (Figure 10 to 14) we can say that higher the

educational qualification the perception of security &

privacy/trust /innovativeness/familiarities/awareness of e-

banking increases.

Findings

• There is a significant difference in the perception of security &

privacy / trust / innovativeness / familiarity / awareness

among different age group people. So we can say that as the

age group increases the perception of security & privacy /

trust / innovativeness / awareness towards e banking

decreases.




privacy / trust / innovativeness / familiarity / awareness to

educational qualification of the people. So we can say that higher

educat ional qual i f icat ion leads to the increased

perception of security & privacy / trust / innovativeness /

awareness of e banking.

• There is a significant difference in the perception of trust /

innovativeness / awareness from the people of the different

occupational group.

• There is no significant difference in the perception of security

& privacy and familiarity from the people of the different

occupational group.


privacy / trust and awareness towards gender.

• There is no significant difference in the perception of

innovativeness and familiarity towards gender.

Recommendation

• Banks should add demo of using the particular service online

to enhance user friendliness of the website.

• Some customers are hindered by lack of computer skills. They

need to be educated on basic skills required to conduct online

banking.

• Consumers above the age of 66 years are facing difficulty in

using the technology in banking & to avoid so bank should

educate them effectively.

• Majority of the customers are having insecurity regarding the

online transaction made by them so bank should emphasize of

bringing awareness regarding the security of every single

transaction held on the bank's platform.

• Banks are usually charging for most of the online activities & in

order to enhance the usage of online banking, banks should try

to minimize the cost pertaining to the online activities.

Conclusion

The study reveals the characteristics of the customer consuming

e-banking service of the bank in Ahmedabad. As the age group

increases the perception of security & privacy / trust /

innovativeness / awareness towards e banking decreases.

Higher educational qualification leads to the increased perception

of security & privacy / trust / innovativeness / awareness of e

banking. There is a gender wise difference in the perception of

security & privacy, trust and awareness amongst the consumers.

There is a difference in the perception of trust / innovativeness /

awareness from the people of the different occupational group.

The study is intended to be useful to the banks to design their

marketing strategies for attracting the existing customers using

branch banking facilities towards internet banking.

3.750

3.500

3.250

3.000

2.750

Mea

n of

Fam

iliar

ity

Under Matriculate



3.500

3.250

3.000

2.750

2.500

2.250

Mea

n of

Aw

aren

ess

Under Matriculate



3.200

3.000

2.800

2.600

2.400

2.200

2.000

Mea

n of

Inno

vativ

enes

s

Under Matriculate





Bibliography

1. Curran, M. James and Meuter, L. Matthew (2007). Encouraging existing customers to switch to self-service technologies: put a little

fun in their lives. Journal of Marketing Theory and Practice, 15 (4), 283–298.

2. Daniel, E. (1999). Provision of electronic banking in the UK and the Republic of Ireland. International Journal of Bank Marketing,

17(2), 72-82.

3. Fox, S. and Beier, J. (2006). Online banking 2006: surfing to the bank, Pew Internet & American Life Project, available at:

www.pewinternet.org/Reports/2006/Online- Banking-2006. aspx (accessed 17 March 2009).

4. Lau, E. [Speech on 30 September 1997]. Government policy on smart card applications and Internet Banking. Hong Kong Monetary

Authority.

5. Liao, J. and Lin, T. (2008). Effect of consumer characteristics on their acceptance of online shopping; comparisons among different

product types. Computer in human behavior, 24 (1), 48-65.

6. Liao, Z., & Cheung, M. (2003). Challenges to Internet E-Banking. Communications of the ACM, 46(12), 248-250.

7. Mattila, M., Karjaluoto, H. and Pento, T. (2003). Internet banking adoption among adult customers: early majority or laggards?.

Journal of Services Marketing, 17 (5), 514-28.

70

The key role of Strategic Human Resource in promoting Corporate Governance

Dr. S. Chinnam Reddy : Dean, Marwadi Education Foundation. E-mail: [email protected]

Prof. Swapna Viswanathan : Faculty, Marwadi Education Foundation. E-mail: [email protected]

Abstract

Today's business is operating in a global economy where the

need to shoulder a multi dimension Corporate Social

Responsibility (CSR) is intensely held across the organizations.

There's an increasing responsibility to aid, implement and

promote CSR due to global corporate operations.

Sustaining business is a major drive for all the entrepreneurs for

which they have to elevate their vision and mission above the

profit earning statements to a wide purpose of corporate

citizenship, emphasizing Corporate Social Responsibilities. In

order to distinguish themselves, organizations have to plan a

sound Corporate Social Responsibility (CSR) that can also heed

to untapped major social issues as well as increase their

shareholder value, employee morale, and employee engagement

activities with organization brand recognition.

Human Resource Department plays a very important role in

leading, educating and ensuring that their firm adopts and

strategically implements Corporate Social Responsibilities.

Moreover Human Resource Department can plan CSR activities

proactively, decide implementation dates, allot responsibilities to

employees or departments to perform it and can celebrate its

success organization-wide, inspiring more employees to

participate in voluntary programs related to CSR.

Human Resource Department can concentrate in training the

employees for practicing multi-dimension business ethic.

Cultivating a strong organizational culture which focuses on

Corporate Social Responsibility aptitude and values will help in

achieving greater synergistic advantages.

The present study is an effort to explore the role of Strategic

Human Resource Management professionals in promoting and

strategically implementing activities concerned with Corporate

Social Responsibility. It also provides antidotes and suggestions

for Human Resource professionals to practice CSR more

strategically benefiting the society as well as their organization

growth.

Key words: Corporate Social Responsibility, strategic human

resource practices, working environment, business ethic.

Introduction

Today's corporate business organizations are operating in global

market wherein they have built the foundation of nation's

economy. Organizations have developed technology,

employment opportunities, wealth creation, innovated products

and services that make life and work easier and comfortable.

However with all these development the most important asset of

organization – “Human Resource” became more convenient

oriented and practical, losing the spirit of social responsibility and

mishandling significant resources which symbolizes its

existence like environment, society, human resource, fuel,

energy, shareholder and investors. With increasing competition

there is an elevating urgency of implementing corporate social

responsibility.

Since past two decades organizations have gradually

transformed their relationship with the environment and to the

society which plays an integral role in their existence. An

increased realization of social responsibilities can be seen in the

Organizations' vision and mission statements, activities catering

social needs and business operations for their existence in the

business market, to sustain the terrific competition, to retain and

attract quality talent from the market and industry who will foster

a foundation of ethics and corporate social responsibilities

throughout the organization.

Literature Review

Different researchers have emphasized on the vital role of HR in

implementing CSR activities in the corporate organizations.

Coro Strandberg, Principal, Strandberg Consulting (2009) States

that Human resource manager are well positioned to play an

instrumental role in helping their organization achieve its goals of

becoming a socially and environmentally responsible firm – one

which reduces its negative and enhances its positive impacts on

society and the environment. Further, human resource (HR)

professionals in organizations that perceive successful corporate

social responsibility (CSR) as a key driver of their financial

performance can be influential in realizing on that objective.

Human resource professionals are highly tuned to considering

CSR from both, a value-based and a business-case perspective.

They work in a business function that readily identifies both, the

business benefits and the people benefits of fostering CSR

alignment and integration. He further explained 10 steps in which

CSR can be integrated in HR of the organization.

Suparn Sharma., Joity Sharma and Devi A (2009) explained




certain HR activities which will help CSR orientation in employees like providing training facilities, empowering managers by giving

them decision making authority, effectively measure and evaluate CSR activities.

(2004) Shafiq Lokhandwala, CEO of NuView Systems, Inc. describes, implementing several “green practices” can assist in

environmental waste reduction, while promoting and encouraging stewardship growth, better corporate ethics and long-lasting

practices that promote both personal and corporate accountability.

The above verdict of various researchers in different time frame entails that HR plays a key role in designing and implementing CSR in

the organization. They have mentioned various types of CSR activities to internalize CSR in HR and steps to do the same. But they have

not explained how Strategic HR differ from traditional HR in practicing CSR in the firm and their impact. Keeping this in mind this paper

describes six components of CSR programs comparing both.

Concept of Corporate Social Responsibility

Corporate Social Responsibility (CSR) means organizations' moral responsibility apart from their purpose of existence of wealth

creation. CSR has evolved itself from philanthropic activities to a higher purpose to cater even the most neglected social issues like

protecting the environment, developing employees and practicing business ethics towards society, shareholder, investor as well as

customers.

Strategic Human Resource Professionals' role in CSR

“Ethics really work best in an organization when they are woven into the fabric of the company. And that's where HR does its work.”

(Professor Linda K. Trevino March 2002) Human resource (HR) professionals have evolved themselves as strategic business partners.

Apart from managing talent they also manage employees' mind. They create a perception of the organization's values and identity for

the external environment and employees. They initiate business structure, sieve and nurture quality talent, inspire and motivate the

work force towards cultivating ethical business culture, promote and implement activities pertaining to CSR. Therefore society

respects them due to the perception created and their action. When employees see that their organization walks the talks their morale

gets a boost and they foster a culture of ethics and adopt corporate social responsibilities as individual duty.

Three types of organizational CSR implementing patterns through HR

• Organizations having their own Strategic CSR department which plough back certain percentage of their profits into CSR activities

as a mandatory process.

• Certain Private Ltd. organizations and Medium Enterprises with traditional HRD practice CSR occasionally to create public image.

• An organization having no formal CSR/HR department creates a committee with nearby villagers and together they cater their

service towards social needs.

Many organizations don't have CSR department but their HR may indulge in lots of CSR activities occasionally for instances on

environment day, Water day, education day, World's AIDS day, No Tobacco day etc.

Table 1: Strategic CSR departments' Vs. Traditional HR departments and organizations' with nearby village tie-up


CSR Program Elements

Organizations with own strategic CSR department

Organizations Traditional HR Department

implementing CSR

Organizati ons with tie-up in nearby villages for CSR

Organizer Strategic HRM

Professionals in CSR/ HR department

Traditional HR Department

A committee formed of HR/admin/PR and nearby villagers.

Purpose

Strategically address social issues which are

untapped and those which need attention.

**Mandatory to invest some percentage of profit

in CSR due to government or company policy.

Implement CSR occasionally for organization’s

reputation in market as well as for goodwill.It’s not mandatory to

implement CSR.

Want to Indulge in CSR at the same time don’t want to invest time in

planning it hence either give a certain amount to the village head who

will use it for village development.

Don’t compulsory implement CSR.



Strategies

Regular CSR Activities utilizing a blend of competencies of

employees and the organization

Strategies may differ with different

occasion and need of the organization.

Strategies may vary with the need of nearby

villagers, need of organization to exist in that particular area and sustainability of certain

projects.

Recipient

Strategically linked to Society, environment, stakeholder, investor,

customer and organization itself

Constituents of the Organization and external business

environment get less benefit as traditional

CSR often implements activities which are intangible

Nearby Villagers and the organization if it

was done for sustaining particular project.

Resources

Innovative and creative usage of employees skills,

cash, products and organization’s assets to

influence maximum impact

Products or cash donations and at times employee volunteerisms

Public Relation Officers and the village

committee members at times government subsidies.

CSR Management

CSR department which consist of Strategic HR professionals design,

implement and evaluate innovative and creative

CSR activities. Publish or upload their CSR

activities regularly in media and their websites.

Team managing CSR will approve

the occasional CSR activities then they

maintain a reporting system.

Cash/ product/ grants are provided to thesarpanchs’ who will implement it for the social cause or the

committee work together and maintain a reporting system to the

business owners.

Table 1 explains the comparison of CSR implementation between

strategic and traditional HR which shows strategic HR practices

CSR systematically and strategically with huge impact compared

to others.

Strategic HR can promote CSR in 8 steps:

Step 1 Design Vision, Mission, Values and develop a CSR

Strategy

Design the Vision, Mission and values of the organization

strategically which will promote clarity of purpose, business

ethics and CSR in the employees. This will inspire employees

with a sense of ROI (Return on Investment).

Once this is designed the company will be prepared to develop

the CSR strategy. According to the requirement of the firm HR

should develop their CSR strategy either to cultivate ethical

culture, employer branding, employee development etc.

Step 2 Values, rules, regulations and policies should be

formed

HR holds the ultimate authority in creating the organizational

culture for which they have to decide specific codes of conduct

supporting to develop and sustain it. Encouraging synergy

among the employees and an environment for healthy

competition and growth.

For instance, Tata Group's code of conduct consists of 5 aspects

like Integrity, Understanding, Excellence, Unity and

Responsibility.

Step 3 Strategic human resource planning and Selection

Workforce planning includes identifying necessary

competencies for the organization, comparing them with the

present human resource, evaluating the future competencies and

matching availability with the future need.

HR should conduct competency mapping, identify the gap and

train the existing employees and recruit the future workforce by

selecting the one's comprising competencies needed in future.

Step 4 Socialization, training and workforce development

In the socialization process employees should be given clarity of

company's vision, mission and core values. They should be

provided with past and future CSR reports and strategy so that

they become CSR oriented. Communicate how company

measures its ROI and CSR effectiveness.

Employees should be given regular CSR training like ways to save



energy, use of recycle material etc. Tudor India Ltd., a

manufacturer of batteries, have separate dispensary unit to

dispose their waste material containing lead as it is poisonous if

disposed openly. Technical training is given to their worker to

dispose lead waste in their dispensary. Employees should be

motivated through effective performance management and work

compensation to inspire them in undertaking CSR activities

voluntarily.

Step 5 Cultivate corporate culture and Dynamism

HR practitioners are responsible to bind the corporate culture

with the spirit of team work and adaptability towards change. As

successful CSR programs need team spirit and same purpose;

HR has to create a zestful culture in the firm encouraging those

employee behaviors which promote CSR activities.

Step 6 Employee Engagement activities and encourage

employee participation

Employee citizenship increases only when employees feel

belongingness to the firm. Strategic HR should increase

employee participation and design employee engagement

activities which will help to boost their morale. This will increase

employee ownership to the firm consequently increasing trust

and citizenship.

Step 7 Develop CSR Programs and communicate to

employees

HR is in a position to develop and implement strategic CSR

programs aligning business vision and mission within and

outside the organization.

Certain CSR activities implemented within the organizations

are:

• Clarity of employee role, job profile, principles, expectations

and purpose of organization's existence should be provided

on the day of employment.

• Promoting gender and human rights creating equal

opportunity

• Provides CSR Training and developing employees

• Flexi timing, special maternity/paternity leaves, encouraging

work-life balance and counselling sessions.

• Communicating concept of accountability towards

shareholders, investors, customers, society and

environment.

• Encourage to save resources like saving electricity, water and

fuel.

• Encourage tele-conferencing instead of out station official

meetings.

• Walk your Talk and Involve employees for all the CSR

activities.

• Use recycled papers, stationary and cans and quit polythene

bags.

Few strategic CSR programs implemented outside the

organization by the HR and employees are:

• Creating Employment of disabled persons

• Being transparent to shareholders, investors and clients.

• Address issues related to HIV/AIDS, general health,

environment, child labour and illiteracy, mentally challenged,

underfunded orphanages and old age homes, people who are

affected by natural calamities, animal protection, potable drinking

water and personal hygiene.

Most important thing is to communicate the designed CSR

program to the employees who can definitely increase the impact

of the program by volunteering. Every CSR program needs to be

communicated through regular review meetings, employee

newsletter, get together, sticking CSR program hoardings in

cafeteria and announcement in assembly hall etc.

Step 8 Evaluating and Measuring CSR activity and celebrate

success

CSR activities have high impact if it is measurable and tangible.

There are organizations who indulge in intangible CSR but their

efforts never bring ROI; for instance, philanthropic CSR never

counts until it is done on a higher note.

Strategic CSR measurement includes filling of feedback forms

from employees consisting statements like:

“Our CSR strategy is very effective and participative.”

“I feel proud to be associated with this firm due to our CSR

strategy”

“I believe that the company walks their talks always”

While measuring the CSR programs other inevitable factors are

the firm's turnover ratio, absenteeism, employees' health and

safety, positive work atmosphere, employee initiative and

participation.

After measuring CSR it should be reported to the higher

authorities and the board members to communicate the

integration of employees and HR to make the program

successful. Before preparing the CSR report strategic HR should

always consult those employees who were the important agents

for making this event effective; they should be asked regarding

the contents included in the report and presentation of certain

information however it should be published only after getting the

approval of board of directors as it is for the public release.

Antidotes and Remedies

Problem 1: CSR Budget transparency

Remedy: Develop CSR budget in relation to the net profit earned

by the organization, for instance certain percentage of the net

profit should be taken as CSR budget.

Problem 2: Walking the Talk

Remedy: Don't give up to temptations, if the situation seems to be

difficult limit to the company values. Create policies and

regulations which will bind the employee and the employer to

firm's mission and purpose.



Problem 3: Optimum utilization of workforce for all CSR program is not possible

Remedy: Get a competency analysis of the employees and mobilize them with activity of their interest where they will happily contribute

their time and skill hence their competency will be utilized adding one more feather to the firm's CSR.

Problem 4: Measuring CSR effectiveness and ROI internally and externally

Remedy: Internally CSR can be measured by employee turnover ratio, health of the employees, and impact of the program on the

recipient as well as the firm's profit after the program. It can be measured by carbon footprint rating if it was implemented to protect

environment from global warming. Externally can be measured as mentioned in

Table 2.

(Source: Businessworld, January 2003 [India's most respected companies])

Problem 5: Strategic planning for start-up and closure

Remedy: Start somewhere! CSR Training to the employee, equal opportunity in the organization, consult the employees for CSR

program, strategize according to the vision and mission and assign CSR work according to the competencies and once the CSR

program finishes appreciate employees and celebrate success.

Conclusion

Successful CSR programs are a result of effective design and implementation by enlightened HR professionals and dynamic

workforce. Strategic HR plays a key role in promoting CSR in every walk of their organizational activities. Attracting quality employees,

providing effective socialization, assigning job profile, designing structure and role, motivating them by CSR training and development,

involving them through employee engagement activities all sum up to their tangible role of uplifting employees to initiate and participate

in CSR.

Strategic HR helps the organization utilize CSR as a medium through which they can serve others and grow more; firms become

recipients of branding and attracting high performance employees to join them.

Though CSR is in its emerging state a survey says India stands among the top ten Asian countries that are paying an increasing

importance towards Corporate Social Responsibility (CSR).

The top ten companies in India's CSR rankings include Tata Consultancy Services, ITC Ltd, Infosys Technologies, Larsen and Toubro,

Reliance Industries, Oil and Natural Gas Corporation, Indian Oil Corporation, Bharti Airtel, Steel Authority of India Ltd and NMDC Ltd.

(www.Karmayog.com) Hence organizations are now educating themselves regarding the importance of CSR and strategic HR

professionals are putting in extra efforts to promote CSR for sustaining in the market.

Bibliography

1. Coro Strandberg (May 2009) The role of human resource management in corporate social responsibility issue brief and

roadmap www.corostrandberg.com

2. Carroll Lachnit (March 2002) Why ethics is HR's issue Accessed on 11/09/11

2011http://findarticles.com/p/articles/mi_m0FXS/is_3_81/ai_84148617/?tag=rbxcra.2.a.44

3. Nancy R. Lockwood (December 2004) Corporate social responsibility: HR's leadership role

http://findarticles.com/p/articles/mi_m3495/is_12_49/ai_n8583189/ accessed on 11/09/11

4. Suparn Sharma (Phd), Joity Sharma (Phd), Arti Devi (January 2009) Corporate social responsibility: the key Role of human

resource management

5. http://www.saycocorporativo.com/saycoUK/BIJ/journal/Vol2No1/article9.pdf accessed on 15/09/11

6. http://www.karmayog.org/ csr500companies/ accessed on 19/09/11

No. of timeschosen by

respondents

Belief intransparency

Belief incustomer

satisfaction

Globalcompetitiveness

Overall Quality

Ethics

Track record ofcompany

Consistentcorporate

performance

Top managementleadership

Socialresponsiveness

Dynamism

Returns to shareholders

Depth of talent

Environmentalconsciousness

Speed of response to

change

Value forstakeholders

Quality ofproducts/services

provided

Ability to attracttalent

Continuousinnovation

Ability to copewith recession

75

A Conceptual perspective on role and relevance of Human Resource Management in sustaining and refurbishing Corporate Governance –A renovative approach

Ms. Vijit Chaturvedi : Assistant Professor, Lingaya's University, Department of Business Administration, Faridabad

E-mail: [email protected]

Abstract

Corporate governance is the set of processes, customs, policies,

laws, and institutions affecting the way a corporation (or

company) is directed, administered or controlled. Corporate

governance also includes the relationships among the many

stakeholders involved and the goals for which the corporation is

governed. The principal stakeholders are the shareholders, the

board of directors, employees, customers, creditors, suppliers,

and the community at large.

Apart from various dimensions of designing effective corporate

governance the role of HR is most prominent. Since the human

resource is the most significant component in any organization

and any policy or process has to go through his efforts, intellect,

capability and potential it is important to see that how the

regulations or rules framed in governance are going to best utilize

the human potential and to what level the scope of generating

equity, adopting fair and honest measure for employees

effectiveness are been followed by organization.

Objectives of the paper

1. To understand the HR perspective of corporate Governance

2. To understand the role of different policy ,procedure framed

in corporate governance and its impact on effective HRM

3. To understand benefits incurred wit effective designing of HR

perspective in governance.

The paper will focus on ways and means by which planned

inclusion of HR perspective in governance helps in effective

employee satisfaction, retention and enhanced commitment and

involvement in job and benefits incurred by this to organization.

Keywords : Corporate Governance, Human Resource

Management, HR policies, Organization effectiveness

Introduction

Corporate Governance is the method by which a corporation is

directed, administered, or controlled. Corporate governance

includes the laws and customs affecting that direction, as well as

the goals for which the corporation is governed. The principal

participants are the share-holders, management and the board of

directors. Other participants include regulators, employees,

suppliers, partners, customers, constituents (for elected bodies)

and the general community The term "corporate governance"

refers to the policies and procedures a company uses to run the

organization and defines the responsibility of each individual

within the company. Corporate governance is used to monitor

whether outcomes are in accordance with plans; and to motivate

the organization to be more fully informed in order to maintain or

alter organizational activity. Primarily, though, corporate

governance is the mechanism via which individuals are

motivated to align their actual behaviours with the overall

corporate good (i.e., maximum aggregate value generated by the

organization and shared fairly amongst all participants).

The importance of HRM in gaining competitive advantage has

been long recognized (Tichy, Fombrum, and Devana, 1982;

Schuler and Jackson, 1987). Such importance is enhanced to

the extent that HR practices are successful in developing

organizational capabilities that enable an organization to adapt to

a changing environment (Youndt, Snell, Dean, and Lepak, 1996).

These practices provide the infrastructure necessary for the

organization to create value (Becker, Huselid, Pickus, and Spratt,

1997). Some authors argue that the HR function must be involved

not only in strategy implementation but also, more importantly, in

strategy formulation (Tichy and Devana, 1982; Schuler, 1990),

create employee manuals and standards.

However, it appears that focusing HR's involvement in strategy

formulation and its implementation is not enough for the

organization to create value and sustain its competitive

advantage. Apparently, it cannot be assumed unequivocally that

managers possess the vision and managerial skills to lead the

even as they discharge their duties with discipline and without

external control, still taking into consideration the concerns of the

different stakeholders (Collis and Montgomery, 1998). There is,

thus, a need to take a step backward and look at corporate

governance.

The factors that gave rise to Corporate Governance are

• Business corporations are no longer small in size.

• Multinational as their boundaries are not restricted

• Resources tapped from large number of investors across

the world.



• Companies are diverse, varied commanding large

resources, both financial and human.

• Corporations Answerable not only to Government,

suppliers' lenders or their shareholders but also to the public

at large (Social Responsibility)

The major objectives of corporate governance are

• To fulfill the long term aims for which the company was

incorporated

• To ensure shareholder protection

• To ensure employee protection

• To ensure that responsibilities to the society and environment

are carried out

• To ensure compliance with laws and regulations

• To ensure correct presentation of finances of the company

Reasons driving need of Corporate Governance in India

In today's globalized economy, corporate play a major role in

shaping quality of life of the society as a whole. According to

Nobel Laureate, Amartya Sen, "Market forces alone are not

sufficient for equitable distribution and some sort of intervention

is required, be it political or from business houses, towards

society." Companies should be responsible to the society for their

activities and owe to the environment in which they operate.

Consequently, environmental protection, transparency among

stake-holders, education, health, employee welfare activities and

compliance with the legal requirements, has gained importance

for corporate world-wide. A company should take a balanced

view of the components of corporate social responsibility and

implement the strategies in coherence with the vision, mission

and values of the company. Corporate Governance is the method

by which a corporation is directed, administered, or controlled.

Corporate governance includes the laws and customs affecting

that direction, as well as the goals for which the corporation is

governed. The principal participants are the share-holders,

management and the board of directors. Other participants

include regulators, employees, suppliers, partners, customers,

constituents (for elected bodies) and the general community

• India was previously a closed system of capital market. But

today it is transparent and inter connected globally.

• Supply of debt capital was almost from the public sector

• Significant share capital held by domestic FIs who played a

passive role

• Consequently promoters with minority shareholding have

been able to influence governance structure.

• Major economic reforms from 1991

• Establishment of SEBI

• Increase in amount of foreign investment

• Indian shares were sold to foreign institutional investors

• Indian companies began to face competition from foreign

firms.

• Lowering of trade barriers

• Demand for more disclosures transparency and

accountability and performance standards from investors and

lenders.

• Problem of dominant shareholders and limited protection for

minority shareholders.

• Issues of insider trading

Need of Focusing on role of HR in Corporate Governance

Historically, boards have not seen HR as essential players in

corporate governance, questioning their overall value to the

organization. The problem is exacerbated by HR executives who

see themselves as HR people first and business people second.

HR needs to ensure that it understands the business in its entirety

and its place within that holistic model, according to Anthony R.N

Govind Raman : “HR unfortunately still suffers from a reputation

of being more of a cost centre and more of the softer area of the

business,” she says. If a HR specialist is to broaden the

opportunities they have in their career, it is imperative they pursue

other forms of education and training in business and corporate

governance, such as those offered by the Australian Institute of

Company Directors or Chartered Secretaries Australia.

Delaney, J. & Huselid, M. (1996), also believes HR needs to be

aware of the business strategies that a company has in place and

develop human resource strategies that are aligned to the

business strategies. HR sets about implementing a number of

best practices, without actually thinking through the key people or

organizational issues that need to be focused on to deliver the

strategy. HR sometimes takes a process perspective rather than a

strategic perspective, but if HR is going to help when it comes to

governance it needs to develop a people strategy that's aligned to

the business strategy.”

Functions of Human Resource Committee in Corporate

Governance

The Human Resources Committee is created by the Board of

Directors of the Company to :

Oversee the Company's compensation and benefits policies

generally; evaluate executive officer performance and review the

Company's management succession plan; oversee and set

compensation for the Company's executive officers; review and

discuss the Company's compensation discussion and analysis

(CD&A) disclosure with management and provide a

recommendation to the Board regarding its inclusion in the

Company's annual proxy statement; and prepare its report that

the Securities and Exchange Commission rules require to be

included in the Company's annual proxy statement In addition to

any other responsibilities which may be assigned from time to

time by the Board, the Human Resources Committee is



77

responsible for the following matters.

a. Compensation Policies

The Human Resources Committee shall review and approve the

Company's compensation and benefits policies generally

(subject, if applicable, to shareholder ratification), including

reviewing and approving any incentive-compensation plans and

equity-based plans of the Company. In reviewing such

compensation and benefits policies, the Human Resources

Committee may consider the recruitment, development,

promotion, retention and compensation of executive officers and

other employees of the Company and any other factors that it

deems appropriate. The Human Resources Committee shall

report the results of such review and any action it takes with

respect to the Company's compensation and benefits policies to

the Board. In addition to compensation and benefits policies, the

Committee may also consider and periodically review the

Company's policies on diversity and values and such issues

affecting employee morale as the Committee deems appropriate

b. Executive Compensation

The Human Resources Committee shall review and approve for

each employee who is an officer of the Company for purposes of

Section 16 of the Securities Exchange Act of 1934 his or her (i)

annual base salary level, (ii) annual incentive compensation, (iii)

long-term incentive compensation, (iv) employment, severance

and change-in-control agreements, if any, and (v) any other

compensation, ongoing perquisites or special benefit items. In so

reviewing and approving executive compensation, the Human

Resources Committee shall, among other things:

• Identify corporate goals and objectives relevant to executive

compensation

• Evaluate each executive's performance in light of such goals

and objectives and set each executive's compensation based

on such evaluation and such other factors as the Human

Resources Committee deems appropriate and in the best

interests of the Company (including the cost to the Company

of such compensation)

• Determine any long-term incentive component of each

executive's compensation based on awards given to such

executive in past years, the Company's performance,

shareholder return and the value of similar incentive awards

relative to such targets at comparable companies and such

other factors as the Human Resources Committee deems

appropriate and in the best interests of the Company

(including the cost to the Company of such compensation).

• The Human Resources Committee may delegate to one or

more officers of the Company the authority to make grants and

awards of stock rights or options to any non-Section 16 officer

of the Company under such of the Company's incentive-co.

c. Management Succession

The Human Resources Committee shall, in consultation with the

Company's CEO, periodically review the Company's

management succession planning including policies for CEO

selection and succession in the event of the incapacitation,

retirement or removal of the CEO, and evaluations of, and

development plans for, any potential successors to the CEO.

d. Human Resources Activities

The Human Resources Committee will periodically review the

Company's practices for supporting diversity in the workplace.

The Human Resources Committee may review, as appropriate,

the Company value statements and programs in support of

employee morale and satisfaction.

e. Disclosure

The Human Resources Committee shall review and discuss the

Company's CD&A with management and provide a

recommendation to the Board regarding its inclusion in the

Company's annual proxy statement. The Human Resources

Committee shall prepare its report on executive compensation

that the Securities and Exchange Commission rules require to be

included in the Company's annual proxy statement.

Other role of Human Resources in Corporate Governance

• Reviews and recommends to the Board for approval the

adequacy and form of compensation of Board members to

ensure that their compensation realistically reflects their risks

and responsibilities

• Reviews and recommends to the Board for approval the

overall compensation strategy and yearly compensation of

executive management

• Recommends to the Board for approval grants under the

Company's Stock Option Plan

• If so requested by the Board, assesses the efficiency of the

Board and of Board Committees

• Recommends new candidates for the position of director to

the Board, as appropriate

Roles of HR in Corporate Governance: A Human resource

perspective

• Corporate governance typically creates the overarching

policies and procedures for an organization. Each individual

department or division may be responsible for taking this

governance and incorporating it into its internal policies.

Human resources will influence corporate governance

because both federal and state laws have strict employment

requirements.

• Business owners, board members, directors and managers

need to protect all stakeholders in the organization, including



78

employees and customers, but especially those stakeholders

who hold a financial interest in the company. Human

resources policies in corporate governance can also set

liability limits regarding employee issues, require arbitration

rather than formal lawsuits and create conflict resolution

procedures.

• Human resource policies---such as establishing acceptable

behavioral standards, developing a code of ethics, using a

performance review process and rewarding employees for

reducing waste or inefficiencies---can help companies limit or

prohibit negative employee situations. This can also improve

overall employee expectations by putting these policies into

the organization's corporate governance

• The ASX Corporate Governance Guidelines deal implicitly and

explicitly with a number of HR issues, such as a transparent

and thorough appointment process for senior executives,

executive remuneration structure and public reporting of

reward policies. John Egan believes that HR has a “terrific

opportunity” to get closer to boards with these guidelines.

• HR can play an important role at the organizational level. As

boards are charged with assessing the strategy for an

organization, and with monitoring management's delivery of

that strategy, they need to recognize that the main drivers of

such strategies are the people involved.

• HR should also be able to create a 'success profile' for the NED

role, which includes the core competency set, organizational

values (such as integrity) which help guide selection and

assessment. The department could manage the external

search and monitor performance thereafter, by adapting the

multi-rater process for use at board level, to assess

performance against the NED profile and board. And the

senior

• HR executive could also act as a 'confidante' to the CEO and

Chairman on these issues, and serve as advisor and

confidential sounding board HR could assess the needs of the

board, looking at the core capabilities required in Non-

Executive Directors (NEDs), based on the nature of the

business and its strategies, to ensure that both the

geographical and cultural representation of the business is

reflected in board composition

• HR certainly has become more involved in the selection of

board members. Their focus for the future must be not just on

the competence of the members, but those potential

members' relational networks

• Many firms have gone to evaluating boards and board

members. Many have begun requiring or subsidizing board

members to receive training. Many have moved to having

chances for the boards to meet without managers present.

Again, the competencies of top HR executives such as team

building, group processes, selection, training, performance

management, etc. are all critical to an effectively functioning

board. Consequently, HR's role must expand to include these

activities at the board, not just the organization level.

• They must expand the focus of relevant organizational actors

beyond internal executives to include auditors, consultants,

investment bankers, and board members, and be on constant

vigil to spot potential conflicts of interest. Most importantly, at

the first hint of dishonest behaviour, HR executives must have

the confidence and courage to explicitly and specifically put it

on the table for top managers and/or the board to see

HR challenges and suggested remedies in Corporate

Governance

HR is often the victim of a vicious cycle in Corporate Governance

because it lacks business perspective; HR lacks credibility within

the organization. But without credibility, HR often has trouble

getting a foot in the door of business opportunities.

One way to establish your credibility is through your CEO and

CFO, who typically sit on the board as well. They can talk up HR at

the board level But the first step for HR is to establish credibility

with the CEO and CFO,. HR needs to present people solutions with

the business primarily in mind, as opposed to solutions that focus

on functional excellence. Until HR can establish that credibility

with the CEO, the CFO and the rest of the executive, then the

invitation to play a value-adding role at the governance level will

not be forthcoming The focus of HR should be on developing a

positive and ethics based culture in organization so that a

direction for exhibiting functions could be properly made. HR can

play significant role in developing the following -

Equitable Treatment of Share-holders

The CEO should respect the rights of share-holders and help

share-holders to exercise those rights. He can help share-holders

exercise their rights by effectively communicating information

that is understandable and accessible and encouraging share-

holders to participate in general meetings.

Role & Responsibilities of the Board

The board needs a range of skills and understanding - to be able

to deal with various business issues and have the ability to review

and challenge management performance. It needs to be of

sufficient size and have an appropriate level of commitment to

fulfill its responsibilities and duties. There are issues about the

appropriate mix of executive and non-executive directors. The

key roles of Chairperson and CEO should not be shared.

Integrity & Ethical Behaviour

The CEO should develop a code of conduct for their directors and

executives that promote ethical and responsible decision-

making. It is important to understand, though, that systemic



reliance on integrity and ethics is bound to eventual failure.

Disclosure & Transparency

The CEO should be ready to clarify the company's position to the

share-holders and the board and management to provide share-

holders with a level of accountability. They should also implement

procedures to independently verify and safe-guard the integrity of

the company's financial reporting. Disclosure of material matters

concerning the organization should be timely and balanced to

ensure that all investors have access to clear, factual information.

A Human perspective of CEO role in Corporate Governance

To constantly improve what is essential to human progress by

mastering science and technology

Constantly Improve

The CEO must take the oath "If you can't do it better, why do it...

and this under-scores our drive to become an ever better and

bigger company.”

Essential to Human Progress

The products that are made by the company to find their way into

products that provides people the world over with improved life-

styles. One must understand and take pride in this. The company

must also use this concept to further connect with the external

markets and its serve. When the company thinks in terms of the

markets it serve, the company becomes more outside-in focused

and the company can better seek growth opportunities.

Mastering Science & Technology

The company must put the science and technology to work to

create solutions for the customers and for society.

Integrity

The Company believes that its promise is its most vital product -

'our word is our bond'. The relationships that are critical to the

company's success depend entirely on maintaining the highest

ethical and moral standards around the world. As a vital measure

of integrity, the company will ensure the health and safety of its

communities, and protect the environment in all it does.

Developing Respect for People

The company believes in the inherent worth of people and will

honor its relationships with those who let it be part of their world.

The company's stake-holders are the engines of value creation;

their imagination, determination, and dedication are essential to

growth. The company will work to celebrate and reward the

unique backgrounds, view-points, skills, and talents of everyone.

79

Feeling of Unity

The CEO must think like “We are one company, one team." The

company believes that succeeding as one enterprise is as

impor tant as succeeding independently. Balancing

empowerment and interdependence makes the company strong.

Outside-in Focus

The company believes that growth comes from looking at

opportunity through the eyes of customers and all those it serves.

Taking an "outside-in" view ensures that the company's efforts

are always relevant and that the company's unique talents are

applied to "real world" opportunities. The company will see

through the eyes of those whose lives the company affects,

identifying unmet needs and producing innovative and lasting

solutions. The company will bring to this task all of its experience

and knowledge as the unique individuals the company are.

Emerging role of human Resource in Effective Corporate

governance

• Ensure group-wide adherence and commitment to the

principles and values of Pick'n' Pay.

• Foster a corporate culture that promotes ethical practices,

encourages individual integrity, and fulfils social and

environmental responsibility.

• Maintain a positive and ethical work climate that is conducive

to attracting, retaining and motivating top-quality employees.

• Develop and recommend to the Board a long-term strategy

and vision for the Group.

• Ensure that the day-to-day business affairs of the Group are

appropriately managed by the MDs, and that proper systems

and controls are in place for effective risk management of the

Group.

• Ensure, in co-operation with the Board, that there is an

effective succession plan for the CEO

Conclusion

From the above discussions made, it is felt that, corporate

governance is about commitment to values and about ethical

business conduct. This includes company in culture, policies,

timely and accurate disclosure of financial information. Hence

the corporate sector needs resource persons to act as

independent director on who shoulder laid the responsibility to

take the company in the right path. The role of human resource in

terms of its contributions, responsibilities and function as

direction setter should be made clear. The significance of HR can

be made more prominent by correlating its areas and goals with

that of business at large thus the benefits will also be quantifiable

and the role HR plays in contributing towards making Corporate

Governance in its true sense also becomes quite prominent.



80

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81

Corporate Governance and Board Composition Diversities in Indian Companies: An Analytical Study

Ms. Heena Bharadia : Research Scholar, Ph.D- Economics, Department of Economics, Saurashtra University, Rajkot. E-mail: [email protected]

Mr. Bhavik Panchasara : Assistant Professor, Accounting and Finance, Faculty of Management, Marwadi Education Foundation's Group of Institutions,

Rajkot. E-mail: [email protected]

Abstract

The board of directors is one of a number of internal governance

mechanisms that are intended to ensure that the interests of

shareholders and managers are closely aligned, and to discipline

or remove ineffective management teams. While board diversity

has been a growing area of research in recent years, most

empirical research on this topic has been restricted the data. The

generalisability of such findings may not extend across national

boundaries due to different regulatory and economic

environments, cultural differences, the size of capital markets

and the effectiveness of governance mechanisms. Consequently,

the importance and value of various governance structures,

including board diversity should be separately examined in each

country, and the influential factors investigated.

This study reports on the diversity of the board of 2,761 BSE

Listed Companies who have filed information. India has one of

the most developed stock markets in the Asia-Pacific region;

there is an increasing demand to evaluate the corporate

governance practices of Indian companies, including the

composition of boards. Accordingly, this research provides a

timely review of the state of corporate governance in India so far

as board composition is concerned.

Key words : Corporate Governance, Board of Directors, Diversity,

Independent Directors

Introduction

The scope and significance of corporate governance in India

increased sizably in the recent period, particularly following the

financial sector reforms. As Indian corporate are finding new

space in domestic and global markets for business growth, their

interaction with the financial markets and investing community

too witnessed significant surge. In this process, corporate

governance came as an effective instrument for companies to

communicate with the various types of stakeholders in general

and investors in particular.

What began as an industry initiative of CII, corporate governance

today became an essential part of the culture that defines better

run companies and those held in esteem by the investors and

stakeholders. As the rigor of the regulation intensified,

governance standards began to be codified and formed an

important part of the evaluation and assessment process. Clause

49 of the Listing Agreement of the Stock Exchanges is the key

instrument that drives compliance of the corporate governance

standards and practices by companies.

Corporate Governance and Board Structure

The part of any organization that has the most control over

governance is the board of directors and the board is the 'soul' of

a company – the foundation of all business decisions and the

origin of corporate culture of the whole entity. The essence or

attributes of good corporate governance include ethics,

managerial discipline, independence, protection of shareholders'

rights, fairness, transparency, board responsibilities,

accountability, and social awareness. One major corporate

governance principle of OECD is to “focus on the company rather

than on one group of people.” Most corporate governance rating

agencies use some or most of these attributes for measuring the

corporate governance scores on a corporate level. The role of

independent directors has been well documented with particular

reference to agency theory. For example, Jensen and Meckling

(1976), Fama (1980) and Williamson (1990), consider that a firm

is a nexus of contracts between various parties, and Tirole (1988,

16) argues that the firm fulfils three distinct roles, technological,

operational, and contractual. How these arrangements are

introduced, monitored and evaluated are indirectly related to the

mode of corporate governance adopted by the firm and with this,

there has been much attention on the separation of ownership

and control including the role of boards (such as Fama and

Jensen, 1983; and Morch, Shleifer and Vishny, 1988). Other

countries such as the UK and Australia have introduced

compliance codes rather than mandatory requirements. India's

2006 regulations are mandatory requiring a certain proportion of

independent directors on the board depending on the

independence of the chair. While regulation sets the minimum

proportion of independent directors, the proportion differs

markedly and so the determinant of the proportion of outsiders,

even if impacted by regulation, is not absolutely clear from the

literature to date. Studies from other countries lend some support

to the idea of country specific factors as their results differ from



• Total 16,409 individuals are on the boards of 2,761

companies of which only 882 (5.4%) are women. Out of these

16,409 individuals, profiles of 14,537 individuals have been

filed till August 31, 2011.

• These 14,537 individuals occupy a total of 20,170

directorship positions in 3,258 companies listed at national-

level stock exchanges and 417 companies listed at regional

stock exchanges.

• 11,520 hold only 1 directorship each

• 6,263 hold only independent directorship positions

• Only 791 are women (5.4%), occupying a total of 958

directorships. There is at least one woman on the board of 756

BSE-listed companies

• 328 individuals holding 350 directorship positions are foreign

nationals

• 347 hold 5 or more than 5 directorships in listed companies,

with 2 persons holding 14 directorships

• Of 2,761 companies, 893 (32.3%) have a Non-Executive

Chairman, of whom 409 (14.8%) are Promoter-Directors

• 392 directors are from Civil Services.

• Of the 14,537 individuals, 1,403 are on the board of 3,623

foreign based companies.

Distributing the summary by Age of Directors

Analysis of directors of all companies based on their age is as

under :

• The average age of the directors is 56 years.

• The youngest director is aged 19 years and the oldest is 99

years. 60 individuals are below the age of 25 years and 2,376

individuals are above 70 years.

• 60 individuals who are below 25 years hold 10 independent

directorship positions.

• 2,374 individuals who are above 70 years hold 1,699

independent directorship positions.

Table 1 : Age wise distribution of Directors

those of the US, for the determinants of either board size or board

composition (refer in particular Arthur, 2001; Prevost et al, 2002,

and Mak and Li, 1995 for Australia, New Zealand and Singapore,

respectively, and Hillier and McGoglan, 2006; Lasfer, 2006; and

Peasnell, et al, 2003 using UK data). Another factor

characterizing the Indian corporate environment is the

entrepreneurial nature of the market and of its development. This

fact, in combination with its relative newness of the market, has

meant that many of original entrepreneurs still hold significant

stakes in the firms that they established, a factor that could

impact the size and structure of the board. Boon et al (2007)

study the development of companies from IPO to maturity and

find that board size and independence increase with firm size and

diversification. The higher the proportion of entrepreneur

ownership may imply tighter control, and closer alignment of

interests, in line with Jensen and Meckling (1976) and Hermalin

and Weisbach (1998) for example, and hence smaller boards

with lower proportions of independent directors. However, it

could also be argued that the impact of the increasing complexity

and growth of these companies outweighs the role and control of

the entrepreneur as suggested by Boon et al (2007), and many of

the empirical studies reported in Guest (1998). Whether the ideas

developed from previous studies discussed above are relevant in

the Indian market is also not clear as most to date have used data

from developed markets.

Methodology

This study is analytical in nature. Researcher has selected total

31,941 listed/ unlisted companies/ organizations. This is an

attempt of researchers to study the diversity of board of all these

companies by using different parameters. Based on these

parameters, directors are first classified in two categories, all

directors and only independent directors. Then further directors

of both categories are divided in directors of all companies,

SENSEX companies, BSE 100 companies, BSE 500 companies

and PSUs. Further, directors are also classified on the basis of

gender, educational qualification, age, tenure of directors and

number of directors in board of companies. Thus, this research is

a humble attempt of researchers to analyze the diversities of

board of directors of listed/ unlisted Indian Companies.

Analysis of Board Composition Diversities for all directors

The 14,520 individuals are also on the boards of 29,230 unlisted

companies/organisations. In all, as such, they occupy a total of

62,236 directorship positions in 31,968 listed/unlisted

companies/organisations.

Analysis of All Directors of All Companies : (Based on 2,761

BSE-listed companies who have filed information Status as on

August 31, 2011)



25 & Below

26 - 35

36 - 45

46 - 60

61 - 69

70 - 80

81 - 90

Above 90

Not Known

TOTAL

60

752

2,290

6,082

3,046

1,967

390

17

30

14,634

10

256

957

3,181

2,658

3,137

379

18

9

9,605

00.41

05.14

15.65

41.56

20.81

13.44

02.67

00.12

00.20

100.00

AgeNumber of Individuals

Number of ID Positions Held

Percentage(%)

83

Distribution Summary by Tenure of Directors

Table 2: Tenure wise distribution of Directors

• Tenure of 14,513 (79%) Directorship Positions is more than 3 years.

• Tenure of 10,392 (56.60%) Directorship Positions is more than 6 years.

• Tenure of 7,560 (41%) Directorship Positions is more than 9 years; and

• Tenure of 5,790 (31.53%) Directorship Positions is more than 12 years. Maximum tenure is 71 years.

Distribution Summary by Education of Directors

• 57% of ID positions are held by post-graduates (and above). Conversely, 43% of ID positions are held by graduates or below.

• 2,162 are Management Graduates (of which 235 are IIM graduates)

• 1,796 are Chartered Accountants, 449 are Company Secretaries and 269 are Cost Accountants

• 1,367 are Lawyers

• 209 are Medical Doctors

• 3,094 are Engineers

Table 3: Educational Qualification wise distribution of Directors

TenureNumber of

DirectorshipsPercentage (%)

1,014

2,781

4,121

2,832

1,770

,7905

50

18,358

05.52

15.15

22.45

15.43

09.64

31.54

00.27

100.00

Below 1 Year

1 – 3 Years

4 – 6 Years

7 – 9 years

12 Years

Above 12 Years

Not Known

Total

EducationalQualifications

Number ofIndividuals

Percentage (%)

Number of Directorship

Positions Held

Doctorates

Post Graduates

Technical Graduates

General Graduates

Undergraduates

School Level

Not Known

TOTAL

757

6,886

1,869

4,201

173

470

197

14,553

05.20

47.32

12.84

28.87

01.19

03.23

01.35

100.00

1,042

9,319

2,298

4,773

198

525

203

18,358

05.68

50.76

12.52

26.00

01.08

02.86

01.10

100.00

Percentage (%)



84

Distribution Summary by Number of Directors

• There are a total of 18,358 directorship positions on these

2,761 companies, giving an average of 6.7 directors per

company.

• The maximum number of directors in any company is 20

(Jaiprakash Associates Ltd.)

Table 4: Total Number wise distribution of Directors

Distribution Summary by Independent Directors

• A total of 7,399 individuals occupy a total of 9,605

independent directorship positions on 2,723 BSE-listed

companies.

• These 7,399 individuals also occupy 898 non-independent

directorship positions on 2,723 BSE-listed companies.

• There are 38 companies where the status of its directors is not

known.

• 31 companies do not have even 1 independent director.

• 19 companies have only independent directors

• Of these 7,399 individuals, 5,375 hold only 1 independent

directorship each in any of the 2,723 BSE-listed companies.

• Of these 7,399 individuals, 6,269 hold only independent

directorship positions in any of the 2,723 BSE-listed

companies

• Of these 7,399 individuals, only 228 are women (3.1%),

occupying a total of 292 independent directorship positions in

247 BSE-listed companies

• Of these 7,399 individuals, 349 individuals are from Civil

Services occupying 560 independent directorship positions

• Of these 7,399 individuals, 301 hold 5 or more than 5

directorships in listed companies (BSE and non-BSE), with 2

persons holding 14 directorships. Of these, 61 individuals

hold more than 8 directorships in listed companies

• 142 hold 5 or more than 5 independent directorships in listed

companies (BSE and non-BSE), with 3 persons holding 13

independent directorships.

• 148 individuals holding 161 independent directorship

positions are foreign nationals.

• T h e m a x i m u m n u m b e r o f a l l d i r e c t o r s h i p s

(listed/unlisted/foreign companies) held by any individual is

104

• Of the 7,399 individuals, 496 are on the board of 1,518 foreign

based companies.

• The 7,399 individuals are also on the boards of 14,587

unlisted companies/organizations. In all, as such, they

occupy a total of 28,086 directorship positions in 16,922

listed/unlisted companies/organizations.

Distribution Summary by the Number of Independent Directors

• There are a total of 9,605 independent directorship positions

on these 2,723 companies, giving an average of 3.5

independent directors per company.

• The maximum number of independent directors in any

company is 10 (Beml Ltd. and Dhampur Sugar Mills Ltd. and

Hotel Leelaventure Ltd. and Ifci Ltd. and Jaypee Infratech Ltd.

and Jsw Ispat Steel Ltd. and Ptc India Ltd. and Salzer

Electronics Ltd. and Shipping Corp.of India Ltd.)

Table 5 : Total Number wise distribution of Independent

Directors

Distribution Summary by Age of Independent Directors

• The average age of the directors is 59 years

• The youngest director is aged 19 years and the oldest is 98

years. 10 individuals are below the age of 25 years and 1,699

individuals are above 70 years.

• 10 individuals who are below 25 years hold 10 independent

directorship positions and 1,699 individuals who are above 70

years hold 1,699 independent directorship positions.

Number ofDirectors

Number ofCompanies

Percentage(%)

Below 5 361 13

5-10 2,044 74

11-15 329 12

Above 15 26

01

TOTAL 2,760 100

Number of IndependentDirectors

Below 3 564 21

3 - 5 1,761 65

6 - 10 368 14

Above 10 00 00

TOTAL 2,662 100

Number ofCompanies

Percentage(%)



Table 6 : Age wise distribution of Independent Directors

Distribution Summary by Tenure of Independent Directors

• Tenure of 7,250 Independent Directorship Positions is more than 3 years; 4,569 more than 6 years;

2,720 more than 9 years and 1,697 more than 12 years. Maximum tenure is 55 years.

Table 7: Tenure wise distribution of Independent Directors

85

AgeNumber ofIndividuals

Number of IDPositions Held

Percentage(%)

25 and Below

26 - 35

36 - 45

46 - 60

61- 69

70 - 80

81- 90

Above 90

Not Known

TOTAL

10

251

872

2,644

1,913

1,405

282

12

10

7,399

9

253

952

3,177

2,657

2,146

383

18

10

9,605

00.13

03.39

11.79

35.74

25.86

18.99

03.81

00.16

00.13

100.00

Percentage(%)

TenureNumber of

Directorships

Below 1 Year

1- 3 Years

4 - 6 Years

7 - 9 years

10 - 12 Years

Above 12 Years

Not Known

Total

2,697

605

1,734

1,849

1,017

1,697

6

9,605

05.52

15.15

22.45

15.43

09.64

31.54

00.27

100.00



86

Distribution Summary by Education of Independent Directors

Table 8: Tenure wise distribution of Independent Directors

• 65% of ID positions are held by post-graduates (and above). Conversely, 35% of ID positions are held by graduates or below.

• 966 are Management Graduates (of which 129 are IIM graduates)

• 1,156 are Chartered Accountants, 265 are Company Secretaries and 146 are Cost Accountants

• 968 are Lawyers

• 136 are Medical Doctors

• 1,406 are Engineers

Independent Directors in PSUs

• 29 out of 69 PSUs are non-compliant with reference to number of Independent Directors

• 270 individuals occupy a total of 295 ID positions in these 69 PSUs

Scope of the Study

This study is limited to analysis of board patterns and diversities from different basis only. There is a vast scope for the further research

as this area needs a lot work. The same research can be enriched by using the parametric tests or statistical tools. Further, comparison

with board patterns and diversities of other developed countries is also possible.

Limitations of the Study

This study is limited to analysis of board patterns and diversities from different basis only. So it is based on secondary data collected

from the websites of stock exchanges, regulatory authorities and companies up to August 31, 2011, as per requirement. Again,

changes in board pattern after above mentioned date or the information which is not provided by the companies till above mentioned

date are not considered here.

Discussion and Conclusion

This report reveals that board diversities of Indian companies are surprisingly heterogeneous. Entry of young directors is limited but has

considerable share, where as gender wise possess a vast difference. Female directors are very few, which requires more attention as

maximum of them are successful in corporate world. Another major aspect is of interlocking of board of directors. Means as a director,

an individual is sitting in the boards of many companies. Further, based on educational qualification, tenure and number of directors,

various diversities are noted in the boards of Indian companies. Further, the study we can continue with various other basis, i.e., BSE

listed companies, NSE listed companies, PSU's etc.

Number ofIndividuals

Percentage(%)

Percentage(%)

08.05

56.61

12.68

18.75

00.68

01.92

01.32

100.00

Number of

Directorship

Positions Held

773

5,437

1,218

1,801

65

184

127

9,605

07.43

53.10

12.84

21.91

00.76

02.30

01.66

100.00

550

3,929

950

1,621

56

170

123

7,399

EducatQualifications

ional

Doctorates

Post Graduates

Technical Graduates

General Graduates

Undergraduates

School Level

Not Known

TOTAL



87

Bibliography

1. Adams, R.B., Ferreira, D., 2007. A theory of friendly boards. Journal of Finance 62, 217–250.

2. Agrawal, A., Knoeber, C.R., 1996. Firm performance and mechanisms to control agency problems between managers and

shareholders. The Journal of Financial and Quantitative Analysis 31, 377–397.

3. Boone, A.L., Field, L.C., Karpoff, J.M., Raheja, C.G., 2007. The determinants of corporate board size and composition: an

empirical analysis. Journal of Financial Economics 85,66–101.

4. Coles, J.L., Daniel, N.D., Daniel, N.D., Naveen, L., 2008. Boards: does one size fit all? Journal of Financial Economics 87,

329–356.

5. Financial Reporting Council (FRC), 2006. Combined Code on Corporate Governance. FRC,London.

6. Gillan, S., Hartzell, J., Starks, L., 2004. Explaining corporate governance: boards, bylaws, and charter provisions. Unpublished

working paper, University of Texas.

7. Grant, Gavin, et al. (2007) “Beyond The Numbers - Corporate Governance In India,” Deutsche Securities Asia Limited, 15 October.

8. Prevost, A.K., Rao, R.P., Hossain, M., 2002. Determinants of board composition in New Zealand: a simultaneous equations

approach. Journal of Empirical Finance 9, 373–397.

9. Raheja, C. G. 2005, “Determinants of Board Size and Composition: A Theory of Corporate Boards”, Journal of Financial and

Quantiative Analysis, 40, 2 June, 283-306

10. Website of BSE

11. Website of NSE

12. Website of SEBI

www.bseindia.com

www.nseindia.com

www.sebi.gov.in



Are boardrooms still elusive for women?

Mr. Shiv Nath Sinha : Assistant Professor, Institute of Management Technology, Nagpur. E-mail : [email protected]

Abstract

"More than 70 per cent of boards in five countries – Hong Kong,

India, Malaysia, New Zealand and Singapore – have no female

independent directors," said the initial findings of a study (2011)

by KornFerry International, a global talent management solutions

provider.

Boards with three or more female directors were rare, and boards

with three or more female independent directors were almost

non-existent, an Asianet release quoting the findings of study

said.

"The study shows that female directors who are appointed on

boards have different demographic profiles compared to male

directors, and therefore they enhance board diversity beyond just

gender diversity," Mak Yuen Teen, Associate Professor of NUS

Business School at National University of Singapore who led the

study said. There is no doubt that women are severely under-

represented in the board room.

As per “The Bottom Line: Corporate performance and women's

representation on Boards”, 2007, a study undertaken by

Catalyst, the US research organization on Fortune 500

companies, “Financial measures excel where women serve”.

Companies with more Women on Board outperform those

companies with the least in terms of the Return on Equity, Return

on Sales, Return on Invested Capital by 53%, 42% and 66%

respectively.

As per “Women Matter” a study conducted by McKinsey &

Company in partnership with Women Forum for the Economy

and the Society: “The Companies where women are most

strongly represented at board or top management level are also

the companies that perform better.

The Paper attempts to bring the fact and data pertaining to the

female representation on boards of directors of companies

across the globe and whether it should be gender equality on the

Board should be ensured through legislation as done in some of

the countries like Norway, Finland, South Africa.

The paper will be useful for Master's level students of Corporate

Governance.

Keywords : Board diversity, Women director, Corporate

Governance

Introduction

Recent years have seen an increase in emphasis on board

diversity and, in particular, on women in the boardroom. Some

argue that it is only equitable that the gender balance on the board

be addressed and, moreover, redressed given that, broadly

speaking, half of the population are women and half men whereas

a typical board has a majority of male directors. Nor is it 'just' a

case of boards being generally male-dominated, a natural

consequence of this is that women are under-represented on the

key board committees such as the audit, remuneration and

nomination committees, as well.

Others argue that, in addition to the gender balance aspect,

female directors bring their own strengths to the boardroom in

terms of their life experience, their mode of thinking and their

ways of dealing with both people and situations. Some argue that

there are positive financial benefits to have more women on the

board, whereas others state that the benefits are more to do with

the way that the board operates with women more inclined to

discuss matters in depth and to try to reach a consensual

solution.

Various studies around the world have found that women in

corporate boardrooms continue to be an exception rather than the

norm. Some countries have addressed this concern by imposing

specific requirements for women directors in their corporate

governance norms. Several European countries have taken the

lead in this direction.

As per the Corporate Women Directors International/International

Finance Corporation(IFC), World Bank, 2010 Report titled

“Accelerating Board Diversity”, the comparative percentage of

women directors across the globe is as follows :

88




Country No. of Companies

in survey

% of Companieswith women

Directors

% of WomenDirectors

Hong Kong 42 67% 8.9%

New Zealand 100 40% 8.7%

Australia 200 49% 8.3%

China 78 49%

7.2%

Singapore 57 47%

6.4%

Chinese Taipei 75 40%

6.3%

Malaysia 27

37%

5.9%

India 2408

27%

5.1%

South Korea 81

14%

1.5%

Japan 100

16%

1.4%

Norway

517

100% 44.2%

Sweden

180

76%

21.9%

Finland

100

67%

16.8%

Denmark

109

55%

12.5%

UK

100

75%

12.2%

Spain

35

74%

10.6%

Russia

24

33%

5.1%

Italy 23 30% 2.1%

Switzerland 23 57% 6.6%

Netherlands 107 36% 7%



The Case in UK

The UK Corporate Governance Code, 2010 issued by Financial

Reporting Council prescribes the following regulation to be

followed by all the Listed Companies in UK.

Appointments to the Board

Supporting Principle

The search for board candidates should be conducted, and

appointments made, on merit, against objective criteria and with

due regard for the benefits of diversity on the board, including

gender. In 2010 women made up only 12.5% of the board

members of FTSE 100 companies, compared with 9.4% in 2004,

and over half of all FTSE 250 companies have no female board

directors at all. It was this lack of progress that led the

Government to identify barriers preventing more women from

reaching the boardroom, and make recommendations regarding

what government and business could do to increase the

proportion of women on boards. Lord Davies' report titled

“Women on Boards” made a number of recommendations, one

of which was that “the Financial Reporting Council should amend

the UK Corporate Governance Code to require listed companies

to establish a policy concerning boardroom diversity, including

measurable objectives for implementing the policy, and disclose

annually a summary of the policy and progress made in achieving

the objectives”. The Report argued that this addition to the Code

was needed because “enhanced corporate governance

statements will allow companies to pay attention to, and consider

what diversity means within their own organisations.

Stakeholders, both investors and customers, will be able to make

informed decisions about the diversity of the company and the

performance of that company in addressing the diversity

challenge”. The Report ruled out setting quotas, but said that

FTSE 100 companies should aim for 25% by 2015.

The Case in Germany

Similarly as per the German Corporate Governance Code, 2010 :

Tasks and Responsibilities of Supervisory

The Supervisory Board appoints and dismisses the members of

the Management Board. When appointing the Management

Board, the Supervisory Board shall also respect diversity and, in

particular, aim for an appropriate consideration of women.

The 30 companies listed on Frankfurt's Dax index of leading

shares after a meeting stated to the German Government that

they would set targets to promote more female managers. The

German government indicated that the firms would aim to

increase female representation on their boards by 30% by 2013.

It said that companies that failed to meet these goals would face

as yet unspecified sanctions. The figure for Germany's 200

biggest companies is currently 3.2%.

The Case in Norway

In December 2003 the Norwegian Parliament passed an

amendment to the Public Limited Companies Act, establishing a

demand for gender balance in the Companies' Boards. By doing

so, Norway became the first country in the world to demand

gender balance within the boards of Public Limited Companies.

Today approximately 40 percent of the board members in public

companies are women. Reaching a balanced participation is a

question of democracy. The Norwegian Government regards the

legislation on women in boards as an important step towards

equality between the sexes, a fairer society and a more even

distribution of power, and as an important factor in the creation of

wealth in society. The legislation will secure women's influence in

decision making processes of great importance for the economy

in the society. This legislation is also important for the Norwegian

economy. In Norway, there are a high number of women in paid

work, and Norwegian women are also highly educated. For

several years, more women than men have finished higher

education. Almost 65 per cent of the students at universities and

university colleges are women. 50 per cent of the law school

graduates are women, so are 40 per cent of the MBA-graduates,

approximately 70 per cent of the graduates from the Veterinary

College, the School of dental surgery and the psychology

graduates. Almost 60 per cent of Medical School graduates are

women. Despite the fact that an increasing number of women has

finished a higher education, the number of women on company

board remained small. The Government takes seriously that half

the competence that companies need to maintain position in

international competition is found among women. The problem

was not that Norwegian women were not qualified. The problem

was to recruit highly qualified women to board positions and

make use of their competence. This legislation make men in

leading positions see and experience that women also can do the

job. The demand for gender balance in company boards also

secures that we make use of all the human resources in our

country, not just half of it. Some surveys also indicate that

diversity has a positive impact on the companies' bottom line.

Recruiting more women to the boards will increase the diversity,

and thereby influence on the bottom line.

The legislation on representation of both sexes in boards implies

for all Publicly Owned Enterprises (state-owned limited liability

and public limited companies, state-owned enterprises,

companies incorporated by special legislation and inter-

municipal companies) and all public limited companies in the

private sector.

What does the law say?

The requirement of the gender representation law is that both

sexes shall be represented on company boards as follows :

• If the board has two or three members, both sexes must be



represented

• If the board has four or five members, each sex shall be represented by at least two representatives

• If the board has six to eight members, each sex shall be represented by at least three representatives

• If the board has nine members, each sex shall be represented by at least four representatives, and if the board has more than nine

members, each sex must make up at least 40 per cent of the representatives.

Before the law was proposed, about 7% of board members in Norway were female, according to the Centre for Corporate Diversity. The

number has since jumped to 44.2%. Norway's stock exchange and its main business lobby oppose the law, as do many businessmen.

“I am against quotas for women or men as a matter of principle,” says Sverre Munck, head of international operations at Schibsted, a

media firm. “Board members of public companies should be chosen solely on the basis of merit and experience,” he says. Several

firms have even given up their public status in order to escape the new law.

Companies have had to recruit about 1,000 women in four years. Many complain that it has been difficult to find experienced

candidates. Because of this, some of the best women have collected as many as 25-35 directorships each, and are known in

Norwegian business circles as the “golden skirts”.

Some people worry that their relative lack of experience may keep women quiet on boards, and that in turn could mean that boards

might become less able to hold managers to account.

Recent history in Norway, however, suggests that the right women can make strong directors. When a whistleblower at Statoil, the

country's biggest firm, alerted managers in 2003 to possible illegal payments to a consultant to secure contracts in Iran, it was Grace

Reksten Skaugen and two other women directors who called an extraordinary board meeting that resulted in the resignations of the

chairman and chief executive. “Women feel more compelled than men to do their homework,” says Ms Reksten Skaugen, who was

voted Norway's chairman of the year for 2007, “and we can afford to ask the hard questions, because women are not always expected

to know the answers.”

A Global Overview : Legislative Route to Diversify the Boards of Public Limited Companies

Few countries across the world are taking the legislative route to force the companies to diversify their Boards. A recently published

showed that the U.S. lags countries such as Bulgaria, Latvia and South Africa in

board representation by women.

study by Corporate Women Directors International

CountryCountry’s effected

Type of QuotaImplementation

PlanStatus

Norway

Public Limited Companies; State Owned Companies

Passed in 2003; Full implementation in 5 years by 2008

In Effect : Women Directors

6% in 2003;44% in 2003;

SpainPublic Limited

Companies with 250+ employees

8 years endeavorto reach

In Effect: Women Directors in IBEX35

5.2% in 2006;10.2% in 2010;

Finland

Passed in 2004;Target reachedwithin 2 years

Target reachedwithin 2006

SouthAfrica

State OwnedCompanies

Quota- 30% Target reached

Switzerland

Passed in 2006;Target to be

completed within5 years

Target reached Quota- 30% State OwnedCompanies

State OwnedCompanies

Quota- 40%

Quota-(Recommend

atory notobligatory)

40%

Quota-40%


The Case in India

“As the Indian economy shakes off the effects of global financial crisis, there will be an increasing demand for highly qualified and

educated Indian women,” said the ASSOCHAM study.

However, as on 13 September 2011, 16,405 individuals are on the boards of 2,759 BSE listed companies, of which only 883 or 5.4%

are women. Similarly, 351 individuals are on the boards of 30 BSE Sensex companies of which only 18 (5.1%) are women.

The study said female infanticide is so rife that India has the world's most skewed sex ratio at birth. Women consistently have far less

access to health, education and economic participation.

The Corporate Affairs Ministry is contemplating to make it mandatory for companies having five or more independent directors to have

at least one female independent director.

The proposal would be part of Companies Bill 2009, which is expected to be tabled in the Parliament.

Conclusion

A study undertaken by

conomic value.

As per Ana García Fau, Chief Executive of Yell Publicidad, which publishes Yellow Pages directories in Spain and Latin Latin America,

“Quota systems are there to help reach this goal and breach the gap, as they boost women's access to companies' boards and, thus,

their participation in decision-making,” “The emphasis should also be put on encouraging women's access to executive managerial

positions – the transition to board positions would then be a natural progression.

“For this to happen, there has to be a combined effort, starting within the family and at the early stages of a child's education, and then

involving governments, which could play a key role in this change by promoting policies to help balance work and family life – and not

forgetting the cultural change towards diversity that some companies need to adopt.”

The Institute of Directors, London, however, opposes even voluntary quotas or targets, arguing that it is better to encourage more

female executives through mentoring and networking.

As far as Indian corporate governance is concerned, the issue of board diversity is yet to gain sufficient recognition. There has been

very little discourse on this topic, including as to the requirement for women directors. Existing norms and proposals on corporate

governance do not provide any coverage of this topic. Since board diversity does have some benefits, it is perhaps worth considering

the issue at a policy level. Such consideration should keep in mind the relevant factors that are in operation in India, including the

availability of types of individuals who would be suitable to occupy board positions, as well as various economic and cultural factors. It

appears premature at this stage to impose a mandatory requirement of appointing minimum number of women directors in India,

especially because the available empirical evidence is not clear, but it is certainly worthwhile for companies and their nomination

committees to lay down parameters regarding board and gender diversity that may be applied while making board appointments. It is

possible that a handful of blue-chip companies are already following such an approach, but that needs to be reflected in a widespread

fashion.

There are doubts over the effectiveness of quotas in helping women climb the corporate ladder as whilst the number of women on the

board may increase over time, there is not a corresponding improvement in the number of women in senior line management positions.

Diversity should not be for diversity's sake, it should be for the benefit of the company, its shareholders and other stakeholders. Women

can bring new insights to the board, looking at things from a different point of view and maybe challenging long-accepted opinions, and

potentially adding value.

Bibliography

1. The Corporate Library, Beyond the Boilerplate: The Performance Impacts of Board Diversity (July 29, 2010

2. Corporate Women Directors International(CWDI)/ International Finance Corporation(IFC), World Bank, 2010 Report: “Accelerating

Board Diversity”

3. The UK Corporate Governance Code

4. http://www.regjeringen.no/en/dep/bld/Topics/Equality/rules-on-gender-representation-on-compan.html?id=416864

5. http://www.directorsdatabase.com/

6. http://indiacorplaw.blogspot.com/2010/03/board-diversity-and-women-directors.html

InterOrganization Network, titled “The Corporate Library, Beyond the Boilerplate: The Performance Impacts of

Board Diversity”, July, 2010, report that gender diversity increases board effectiveness in terms of both company oversight and

assessment of long-term e

7. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=304499

8. http://www.moneycontrol.com/news/business/onefive-directors-should-bewoman-new-companies-bill_528272.html




9. http://www.assocham.org/prels/shownews.php?id=27909

10. The quandary of quotas by Emiliya Mychasuk; Financial Times; December 07, 2010.

11. http://www.economist.com/node/10431105?story_id=10431105&CFID=6823245&CFTOKEN=5edc893a1521f634-

54E688F6-B27C-BB00-012711DB7AE8EBA8

12. “Women Matter”, McKinsey & Company, 2007

13. http://www.mckinsey.com/locations/paris/home/womenmatter/pdfs/Women_matter_oct2007_english.pdf

14. www.oup.com

15. www.oxfordtextbooks.co.uk/orc/trcker

16. http://www.indianexpress.com/news/asia-inc-shuns-women-at-the-top-study/759036/


94

Equator principles: Can banks ensure eco-friendly economic development?

Ms. Hemali Tanna : Asst. Professor, Marwadi Education Foundation's Group of Institutions, Rajkot. E- mail : [email protected]

Fundamental Question

What problems are the equator principles trying to solve?

1. Is economic growth and development possible without

damaging environment?

2. Can infrastructure development happen without political or

social risks?

3. Can large projects be implemented without affecting

environmental or society?

Which parties should bear the environmental and social risks?

• Host government

• Project sponsors

• Lenders

Which parties are best able to control environmental and

social risk?

1. The sponsors (e.g. construction contractors) are best able

to control the risk because they have the power to eliminate

or remove the risk

• Short term risk (Example: people's livelihoods as a result of

being displaced)

• Long term risk Example : air pollution from the project facility

2. Private Banks involvement in large projects & Banks provide:

• financial advisory services to project sponsors

• help arrange project financing

• provide portion of project debt Private bank risk :

• Banks consider environmental and social risk as credit risk

because the degradation could lead to project interruption

which could impact collection of interest and fees

• Banks consider environmental and social risk as reputation

risk because of the risk of being involved in harmful project.

Introduction

Before we proceed for why Equator Principles are better as a risk

reduction technique in project financing by banks, let us discuss

what are Equator Principles and a brief introduction of its benefits.

What are equator principles?

The Equator Principles (EPs) are a credit risk management

framework for determining, assessing and managing

environmental and social risk in project finance transactions.

Project finance is often used to fund the development and

construction of major infrastructure and industrial projects. The

EPs are adopted voluntarily by financial institutions and are

applied where total project capital costs exceed US$10 million.

The EPs are primarily intended to provide a minimum standard for

due diligence to support responsible risk decision-making. The

EPs, based on the International Finance Corporation (IFC)

Per formance Standards on social and environmental

sustainability and on the World Bank Group Environmental,

Health, and Safety Guidelines (EHS Guidelines), are intended to

serve as a common baseline and framework for the

implementation by each adopting institution of its own internal

social and environmental policies, procedures and standards

related to its project financing activities. Equator Principles

Financial Institutions (EPFIs) commit to not providing loans to

projects where the borrower will not or is unable to comply with

their respective social and environmental policies and

procedures that implement the EPs. The Equator Principles were

developed by private sector banks – led by Citigroup, ABN AMRO,

Barclays and WestLB – and were launched in June 2003. In July

2006, the Equator Principles were revised, increasing their scope

and strengthening their processes. The Equator Principles

represent a significant industry-wide initiative. They were drafted

by the banks in consultation with the IFC, project sponsors,

project engineers, and non-governmental organizations (NGOs).

The EPs have become the industry standard for environmental

and social risk management and financial institutions,

clients/project sponsors, other financial institutions, and even

some industry bodies; refer to the EPs as good practice. In

October 2009, 67 financial institutions have adopted the Equator

Principles, which have become the de facto standard for banks

and investors on how to assess major development projects

around the world. Currently, 72 adopting financial institutions (70

EPFIs and 2 Associates) in 27 countries have officially adopted

the EPs, covering over 70% of international project finance debt in

emerging markets.

Ten principles of Equator Principles

EPFIs will only provide loans to projects that conform to



Principle 1: Review and Categorization

Principle 2: Social and Environmental Assessment

Principle 3: Applicable Social and Environmental Standards

Principle 4: Action Plan and Management System

Principle 5: Consultation and Disclosure

Principle 6: Grievance Mechanism

Principle 7: Independent Review

Principle 8: Covenants

Principle 9: Independent Monitoring and Reporting

Principle 10: EPFI Reporting

How do equator principles financial institutions categories

projects?

Under the Equator Principles (EPs), borrowers must conduct a

Social and Environmental Assessment of a proposed project.

Equator Principles Financial Institutions use common

terminology to categorize (based on the International Finance

Corporation's categorization process) projects into high, medium

and low in terms of environmental and social risk and apply this to

all new projects globally and across all industry sectors.

The categories are

Category A – Projects with potential significant adverse social or

environmental impacts which are diverse, irreversible or

unprecedented;

Category B – Projects with potential limited adverse social or

environmental impacts that are few in number, generally site-

specific, largely reversible and readily addressed through

mitigation measures; and

Category C – Projects with minimal or no social or environmental

impacts.

The benefits of implementing Equator Principles

· The Equator Principles (EPs) have become the financial

industry standard for environmental and social risk management

in project finance.

· Financial institutions adopt the EPs to ensure that the

projects they finance are developed in a socially responsible

manner and reflect sound environmental management practices.

By doing so, negative impacts on project-affected ecosystems

and communities should be avoided where possible, and if

unavoidable, should be reduced, mitigated and/or compensated

for appropriately.

· Adopters believe that the adoption of and adherence to the

EPs offers significant benefits to them, their borrowers and local

stakeholders through their borrowers' engagement with locally

affected communities.

· Adopters should be able to better assess, mitigate,

document and monitor the credit and reputation risk associated

with financing development projects.

· Additionally, the collaboration and learning on broader policy

application, interpretation and methodologies between adopters,

and with their stakeholders, helps knowledge transfer, learning

Principles 1-9 below :

Scope

The Principles apply to all new project financings globally with

total project capital costs of US$10 million or more, and across

all industry sectors.












projects?








The categories are



unprecedented;






impacts.


• The Equator Principles (EPs) have become the financial

industry standard for environmental and social risk

management in project finance.

• Financial institutions adopt the EPs to ensure that the


manner and reflect sound environmental management

practices. By doing so, negative impacts on project-affected

ecosystems and communities should be avoided where

possible, and if unavoidable, should be reduced, mitigated

and/or compensated for appropriately.

• Adopters believe that the adoption of and adherence to the

EPs offers significant benefits to them, their borrowers and


local stakeholders through their borrowers' engagement with

locally affected communities.

• Adopters should be able to better assess, mitigate,

document and monitor the credit and reputation risk

associated with financing development projects.

• Additionally, the collaboration and learning on broader policy

application, interpretation and methodologies between

adopters, and with their stakeholders, helps knowledge

transfer, learning and best practice development.

• The adopters' role as financiers affords them opportunities to

promote responsible environmental stewardship and

socially responsible development.

Effect of Equator Principles on banking industry

Banks' business has not been hurt by adopting Equator

Principles. The Equator Principles Financial Institutions (EPFIs)

have not seen any decline in business because of adoption,

application or implementation of the Equator Principles (EPs).In

fact, the EPs have been championed by the project finance

business heads of participating Equator Principles Financial

Institutions. They continue to believe that having a framework for

the industry will lead to greater learning among project finance

institutions on environmental and social issues, and that having

greater expertise in these areas will better enable them to advise

clients and control risks. In other words, they continue to believe

it is good for business. The revised EPs have led to increased

transparency by requiring each Equator Principles Financial

Institution (EPFI) to report publicly on its implementation of the

EPs on an annual basis.

Role of banks in ensuring eco-friendly economic development

Financial institutions have an important role to play in

environmental sustainability. Sustainable finance begins with

recognizing the risks – be it financial, social or environmental.

Bank lending can be used to mitigate eco risks and ensure

compliance Banks in India have begun to play a key role in

infrastructure financing through the project-financing route —

the most preferred alternative for project sponsors. With banks'

growing role in financing infrastructure, possible action by

activists against them for financing environmentally harmful

projects cannot be ruled out.

In adopting these principles, banks undertake to

(a) Review carefully all project financing proposals from

sponsors, and

(b) Not provide loans to projects where the borrower is unable to

comply with prescribed environmental and social policies

and processes.

Many financial institutions have recognized the importance of

responsible banking. Internationally many initiatives have been



and low-income housing are examples of such emerging

sectors. While Indian banks have become adept at identifying

such eco-friendly business opportunities, they are yet to take

significant action on managing environmental risk.

Implementation of equator principles by Standard Chartered

Bank

The Equator Principles provide a framework to help banks

manage the impacts on society and the environment from

infrastructure and other projects that they finance. They were

adopted by Standard Chartered in 2003. Standard Chartered

Bank applies them to all project finance and advisory

engagements, exceeding the minimum threshold required by the

Principles which are limited to those above $10 million.

Following the Principles means that the Bank categorize the risks

of lending opportunities, based on criteria common to all

signatories. Standard Chartered Bank requires borrowers to

demonstrate the extent to which they meet agreed guidelines and

standards. Loans for high and medium-risk projects include

covenants requiring borrowers to comply with their action plan to

address the risks. Bank monitors compliance and work with

borrowers if necessary to help them achieve their plans.

Equator Principles Projects

2005 2006 2007 2008

Equator Principles

Category A

transactions approved 5 5 8 5

Category B


Category C


Implementation of Equator Principles by HSBC bank

These Principles form a core part of HSBC's approach to the

management of sustainability risk and are applied to all projects

which the bank finances as well as those to which they provide

only financial structuring advice.

The Equator Principles set out the process for assessing a project

in four key phases:

• Impacts are assessed on their degree of potential impact and

are categorized as either A (High), B (Medium) or C (Low).


environmental impacts that is diverse, irreversible or

unprecedented;

Category B – Projects with potential limited adverse social and





impacts.

• An action plan to address those impacts is developed.

put in place to foster responsible banking and one of them is the

Equator Principles which are being adopted by banks to ensure

that the projects financed are developed in a manner that are

“socially responsible and reflect sound environmental

management practices”.

Indian financial institutions have not adopted these principles and

not many steps have been taken to ensure environmental

sustainability through lending and investing initiatives. The

absence of Indian FIs from the list of participants in Equator

Principles reflects the lack of concern for environmental and

social issues. It also reflects the lack of awareness and concern

for the environment in general, as there is no pressure exerted on

the Project Financiers to adopt Equator Principles or similar

environmental initiatives.

What must India do?

It is imperative that the Reserve Bank of India and banks put in

place appropriate measures on the lines of international best

practices to ensure that they do not finance environmentally or

socially harmful projects.

Some of the immediate measures to be initiated are:

• The RBI should devise stringent criteria for environmental

assessment of infrastructure projects,

• Oversight mechanisms should ensure that banks and

institutional lenders involved as advisors or lenders in

infrastructure projects, uncompromisingly, adopt these

criteria,

• Make strict compliance with stipulated environmental and

social standards a precondition for financial closure,

• These criteria could be on the lines of the Equator principles

and customized for Indian projects,

• Leading project financing banks in India, to gain international

and IFC acceptance, should be encouraged to join the select

band of banks following the Equator Principles.

The government faces the challenge of striking a balance

between economic development and environmental or social

degradation. The responsibility is, therefore, on the banking

system to ensure that the need for economic development does

not outweigh the need for environmental protection.

Reserve Bank of India feels that, there is general lack of adequate

awareness on the issue in India. In this context, the need for

sustainable developmental efforts by financial institutions in India

assumes urgency and banks, in particular, can help contribute to

this effort by playing a meaningful role. In December 2007, the

Reserve Bank of India (RBI) issued a circular citing the

importance for banks to act responsibly and to contribute to

sustainable development. The circular referred banks to the

Equator Principles and suggested that there is a need for Indian

banks to evolve institutional mechanisms to enshrine

sustainability. Clean technology, eco-tourism, waste recycling,



• If the commercial, environmental and social risks are manageable and meet the standards set by the Principles a n d H S B C ' s

internal sector policies, an agreement to lend money is made, on the condition that the action plan is followed.

• The project's development in line with the action plan is monitored.

The majority of transactions fall into Categories B and C, as can be seen in the table below, although HSBC do finance Category A

transactions where the impacts can be managed responsibly in accordance with the Equator Principles and bank's internal sector

policies. HSBC also records the number of transactions in which they formally decline to participate where failure to comply with the

Principles was a contributory factor. No transactions were declined in 2009 or 2010, reflecting the good standards of bank's clients

and the experience of their risk managers in identifying high risk proposals at an early stage, and either positively influencing the

project's development, or not proceeding with a loan approval request.

Assurance

In response to stakeholders' requests, HSBC has invited an independent third-party to review their transactions under the Equator

Principles. PricewaterhouseCoopers' gives independent assurance on their application of the Equator Principles.

1 Category A : Projects with potentially significant adverse social or environmental impacts that are diverse,

irreversible or unprecedented.

Category B: Projects with potentially limited adverse social and environmental impacts that are few in number, generally site-

specific, largely reversible and readily addressed through mitigation measures.

Category C: Projects with minimal or no social or environmental impacts.

2 We continue to evolve our approach to applying Equator Principles across export credit loans. This year, we have replaced the

reporting category of ‘Loans by Type of Facility’ with a new category, ‘Loans according to Scope of Equator P r i n c i p l e s ’ ,

which separates the reporting of project finance transactions and export credit loans (extended transactions). The procedures

we apply to the extended transactions have been adjusted (further details are presented in our Reporting Gudance,


Equator Principles : Transactions vetted by HSBC

148 6,842 76 6,707357 4,562Transactions approved

Lending

Advisory

Loans by category’

By mandate

Category A

Category B

Category C

Loans by type of facility

Loans according to scope2of Equator Principles

Solely commercial

Solely export credit

Commercial/Export credit

Project finance transactions

Extended transactions

2008

NumberValue

USSm

48 0

100 6,842

59 4,348

3 178

38 2,316

47 3,508

44 2,403

9 931

- -

-

-1Transactions declined

2009 (re-presented)

NumberValue

USSm

15 0

42 4,562

27 2,183

5 1,297

10 1,082

- -

25 2,795

17 1,767

- -

- -

0 -

2010

NumberValue

USSm

424 0

52 6,707

31 4,063

6 1,644

15 1,000

--

25 3,173

27 3,534

--

--

-0

www.hsbc.com/sus-assurance). For comparability purposes,

we have re-presented 2009 data in the new format.

3 As part of the evolution in applying the Equator Principles,

we have removed certain types of transactions, such as the

financing of assets like aircraft, where it is not appropriate to

apply the Equator Principles beyond the first principle of

categorisation. For comparability purposes, the 2009

‘Transactions Approved’ figure changes from 80 to 57; the

corresponding changes have been made to the other reporting

categories for 2009.

4 Three of the 24 advisory mandates do not reference

Equator Principles. It was determined that formal reference to

Equator Principles. It was determined that formal reference to

Equator Principles was not necessary in these mandates as

local law requirements were considered to be an acceptable

substitute f or the IFC Performance Standards (as allowed for

in Principal 3).

Citi Bank's case study for Indian banks

• The Equator Principles (EPs) have helped Citibank go from

purely risk and brand management to brand enhancement

and positive reputation

• The EPs have informed and are the backbone of Citibank's

broader Environmental and Social Risk Management

(ESRM) Policy

What are the potential benefits to Indian Banks in adopting the

Equator Principles?

• There are currently no Indian banks who have joined the

Equator network (first-mover advantage goes to first bank

that adopts)

• Bank would use common terminology in assessing

environmental and social issues, and a common framework

for implementation and documentation

• Potentially increase productivity through reduced

transaction review and processing time (i.e., “get it right the

first time”)

• Have more certainty in closing project financings – easier to

syndicate deals internationally to other Equator Principles

signatories

• Gain access to network of professionals and international

best practice

• Citi can assist and provide advice, if necessary.

Lessons Learned from Implementation Experience

• The Equator Principles review process needs to be

independent, but also needs to have credit approval authority

within the business: this can't be a public relations or public

affairs execise

• An environmental risk policy (which would include the


Equator Principles) should be integrated fully into bank's

credit risk policies and procedures – back it up with senior

support and staff training

• Using the Equator Principles framework allows a financial

institution to proceed with environmentally or socially

challenging projects – but, in the right way and with a defined

and comprehensive process that provides clarity and greater

certainty.

• Clients appreciate banks' review and advice on social and

environmental issues – the Equator Principles and IFC

standards provide a useful “benchmark” on which to have a

discussion and provide that advice

Case study – applying EP to a toll road project in India

What were the environmental and social risk issues?

• Involuntary resettlement of 1,600 households (covered

under IFC Performance Standard 5)

• Impacts to scheduled tribes / castes, and indigenous

peoples

• Relocation of temples & mosques, and sacred groves

• Impacts to biodiversity

What is the potential Equator Principles Risk Category ?

• Due to potential sensitive issues, such as resettlement, this

was classified as a Category A (high risk) transaction, and

Citi India-based Transactors immediately contacted ESRM

Unit for advice and clearance

• Sponsor understood Equator Principles would apply, and

requested Citi's advice on how to structure the Independent

Review

Detailed Due Diligence Process

• IFC Performance Standards applied

• Timing was extremely tight from Diligence phase to Credit

Approval and Commitment (~ 1 month)

• Challenge: Government responsible for implementing and

managing resettlement (not Citi's client)

• ESRM Unit required hiring of Independent Consultant to

conduct an Equator Principles Compliance Review.ESRM

Unit accompanied the Independent Consultant on due

diligence visit

• Independent Consultant helped facilitate discussions

between client and government agencies responsible for

resettlement implementation

• Independent Consultant wrote E&S Due Diligence Report for

Citi, and identified certain gaps that needed to be filled

Closing and Disbursement

• Loan documentation signed

• Covenant to comply with Equator Principles, and Action Plan



• Action Plan outlines actions to be taken to eliminate or offset adverse impacts or reduce them to acceptable levels; and,

therefore addresses mitigation, actions, monitoring, management of risk, as well as schedules and costs needed to implement

these measures over the life of the project.

• Independent monitoring carried out over life of loan to ensure project stays in compliance

Quick sample of other Indian projects subject to the IFC Performance Standards

• Reliance Jamnagar oil refinery

• Tata Mundra Ultra Mega Power Project – coal-fired power in Gujarat

• Vicat Sagar Cement Project in Karnataka

Bibliography

1. Environmental and Social Responsibility in Lending: Citi's Journey with the Equator Principles: presented on January 30, 2007,

Mumbai, India by Jose Joseph, Independent Risk Management, CitiIndia

2. Environmental and Social Responsibility in Lending : Citi's Journey with the Equator Principles, presented on May 13,

Mumbai, India, by Rajesh Jogi, Global Portfolio Risk Management, Citi India

3. The Equator Principles: A Promise in Progress? presented by Donald H. Schepers, Baruch College, New York

4. Equator Principles, Large Group Discussion presented by Professor Doug Cerf, Donald Bren Graduate School of Environmental

Science and Management, Environmental Risk Management (ESM 286) Winter 2008

5. Equator Principles Manual

6. International Finance Corporation's Manual

7. http://www.equator-principles.com/

8. http://en.wikipedia.org/wiki/Equator_Principles

9. http://www.environcorp.com/services/article.php?t=EquatorPrinciples&id=3757&refsec=services&refid=37

10. http://www.standardchartered.com/sustainability/sustainable-finance/equator-principles/en/index.html

11. http://www.hsbc.com/1/2/sustainability/sustainable-finance/equator-principles

12. http://www.projectfinance.sgs.com/equator_principles_projectfinance

13. http://www.thehindubusinessline.in/2006/05/10/stories/2006051002301100.htm

14. http://cdf.ifmr.ac.in/?project=environmental-and-social-risk-analysis-for-financial-institutions-in-india

15. http://www.csridentity.com/signatoryissues/equatorprinciples.asp

16. http://www.banktrack.org/show/news/equator_principles_principles_profits_or_just_pr_

17. http://www.banknetindia.com/banking/sustain.htm

18. http://www.thehindubusinessline.com/opinion/article1688673.ece


100

Ethics in B-School Curriculum : A Study on attitudes of B-schools' Directors affiliated to GTU

Dr. Mamta Brahmbhatt : Associate Professor, Shri Jairambhai Patel Institute of Business Management and Computer Applications

(SJPI- NICM), Gandhinagar. E-mail : [email protected],

: E-mail :

Dr. Narayan Baser Associate Professor, Shri Jairambhai Patel Institute of Business Management and Computer Applications(SJPI-NICM),

Gandhinagar. [email protected]

Research objective

This research attempts to study and measure the attitudes of B-

schools' directors regarding including ethics in B-school

curriculum and to offer suggestions based on analytical results

and of the study.

Design/Methodology/approach

A survey has been used to collect primary data and 105

questionnaires were sent. Questionnaire items were developed

through a two stage process involving a review of the

measurement scale employed in previous studies and two pilot

study of focus group to identify the attributes for measuring

attitudes regarding the above mentioned topic.

Data Analysis

Microsoft Excel has been used to analyze and interpret the data.

Cross tabulation, Graphical Representation, and Rank Analysis

have been used.

Findings and analysis

Our research results show that it is not unreasonable to believe

that majority of our sample units are positive for including Ethics

in B-school curriculum.

Limitations of research/ Future research directions

Further research in this area is needed. Replications among other

samples are needed to validate the current finding. An important

area of future research is to investigate faculty and students'

attitudes toward including Ethics in B-school curriculum. The

research is just a small step in understanding the attitudes of

directors of B-school.

Implications

GTU course design committee (Board of Studies) should now see

Ethics education for MBA students as an important way to

differentiate their MBA program from any other university.

Academicians, administrators, researchers, in particular and

university in general, should recognize the need of including

ethics in B-school curriculum. GTU authority could devise a plan

of action for incorporating the issues like pedagogical

approaches, content of course, module wise session plan, and

faculty training and development and case development, reading

material of this topic. The appointment of an Ethics Coordinator

for business schools at GTU is essential.

Originality/value

This paper makes a valuable contribution given the fact that there

are only a limited number of comprehensive studies dealing with

including Ethics in B-school curriculum the in Gujarat state.

Keywords Ethics, attitudes of directors, B-School Curriculum.

Paper type Research paper

Introduction

Examining the future prospects of business ethics education is a

very important step for further development and refinement of

MBA programs offered by GTU. Presently, there are a number of

reports and surveys on the including business ethics in B- School

curriculum in various countries. But there are no similar reports

or surveys on the teaching of business ethics at the MBA program

offered by GTU in Gujarat. Therefore, we undertook the first

comprehensive survey of including Ethics in B-School

Curriculum: A Study on attitudes of B-schools' Directors affiliated

to GTU.

Literature Review

Many business schools are choosing to integrate ethics

throughout the curriculum rather than requiring a separate ethics

course (Berl & Shannon, 1997; Imagine, 2003). Researchers

continue to debate over whether ethics should be taught as a

stand-alone course or integrated into the core (or entire)

curriculum (e.g., Oddo, 1997; Zych, 1999). It has been

suggested that the integration of ethics in various business

courses is needed if students are to be able to incorporate

business ethics across business disciplines and to recognize the

interconnectedness of ethical issues in business (Gioia, 2002;

Oddo, 1997 .Sims & Brinkman (2003) have suggested some

ways to design genuinely integrative and and/or interdisciplinary

approaches to business ethics education in which students are



exposed to various levels of ethics education throughout their

entire educational experience rather than in a single stand-alone

course or a little integration somewhere along the way. Hoffman

and Moore (1982) surveyed over 1,200 colleges and universities

in order to find out about business ethics offerings in their

respective institutions. Paine (1988) found over three-quarters of

the schools reported they had included ethics in their curriculum

and many of them had chosen to integrate ethics into courses

such as business law, business policy, functional business core

classes, and business and society courses. Schoenfeldt et al.

(1991) reported on their fall 1988 survey of business deans from

colleges and universities associated with the AACSB. They found

"ethics, as a curriculum topic, received significant coverage at

over 90 percent of the institutions. Ruder (cited in Baumhart,

1968) surveyed 104 business school deans to determine the

extent business schools offered classes on business ethics.

Parmental (1989) examined ninety-nine syllabi of undergraduate

business ethics courses which were collected by the Center for

Business Ethics at Bentley College. Collins and Wartick (1995)

found, since the early 1970s, there had been 11 major studies

conducted which attempted to "identify the stature of Business

and Society courses in business school/program curriculum.

Cathy Driscoll and Jacqueline Finn (2005), found evidence of

discrepancies between students and professors with regards to

their perception of the integration of ethics into coursework. In

addition, discrepancies were found among the perceptions of

some of the students taking the same course. Possible reasons

for these discrepancies are explored, as well as some of the

examples of marginalization of ethics and some of the barriers to

teaching ethics that emerged in this study. Implications for

business faculty and administration are discussed in a study of

the integration of ethics in an MBA program at an Atlantic

Canadian University.

Ove D. Jakobsen, Knut J. Ims, Kjell Grønhaug (2005), conducted

empirical study in Norwegian Business Schools. Based on an

empirical study conducted in Norway authors addressed the

following issue: ''What do faculty members of the Norwegian

Business Schools consider to be their responsibilities in

preparing their students for leading positions in public and private

organizations?'' Moving on to interpreting the results from the

survey, researchers discussed the empirical findings by

comparing the data using four different theoretical perspectives;

neoclassical economics, strategic management, corporate

social responsibility and socio-economics.

Gael M. McDonald (2004), combined a review of existing

literature in the field of business ethics education and a case

study relating to the integration of ethics into an under graduate

degree. The paper also discussed practical questions such as

who should teach ethics, and when and how ethics can be taught.

The paper presented alternative models for the teaching of ethics


in the curriculum of undergraduate and postgraduate business

programmes. An integrative model is elaborated with a case

example describing the six-stage process undertaken in the

move from a single entry course to an integrated approach. The

case study details not only the planning and initial implementation

of ethical education in the context of an undergraduate business

degree programme, but also the means by which a change in the

way that ethics is taught.4Nell Adkins and Robin R. Radtke (2004), “examined whether

accounting students' perceptions of business ethics and the goals of accounting ethics education are fundamentally different from the perceptions of accounting faculty members. The study used a survey instrument to elicit student and faculty responses to various questions concerning the importance of business ethics and accounting ethics education. Statistical analyses indicated that students consider both business ethics and the goals of accounting ethics education to be more important than faculty members.

5Sims, Ronald R. Brinkmann, Johannes (2003), Provided several experiences with offering business ethics modules within other courses and suggested different premises that can serve as step to follow business ethics curriculum in paper titled“ Business Ethics Curriculum Design: Suggestions and Illustrations”.

6Zucheng Zhou and Ping Ou and Georges Enderle (2009), conducted a national survey to gain a thorough understanding of the status of business ethics education in MBA programs in China. Researchers aimed to understand, first, the extent of business ethics teaching currently being offered in MBA programs, and second, the prospects for the development of business ethics teaching in the near term. Survey results show that business ethics instruction is presently offered on a limited scale, and there are constraints impacting business ethics education.

1(1. Cathy Driscoll and Jacqueline Finn (2005), “Including Ethics into Business Education: Exploring Discrepancies and Variability Among Professors and Students”, Journal of Business Ethics Education Vol. 2, No.1. PP. 51-70.

22. Ove D. Jakobsen, Knut J. Ims, Kjell Grønhaug (2005), “Faculty Members' Attitudes towards Ethics at Norwegian Business Schools: An Explorative Study”, Journal of Business Ethics, Vol. 62, No. 3 pp. 299-314.

43. Nell Adkins and Robin R. Radtke (2004), “Students' and Faculty Members’ Perceptions of the Importance of Business Ethics and Accounting Ethics Education: Is There an Expectations Gap?”, Journal of Business Ethics, Vol. 51, No. 3, pp. 279-300

5 4. Sims, Ronald R. Brinkmann, Johannes (2003), “Business E th i cs Cu r r i cu l um Des ign : Sugges t i ons and Illustrations”, Teaching Business Ethics, vol.7, No.1, pp.69-87



convenient basis. On first phase of research questionnaire was sent to directors' personal email id, but response rate was very low. So, in second stage, questionnaire was kept on Google doc and sent to official email id of directors. (i.e. MBA<collegecode>[email protected]) A literature review was undertaken to identify what parameters to consider in research. The data was collected through questionnaire consisting of 30 questions. All of the statements used in questionnaire were measured on a five point "Agree-Disagree" Likert scale. For the analysis of data statistical methods are applied with the aid of SPSS (Statistical Package for Social Science) software, version 16.0 and excel.

Major findings• There are 20 statements measuring the attitudes on ethics, all

are measured on 5-point likert scale. For each item mean score and standard deviation was measured to know the significance of various statements. Mean score is highest for statement number 19 that says GTU should start Centre for Business Ethics and appoint an Ethics Coordinator for business schools. Mean score is lowest for the statement number 7 which says that there is no need to explicitly address ethical issues in the business curriculum.

• Majority of the participating institutes are not publishing any journal/magazines on ethics, few, almost nil are subscribing journals/magazines on ethics.

• Institutes are not giving more weights in API if faculty does research (publishes research paper/working paper, prepare case study/ article, enroll for PhD in this area.

• The attitude of Deans, Head of the Department, Directors and Principals of MBA colleges affiliated to GTU regarding including business ethics education in B-schools is very positive.

• Lack of qualified instructor and Lack of support from trainer from corporate are the two main difficulties rated by respondents.

• Researcher found that future prospects for business ethics teaching are promising.

Limitations of research Few limitations must be acknowledged that suggest caution in generalization. The research is just a small step in understanding the attitudes of B-schools directors towards including ethics in business curriculum. The faculty and students' attitudes have not been investigated. The present study is based on a moderate sample size and sample units are covered from B-schools affiliated to GTU (Gujarat state) therefore the results of this study cannot be generalized. The sample may contain a response bias, since those interested in including ethics in B-school curriculum may have responded at a higher rate than those are not interested. These constraints limit the general liability of the research results.Future research directionsFuture researcher could make extensions of the current study. As mentioned above the research is just a small step in

6 5. Zucheng Zhou and Ping Ou and Georges Enderle(2009), “ Business Ethics Education for MBA Students in China: Current Status and Future Prospects”, Journal of Business Ethics Education 6: pp.103-118.)

Significance of the studySince most of the previous research on business ethics education has focused on faculty and students' perception about ethics, but little, if any, research concerning business ethics education in B-school curriculum has been done. This study is significant in two ways. First, it is being conducted on business ethics education in the business school curriculum of GTU. Secondly, it is the first study examines the attitudes of Deans, Head of the Department, Directors and Principals of MBA colleges affiliated to GTU.

Research questions• What are the business schools' practices towards the

inculcating business ethics among the students and faculties?

• What is the attitude of Deans, Head of the Department, Directors and Principals of MBA colleges affiliated to GTU regarding including business ethics education in B-schools?

• What are the difficulties/ obstacle in including Ethics in B-School Curriculum?

• What are the prospects of teaching ethics in B-schools?

Research objectiveThe main aim of this research is to study and measure the attitudes of B-schools' directors regarding including ethics in B-school curriculum and to offer suggestions based on analytical results of the study. The secondary objective of the research is to study the prospects and difficulties in including Ethics in B-School Curriculum.

SampleSelection of academic institutions and respondents was done on convenience basis. The B-schools which were selected for participation in this study are affiliated to GTU. There are 132 B-school affiliated to GTU, out of which 105 MBA colleges selected for survey. As discussed earlier, sampling unit are Deans, Head of the Department, Directors and Principals of MBA colleges affiliated to GTU.

Survey instrumentThe survey instrument was based on dimensions which were developed by Evans and Robertson. The questionnaire was developed with the certain modifications in the light of suitability to the present study. In addition to the questions in Evans and Robertson's original survey, several additional questions were added to the survey by the researchers.

MethodologyThis is an analytical study based on the primary data collected through questionnaire. The questionnaire had been mailed to 105 directors of MBA colleges affiliated to GTU, chosen on a



understanding the attitudes of B-schools directors towards including ethics in business curriculum. The gap score between students and faculties have not been investigated. Future researcher can develop more specific scale by incorporating the attitudes of them. Future research could examine a wider respondent base across the various states of India by using quota sampling across the faculty level, students and administrators. Lastly, the objectives of this research were fully met, but this is a single area research focusing on B-schools. Such concentration could limit generalizations of the findings to the whole education sector. Anyway, this drawback creates opportunity for future researchers in this area by investigating same dimensions in other areas like medical students.

ImplicationsGTU course design committee (Board of Studies) should now see Ethics education for MBA students as an important way to differentiate their MBA program from any other university. Our research finding shows positive attitudes of directors' of B-school for including ethics in B-schools curriculum. Academicians, administrators, researchers, in particular and university in general, should recognize the need of including ethics in B-school curriculum. On a closing note, it should be noted that while the results and implications of the present study are useful, for broader conclusions, GTU authority could devise a plan of action for incorporating the issues like pedagogical approaches, content of course, module wise session plan, faculty training and development and case development, reading material of this topic. The appointment of an Ethics Coordinator for business schools at GTU is essential. Ethics Coordinator would be someone trained in business ethics or social issues in management. Ethics Coordinator would provide the business school with directions on how to integrate ethics into the curriculum. Ethics Coordinator would act as a link in regards to coordinating ethical content.

ConclusionThis study set out to expand understanding of how including ethics education in B- school curriculum in the context of fast developing state like Gujarat. The purpose of this study was to provide satisfactory answers to the research questions, as well as to meet the objectives of the research. In this conclusion section, the major results in terms of research questions and the key research objectives are summarized. The first research question was: What are the business schools' practices towards the inculcating business ethics among the students and faculties? Majority of the participating institutes are not publishing any journal/magazines on ethics, few, we can say almost nil are subscribing ethic journals. Institutes are not giving more weights in API if faculty does research in this area. Second question was : What is the attitude of Deans, Head of the Department, Directors and Principals of MBA colleges affiliated to GTU regarding including business ethics education in B-schools? For this question research received high rate of positive response. Second question was: What are the difficulties/ obstacle in including Ethics in B-School Curriculum? Lack of qualified instructor and Lack of support from trainer from corporate are the two main difficulties rated by respondents. Last question was: What are the prospects of teaching ethics in B-schools? Researcher found that future prospects for business ethics teaching are promising. To conclude, the contribution of this paper is not only in the discussion of whether to integrate ethics in B- school curriculum but also to the mechanisms for initiating and conducting the change process. The success of the change management process was largely attributed to the Dean's desire to integrate ethics in B-school curriculum and to overcome the obstacles found during survey. The B-school should make more efforts to integrate business ethics education in order for all business activities to maintain ethical standards and to gain sustainable competitive advantage in a significant way.

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Ethics from Patanjali Yoga Sutra and its Relevance in Corporate World

Mr. Dinesh Kapadia : Asst. Professor, GIDC Rajju Shroff Institute of Management Studies, Vapi. E-mail : [email protected]

Abstract

Evolution of human civilization is a mystery, a puzzle for which till

date conclusive answer is missing. The origin of human

civilization and how the laws governing human life work, have

been debated extensively by scientists, sociologist, theologists,

and philosophers across the world in different time frame

resulting in many theories floating around. However, there seem

to be an agreement among all people on some of the qualities,

which are universally good. Since time immortal good behavior

and right conduct in human being have been appreciated in all the

cultures across the world. The people who cared for humanity

have been put on pedestals and even worshiped in many cultures.

There seem to be broad understanding among the people as to

which are such qualities. Ethic is the term coined for exemplary

human qualities.

Key words : Maharshi Patanjali, Ashtang Yoga, Yama , Ethics,

Corporate world

Ethics

Ethic is generally associated with moral rules and conduct.

However it is significantly broader than the common conception

of analyzing right and wrong. A central aspect of ethics is "the

good life", the life worth living or life that is simply satisfying,

which is held by many philosophers to be more important than

moral conduct.(1)

Time and again, different civilizations have thrown up great

human beings who have guided humanity in peril by living up

those human values that are cherished by one and all. The

importance of self knowledge and the ways leading to it were the

guiding mile stones yesterday, are there today and it will be there

tomorrow too. Socrates was one of the first Greek philosophers

to encourage both scholars and the common citizen to turn their

attention from the outside world to the condition of man. In this

view, knowledge having a bearing on human life was placed

highest, all other knowledge being secondary. Self - knowledge

was considered necessary for success and inherently an

essential good. A self-aware person will act completely within

their capabilities to their pinnacle, while an ignorant person will

flounder and encounter difficulty. To Socrates, a person must

become aware of every fact (and its context) relevant to his

existence, if he wishes to attain self-knowledge. He posited that

people will naturally do what is good, if they know what is right.

Evil or bad actions are the result of ignorance. If a criminal were

truly aware of the mental and spiritual consequences of his

actions, he would neither commit nor even consider committing

them. Any person who knows what is truly right will automatically

do it, according to Socrates. While he correlated knowledge with

virtue, he similarly equated virtue with happiness. The truly wise

man will know what is right, do what is good and therefore be

happy. (2)

At molecular level, there exist similarity between business

organization and society. The common element for both is human

being. Since human is functional unit in both, the actions of it will

have major impact on survival, flourishing and destruction of

both. For survival and flourishing, ethic serve as lamp post and

absence of it can lead to destruction for sure. Indian subcontinent

has given rise to four major religions namely, Hinduism,

Budhhism, Jainism and Sikhism. In all these religions there are

common principles like Satya – Truth, Ahinsa – non-violence,

Tapas – willingly accepting to undergo hardships are some of it

which are in line with what Socrates had advocated. Patanjali

Yoga Sutra is one of the authentic manuscripts available to

human kind which not only shows the path, it provides guide

stones too, at every stage to seeker of the path to self knowledge.

Maharshi Patanjali in Ashtang Yoga treaty has elaborated what

are these values which are essential to human existence and

which can ultimately lead to reaching final goal for human being,

self actualization. Hierarchy of need in motivational technique

proposed by Abraham Maslow is one such attempt in morden

management literature which relates to Patanjali Yoga Sutra.The

authenticity of time frame of Maharshi Patanjali can not be

ascertain for sure. However. the circumstantial evidence suggest

it to be about 2000 years ago. Maharshi Patanjali is considered as

the first person who condensed the knowledge of Yoga in sutra

form in his treaty Ashtang Yoga. The literal translation of ashtang

Yoga is eight limbs of Yoga and sutra means thread or links. The

eight limbs are Yama, Niyama, Asana, Pranayama, Pratyahara,

Dharna, Dhyana, and Samadhi. Yama and Niyam are the relevant

limbs that deal with ethics. The present paper will focus on Yama

105



taken toward non polluting natural resources can results in better

image in society in turn can results in good employers image and

can attract talents across the country. Talented employees will be

favorably disposed towards such organization.

Sutra II 36 satya pratisthayam kriya phalasrayatvam

Established in truth, one can get fruits of good deeds without

actually performing deeds.Truth is being true to one nature. True

nature of an organization is symbiotic in purpose. Organization is

an integral limb of society hence its well-being is directly related

to the health of the society. Intention of harming or actually

harming the interest of any of the stakeholder is not in true nature

of organization. Hence when organization sees it self as care

taker of the all stake holders, it will reap the good rewards with out

actually asking for. Good publicity, preferred buyer and supplier

status are some of the rewards that can fall on lap of the

organization when established in truth.

Sutra II 37 asteya pratisthayam sarva ratnopasthanam

Established in abstention from theft, all wealth comes to him.

Honesty is the best policy is seen in many organizations in

mission or vision statement. Yet corruption, exploitation,

expropriations and dishonesty are quite freely visible in the

corridors of corporate world. The meaning of Steya is to steal. An

organization indulge in stealing only when it is away from its

nature (satya), when it sees itself as different from other

(society). By polluting river stream, organization steals the lively

hood from people who are dependent on river water for

agriculture or fishery. By exhausting all non-renewable

resources, it can deny the use of it for future generation. It is

stealing- dishonesty. According to this sutra, all wealth comes to

the one who practices asteya. Established in honesty in all deeds,

relationship with all concerned is all that is required for well being

of organization. The wealth will flow towards it. In corporate

history, there are many example to testify that dishonesty in long

run has never paid positive dividend , But, honesty has survived

the toughest battles.

Sutra II 38 brahmacarya pratisthayam virya labah

Established in one consciousness, one get strength and vigor.

Residing in one ness i.e. letting go of duality, the conflicts are

eliminated resulting in energy preservation for constructive

purpose. When an employee realizes that he and organization are

not two separate entities but both are the part of same substance,

corruption and conflicts will cease to exist. It will result in positive

energy flow from each individual and organization will have more

benefits. When organization adopts policy of both of us

prospering instead of either I or you, constructive inter action will

take place. Water related policy of Pepsi co India state that it adds

more water to aquifer than what it extract has created better

part of it since it is more related to relationship with external

environment. Niyam are more pertaining to an individual. There

are five aspects of Yama and five are of Niyama. Yama and

Niyama of Ashtang yoga of Patanjali Yoga Sutra are as relevant

today as it were in 2000 years ago.

Yama

Sutra II 30 Ahimsa satya asteya, brahmacarya aparigraha yamah

Ahimsa – non violence, satya – truthfull ness, asteya –

abstention, non stealing, brahmacarya – residing in Brahman ;

being in conciousness, aparigrha - non acceptance non

accumulation are Yama. These five values are called Yama. Each

aspect has been dealt separately in subsequent sutras.

Sutra II 35 ahimsa pratisthayam tat samnidhau vaira – tyagah

Established in ahimsa , in presence of him, himsa cease to exist

Ahimsa means non- violence, not harming or not destroying It

can be applied at two levels physical and mental because

violence can take place at both the levels. It can have impact on

internal environment of a person as well as external environment

i.e. society. In corporate world, there are few opportunities to

indulge in physical violence but there are ample of scope for

mental violence to come alive. Abuse of power and intentional

discrimination are two such tools effectively used in almost all

organization. Poorly maintained essential services like, light,

ventilation, non-hygienic dining place, odd hours working,

exploitation of Woman College by male boss, inadequate

compensation are few area of violence of physical nature. Mental

violence is more pervading in business organization which

include back biting, playing one against other, spreading false

rumors, intentional discrimination among subordinates,

favoritism are some of the prominent expression of mental

violence. Violence does not limit to organization office only, it can

spread among all stakeholders. Suppliers, Buyers, Government,

society in general, environment too can be victims of

organizational violence. Exploiting weak suppliers, short

charging unaware buyers, false conditional promises, not paying

due tax to government, polluting environment intentionally to

save money are some the areas which can be termed as

organization violence. What happens if organization adopts

ahimsa as policy? According to Maharshi Patanjali by getting

established in ahimsa, himsa – violence cease to exist in its

(organization) presence. Anybody dealing with such organization

will not show any enmity toward it. It implies that cordial

relationship can be established with suppliers that will be

symbiotic in nature. Organization is likely to have loyal

customers, which can result in decreasing promotion cost, repair

and replacement cost and improved profit. By keeping proper tax

payment to government, harassments and bad publicity is not

generated and get due respects in government offices. The Steps




acceptance in society vis a vis Coca cola India which had to shut down a bottling plant in Kerala due to protest from people.

Sutra II 39 aparigraha sthairye janma kathamta sambodhah

By following aparigraha,- non accumulation one can get knowledge of past, present and future. Accumulation is result of greed and

there are no limits to which greed can take to any individual or organization. Generally the prime objective for an individual is to maintain

what it has and second is to get what he does not have. When anxiety or attachment take over, the discrimination power is reduced and

greed takes over resulting in accumulation of unwanted or not letting go what is not required. Judgmental faculty gets clouded and one

looses the track where it is heading for. Ramlinga raju ex CEO of Satyam has exemplified that where greed can take to a person. Not only

he destroyed himself, his family, he contributed in downfall of the organization and gave bad name to his community and country.

According to the sutra, aparigraha results in gaining clarity about past, present and future. When a person is preoccupied with past

experience, he tends to see the event in linear manner i.e. he expect the similar outcome. What is missing in this understanding in fact

that environment is dynamic in nature. Every thing is changing. What was valid yesterday may not to be today. This state of mind cannot

totally grasp the complete past nor can decipher future. The ability to let go, dropping judgments reduces anxiety and attachments and it

leads to better vision.

Sutra II 31 ete jati – des- kal –samayanavchhinah sarvabhouma mahavratam

These are cardinal principle applicable irrespective of community, country, purpose and time

It shows that Yama referred by Maharshi Patanjali are relevant in every sphere of our life. The knowledge is truth and it will be always

new. If it becomes irrelevant than it is just a piece of information and not knowledge. It is time that corporate world wake up to the reality

that our ancestors have left more than adequate knowledge for us progress in life. What is need of the hour is open mind and receptive

intellect.

Bibliography

1. Conference report :Ethics for 21 Century ; Sept 21 – 22 ,2000, UNESCO HQ Paris

2. Commentary on Patanjali Yoga Sutra By H.H. Sri Sri Ravishankar – Vyakti Vikas Kendra Publication

3. http://dictionary.reference.com

4. http://en.wikipedia.org/wiki/ethics

5.

6. 14/09/2011

www.unescdoc.unesco.org/image/0012/00124626eo.pdf

www.abardoncompanion.com/alex/patanjali.pdf



Corporate Social Responsibility : Case study of Hindustan Unilever Ltd.

Dr. Tripat Kaur : Dr. D. Y. Patil Institute of Management & Research Centre, Bharuch. E-mail: [email protected]

Ms. Ashiya Anjum Shaikh : Parul Institute of Management. E-mail: [email protected],

Abstract

The society and local community is the resource pool from which

any organization gets its manpower & also so to say 'the licence

to operate'. The research paper presents the case of Hindustan

Unilever Ltd. (HUL), a leading company in the FMCG (Fast moving

Consumer Goods) sector in India for the past seven decades, to

highlight their best practices towards the society, local

community, NGOs and the natural environment. HUL sees

opportunities to grow its business by addressing some of the

most important social and environmental challenges facing the

world today. There are a lot of activities undertaken by HUL in

diverse areas. On the social front, HUL works in the areas of

Health and Nutrition, Special Education and Rehabilitation, and

Relief Works; its Economic Agenda is driven towards Enhancing

Livelihoods and Empowerment of Women; and the

Environmental Agenda focuses on Water Conservation and

cutting Green House Gases. HUL has developed specific

programmes and initiatives to address each of these. Some of

these have been highlighted in the case. The case follows an

Exploratory Research Design and the findings include diverse,

innovative & landmark initiatives undertaken by the company to

contribute to societal welfare. The data collection for this case

has been done through information available in the public

domain.

Keywords: Corporate Social Responsibility, Stakeholder's

welfare, environment protection, natural environment

preservation, local community welfare

Company Introduction

HUL is a subsidiary of Unilever, one of the world's leading

suppliers of FMCG with strong local roots in more than 100

countries across the globe. The Unilever group has more than

400 brands spanning 14 categories of home, personal care and

food products. HUL is a packaged mass consumption FMCG

company based in India and is also one of the country's largest

exporters. HUL's brands are household names across the

country and it operates through seven business segments: soaps

and detergents, personal products, beverages, exports, foods,

ice creams and other operations. The notable thing in the

company's history is that it became the first foreign subsidiary in

India to offer equity to the Indian public. HUL has more than 670

live patents. Headquartered in Mumbai, HUL has a national sales

network with offices in 4 metros and more than 35 manufacturing

locations across India, with major hubs being Assam,

Uttaranchal, Himachal Pradesh, Pondicherry and Dadra and

Nagar Haveli.

Objective of the Case Study

1. To highlight the society, local community and natural

environment-related best practices of HUL.

2. To find out the diverse social and environmental initiatives

taken by the company and its methodology of

implementation.

3. To study the Organizational areas of Improvement of the

company with respect to the Society and Local Community.

Methodology of the Case Study

The case study follows an exploratory research design and is

based on the following five parameters:

• Needs : The needs/expectations that the society, local

community and natural environment have from the company.

• Constraints: The constraints/challenges faced by the

company in order to fulfil the needs/expectations of the

society, local community and natural environment.

• Alterables : The alterable/best practices undertaken by the

company to satisfy the needs of the society, local community

and natural environment or to overcome the

challenges/constraints that exist with respect to it.

• Strengths : The strengths possessed by the company with

respect to the society, local community and natural

environment.

• Areas of Improvement: The areas where the company needs

to improve with respect to the society, local community and

natural environment.

The parameters of Needs, Constraints and Alterables as stated

above are based on the Social Systems Engineering Tools as

proposed by Sage (1977) and Warfield (1976).

Corporate Social and Environmental Responsibility at HUL-

The Society, Local Community and Natural Environment

Stakeholders

With respect to the Company's community involvement, the Code



of Principles of HUL states the following: 'Unilever strives to be a

trusted corporate citizen and, as an integral part of society, to fulfil

our responsibilities to the societies and communities in which we

operate.' With respect to the environment, the Code of Principles

of HUL, states the following: 'Unilever is committed to making

continuous improvements in the management of our

environmental impact and to the longer term goal of developing a

sustainable business. Unilever will work in partnership with

others to promote environmental care, increase understanding of

environmental issues and disseminate good practice.' HUL is a

founder member of the CORE-BCSD (Corporate Roundtable on

development of strategies for the Environment and Sustainable

Development-Business Council for Sustainable Development),

the Indian Chapter of the World Business Council for Sustainable

Development (WBCSD) which is facilitated by TERI.

Needs

Needs have been identified with respect to two major

stakeholders in this area – one is the local community and society

and the other is the NGO which facilitates the satisfaction of the

needs of the other.

Society and Local Community

• Water

• Employability and livelihood

• Village self-sufficiency

• Health and hygiene related awareness and infrastructure

• Medical Initiatives

• Vocational training

NGOs

• Capacity building

• Financial Support

• Transparency

Constraints/Challenges

There do exist constraints and challenges while undertaking

activities for the welfare of the society and local community.

Some of these are discussed below:

Society and local community

• Project sustainability, growth and long-term solutions : The

biggest problem is to make the initiatives in the villages

sustainable. HUL can be in the villages for a certain number of

years, but what after that.

• Comprehension problems : Villagers might have

comprehension problems, because a lot of people have gone

to them and promised them a lot of things and have not

fulfilled their word. As a result these people have got

disillusioned.

NGOs

• Lax on timelines: Company might work with fixed timelines

but the NGOs might be a little lax on the timelines. But if there

is a clear partnership code of conduct where there is

transparency, equity and mutually agreed terms of working,

then there will be no problems.

• Conflicts: These may arise with the NGOs when there is a lack

of transparency, or when there is a lack of equity wherein the

company sits on a high horse and says that it is the donor and

the NGO is the recipient and so the NGO must do as HUL says

.

Alterables/Best Practices

In HUL safety, health and environment is integrated into the

functioning of the company and the management measures the

entire thing. Since everything cannot be done to everybody, it has

chosen a few areas so as to focus on them.

CSR Methodology at HUL

HUL works with NGOs in such a way that instead of providing a

quick fix solution, the company involves the community in such a

way that they themselves can take care of their requirements in

the long term. They feel that it is better to work with the NGOs

because they have a lot of knowledge about the actual

community's requirements. So the organization provides

financial support, occasionally human resources support and

expertise to the NGOs who actually go and work with this

organizational support in the communities.

There are a lot of activities under taken by HUL in diverse areas.

Some of these have been highlighted here.

HUL and Star Bazaar launch 'India's Favourites' Consumer

Campaign

The India's Favourites campaign was launched by HUL CEO, Nitin

Paranjpe, Trent Hypermarket, CEO JamshedDaboo and Harish

NandanSahay, Director-Operations, Smile Foundation, at a Star

Bazaar outlet in Mumbai on August 29, 2011. India's Favourites is

a three-week consumer initiative which started on August 29th

and runs until September 21st in all 13 Star Bazaar stores across

seven cities in India. Five percent of the sales proceeds of this

consumer initiative will be donated to Smile Foundation, Parikrma

and Thozhamai, which work in the area of education for

underprivileged children. HUL and Star Bazaar had conducted the

'India's Favourites' campaign in September 2010. The event had

helped create awareness about various social causes including

education of underprivileged children, welfare of blind children

and support for orphans and deepened the emotional connect for

the shopper with their favourite HUL brands. The NGO partners

were Pratham, Akshara, Andhjanmandal and Udavam Karangal.

The Unilever Sustainable Living Plan

The Unilever Sustainable Living Plan was launched on November

15, 2010. The Sustainable Living Plan aims to help everyone



enjoy a good quality of life while respecting the planet. The

Unilever Sustainable Living Plan decouples business growth

from environmental impact. It sets out over 50 social, economic

and environmental targets. The Unilever Sustainable Living Plan

has set three big goals for Unilever to achieve by 2020:

• Help more than one billion people improve their health and

well-being.

• Halve the environmental impact of our products.

• Source 100% of our agricultural raw materials sustainably.

Health and Nutrition

Lifebuoy Swasthya Chetna : Lifebuoy Swasthya Chetna (LBSC)

is a rural health and hygiene initiative which was started in 2002

in villages in Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal,

Maharashtra and Orissa with the objective of spreading

awareness about the importance of washing hands with soap.

This was based on the findings of a study undertaken by the

London School of Hygiene and Tropical Medicine that washing

hands with soap can reduce the incidence of diseases like

diarrhoea, to the extent of 47 percent and would especially be

beneficial in India which accounts for one-third of the total such

diarrhoea-related deaths. It mainly targets the vulnerable groups

– children and also the women since they are considered the

custodians of family health.

Sanjivani : HUL started Sanjivani – a free mobile medical service

camp in the year 2003 near its Doom Dooma factory in Assam.

There are two mobile vans dedicated to the project consisting of

doctors and it is equipped with basic medical kits. In a year,

approximately 400 medical camps are conducted under the

Sanjivani project. Along with the regular consultancy and

treatment given at the medical camps, Sanjivani also undertakes

activities like awareness campaign on hygiene, child

immunization camps, iron supplement therapy, free eye

checkups, family planning awareness camps, anti tobacco

education and anti alcoholism camps based on the requirement

of the villagers. The Sanjivani project has provided medical

assistance to more than 154,500 patients since its inception.

Project Shakti Vani : The Shakti vani Programme educates rural

community about basic health practices. Rural women are

appointed as “Vanis” (communicators) and trained to

communicate in social fora such as schools and village get-

togethers. The programme covers areas including pre and post

natal care, infant nutrition, sanitation, good hygiene practices and

the prevention of common diseases. Over 300 NGOs are actively

involved in the project.

Asha Daan : The initiative began in 1976, when HUL supported

Mother Teresa and the Missionaries of Charity to set up Asha

Daan, a home in Mumbai for abandoned, challenged children, the

HIV positive and the destitute. Asha Daan has been set up on a

72,500 square feet plot belonging to HUL, in the heart of Mumbai

city. The needs of the abandoned/challenged children are met

through special classes of basic skills, physiotherapy, etc., being

taken care of by the Sisters of the Home. Wherever necessary,

corrective surgery is also arranged for in the city hospitals by the

Home.

Ankur : In 1993, HUL's Doom Dooma Tea Plantation Division set

up Ankur, a centre for special education of challenged children.

The centre takes care of children with challenges, aged between 5

and 15 years and provides educational, vocational and

recreational activities to children with a range of challenges,

including sight or hearing impairment, polio related disabilities,

cerebral palsy and severe learning difficulties. These children are

taught skills, such as cookery, painting, embroidery, bamboo

crafts, weaving, candle making, stitching, etc., depending on

their aptitude.

Kappagam : Encouraged by Ankur's success, Kappagam

(shelter), the second centre for special education of challenged

children, was set up in 1998 on HUL Plantations in South India.

The focus of Kapagam is the same as that of Ankur.

Anbagam : Anbagam (shelter of love) has been started in 2003

also in the South India Plantations. Besides medical care and

meals, the children here are taught elementary studies and skills

such that they can become self-reliant.

Relief Works

Yashodadham : After the devastating earthquake in 2001, HUL

reconstructed village in the Bhachau taluka of Gujarat's Kutch

district (in Dec 2002). The village, which has been named

Yashodadham, was dedicated to the 1,100 residents of Nani

Chirai village, which was completely wrecked by the earthquake.

Yashodadham, constructed with the active involvement of

villagers at every stage, is spread over 25 acres, and comprises

289 homes. HUL has also provided a school building, a

playground, a multipurpose community centre, a crèche, health

care and community room and village administration office. All

the structures are earthquake and cyclone resistant. HUL has

constructed both an underground reservoir and an overhead tank

for water.

Tondirapet : HUL contributed more than Rs. 100 million towards

relief and rehabilitation of tsunami affected families by way of

relief material, land and towards construction of facilities and

distributed nutritional and personal hygiene products worth Rs.

50 million for immediate relief to the needy when the tsunami had

hit the region. HUL donated 5.27 acres of land at Tondiarpet. Later

the community hall was constructed for the benefit of tsunami

affected families at HUL Nagar, Tondiarpet, in Chennai. The

complex has 960 permanent houses spread over 5.27 acres of

land donated by HUL. HUL employees contributed Rs 5 million

towards the construction of the facilities in the complex.

Bihar floods : After the floods in Bihar in 2008, HUL contributed



10,000 kits worth Rs. 6 million as first instalment of relief material

for the immediate relief of the flood affected families of Araria

district in Bihar. The kit contained essential items such as

utensils, clothes, blankets and other useful material. Also, more

than Rs. 4 million of contribution was received from employees

and matching contribution from the Company was collected,

which is said to be invested in rebuilding homes in a village of

Bihar.

Women Empowerment and Livelihood Generation

Project Shakti : HUL's Project Shakti is a rural initiative that

targets small villages populated by less than 2,000 individuals.

The Shakti Entrepreneur Programme creates livelihood

oppor tunities for underprivileged rural women. Shakti

contributes by creating profitable micro-enterprise opportunities

for rural women. Armed with micro-credit, rural women become

Shakti entrepreneurs: direct-to-home distributors in rural

markets. The products distributed include a range of mass-

market products that are especially relevant to rural consumers.

Moreover, HUL invests its resources in training the entrepreneurs,

helping them become confident, business-savvy professionals

capable of running their own enterprise. This programme has

over 45,000 Shakti entrepreneurs covering over 100,000 villages

across 15 states.

Creating livelihoods: HUL is working with the Dhan Foundation

to provide livelihood to 75,000 women who earn less than $1 a

day. HUL aims to work towards improving their livelihood. This

initiative has been undertaken in the four southern states and

these women are from the rural belt; the urban poor and tribal

regions and the SC/ST. HUL would be employing a particular

youth from the community and paying his/her salary. It would be

the youth's job to find out what is the core strength of that

community- goat rearing, rainfed farming, etc.—and HUL would

be helping them to gain monetary help from micro-finance

institutions and other government related sources.

Livelihood training : HUL is undertaking livelihood training in

villages by providing education to the local people and their

children in which the children pay 10% of the total education and

the company pays the rest and then these children are made

leaders of the local projects which will also help them develop

leadership qualities.

Direct sourcing : Through this initiative, HUL sources raw

material directly from the primary farmers. The Company has a

group of 480 farmers from whom it sources tea directly. This

enables the removal of the middlemen from the process and

helps the farmers to get the right prices for their products.

Natural Environment

Water Management

Water Management has been a focus area for HUL, and has been

made one of the key performance indicators of all HUL factories.

HUL is also committed to extending its efforts on water

management to the larger community, and has engaged in

community projects in water adjacent to manufacturing sites.

From 2004 to 2008, in the Union Territory of Dadra and Nagar

Haveli, 133 bunds were created as a part of the water harvesting

initiative. As a part of the afforestation activity, 58,000 trees were

planted covering 43 hectares of land and over 8,000 mango

plants were distributed to farmers as part of the horticulture

development programme.

Watershed at Khamgaon

HUL developed a watershed in the Khamgaon region of

Maharashtra and developed technology to make soap from fatty

acids without using water or steam after it realized during the

drought years (1996-1999) that its water consumption was

unsustainable. As a result, it has reduced specific water

consumption by 68 per cent, specific energy consumption by 50

percent, emission of carbon dioxide by 46 percent; stopped using

ozone depleting substances; saved 88,000 TPA of hardwood and

bamboo by using agricultural waste for secondary packaging,

34,000 tonnes of wood by using 1,000 tonnes of HDPE woven

sacks and 17,000 tonnes of wood by using 7,000 tonnes of

recycled board for lined cartons.

Optimal Energy Consumption

HUL claims to have taken a number of steps in this direction. The

company says that it has reduced the consumption of electricity,

energy, water etc. by 20-30% in the last five years. It is not just the

concern for Carbon dioxide but this also makes a good business

sense.

Carbon Footprints

HUL claims to be the first Unilever Company to get carbon credits

through a particular process that has saved energy in its soap-

making business. There are several other projects which HUL is

undertaking for its carbon footprints. The company feels that the

carbon credits issue is not about money, but the issue for them is

that it will make the people say, that it wants to become more and

more efficient and the company says that it is committed to

reduce its carbon footprints over the years.

Sustainable Agriculture

HUL has evolved a model for sustainable agriculture in its tea

plantation facilities based in South India. It has adopted various

initiatives to minimize the harmful impact of its operations on air,

groundwater, soil and on the ecology in general. A few significant

features include gradual shift to cleaner and efficient modes of

energy such as wind energy; recycling of green wastes from the

estates to produce vermin compost that is used as a substitute

for inorganic fertilizers, thereby reducing pollution and increasing

soil fertility and nutrient efficiency, and development of bio-

pesticides to prevent adverse impact on ecology.



• Change of attitude towards NGOs: The people in the

organization must be made aware that the NGO is not just an

agency but more so a partner of the organization.

Conclusion

By undertaking the above mentioned analysis (based on Needs,

Constraints, Alterables, Strengths and Areas of Improvement),

greater visibility of the society, local community and natural

environment related issues of the organization can be highlighted

for appropriate organization- wide and industry specific

interventions. HUL has been a market leader in the Indian FMCG

industry for more than seven decades. Its products and brands

are household names and its HR practices are considered to be

one of the best in the country. To match these benchmarks in its

corporate conduct, the Company has endeavored to set

benchmarks even in its social conduct. As seen from the case,

HUL has undertaken diverse initiatives, though on a small scale in

some cases, to benefit the society and local community. Diverse

initiatives in the field of education, livelihood generation, rural and

women's empowerment, health and hygiene and natural calamity

rehabilitation have been attempted by the Company. Some of

these initiatives are outstanding in nature and are benchmarks

worthy of emulation. The Company has gone beyond charity and

made attempts in association with various NGOs and SHGs to

make the local communities and local population in and around

its manufacturing units self-reliant and empowered so that they

can earn their own livelihood and not be dependent on corporate

organizations for eternal help and support. The Company has

also undertaken a number of initiatives in terms of eco friendly

products, processes and packaging to protect and preserve the

natural environment. We hope that the diverse social and

environmental initiatives of the Company and the methodology of

implementation as detailed in this case would act as eye openers

for many other corporate organizations, which can, based on

their scale and capability, attempt to contribute to the societal and

natural environment welfare.

Bibliography

1. Hindustan Unilever Limited (HUL), Annual report, 2010-11

2.

3. Cleaner is cheaper – Case studies on Corporate

Environmental Excellence (TERI, 2009)

4. The ICFAI University Journal of Corporate Governance

(January & April 2010)

5. Journal of Human Values (January – June 2009)

6. Sage, A. P. (1977). Methodology for large scale systems,

McGraw Hill

7. Warfield, John N. (1976). Social Systems – Planning, policy

and complexity. Wiley – Interscience Publication

www.hul.co.in

Effluent Treatment in Factories

All HUL factories have effluent treatment plants. Twenty-nine of

its sites are zero discharging sites. These sites can either

conserve everything or they recycle everything.

Environmental Reporting

This is done at HUL through a monthly report from each unit to the

central corporate safety and environment group, which compiles

the data and submits it to Unilever every quarter. Each unit also

submits an annual environment performance report through the

group to Unilever. The data collected from all manufacturing units

across the world are analyzed and reported at the biannual

Unilever Environment Report. The system has built-in targets to

improve performance of all key parameters.

Corporate Social Responsibility Awards

• UNESCO Water Digest Water Awards, 2008-2009, in the

category of Best Domestic Non-electric Water Purifier for

Pureit.

• Bombay Chamber Good Corporate Citizen Award for the year

2007-2008

• Bombay Chamber Civic Award, 2007, in the category of

Sustainable Environmental Initiatives, for HUL's Water

conservation and harvesting project at Karchond village,

Silvassa, in Dadra and Nagar Haveli.

• Social and Corporate Governance Award in the category of

Best Corporate Social Responsibility Practice, awarded by

BSE, NASSCOM Foundation and Times Foundation.

• Silver Trophy of the EMPI- Indian Express Indian Innovation

Awards for Project Shakti.

• The water conservation and harvesting initiative in

Maharashtra received appreciation at the Johannesburg

World Summit on Sustainable Development.

• Ankur received the Lawrie Group's Worldaware Award for

Social Progress in 1999 from Her Royal Highness in London.

Organizational Areas of Improvement with Respect to the

Society and Local Community

The following areas have been identified :

• Integrating Sustainability into the Business: The company

should move forward by integrating sustainability into the

way it does business like the sourcing of raw materials,

thereby creating and enhancing livelihoods, etc.

• Employees' Involvement: The Company can further work in

having a culture among the employees to go and interact with

the members of the community through volunteering.

• Carbon Negative and Water Positive: The Company is

working towards becoming Carbon Negative and water

positive and should continue to do so.


113

The Baby Business: One Sperm Donor, Multiple Offspring

Pratik B. Mehta : Pursuing PGDM, Marwadi Education Foundation Faculty of Business Management. E-mail: [email protected]

Pawan K. Gangwar : Pursuing PGDM, Marwadi Education Foundation Faculty of Business Management. E-mail: [email protected]

Abstract

Can you imagine several offspring conceived from sperm of a

single donor? Yes it's true. As more women choose to have

babies on their own, and the number of children born through

artificial insemination increases, and in the later case, outsize

groups of donor siblings are starting to appear.

Now, there is a growing concern among parents, donors and

medical experts about potential negative consequences of having

so many children fathered by the same donors.

This case study discusses the use of sperm from a third party to

conceive a child; it further discusses the ethical issues pertaining

to the sperm donation and its consequences. It also discusses

some of the real life examples and theirs outcomes.

Keywords: Assisted Reproductive Technologies, Sperm banks,

Sperm donor, Artificial Insemination

Case Study

The novel, Angels and Demons, ends with the startling revelation

that the Pope has fathered a child, using artificial insemination. To

boot, it turns out that this child is the villain, Camerlengo Carlo

Ventresca, not the suspected Illuminati, which have been extinct

for centuries. Ventresca was about to be elected as the new Pope,

but commits suicide, presumably from the guilt inhabiting him for

all that he had done. In other words, the enemy of the Church is

not an angry secret society, but the most official and orthodox of

all people. Roman Catholics are bound to be offended by all of

these suggestions. Although the young priest who became Pope

and the surrogate mother, a nun, claimed they could keep their

vows of chastity while still enjoying the great gift of childhood,

this suggestion is surely repugnant to devout Catholics, verging

on blasphemy. What, indeed, is artificial insemination? What are

the ethics surrounding this procedure? Very simply, artificial

insemination, better-known as intrauterine insemination (IUI) is a

procedure whereby the male sperm is inserted into the female

reproductive system in the hopes of fertilizing her ova (eggs) and

thus producing an embryo which will implant, and then develop

into a child. It is a subset of assisted reproductive technology

(ART). Artificial Insemination by Donor give rise to the ethical

issues and is somewhat analogous to adultery, not physically, but

by the introduction of a third party into the sacred bond of the

marriage. It is thus unacceptable.

Cynthia Daily and her partner used a sperm donor to conceive a

baby seven years ago, and they hoped that one day their son

would get to know some of his half siblings — an extended family

of sorts for modern times. So Ms. Daily searched a Web-based

registry for other children fathered by the same donor and helped

to create an online group to track them. Over the years, she

watched the number of children in her son's group grow. And

grow. Today there are 150 children, all conceived with sperm

from one donor, in this group of half siblings, and more are on the

way. “It's wild when we see them all together — they all look

alike,” said Ms. Daily, 48, a social worker in the Washington area

who sometimes vacations with other families in her son's group.

With this way one father is getting 150 children. It was originally

thought for women to be liberated and independent to go for their

babies without any husband. But it seems it only helped Men due

to basic nature provided ability to father lacs of children or even

crores in one life time, due to trillions of sperms production in one

Man every month. If you make it it free to be distributed to any

women, this is what will come as result. It is indirectly fathering

the child from so many women without marring them all.

It is estimated that 9% of couples worldwide are infertile. In that

case the fertility centers and the sperms are earning huge profits

by allowing too many children to be conceived with sperm from

popular donors Is there any legal limits on the number of children

conceived using the same donor's sperm and a re-examination of

the anonymity that cloaks many donors. It seems that we have

more rules that go into place when you buy a used car than when

you buy sperm. Some experts are even calling attention to the

increased odds of accidental incest between half sisters and half

brothers, who often live close to one another. Section 3.9.1.3 of

Guidelines for ART Clinics in India says that, a sperm bank may

advertise suitably for semen donors who may be appropriately

compensated financially. So it clearly seems that it has become

the Baby Business. In one of the case we learned that The

Brisbane Supreme Court has denied an Australian woman's

request to harvest and freeze her dead fiancé's sperm for future

impregnation. After she was denied access to the sperm, the

woman learnt that her fiancé´ may have been a sperm donor and



she began checking to find out if his sperm was still available.

Given what we know, there is a good ethical argument that

whether the woman should have access to the sperm and have

her dead fiancé's child or not. This case also opens up ethical and

legal issues It used to be that when men died, their chance of

generating new life went with them. But this is no longer the case.

Simone Baker, the woman at the centre of the recent Brisbane

Supreme Court Decision, is just one of a growing number of

individuals—not just wives, but girlfriends, parents, and even in

one case a social worker—who have sought over the last few

decades to obtain legal permission to extract, store, and use the

sperm of dead men to achieve a pregnancy.

Future Consequences

Don't get shock and pull your nerves when you see newspapers

with headlines, “Required: Tall, handsome, educated sperm

donor.” A thirty-year-old Aruna Singhal, who longed for a baby for

five years, says she had to be very careful before choosing the

donor. My husband is very good-looking and knowledgeable, and

we were very selective about the donor. It took us time to select a

person of similar caliber, she says. My husband even met the

donor and asked him several questions to know how educated he

was. Women are aware these days and they do not mind asking

for their choice, says

Conclusion

It would be important to respect those boundaries of keeping it in

the family, and avoiding any kind of wild behavior. Having children

is a blessing of the Lord. But when this is not possible, we need to

know how far to go with alternatives. Whether to remain content

as we are, without a child is in our hands. This calls for great

wisdom and confidence in God's plan.

A legitimate conflict between science and religion cannot exist.

Science without religion is lame, religion without science is

blind… By Albert Einstein

Discussion

• With the increasing number of sperm donor and presence of

sophisticated technologies there is a striking demand for the

'Donor Sperm'. Should countries put some legal limits to the

number of offspring from a single sperm donor like what

Britain, France and Sweden, or like the United States where

there is on such there is no such limits. And what would

indeed be the consequences if there are on such legal limits to

the number of children fathered by a single sperm donor?

• With increase in the use of the Assisted Reproductive

Technologies like the Sperm Donation, Egg Donation, IVF (In-

vitro Fertilization) there should be an increase in the

awareness for the same. Government should put in effort to

execute awareness programs to educate the general public

with the pros and cons of these techniques.

• It is estimated that over 3 million babies are born through

different Assisted Reproductive technologies (ARTs). Having

babies is a God gift. The use of these tools of ARTs and taking

control over God's natural process is like showing disrespect

toward the Lord. One sperm donor, 150 offspring. Is this

ethical? To what extent?

• Without limits in place, the same donor could theoretically

produce hundreds of related children. In that case it is even

possible that accidental incest could occur among hundreds

of half siblings. Who would be responsible for such

consanguinity? Is there any regulatory body working upon the

same?

• The sperm banks take up sperm from donor and use it to

produce as many siblings as possible. There are no such

limits in place. Now this is unfair and reprehensible to the

donor families, donors and donor children. The sperm banks

have turned in to 'Production Houses'. There are no underlying

legislations to control these Sperm Banks. What matters to

sperm banks is only 'Profits'. Ethics. Who Cares!

• Some heterosexual couples never tell a child that he or she is

the product of a sperm donation. In that case what it means to

a child to discover that he or she is but one of 50 children — or

even more. What does family mean to these children?

Bibliography

1.

2.

3. Who owns a Dead man's sperm? By L Cannold

http://www.truthaboutangelsanddemons.com/church-and-

bio-ethics/articles/bio-ethics.html

http://www.nytimes.com/2011/09/06/health/06donor.html?

pagewanted=all




Business meta-ethics: Can corporation have a conscience? (Case study on theme of government and business organization)

Dr.Bijal Amin : Assistant Professor, Parul Institute of Eng and Tech. E-mail: [email protected]

Mr. Prashant Amin : Dy. Chief Engineer, Elecon Engineering Ltd,V.V.Nagar. E-mail: [email protected]

Introduction

The concept of 'business ethics', we must clarify the matter of

definition. It is useful to distinguish between 'beliefs' about right

and wrong, good and bad, or moral values, on the one hand, and,

on the other, the specific patterns of conduct or action that involve

those beliefs. Business is action-oriented; it deals with conduct,

transactions, people relationships, buying, selling, hiring,

contracting, producing goods and services. Even if we could find

a theoretical system of priorities for moral values, we would have

an almost impossible task in applying such priorities and criteria

to this assortment of business activities and still avoid conflicts

and encounters. Business has to do its own job, employing all it

can learn from the variety of basic principles and theories of

ethics; but not being an instrument exclusively subservient to

what one or another ethical theory propounds. Metaethics talks

about the nature of ethics and moral reasoning. Discussions

about whether ethics is relative and whether we always act from

self-interest are examples of meta-ethical discussions. In fact,

drawing the conceptual distinction between Metaethics,

Normative Ethics, and Applied Ethics is itself a "meta ethical

analysis.

http://www.phil.cmu.edu/Cavalier/80130/part2/II_preface.html

Business ethics conduct

This brings us to an attempt to state some of the dimensions and

boundaries of 'ethical' business conduct:

• Business ethics are 'applied' ethics. They have come up with

an answer, not just a debate. They relate to specific patterns

of conduct, not eliminating but going beyond such

generalized attributes as honesty or fairness.

• Business ethics deal with relationships. They must be

accepted as well as asserted; their validity depends upon

mutual acceptance.

• Business ethics can often be institutionalized, with

systematic procedures and rules for administering and

implementing them.

• Business ethics are designed to provide a common

denominator of understanding and communication between

parties to a transaction or relationship, vastly simplifying the

negotiation process by providing predictability and

dependability in the conduct of affairs.

• A business ethic (or pattern of conduct) is valid only for the

area of common acceptance by the parties affected by the

transaction involved.

• Strategic management cannot ignore the place of applied

business ethics in organizational planning and decision

making. This article establishes some of the aspects that

make business ethics unique, together with the necessary

steps for making them an effective contributor to business

performance. The focus is upon applied business ethics-

patterns of conduct.

The usefulness of business ethics is discussed in terms of its

dependence upon the total objectives of the firm, the

identification of relationships and interests of affected par ties in

the relevant environment, and the recognition of the need for

consensus and for positive implementation procedures. These

structural requirements and constraints constitute a system

through which effective action can be attained as management

addresses the various moral, social and human elements with

which business ethics has to deal. In this paper the author is not

presuming to offer substantive answers to all, or even a few, of

the ethical dilemmas and conflicts that business firms (or anyone

else) cannot escape. Instead, what is proposed is a pragmatic

approach outlining a path that can help to determine where we

are, who is involved, what are the options, what are the

dimensions and parameters of the problems in a business

context, so that ethical issues (even those where uniquely 'right'

answers are unattainable) can be treated with intelligence and

fairness. How does a businessman get a practical hold of the

concepts of business ethics? Is it anything more than general

ethics as applied to business situations? Are there exemptions or

immunities that make it possible for business firms to act in ways

that would not be acceptable if only individuals were involved? If

we are to address the topic of 'Making Business Ethics Useful', we

need not concern ourselves here with the question of whether

business itself is a necessary and legitimate institution in our

society. Instead, we can proceed on the supposition that the

businesses we are talking about are basically accepted as

legitimate components in our free market society. It is their

conduct that will concern us, not their existence.



The fact of the matter is that business relies much more

frequently upon applied ethics and ethical practices than does the

average individual. The explanation of this is easy. It is primarily

because businesses have more relationships ('transactions', if

you will) than is ever likely for the average individual. It is not just

that one firm is dealing with other firms or individuals; the firm is

also the framework within which employers deal with employees,

salesmen with customers, bosses with subordinates. Most of

these relationships develop patterns of conduct which are

regarded as ethical in themselves or at least mutually accepted by

the affected parties, so that it is frowned upon as unethical for one

or both parties arbitrarily to depart from them. Example of Tata's

Ethical code of conduct Every employee of a Tata company,

including full-time directors and the chief executive, shall exhibit

culturally appropriate deportment in the countries they operate in,

and deal on behalf of the company with professionalism, honesty

and integrity, while conforming to high moral and ethical

standards. Such conduct shall be fair and transparent and be

perceived to be so by third parties. Every employee of a Tata

company shall preserve the human rights of every individual and

the community, and shall strive to honour commitments. Every

employee shall be responsible for the implementation of and

compliance with the Code in his / her environment. Failure to

adhere to the Code could attract severe consequences, including

termination of employment (www.tata.com).

The ethical trading initiative

The Ethical Trading Initiative (ETI) is a UK based partnership of

NGOs (including Oxfam, the Fairtrade Foundation and Save the

Children), trade unions and high street companies. The ETI's aim

is to ensure that internationally recognised labour standards are

observed at all stages in the production of high street goods sold

in the UK. The ETI seeks to achieve this by promoting the

implementation of codes of conduct that embody such

standards, which are backed by monitoring and independent

verification. Corporate members of the ETI must provide an

annual progress report which provides an overview of their

supply chain monitoring. The reports must include details of

management responsibility for ethical trade, areas of compliance

and non-compliance with the codes, and corrective action taken.

Companies that are members of ETI

Premier Brands; Anchor Seafood; Asda; Tea Sourcing

Partnership ;Fisher Foods ; Co-operative Wholesale Society; J

Sainsbury; Lambert Howarth Levi Strauss & Co.; Littlewoods

Marks & Spencer; Monsoon; Pentland Group; Safeway;

Somerfield;Tesco; The Body shop

The ETI Code contains provisions including the following:

• No forced labour

• Freedom of association

• Safe and hygienic working conditions

• Living wages to be paid

• No excessive working hours

In the case of agricultural commodities (such as tea, coffee and

cocoa), ethical trade is aimed at ensuring workers on plantations

enjoy these rights. Ethical trade is distinct from fair trade in that it

targets workers employed in plantations, exporting businesses

and processing plants. By contrast, fair trade targets small

farmers, and supports them to become involved in international

trade by guaranteeing a minimum price to producers. Codes of

conduct need to be monitored effectively to ensure proper

implementation. ETI figures show that of the 14 UK corporations

that have ETI membership, eleven were able to provide a progress

report in the form requested. They revealed that 1,183 suppliers

were evaluated for ethical performance during 1999. Of these,

more than 65% were found to be in significant breach of the ETI

Code, a figure that illustrates the scale of the challenge.

A recent report suggests that the growth of direct relations

between commodity producers and commodity buyers (because

of vertical integration) can potentially contribute to the

improvement of working conditions on plantations3. If direct

relations exist, cocoa buyers and processors can be held

accountable for labour conditions on plantations that they use as

suppliers. Another way in which ethical trading can benefit

plantation workers is to emphasise code provisions that ensure

freedom of association. This would strengthen worker

organisations at the local and national level. These issues point

to an overlap between ethical and fair trade, which, although

distinct, can complement one another. An example from the

coffee sector in Mexico reveals that many small farmers work on

large plantations part-time to supplement their income. However,

after forming an association that sells to the fair trade market, its

members have ceased working on plantations as they have

increased productivity and incomes as a result of entering the fair 4trade market. Plantation owners have responded by arguing that

it is unfair that buyers request improved labour conditions without

contributing to the cost. But many plantations do have relatively

good living and working conditions on their plantations, and a

good relationship with their workers, which proves that it is

possible to do so without going bankrupt. Good working

conditions and salary also attract better skilled workers and

increase labour productivity.

Ethical trade's advantage over fair trade lies in the fact that it is

more widely applicable. Presently, the fair trade market is too

small for transnational corporations to source all their primary

commodities from. However, buying from sources that adhere to

ETI codes of conduct would be more viable for TNCs. A downside

is that plantations will often simply sign codes of conduct to

create the impression they have an acceptable policy, yet do

nothing to implement the code in practice, a situation that points



to the importance of effective monitoring (Suparn Sharma,

Jyoty Sharma, Arti Devi,2009).

Recent Examples of Companies facing corporate government

unethical issues :

Following examples which discuss Ethical al practices:

1. Everonn Education

The MD has been arrested for paying a bribe to an IT official for

concealing income to the tune of Rs 122 cr.Because of that the

stock has been on a downward trajectory falling from 439 Rs to

260 Rs.

2. LIC Housing

LIC Houncing Finance CEO was arrested on charges of accepting

bribes for sanctioning loans.Through the stock price fell initially

form 258 Rs. To 186 Rs post a new MD coming in, it has

recovered it loses.

3. Sattyam Computer

Executive chairman Rmalinga Raju confessed to overstating

profits.Through the company has been take over by the Mahindra

Group, the stock price at 73 Rs is les than half of what it was

before the scam broke out.

4. DB Realty

CBI arrested promoter Shahid Balwa in connection with the 2G

spectrum allocation scam. The stock has been on a continuous

downhill falling from Rs. 144 in February 2011 to Rs. 59.

5. Unitech

MD Sanjay Chandra was arrested in connection with the 2G

Scam. Ever since the CBI questioning started followed by his

arrest, the sock has been on a downhill, falling from 45 Rs in

February 2011 to 29 Rs now(www.Economic times.com, 12th

septemeber,2011)

Case On Enron Scandal

Enron is a remarkable story of the creation and destruction of

value in a company. It starts with Ken Lay merging two regional

gas pipeline companies and evolving them into one of the largest

and most successful companies in the global energy field. He and

his top team transformed a $5 billion company into one with a

market capitalization of $65 billion in little more than a decade.

The real issue was a corporate culture that encouraged a focus on

the balance sheet—or, in some cases, off-balance sheet

partnerships. Enron converted business into a technical science

of manipulation involving computer information systems,

software, and financial analysis that did not consider social or

ethical consequences. It even learned to manipulate its auditor,

Arthur Andersen. The company also developed a reputation for

ruthlessness with all of its stakeholders and became far more

focused on short-run earnings than the effect its actions would

have in the long run on its employees, stockholders and society.

Like most Fortune 500 companies, Enron may have had a code of

ethics, but it was only window dressing. The role these codes

play in daily business activities varies tremendously from

company to company. The Enron case should be a wakeup call to

companies and colleges of business, signalling that teaching

people about organizational ethics, organizational integrity, and

social responsibility is good business. The most profitable

companies do not end up on the front page of the paper accused

of ethical violations. What brought about the sudden collapse of

energy giant Enron? Was Enron a failure of strategic management

and organizational leadership? In fact, research shows that good

corporate citizenship equals long-term profitability. Many great

corporations— including IBM, Hershey Foods, Cisco, General

Electric, and Starbucks—have a track record of integrity even

when their stocks are not doing particularly well. Starbucks, for

example, works hard to interact with the community and be

socially responsible. Not only does Starbucks provide ahigh-

quality product to consumers, but it also works all the way down

the supply chain to make sure farmers are paid a fair price for their

coffee beans. The Enron failure is causing many colleges of

business to ask thoughtful questions. Are we sending out

students who may be technically competent but deficient in

understanding their responsibilities in managing a company and

interacting with society? I feel that we need to make ethics a top

priority over the next few years. The Enron scandal involves both

illegal and unethical activity and the courts of law will determine

the precise extent of civil and criminal liability that accrues to the

perpetrators. People commit fraud, for instance, for a wide range

of motives including perceived lack of effective deterrent

punishment and rationalization of acceptability of illegal activity

(Albrecht and Searcy 2001). To control fraud by focusing on only

one dimension, such as more effective deterrent punishments, is

like trying to put out a skyscraper fire with a garden hose. In

addition, people harbor myths, such as organizations cannot

proactively detect or prevent fraud, which only result in

disempowered resignation to the inevitability of corruption and

more future Enron's. The Enron scandal is one that left a deep

and ugly scar on the face of modern business. As a result of the

scandal, thousands of people lost their jobs, some people lost

their entire pensions, and all of the shareholders lost the money

that they had invested in the corporation after it went bankrupt. I

believe that Kenneth Lay, former Enron CEO, and Jeffrey Skilling

behaved in an unethical manner without any form of justification,

but the whistleblower, former Enron vice president Sherron

Watkins, acted in a way that upheld moral principles. There are

many causes of the Enron collapse. Among them are the conflict

of interest between the two roles played by Arthur Andersen, as

auditor but also as consultant to Enron; the lack of attention

shown by members of the Enron board of directors to the off-

books financial entities with which Enron did business; and the

lack of truthfulness by management about the health of the

company and its business operations. In some ways, the culture



of Enron was the primary cause of the collapse. The senior

executives believed Enron had to be the best at everything it did

and that they had to protect their reputations and their

compensation as the most successful executives in the U.S.

When some of their business and trading ventures began to

per form poorly, they tried to cover up their own

failures(www.aacsb.edu).

Learning's from the Enron case

Enron will be the morality play of the new economy. It will teach

executives and the American public the most important ethics

lessons of this decade. Among these lessons are:

• You make money in the new economy in the same ways you

make money in the old economy - by providing goods or

services that have real value.

• Financial cleverness is no substitute for a good corporate

strategy.

• The arrogance of corporate executives who claim they are the

best and the brightest, "the most innovative," and who present

themselves as superstars should be a "red flag" for investors,

directors and the public.

• Executives who are paid too much can think they are above

the rules and can be tempted to cut ethical corners to retain

their wealth and perquisites.

• Government regulations and rules need to be updated for the

new economy, not relaxed and eliminated

Ethical dilemma for unethical issues

Issues of poor corporate governance have cropped up earlier in

companies like LIC Housing, (erstwhile

Satyam Computer Services), and DB Realty. In all the

cases, the stocks fell sharply once the investors lost faith in the

leadership of the company. "Bigger investors like domestic

institutions and foreign funds are the first ones to desert a stock

once there are issues related to corporate governance,"

Predictably, small investors were badly hit and they had to really

struggle to get out of the stock even at a loss. This is because in

such cases the stock would be frozen at the lower circuit with

only sell orders from investors, with no one willing to buy. So, it

may be difficult to even exit the stock once the news hits the

market. The situation could be extremely fluid and in a matter of

days, the stock could be down by as much as 30-50%,

depending on the extent of the damage.

Investors steps to conquer unethical issues

"The situation in one company could be very different from the

other. Investors will have to evaluate each company on a case-

by-case basis, before arriving at a decision.

Mahindra Satyam

Unitech

Check Promoters' Pedigree :

The promoters of a company play a very important role in giving

direction to the business of the company. So, if the company

under question belongs to a larger corporate group like that of the

Tatas or is a public sector entity, then the promoters will be quick

to step in. "If it is a company run by a big group, the management

will act fast and a damage-control mechanism will quickly fall in

place and the board will take care of lapses," says Varun Goel,

Head, Portfolio Management Services, Karvy Stock Broking.

A case in point is Finance, where the managing

director was involved in a case of taking bribes for giving loans.

Since the parent was LIC, a strong PSU entity, it acted fast.

Immediately, a new managing director was put in place, who

reassured investors that systems were in order and the business

model robust. Though the stock price fell from 258 on November

23 to 186 on November 26, it subsequently recovered and on

Friday it was quoting at 220. However, for smaller promoter-

driven companies, that may not be the case. There may be very

little management depth besides the key promoter and his family.

The core business of the company could be at risk, causing most

investors to lose confidence. Hence, investors need to be very

cautious in such cases. "If the other members of the board don't

inspire confidence, the best case here for investors would be to

sell the stock even though it might mean booking a loss,". Another

thing which investors need to look at carefully is how the future

business of a company would be impacted. For this, we need to

look at what industry or business the company is into.

Companies like DB Realty and Unitech are primarily in the real

estate business, which is going through a rough patch. Shahid

Balwa of DB Realty and Sanjay Chandra of Unitech are under

arrest in connection with the 2G scam. Stocks of DB Realty and

Unitech have been on a downtrend ever since their promoters

were arrested. While DB realty's shares fell from 144 to 59 trading

at a loss of 59%, Unitech's fell from 45 to 29, trading at a loss of

36%. .An issue of corporate governance like the arrest of the

managing director would unnerve both lenders and buyers.

"No prospective buyer would like to book a flat in a project floated

by a developer whose MD is behind bars," says a fund manager

who did not want to be named. Similarly, bankers would be

unwilling to lend to such projects or if they did, then they would do

so at very high rates. Ultimately, this will affect the profitability and

model of the business, which raises the business risk for an

investor. In industries like IT or education, many a time the

managing director or the promoter is the key business driver. His

relationships, built over the years, would have helped the

company win key deals. "Lots of clients come on board due to the

confidence in the promoter," says Sadanand Shetty, Fund

Manager, Taurus Mutual Fund. Now, if there is an issue of

corporate governance with the promoter, this situation could

change. It is quite likely that new alliances or contracts may not

LIC Housing



come through at all. "The company could get tainted or

blacklisted and in such a case it may make sense for retail

investors to exit," says Ranjan of Way 2 Wealth.

Taking a final call : Once you have assessed the fundamentals of

the business, the next thing which you need to look at is how

much damage has been done to the share price already. However,

experts caution retail investors from getting into averaging or

buying more of the stock, when it falls. "Once an issue of

corporate governance crops up, it could open a Pandora's Box

and it becomes very difficult for a retail investor to keep track of

such situations," says Ranjan. He points out that though the

erstwhile Satyam Computer has been taken over by the Mahindra

Group, its share price is still 75, which is less than half the price

the erstwhile Satyam Computer used to command before the

fraud came into light(Economic Times, 14th Septemeber,2011).

Conquer unethical issues

Various scams that have happened worldwide - Enron, Barrings,

Madoff and now Satyam is one more. regulators need to show to

the world that decisive action is taken against the culprits.

• Each company has to be looked at on a case to case basis

and there is no easy way out.

• Companies with a bigger group would act quickly due to the

management depth they have and ensure things are in place at

the earliest.

• Stocks of lesser known companies could fall sharply if there

are issues relating to corporate governance.

• If the business fundamental change due to the promoters

arrest, it may make sense to exit.

• Do not average your investment merely because the stock

price is falling.

• Price Waterhouse Coopers were their auditors; they need to

be punished more than anyone else. Satyam was listed in the

US too, what US regulators and PWC US were doing. Auditors

and regulators in the US and India need to be pulled up along

with the board and the independent Directors of Satyam.

• Satyam does not decide the course of economy or the stock

market. Surely the impact will be bad in terms of corporate

governance image of India and we may see some negative

sentiment in terms of foreign investment into India, long term

the markets will behave keeping in mind the macro-economic

factors.

• Regulators and Auditors will become more vigilant and

companies who are still cooking their balance sheets will get

shut or will correct their balance sheet. Companies whose

stock prices are up due to wrong balance sheets would be

affected most as they will now try to get them to order and

which may show a grim picture.

Bibliography

1. Berger, Peter L. 'New attack on the legitimacy of business',

Harvard Business Review, September- October 1981, pp. 82-

89. Drucker, Peter. 'What is business ethics?', The Public

Interest, No. 64, Spring 1981, pp. 18-36. (Also appearing in

Forbes with the title 'Ethical chic'.) Goodpaster, Kenneth E.

and John B. Matthews, Jr. 'Can a corporation have a

conscience?', Harvard Business Review, January-February

1982, pp. 132-141.

2. Murray Norm E (2008). Corporate Social Responsibility is the

Number One Criteria for Job Hunters Today, retrieved on

March 30, 2008 fromht tp : / /normmur ray.org /2008/02/18/corpora te-soc ia l -

responsibility-is-the-number-one-criteria-for-job-hunters- today/

3. Nancy R Lockwood (2004). Corporate Social

Responsibility: HR's Leadership Role December, retrieved

on June 15th, 2008 from http://www.shrm.org/Research/quarterly/1204RQuart_essay.asp.

4. Raman S Raghu (2006). Corporate Social Reporting in India-A View from the Top, Global Business Review, Vol. 7( 2): 313 – 24.

5. Redington Ian (2005). Making CSR Happen: The Contribution

of People Management, Chartered Institute of Personnel and

Development, retrieved on April 15, 2008 from

www.bitc.org.uk/document.rm?id=5103.

6. Tripathi PC and Reddy PN (2006). Principles of Management,

Tata McGraw Hill, New Delhi: 41.

7. Young Mark (2006). HR as the Guardian of Corporate Values

at Cadbury Schweppes, Strategic HR Review, Vol.5 (2): 10-11.

8. Zappala Gianni and Cronin Caitlin (2002). The Employee

Dimensions of Corporate Community Involvement in

Australia: Trends and Prospects, Paper Presented at the 6th

ANZTSR Conference; 27-29 November, Auckland, New

Zealand, 1-24.

9. Suparn Sharma, Jyoty Sharma, Arti Devi; corporate social

responsibility: the key role of human resource management;

Corporate Social Responsibility: The Key Role of Human

Resource Management;2009; PP.No.205-213.

10. Henry B. Arthur Making Business Ethics Useful Author(s):

Source: Strategic Management Journal, Vol. 5, No. 4 (Oct. -

Dec., 1984), pp. 319-333

11.

12.

13. May /June 2002;pp.No.40-46

14. Economic Times, 12th Septemeber, 2011; What You should

do whn COS Slip on Ethics; PP.No.14.

www.tata.com

http://www.phil.cmu.edu/Cavalier/80130/part2/II_preface.html


120

Case on Spirituality at work : Muni Sewa Ashram, Goraj

Mr. Subhash Yadav : Faculty member, Narmada College of Management, Bharuch. E-mail: [email protected]

Abstract

This case is on Muni Sewa Ashram Goraj. The Ashram is located

at a distance of 30 kilometres from Vadodara. It is an organisation

working in the social and educational sector. The case begins

with the history of its founder Pujya Shri Anuben Thakkar and

attempts to trace the roots of the present spirituality at work in the

Ashram in the personal life of the founder. The case describes the

evolution of the Ashram, and how it is an example of Spirituality at

work by giving examples, linking important concepts with

practice. Certain instances of spiritual practice in the life of the

present chairman Dr. Vikram Patel are mentioned and it has been

shown and how it has influenced the functioning of the Ashram.

The case closes with the question of whether the Ashram will be

able to sustain itself and its spiritual core in future as it is poised to

grow larger in operations and people in the coming years.

Spirituality at work : Muni Sewa Ashram, Goraj

“We will walk our path, people who share our vision and

understand our feelings will join us. The money we receive is not

for us, we are just facilitators for the society, and the money we

receive is for the society.” - Pujya Shri Anuben Thakkar, Founder

of Muni Sewa Ashram, Goraj “People are greedy because they do

not know their real needs. Man's real need is joy. When you lose

that joy in the inside, you start looking outside.” - D r , V i k r a m

Patel, Chairman, Muni Sewa Ashram Goraj “I was working as a

salesperson for Garnier, selling their products in the districts of

Panchmahal and Dahod.” Sunilbhai told the case writer as we

went together to take a close look at all the major departments of

the Ashram. “I was not satisfied internally, though I was well paid.

I somehow felt that the purpose of my life is not to do this. So

when I saw this advertisement in a newspaper for a job in this

Ashram, I applied, got selected and now I am a residential

employee of the Ashram. Sunilbhai is one of the 300 residential

employees of the total 450, who work for the Muni Sewa Ashram

Goraj. He works all seven days a week, morning till evening and

finds a sense of meaning in his life, and is contributing in some

way, he feels, for the betterment of people whose life is touched

by the Ashram through its various activities. Muni Sewa Ashram,

located at a distance of 30 kilometres from Vadodara is an

Ashram, which is spread into 300 acres and is working in the

areas of Education, Health, Social Services, Energy,

Environment, Organic Agriculture, and Dairying. The place is full

of peace and tranquility complete with a natural beauty, justifying

its title as an Ashram. It epitomizes the ancient Indian ideal of

Satyam – the truth, Shivam – the good and Sundaram – the

beautiful, existing together to serve the needs of people.

The founder

Pujya Shree Anuben Thakkar as she is known here was born at

Anjar, in Kutch district on 6th September 1944. Her father was

working in the Customs Department and mother was a

housewife. She spent her childhood at Sanand, a small town near

Ahmedabad, famous today as the Detroit of India. She got trained

a primary school teacher and was influenced by Gandhians

working at the Gandhi Ashram, Vedchi, Surat like Sri Ravishankar

Maharaj, Jugatrambhai Dave and Annapurnaben Mehta. She had

a spiritual orientation right from childhood, and Muni Maharaj

whom she used to visit along with her father at his Ashram near

Sanand ignited this tiny spark within her into a fire with his

foresight, vision and spirituality. Unlike her two elder brothers she

decided to work for the poor and underprivileged of the society. In

1978, she took on saffron robes, renounced her family and aged

34, as directed by her Guru Muni Maharaj, chose Goraj as her

karmabhumi out of the four locations suggested by him and

started a small school in this village which was full of poverty

and crime. She along with Doliben, a resident of the village used

to bring the children of villagers who left their houses in early

morning going for theft, wages, or to work in the place of bullocks

harnessing in the plough. She used to bathe the kids, teach them,

feed them and return them back to the family in the evening.

Slowly the children became her agents, calling more children with

them and finally the school got converted into Sharda Mandir and

Vivekanand Uttar Buniyadi and Uchchatar Uttar Buniyadi

Vidyalaya. Beginning with education, she also worked to reduce

alcohol abuse in the village. She found out some donors who

donated cows to the villagers, tied up for selling the milk to

Baroda Dairy. Being a remote village, it had problems of health.

With her ingenuity and courage she went to Baroda Medical

College met the interns and persuaded them to come weekly to

the village and do medical checkup for the villagers. Dr. Vikram














projects?








The categories are



unprecedented;






impacts.




in project finance.







for appropriately.











who was to later join her and lead the Ashram was one of the

interns who used to come every Sunday to medical checkup for

the kids of her school. Later a make shift dispensary took shape,

then an 11 bedded hospital and today it has grown into the Akshar

Purushottam Arogya Mandir and Kailas Cancer hospital and

Research Centre. Working in the village, a family from Mumbai

asked her if some care can be taken of their mentally challenged

daughter at her place. Thus was born the Bhagini Mandir which is

a residential care centre for girls aged above 18 years. Once,

someone informed Anuben that a new born baby girl has been

found on the outskirts of the village, abandoned by parents. That

gave birth to the Parivar Mandir which is a home for new born

babies or children of single parent who is unable to take care of

the child. All the major work areas of the Ashram evolved from

situations like these and not as per a plan made in advance. She

had an immense practical wisdom in her, recalls Manubhai Patel,

who worked with her in the initial years. She also had this quality

of being so crystal clear like water that one always felt that she

was an inseparable part of oneself. All the spiritual and saintly

figures of that time, Pramukh Swami Maharaj, Morari Bapu,

Indirabetiji, blessed her and always supported her work. Narayan

swami of Santram Mandir considered her as his daughter. As the

Ashram grew, help came from all around. Anuben went to US in

1990 and met the non resident Indians which resulted in some

help for the growing needs of the Ashram. Being convinced of her

commitment and transparent administration of finances, help

came from all over the world. While working on her last project,

the Kailas Cancer Hospital and Research Centre, she left her body

in the year 2001.

Spirituality at work

“Within seconds of entering such a mammoth institution with

larger-than-life decorations, all very elegantly placed, you wonder

if you've entered a corporation or an Ashram. Within seconds of

leaving the humble Ashram, you wonder if perhaps all

corporations can be Ashrams like this.” - Nipun Mehta, NRI visitor

Muni Seva Ashram was inspired, founded and is now being lead

forward with persons of impeccable spirituality. Muni Maharaj in

whose name the Ashram exists belonged to Ludhiana near

Punjab. He lived in an Ashram near Sanand, inspired Shri Anuben

to start this Ashram and used to visit this place during its

founding years. Shri Anuben herself was a deeply spiritual

person who dedicated her life to serve those around her. She

always believed that she is just an instrument in the hands of God.

It is he who is getting all this work done through her. Dr. Vikram

Patel who currently leads the Ashram also had this spiritual

element within him. His sister recalls that his thoughts were

always different in his childhood. As an elementary school

student, he would trade in her comic books at the library for

books of Vivekananda. When asked by Shri Anuben to join her


work, he left all the comforts of the city, and chose to settle down

in a village, choosing where his Spirit was rather than bodily

comforts. Recalls, Nipun Mehta, an NRI who visited the Ashram

in 2005, “Leading a simple life style he has never taken a single

paisa as salary in his 29 years of service with the Ashram. He eats

only two bhakris for dinner and sleeps on the floor every night. He

never married so that he could serve the needy. He owns two

pairs of clothes which were given to him by friends. His

spirituality is very unimposing and practical yet he meditates

daily…you feel his humility straight in the gut. ” The Ashram,

unlike any modern organisation evolved organically as per the

needs of the community. There we no targets to be met and goals

to be achieved. As problems were faced, solutions that worked

were discovered and applied. One advantage of this kind of

evolution is that the members of the organisation have very little

stress in their organisational life. Each one is supposed to serve

with their fullest capabilities even playing multiple roles at times

for the benefit of the organisation. Spirituality can be experienced

in the organisational culture, when you see people working in the

office, taking care of the inmates, attending to visitors and

patients in the hospital.All the departments of the Ashram have

the term 'Mandir' attached with them. So a day care centre is Bal

Mandir, the school is Sharda Mandir, hospital is Arogya Mandir,

the old age home is Vanaprastha Mandir, orphanage is Parivar

Mandir, the residential centre for mentally challenged girls is

Bhagini Mandir and the hospital is Arogya Mandir. The intention

behind this naming was that the spirit in which all the work has to

be done at these places should be that of prayer and serving in a

temple. All life of the people who work here is expected to be

Yoga. The sense of meaning which the employees find in their

lives by working here, the interconnectedness with e a c h

other and identification with the mission of their organisation is

clearly visible in their behaviour in the Ashram. The results are

there for all to see. The administrative expenses of the Ashram are

as low as 1.5 to 2 %. Recalls, Dr. Vikram, “when we were

marching ahead, some obstacles obviously came into our path,

but as I learnt from Anuben, the principles of administration,

(kaam karo, marga ane sahkar eni mete malse) running the

Ashram has been easy for me.” Sustainability and care of the

environment has been the fundamental principles on which the

Ashram works. They have initiated many alternative energy and

farming technologies and have even helped local adopt them for

their benefit. Solar energy is being used to run air conditioners,

cooking, and even a solar crematorium. Close to 80 percent of

the resources the Ashram needs for its functioning are generated

in house. Dr. Vikram wants to make the Ashram completely self

sustainable in all its energy needs. Alternative energy

technologies like Plasma Pyrolysis, Bio Mass Gasification, and

Bio diesel plantations have been taken up at the Ashram.In

agriculture also organic farming is practiced. The Ashram runs a



gaushala where cows are reared with scientific approach. Activities like Green house farming, Vermiculture have also been taken up

and people are taught to grow and prepare Green tea extracts, Palmarosa oil, Nilgiri oil, Chhyvanprash etc. Many other projects for

employment generation like Hand weaving and Bakery have been started to take care of the needs of the community and also sell to

Ashram visitors and relatives of the patients who come for treatment.Miracles have also been witnessed in the history of the Ashram.

Since the Ashram operates on the pay as much you can for its services, there are always shortfalls in the budget of almost every

department has deficits which are made up by donations. Whenever there have been deficits, resources miraculously appeared

through some person or another. No Management theory can explain how it happens but it is there for all to see. Today the Ashram has

grown into an organisation worth rupees few hundred crores. The Kailas Cancer Hospital and Research Centre was built at the cost of

rupees 100 crores. As the Ashram grows there are challenges to be faced and over come. With growth the Ashram needs new people to

join them and will it be able to retain this spirituality in every aspect of its functioning, is a challenge which the Ashram faces today. Can

the Ashram become the model of the business corporation of the future, a business corporation which exists to satisfy the needs of

people in ways that are sustainable and spiritual?

Annexure one

Major activities undertaken by Muni Sewa Ashram, Goraj

DEPARTMENT Sr. No. ACTIVITIES NUMBER

1 Bal Mandir Day care centre for children, teaching, Bal Melas

500 students benefit from this facility

2 Sharda Mandir Residential school for

th children till 7 standard

350 students are given free education, boarding

3 Akshar Purushottam Arogya Mandir and KCHRC

World class medical facilities at 1/10 of the cost

44731 OPD patients and 32537 Indoor patients were treated

4 Bhagini Mandir

Residential care centre of Mentally challenged girls above 18 years

100 girls are using the facility and a long waiting list is existing today

5

Parivar Mandir

Home for forsaken children NA

6 Vanaprastha Mandir Old age home for senior citizens 120 people

7 Atithi MandirGuest house for Relatives of Indoor patients and visitors

NA

8

Energy and environment Solar Energy, Sewage treatment plant,

Plasma Pyrolysis Technology, Bio Diesel, Bio Mass Gasification

9 AgricultureAnimal Husbandry, Farming, Green house farming, Vermiculture, Agro products

Planted 250000 within the treescampus and nearby area

10 Other projectsGau Mandir, Aid for Handicapped, Hand weaving, Bakery



Teaching note

The case can be used in the following areas: Business Ethics, Sustainability, Social Entrepreneurship, and Organisational Behaviour

Students can be asked to read the case and discuss the following issues:

• How did the organisation evolve over the years? Can they relate it with some theory of how organisations evolve? Unlike other

organisations they can study the process of evolution of a spiritual organisation. What are the fundamental requisites for a Spiritual

Organisation?

• How is the organsational culture in this organisation? What are the factors that have contributed in building such an organisational

culture

• This case also be taught as a practical example of Workplace Spirituality. Students can be asked to relate the spiritual foundation of

the three most important people behind this organisation. Muni Maharaj, Shri Anuben Thakkar and Dr. Vikram Patel with the

practices that are followed at the Ashram

• Some discussion can also take place on the concept of “Mandir” in the Indian tradition. Why most of the social institutions are

named as Mandir.

• Can we Udyog Mandir also? Compare the Contrast the functioning of this organisation with that of a modern Business Corporation.

Students can compare the principles which govern a Business Corporation and which are governing this organisation

• A creative discussion can be held on the topic where can business corporations of the 20th century be like that of an Ashram.

Spiritual, Sustainable and Ethical.

• Students can also be asked to relate the size of the organisation with its spirituality. As the organisation grows what changes are

need to ensure that the spiritual core remains intact

• A comparison of other spiritual organisations can be made with this organisation and similarities and differences discussed in the

class


124

An Insight into Whistle-blowing as an anti-corruption tool

Dr. Vaishali Trivedi : Assistant Professor, SJPI, Gandhinagar. E-mail: [email protected]

Abstract

Over the last two years, India has seen an increase in the number

of scams spanning across the public as well as the private sector

which have highlighted the prevalent levels of bribery and

corruption in the country.

For a nation like India which is so fervently marred and tainted by

instances of widespread corruption, it must take a lot of grit and

audacity to stand up against a particular malpractice and

challenge the system. Whistle blowing is the “disclosure by

organization members of illegal, immoral, or illegitimate practices

under the control of their employers, to a person or organizations

that may be able to effect action” For those who dare to undertake

this daunting task, the need of the hour is to provide them

effective protection and avert circumstances that may be life-

threatening. The key concern in this paper is to address

whistleblowers' ability to lower the incidence of corruption.

The paper attempts to study the following:

• The pros and cons of whistle blowing as a tool to eradicate

corruption.

• The current scenerio of whistle blowing in India.

• Legal framework for Whistle blowing in India.

• To offer suitable suggestions to encourage whistle blowing

among the employees.

Keywords : Whistle blowing , corruption, effective protection,

legal framework An Insight into Whistle-blowing as an anti-

corruption tool

Introduction

Over the last two years, India has seen an increase in the number

of scams spanning across the public as well as the private sector.

These scams, to some degree, have highlighted the prevalent

levels of bribery and corruption in the country. The World

Economic Forum's Global Competitiveness Index 2010 indicated

that amongst other factors (like business freedom, trade

freedom, fiscal freedom and government spending),freedom

from corruption is one of the factors that influences an

economy's competitiveness. Corruption could be a major hurdle

in India's growth story in the coming decade and may impact its

fair business competitiveness. The key concern in this study is to

address whistleblowers' ability to lower the incidence of

corruption. It is generally accepted that corruption exists in all

nations. Only its severity differs among the nations. For a nation

like India which is so fervently marred and tainted by instances of

widespread corruption, it must take a lot of grit and audacity to

stand up against a particular malpractice and challenge the

system. For those who dare to undertake this daunting task, the

need of the hour is to provide them effective protection and avert

circumstances that may be life-threatening. The concept of

protection to whistleblowers is quite akin to the need for devising

an effective Witness Protection Programme (WPP). The purpose

of a witness protection program is to afford protection to

witnesses who are of utmost importance to a particular trial and

for them to give their testimony in the Court of law without any

fear and apprehension as to any danger to their life, limb or loved

ones.

Objectives of study

The paper attempts to study the following:

1. The pros and cons of whistle blowing as a tool to eradicate

corruption.

2. The current scenerio of whistle blowing in India.

3. The Legal framework for Whistle blowing in India.

4. To offer suitable suggestions to encourage whistle blowing

among the employees.

Whistle blowing

Whistle blowing is the “disclosure by organization members of

illegal, immoral, or illegitimate practices under the control of their

employers, to a person or organizations that may be able to effect

action” (Miceli and Near 1984). A whistleblower is a person who

tells the public or someone in authority about alleged dishonest or

illegal activities

heir allegations internally

(for example, to other people within the accused organization) or

externally (to regulators, law enforcement agencies, to the media

(misconduct) occurring in a government

department, a public or private organization, or a company. The

alleged misconduct may be classified in many ways; for

example, a violation of a law, rule, regulation and/or a direct threat

to public interest, such as fraud, health/safety violations, and

corruption. Whistleblowers may make t














projects?








The categories are



unprecedented;






impacts.




in project finance.







for appropriately.











or to groups concerned with the issues).

Whistle blowing in India

In India, corruption needs no elucidation when it comes to

companies as the statistics for white collar crimes keep shooting

every year. Corruption is rampant in India as it is in almost all

developing countries. Both corrupt political and corporate

officers manage to siphon off funds – intended to aid the people

of India – off to political and private sector elite. Recent efforts in

India to challenge this corrupt affront on humanity have been met

with severe violence. There is rampant personal use of company

funds, misappropriation and recurrent frauds at different levels.

This is clearly reflected by the 2G Scam, Satyam scam and the

stamp paper scams in the past. KPMG India Fraud Report 2010

states that 75% of the frauds are conducted by the employees of

the organization. In a recent survey by Transparency International

(TI) , India's integrity score has dipped from 3.5 last year to 3.4

this year. In the table of transparency, we have slipped from the

72nd position to the 85th rank. The TI spokesperson has bluntly

said that India fared poorly because of increased corruption. In

India, the whistle blower policy is restricted to the public servants

or in works connected with the Central Government and there

exists no provision for corporate whistle blowers, except in

clause 49 of the Listing Agreement. Whistleblowers can play a

crucial role in providing information about corruption. Employees

who work in a department/agency know the antecedents and

activities of others in their organization. They are, however, often

unwilling to share the information for fear of reprisal. If adequate

statutory protection is granted, there is every likelihood that the

government would be able to get substantial information about

corruption.

The Whistleblowers in India

Following are the instances which highlight the role of whistle

blowers in exposing corruption in India and the fate that many of

them had to meet in the absence of adequate protection

mechanism then :

• Manjunath Shanmugam working with Indian Oil Corporation

(IOC) was a graduate of the Indian Institute of Management,

Lucknow. He refused bribes and ignored threats to his life in

his fight against adulteration by the petrol pump owners. He

paid the price. He was shot dead on 19th November, 2005

allegedly at the behest of corrupt petrol pump owners.

• India was shocked by the murder of Satyendra Dubey, a

government engineer who exposed corruption in the national

highway building program.

• Sri Amit Jethava had filed petition in High court and got

canceled an anti- environmental forest official's promotion.

He also had to pay the the price for same and was


subsequently murdered.

• The Telgi fake stamp paper scandal went on for years,

crossed State boundaries, deprived the government of

hundreds of crores of rupees and would have continued to do

so hadn't it been for a whistle-blower (in the Pune police

department) and an activist with a conscience and a

Gandhian approach (Anna Hazare).

Legal framework for Whistle blowing in India

Legislation for Listed Companies

The listed companies, are governed by Clause 49 of the Listing

agreement, where whistle blowers policy is non-mandatory in

nature. It reads that listed companies may establish a mechanism

to enable disclosure of unethical behaviour, actual or suspected

fraud or violation of company's code of conduct or ethics policy.

The Limited Liability Partnership Act, 2008 has also incorporated

provisions to protect the interests of whistleblowers and ensure

that they are not subjected to harassment, termination of

employment or any such treatment, to enhance transparency and

promote an anti-corruption tendency within the company.

The Public Interest Disclosure and Protection of Person

Making the Disclosure Bill, 2010

The issue of protection for whistleblowers caught the attention of

the entire nation when National Highways Authority of India

(NHAI) engineer Satyendra Dubey was killed after he wrote a

letter to the office of then PM Shri A B Vajpayee detailing

corruption in the construction of highways.

Based on the 179th report of The Law Commission and

recommendations of the Second Administrative Reforms

Committee (SARC), the Protection of whistle blowers and The

Public Interest Disclosure and Protection of Persons Making

Disclosure Bill, 2010 (Whistleblower bill), has been passed in

Parliament to protect whistle blowers.

The bill states that anonymity of the whistle blower is a must and

this will be an important determinant in improving the instances

of whistle blowing by honest men. However a provisions to this

sub-section permits the Central Vigilance Commission (CVC)

and similar competent authorities to reveal the identity of the

whistleblower to the Head of the Department while seeking

comments or explanations in the course of an inquiry. The Head

of the Department is further barred from disclosing the identity of

the whistleblower to anybody else. However this provision alone

defeats the very purpose of the law. The central philosophy of

whistleblower legislation is to protect the identity of the person

making the public interest disclosure so that he/she may not be

targeted by the Head of the Department or any colleague or any

person who has a vested interest in keeping the lid on wrongdoing

shut tight.



Loopholes in Whistleblower Bill, 2010

There seem to be significant weaknesses in the way the Bill has

been drafted. For instance, on the one hand, the Bill requires that a

whistleblower's identity be kept confidential. On the other hand

though, under certain circumstances (it's not clear exactly what

these circumstances are), the name of the whistleblower can be

disclosed and that too to the very head of the department against

whom the complaint is being made.

There are other flaws as well. The Bill requires that a

whistleblower be protected from 'victimization'. But what exactly

does victimization mean in this context? Sacking? Demotion?

Transferring the complaining employee to a Naxalite-infested

area? The Bill isn't clear on this point either. The Bill doesn't allow

anonymous complaints. Similar laws in the US, the UK and

Canada allow anonymous complaints.

The Jan Lokpal Bill

On 27 August 2011, a special and all exclusive session of

Parliament was conducted and a resolution was unanimously

passed after deliberations in both the houses of Indian Parliament

by sense of the house. The Jan Lokpal Bill aims to effectively

deter corruption, redress grievances of citizens, and protect

whistle-blowers. If made into law, the bill would create an

independent ombudsman body called the Lokpal (Sanskrit:

protector of the people). It would be empowered to register and

investigate complaints of corruption against politicians and

bureaucrats without prior government approval.

Advantages of whistle blowing as an anti corruption tool

As an anti-corruption tool, whistle-blowing has the following

advantages :

• An insider has first-hand, fresh information compared to an

external investigative agency. He may, therefore, be able to

supply clinching evidence for pinning down the guilty.

• An insider may give early warning signals which may help

abort corruption.

• Protecting whistle-blowers may deter corrupt behavior by

others.

• Protection to whistle-blower employees will place honest

employees right in the centre of administration and prevent

he situations like where they are often helpless spectators, or

are bullied into acquiescence by their corrupt colleagues and

superiors who dominate the department.

• The common law expects every citizen to report the

occurrence of, or attempts to commit, a cognizable offence.

Why, then, should any employee not have the right to report

corruption in his own department?

Problems and Issues concerned with whistle blowing

As against this, protection to whistle-blowing may throw up the

following problems and issues:

• Any department or organization needs to be an internally

cohesive entity with a certain degree of mutual trust and

dependability among employees. If every employee is a

potential “squealer,” will this not destroy trust, teamwork and

open communication, and create fear and suspicion in their

place

• In every organization there is an unwritten code of silence

which expects every employee to be loyal to the others to the

extent of not betraying them. If this code is broken, there are

umpteen ways of humiliating or harassing the employee

without recourse to formal disciplinary action. At least, such

employees may be marginalised by being assigned to

inconsequential posts or remote stations.

• Officially encouraged whistle-blowing may discourage

corrupt behavior. What if it also discourages initiative and the

willingness to take bold, quick decisions, and encourages

negativism, defensiveness and procrastination?

• Unlike a stranger or a casual acquaintance against whom one

makes a complaint of lawlessness, colleagues and bosses

are people with whom one has to live day in and day out. Even

if whistle-blowing was morally justified, how many

employees would be willing to face organizational ostracism?

• In the present politically and morally vitiated administrative

environment, is there not a risk of whistle- blowing being used

to blackmail colleagues or even bosses? Even if it is found to

be baseless later, what about the mental agony and the

adverse publicity that an honest victim of dishonest whistle-

blowing has to go through?

• The political executive will not agree to whistle-blowing

covering the conduct of Ministers. Very few subordinates will

have the courage to blow the whistle on top officers.

Ultimately, the big game hunters will all go scot free and only

he small fry will get caught. Is it then really worth the trouble?

• Millions of ordinary citizens face corruption everyday at the

cutting edge of administration. Employees at this level usually

gang up and operate an unwritten manual. It is doubtful

whether whistle-blowing can impact this level of

administration at all.

• If we can permit whistle-blowing, then why not go the whole

hog and introduce electronic surveillance in all offices?

Balancing pros and cons

It is now necessary to balance the pros and cons and take a view

on whether or not whistle-blowing has a net advantage. The

following considerations are relevant in this connection:

(a) There is a saying that all that is needed for evil to prevail is

for good men to do nothing. Any reform which puts power in

the hands of the good and the honest, therefore, deserves

earnest consideration. It is necessary to rescue the



administration from the corrupt hijackers and it is only the

empowered honest who can do it.

(b) C. D. Deshmukh once said in Parliament, “Corruption can be

eliminated not by mere disapproval but by a fanatical

intolerance of it.” Maybe whistle-blowing, once legalized and

encouraged, would fan the resistance of the few into a

fanatical intolerance of the many.

(c) Most books on management emphasize the importance of

encouraging dissent and managing it in the interests of the

organization. Whistle-blowing is a form of dissent. Unlike

dissent on business goals and strategies on which different

views are possible, whistle-blowing has an unimpeachable

moral basis and needs to be given a legal basis.

(d) However lofty and desirable an idea may be, putting it into

practice cannot be done on blind faith and has to consider

organizational and cultural realities. The idea itself needs to be

defined precisely and operationally.

(e) Norman Bowie, in his book Business Ethics, has suggested

the following norms for legitimate whistle-blowing:

• Should spring from moral and not selfish motives.

• Should have exhausted internal remedies first.

• Should be based on evidence that would normally persuade a

reasonable person.

• The whistle-blower should perceive serious consequences if

the whistle is not blown.

• Should be related to his or her normal responsibilities in the

organization.

• These norms are sound enough to start with and could be

fine- tuned based on experience.

(f) Violation of the above norms should be punishable.

Adherence to the norms need not be specially rewarded as the

intention is to empower employees with high moral values to

assert themselves on principle and not with an eye on

rewards.

(g) Should whistle-blowing be a right or a duty? Once immunity is

given to an employee whistle-blower, does it not follow that

“not blowing the whistle when he ought to” should be treated

as connivance? To start with, at least All India Service Officers

should not only be empowered to blow the whistle but made

duty- bound to do so even if it involves Ministers.

(h) A good way of implementing the idea would be to try it out as

pilot projects in a few offices of sensitive departments like

PWD, Excise, Commercial Taxes and Registration and learn

from experience before extending, modifying or abandoning

the experiment.

(I) Internal whistle-blowing - that is, approaching higher levels in

one's own department without any restriction - may be first

tried out before allowing access directly to external

government agencies like CVC, CBI, CAG, etc. Similarly,

access to these external agencies directly may be

experimented with before allowing direct access to external

agencies like the media, MPs, etc. Progress from one stage to

the next should depend on how well the idea takes root and

how healthily it grows.

Encouraging more employees to blow the whistle

Adequate protection to whistle blowers : It takes courage to

whistleblow. The costs are involved when one blows the whistle.

Unless the whistleblower is protected, it is difficult to get him/her

to speak up. Blowing the whistle should be carried out for moral

reasons. To encourage employees to speak up against immoral

organizations and managers, the law must protect them not only

on paper but in real sense. For example, whistleblowers must be

able to resume their career after blowing the whistle. They must

be confident that follow-up actions will be taken against the

potential offenders.

Role of Board of Directors : In Asian countries, employees are

loyal to their paymasters. Any unhappiness is expressed in

closed-doors rather than declaring them openly in the public

domain. Even if employees remain quiet, at least, with the internal

controls, some forms of monitoring are present. The key is to let

managers know that their actions are being monitored. Board's

role is essential. Besides thinking about long-term strategies for

their corporations, board of directors must participate actively in

nominating board members and top managers. They must audit

the companies' financial statements to make sure they are fairly

and accurately presented. They must be willing to listen to

employees.

Feedback mechanisms : Feedback mechanisms like hotlines

and staff suggestion schemes can be set-up to encourage

employees to voice their concerns internally. Employees must be

given the option to remain anonymous when they contribute.

Other measures include setting up a clear avenue for them to

voice their concerns and ensuring employees that appropriate

follow-up actions will be undertaken.

Education : Educating the public is essential. The role of media

should not be underrated in this aspect.

Conclusion

Stopping, or at the least curbing, corruption is important, but

there are many ways to work towards that effort. India's

legislative efforts to protect whistleblowers and those who work

to fight corruption is a step in the right direction, however more

must be done.

Global efforts to make it harder to move illicit funds around the

world would help. These efforts include increasing financial

transparency, as well as stronger work by developed-country



governments to crack down on their home banks accepting these laundered, illicit funds. The developed world's continued passive

acceptance of illegal money sets a poor precedence for reigning in such activities.

With technology advancements, it has become easier for concerned employees to blow the whistle. But the point is, employees'

concerns should not be neglected. Their grievances should be heard. They should be encouraged to direct their concerns internally to

managers and even the board of directors rather than letting the general public know about them first. This country is still emerging into

higher transparency levels, and it may take a while before the ethical parameters being pioneered by such companies are adopted

across the board. The required levels of transparency and fair play would require companies to put cer tain proactive and protective

systems into place.

A protection of law to a Whistle-blower will be boosting his moral fiber to disclose the corrupt practices in his knowledge. The bill will

attract others also to whistle-blow for a better future of his country.

Bibliography

1. Absolute Integrity Allows Whistle Blowing, http://fightcorruption.wikidot.com/whistle

2. Advocate Sabelo Mboyi, An Investigation Into The Use Of Whistle Blowing As A Means To Curb Unethical Behavior Of Police

Officers In The Nelson Mandela Bay, April 2008

3. Balkrishnan Ishwarya & Sharma Geetanjali, Need For Mandatory Whistle Blowers Policy For Companies , NSE Newsletter, January

2011

4. Case For Whistle Blowing Law In India, http://www.humanrightsinitiative.org/programs/ai/rti/news/whistleblowing_law.htm

5. Choon Sam Yin, Whistleblowing and Corruption, October 2003, http://choonyin.tripod.com/whistleblowing/

6. Krishnan Sandeep, Whistle Blowing Gets Real, www.humancapitalonline.com

7. Nayak Venkatesh, whistle blower bill in india, August 27, 2010

8. 2001Survey on Bribery and corruption 2010, www.kpmg.com/in

9. Sharma Ritwika , Blowing the whistle, August 31, 2001, http://www.mylaw.net/Article/Blowing_the_whistle

10. Suresh KC, Whistle Blower- A national force to combat corruption, AUGUST 3,2008 , www.lawyersclubindia.com

11. Whistle Blowers Protection, United Nations Office on Drugs And Crime , http://www.unodc.org


129

Why the business or industry people tempted towards unethical or corruption practices reluctantly-A study of business people of – Rajkot city

Prof. Lalit Chande : Asst. Director, T.N. Rao College of Management Studies, Rajkot. E-mail: [email protected]

Abstract

Through the clinical research methodology here I have tried my

level best to understand the social panic problem of corruption or

unethical problems prevails in the Small and Medium Scale

Industries or Traders. The Research has been carried out with the

help of MBA fresher who have been instrumental linkage to my

research objectives which can not be fulfilled without the

response from the industrial and business people of Rajkot. The

endeavour to discover answers to intellectual and practical

problems through the application of scientific method through

convenient sample and tried to know only the causes or reasons

why the business or industry people draw towards unethical or

corruption practices reluctantly.

Introduction

The sober way of defining ethics and moral values would be not to

distinguish between the two and say that they describe what is

right and what is wrong in human behavior but in the given

situation what ought to be is also very important. According to

Thomas carratt” Ethics is the science of judging specifically

HUMAN ENDS and the relationship of means of those ends. It is

also the art of controlling means so that they will serve

specifically human needs “-.It is rather difficult to generalize and

prepare the specific frame for the behavior in all condition. So

many intellectual people have given the theory for the behavior

and conduct where values plus knowledge equals to ethics.

Is it possible for an organization to remain ethical in the face of the

growing corruption, increasing disparity between people and

rapidly reducing profit margins? Thousands of underhand deals

are struck everyday and go unreported or unnoticed. There is

hardly an institution, which has not at some time or the other been

either involved or suspected of some foul play. Even companies

which started off with intentions to do business in an ethical

manner have had to compromise their principles due to the highly

politicized and beauraucratic business.. The dimension of the

routine life has been greatly influenced by the Liberalization,

Globalization and Privatization the policy accepted by the

Government in 1991.Basically nature of human being is very

much rational and selfish from the birth and try to satisfy their

needs and wants by hook or crook and for that they don't mind

even to compromise with the eternal and morale established

values of the society. The paradoxical part is as Human in

individual life very much religious and even try to follow the

ethical norms but collectively and at the time of taking decision in

business they hardly take account of extend of human suffering

and their action might cause in the society. Man is the bundle of

wants and tries level best to even satisfy even psychological

needs too and in that competition everybody run behind luxuries

and consequently so many social ,economical and national

problems arises out of this lust and goose chase and ultimately

resulted in to greed which has no end. The cause and solution is

with the ethical and moral conduct as they are the base of human

relations and it can only save the society from the huge disaster. If

the ethics and values are not to be inculcate naturally in human

behavior then the whole structure of the society, government and

the public system may collapse and destroy the whole beauty.

Specifically in the area of business , ethical reforms are need of

time to prevent country to close destruction and to stop the crime,

bribe, corruption and to feel our country a matter of pride as she

is known for the spirituality and ancient great heritage .Today the

scam like Ghanschara, 2G spectrum , sports scam , Enron and

other corporate scandals boforce and the issues of black money

which are the few examples or glimpse or point percent issues

which are coming on the surface. Most of the colleges and

universities they have started to teach ethics as subject and such

conferences are also a great help to understand the issues but the

question is to inculcate ethical and pious behavior which can

became the part in individual, religious and collectively in the

activities and decision making process of the business.

Some socially panic practices…scams

• Be it the rail-road 'robber barons' in the US,

• The zaibatsu in Japan

• The Russian oligarchs

• The Korean chaebols

• India found itself in the center of such protests in 2010-2011

over the scam in 2G spectrum allocation to telecom

companies. By magnitude of loss to exchequer – over US$ 40

billion – this scam was reported to be the biggest in

democratic India.

• The US-based Union Carbide Corporation (UCC), the parent

company of UCIL-welcome and host by the Indian



Government where more than 25000 workers were killed in

Bhopal plant

• Coffin

• Ghans chara

• Boforce

• Naranpura bank

• Satyam computer

• Ketan parekh

• Bullet proof jackets

• M azaruddin ,Ajay jadeja ,Suresh kalmadi

• Kanimozi

• A-Raja ……….etc.

They all exemplify smoky backroom dealings and patronage

politics. The flow of favoritism from government to certain

(usually large) business corporations in exchange for funds to

important politicians and key bureaucrats. Yet, whenever such a

nexus is unearthing, a huge public outcry follows - as if such

things have never been heard of before. The uproar and the

movement of Ann hazare and fast was also the result of Extreme

level of unethical practices.

Causes of the unethical and corruption practice in business

The question was asked to the business people: Why most of the

people (Business Houses) want to conduct their business

ethically; somehow they are tempted to deal unethically in the

business, why?

The causes were explained by the 100 responded from SMES like

these………..

• For making extra benefits

• Saving time and complete the task in urgency

• High tax structure (VAT) and complexities

• Improper Government policy

• Profit maximization motivates instead of welfare attitude

• Lowering the cost

• Meeting the expenses

• Survive in competition

• Customers are not ready to pay the tax and

• Making their name very famous in the market

• Government policy and procedures

• Not practical tax structure

• Redtapism and strict behavior

• Very complex procedure for sectioning loan ,subsidies ,grant

• Undue query and delay in taking action by the authority

• Law and regulations are not practical and development

friendly

• Everybody practice and progress why should I alone, just flow

along

• Intentional delay tactics by the power orientated people

• Neither the customers nor the traders wish to issues bills to

save the taxes

• External and internal factors pull to practice unethically

• Every body wants to enjoy the life with full luxury and no

compromise even with the standards

• No threats of law

• System itself is corrupt

• Because of severe competition in the market

• Honesty is not rewarded even at last and mostly punished so

why to practice honesty and ethics

• Greed and temptation for earning much

Need and objective of the study

Noble, Honest and integrated citizens are the base for the

developmental process for any nations. India is the country

which is known for the great heritage and role model practices by

so many spiritual and social leaders they have depicted the path

of honesty and integrity by not preaching but practicing in their

own life. The questions arise why the people of business forget

this reality? With the help of this study the young generations who

are directly or indirectly look this all issues and may be tempted to

practice such unethical practices in their individual life too. The

sole purpose of this study is to identify the causes of unethical

practices prevail in the business and why they are tempted

towards such practices. With the help of MBA fresher to know the

ethical practices in business so that they get the idea of practical

research and by that they interact with the corporate and

business world and get practical exposure as well as the

understanding the burning issues of the current time. Another

implied objective is to diagnose this severe and panic problem

minutely and put these all reasons before the researchers and

government officials or even to the concern authorities to prepare

such laws or policies which curtail directly or indirectly this social

and economic curse and make India free from the clutches free,

consequently feel India, really a country or land of peace and

harmony not the land of cunnings or scams.

Scope of the study

Issues which are being studied can be referred by the all

intellectual people and officials gathered here in the 2nd national

level conference and may be beneficial to the corporate houses

and the teaching fraternity and the MBA trainees in the long run.

The outcome has greater impact directly or indirectly to improve

decision makers or policy makers who play the major and

important role for creating development friendly atmosphere. The

policy and law concern with the business and corporate policy

must be structured in such a way that the people find it easy to

practice ethically and integrated in their routine operations. The

study provides sound foundation for future study also. The

further research can be done for whole Gujarat or Entire India to

get the perfect ideas about the temptations of business people

towards the unethical practices and even to add some more

aspects in the questions relate with the government policy or the

prevailing laws concern with the issues.




Research design

The study is base on the descriptive research design where

questionnaire tool is being used to come on the conclusion. The

data has been generated from the 100 respondents the Small and

medium scale industries and business people of Rajkot city only

to fulfill the purpose of the paper. The primary data resource has

been used for the fulfillment of the purpose.

The primary data

The Primary data was collected by the means of questionnaire

administration. The MBA fresher (Management Trainees) were

sent to business houses of Rajkot city personally to contact and

to fill the questionnaire.

Population and the sample size

The respondents were from the Rajkot city only as it is the capital

city of Saurashtra region and Automobile hub too. The 100

respondents were selected from various business class people

so that each section can be represented and we can get the ideas

or causes of unethical practices from each section. The samples

size was taken so far as the convenience of the Management

Trainees are concern.

The sample

The sample consists of 100 business houses – represented by

small and medium business people who are manufacturers,

traders or semi wholesalers. The business people from FMCG,

Electronics, Export business houses or hotel and tourism

industries too. They are mostly contacted personally to collect

the data with the help of questionnaire; some students were sent

the questionnaire and get them filled through e mails as well as

the telephonic interviews conducted too

The sampling method

Important opinions and the reasons behind unethical practices

have been collected from the respondents by convenient

sampling methods only to understand the ground root reality.

Data analysis

The analysis of the data is the core part of the research. Scientific

methods have been used nowadays to get the output or study

made authentic and can also sufficed the purpose what the study

meant for. Here the data were analyzed by manual methods as the

clinical research approach has been utilized to know only the

reasons behind unethical practices in business in Rajkot city only.

Limitations of the study

No research is perfect but it opens the new horizon for further

study and find out the better way of finding out the conclusion and

out put. The study had the some impediments as follows.

• Definition of the bribe or corruption or unethical practice is not

clear so confusion

• So far as the time constrain is there so only the data has been

collected from the Rajkot city only

• The purpose of asking the question is to understand only the

causes of unethical practices so many dimensions were not

included in the study The data have been collected from the

primary resources and first hand information so the handy

information may not give full justice to be included all relevant

sources

• The respondents have been contacted on the basis of

relationship and availability of the time and resources

• The sample may not represent population

Conclusion

In this conference and among the august and most intellectual

educationist and industrialist audience I would request u all to

think about the issues which may be pondered and think upon

indicated issues below and some authentic solutions can be put

in to practice to make the society corruption free.

The issues to be pondered

• Environment • Gender justice

• Corruption • Child Labour

• Consumer grievances • Un employment

• Challenges to the law • Paradox in human behavior

Bhisma Pitamah to Yudhisthir in Mahabharat “self interest is the

most powerful factor in the life of any one. The entire world is

pivoted only on this one factor” At last I would like to sum up with

the thought of our most beloved and respectable father of nation

Mahatma Gandhi “Wealth without work, pleasure without

conscience, knowledge without character, commerce without

morality, science without huminity, religion without sacrifice and

politics without principles “ is of no use. Practicing morality and

become the role model is the most important in the family,

society, government officials or teachers or a professors in a

given filed of karma. Today young generations need role model if

they come across such practicing people even no need to teach

or inculcate separately, they see, feel and never hesitate in

implementing. That is the reason why it is spoken that “values

and ethics are not to be taught but caught”.

Bibliography

1. Schmitt and Klimoski- four ethical dimension relate to HRD

evaluation

2. The case of Hewlett-Packard –Value Based Management in the

organization for “hard” and “soft” Managerial Approach

3. Ethical choices in business- RC SEKHAR

4. Indian ethos of management by Jitatma Nandji.

5. Case and the study of Garg and Parikh 1995,Chakraborthy

1995a (Indians) and from west Macintyre 1981,jackal 1988

6. Corporate in India can not afford to be ethical (Published in

Management & Labour Studies, February 2003)

7. Steidlmeier, P., 1999, 'Gift giving, bribery and corruption:

Ethical management of business relationships in China',

Journal of Business Ethics, Vol. 20, pg. 121 – 132.

8. Verschoor, C. Curtis, 1998, 'A study of the link between a

corporation's financial performances and its commitment to

ethics', Journal of Business Ethics, Vol. 17, pg. 1509 – 1516.


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last names of the authors, under the heading “Bibliography”, at the end of the text. Please don't cite references as footnotes at the

end of each page. Examples of how the references are to be listed in 'Bibliography' are listed below:

* (Book) : Joseph Hair Jr. F., Bush Robert P. and Orthinau David J. (2003), Marketing Research – Within a Changing Information

Environment, New Delhi, Tata McGraw Hill Publishing Company Limited, Second Edition, pp. 542.

* (Research Paper/article in a journal): Fornell C. (1992), National Customer Satisfaction Barometer- The Swedish Experience,

Journal of Marketing, Vol. 56, No. 1, pp. 6-21.

• Papers will be processed through a blind review by experts in the subject areas.

• The title of the paper, writer's name, designation, name of the institute and university, mobile number and E-mail ID should appear

only on the first page along with title of the paper and should not be repeated any where else. Please mention your Postal Address

where the journal should be posted, in case your paper gets selected for publication.

• The responsibility for the subject matter and the views expressed in the papers published in the journal lie solely with the authors. The

publication team shall not be responsible for the mistakes of the authors.

• The Publication Team, reserves the right to omit/delete/edit some, or part there of, of the research paper / work submitted, if found

necessary.

• All manuscript should be submitted in only electronic form to Email: [email protected]

• The Publisher / Institute/ Trust and Publication Team shall not be responsible for :

* Manuscripts e-mailed to any other E-mail address other than: [email protected]

* Plagiarism in research paper by the author.

* Late receipt of research papers for a particular issue of Journal.

* Acceptance / rejection / late printing of any research paper / case study / book review, without assigning any reason.

* Any unintended mistake by the editorial, publication and printing team.

• Only original work, which is not considered in any other Journal, and has not been submitted to any other Journal, will be considered

for publication in the Journal. Concurrent submissions to other publications or journals are viewed as serious breach of ethical and

legal norms. The Editor-in-Chief, the Editorial Team and Publisher are not responsible for authentication of the papers/ research work

published in this journal. The authors are solely responsible for any legal matter resulting out of violation of Copyright Act. The

author should submit a Declaration along with the Paper, mentioning that the work is original in nature and has not

been submitted elsewhere to any other Publication/ Journal concurrently.

• Please send your article to : [email protected]

132

GUIDELINES FOR AUTHORS/CONTRIBUTORS



AUTHOR GUIDELINES FOR WRITING CASE STUDY



SANKALPA : Journal of Management & Research invites

teaching case studies, in the areas of Management & Technology.

The Review Process

Each case study has to pass an initial screening and, if judged

suitable for this publication, it is then sent to an appropriate

editorial board member for review.

Editorial Criteria

The following points should be considered before submitting your

case study.

Case Study – quick reference questions for case-writers:

• A case should an explicit or implicit management issue (or

decision)?

• The issue should be important and relevant to the learning

objectives of the course which can be taught

• Present a balanced perspective, including contrast and

comparisons?

• Have you taken a “neutral” stand (avoid biasing the readers)?

• The case should provide “currently useful generalizations”?

Copyright & Permissions

Consent to Publish- Release form

Case studies which includes data which is not made public by the

company must include appropriate signed permissions from

case protagonists e.g. CEO; company directors or any employee

given authority by the organisation; or the person or persons

under review, granting full permission to publish the case.

Defamation/libel

If inaccurate, unsubstantiated or controversial statements are

made about organizations or people in a submitted case, the

Publisher reserves the right to request changes to the text from

the author or to reject the case prior to publication. However, the

Publisher or the printers shall not be responsible for any errors,

whatsoever, committed by the authors of case studies.

Critiques and reviews of organizations, products and services are

acceptable but comments must be constructive and must not :

1) Expose groups or individuals to hatred, ridicule or contempt

2) Cause them to be shunned or avoided

3) Lower them in the estimation of right-thinking members of

society generally

4) Disparage them in their business, trade, office or profession.

Originality

Case studies submitted should not have been published before in

their current or substantially similar form, or be under

consideration for publication in any ISSN/ ISBN-registered

publication.

Permissions

Case studies submitted for publication are not an infringement of

any existing copyright. For ease of dissemination and to ensure

proper policing of use, case studies and contributions become

the legal copyright of the publisher unless otherwise agreed.

Prior to article submission, authors should clear permission to

use any content that has not been created by them.

Authors should not assume that any content which is freely

available on the web is free to use. Authors should check the

website for details of the copyright holder to seek permission for

re-use.

Manuscript Requirements :

Covering letter : A brief letter outlining the education need

identified for the case, including a list of the courses and

institutions this case has been used in. The letter should also

confirm that the subjects of the case have seen the case and are

happy for it to be publicly distributed.

Case Study : We accept both short cases and longer in-depth

case studies:

• Minimum length – cases must be no shorter than 1000

words, excluding Appendices, references and supplementary

materials.

• Maximum length – cases must be no longer than 3,000

words, excluding appendices, references and supplementary

materials

• A title of not more than eight words should be provided.

• A brief autobiographical note should be supplied including:

* Full name

* Affiliation

* E-mail address

* Full international contact details

* Brief professional biography.



NB : This information should be provided on a separate sheet and

authors should not be identified anywhere else in the case.

Teaching Notes : all cases must include at least one page of

discussion and assignment questions.

Structured Abstract : the abstract must be no longer than 250

words and should include the following points:

* Subject area of the case

* Student level and proposed courses the case can be used

on

* Brief overview of the case

* Expected learning outcomes

* List of supplementary materials

* Key words

Optional

* List of further reading materials

* Multimedia accompaniment to the case e.g. audio, visual

files

Formatting

1. Headings must be short, with a clear indication of the

distinction between the hierarchy of headings. Headings to be

presented in bold format, with consecutive numbering.

2. Notes or Endnotes should be used only if absolutely

necessary and must be identified in the text by consecutive

numbers, enclosed in square brackets and listed at the end of

the article.

3. All Figures (charts, diagrams and line drawings) and Plates

(photographic images) should be submitted in both electronic

form and as hard copy originals. They should be of clear

quality, in black and white and numbered consecutively with

numerals.

Figures created in MS Word, MS PowerPoint, MS Excel,

Illustrator and Freehand should be saved in their native formats.

4. Tables should be typed and included as part of the

manuscript. They should not be submitted as graphic

elements. Supply concise and clear captions for all tables,

figures and plates. Ensure that any superscripts or asterisks

are shown next to the relevant items and have corresponding

explanations displayed as footnotes to the table, figure or

plate.

5. References to other publications must be in Harvard style and

carefully checked for completeness, accuracy and

consistency. This is very important in an electronic

environment because it enables your readers to exploit the

Reference Linking facility on the database and link back to the

works you have cited through Cross Ref.

You should quote publications in the text: (Adams, 2006) using

the first named author's name or (Adams and Brown, 2006) citing

both names of two, or (Adams et al., 2006), when there are three

or more authors. At the end of the paper a reference list in

alphabetical order should be supplied:

For journals: Surname, Initials (year), "Title of article", Journal

Name, volume, number, pages. e.g. Capizzi, M.T. and Ferguson,

R. (2005), "Loyalty trends for the twenty-first century", Journal of

Consumer Marketing, Vol. 22 No. 2, pp. 72-80.

Final submission of the case

Once accepted for publication, the editor may request the final

version as an attached file to an email or to be supplied on a CD-

ROM labelled with author name(s); title of article; journal title; file

name.

Authors should note that proofs are not supplied prior to

publication. The manuscript will be considered to be the definitive

version of the case. The author must ensure that it is complete,

grammatically correct and without spelling or typographical

errors.

The preferred file format is Word. For technical/maths content,

Rich Text Format (rtf) is acceptable. PDF files “Cut & Paste”,

Data Table / Graph / Chart etc. are not acceptable. Please

send your Case Study to : [email protected]

Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012 135


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