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,
Wealth and the whole world. The effect of slowing economies of The USA and Europe, especially PIIGS
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Middle-East and some African countries. Under the circumstances, our universities and higher education
institutions must change to reflect 21st century needs and demands of people.
Many States, universities and colleges offering traditional professional degree programs in Pharmacy, MBA and Engineering
streams are finding 25% to 30% seats vacant during last 2 years. The trend will continue even in the wake of rising demand for Higher and
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to 50% to 60% GER in some developed nations.
Under the circumstances, our esteemed universities, many of which offer age-old courses and obsolete syllabi, and turnout
jobless graduates, must change to reflect new learning opportunities that are required by new-age industries, businesses and
professional, in addition to the existing courses for current businesses. This is possible only by introducing practical, work-based
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Technological University through its 130 affiliated MBA Institutes. Sadly, many other universities in the country are yet to catch up with
the speed of such modernization.
21st Century Universities should be learner-centric, offering courses that enable students to find and fit into work or job
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off-the-campus. Industry managers must come forward to invest in teaching young students. The universities must focus on holistic
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requirements; at philosophy, policy as well as practice levels. For example, we can call -
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Ultimately, students must be attracted to join the university as a seat of learning, like Nalanda and Takshashila Vishvavidyalaya
(in Bihar / Jharkhand now) and Vallabhi University (near Vallabhipur, Dist: Bhavnagar in Gujarat) during 8th to 14th century. Recently,
Madhya Pradesh Government has given land to set up Budhhist University near Bhopal, while Gujarat Government declared Ahimsa
University.
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
India Survey; in addition to several Awards and Certification received by our institute, Faculty members and Students for outstanding
performance in teaching, research and publication. Checkout at www.cksvim.edu.in
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
Editor-in-Chief
Dr. Rajesh Khajuria
Editorial Board
Dr. Satendra Kumar
Dr. A K Sen Gupta
Dr. Besant Raj Bhandari, Geneva
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Editorial Sub-committee
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Dr. J. P. Joshipura
Dr. O. S. Junare
Dr. Abhijeet Chatterjee
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Dr. Kunjal Sinha
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Mrs. Savitha K.
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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
Management and Business Ethics & Corporate Governance. The
bi-annual Journal 'SANKALPA' portrays our strong conviction to
disseminate the thinking of academicians and practitioners in
the field of Management discipline, which they communicate
through their 'Reporting' in the form of research papers/ articles,
study reports,case studies original conceptualizations with
logical vigor and vision.
The members of the Editorial Board appeal to all the academicians and practitioners to communicate their 'Reporting' to the Editor-in-Chief for publication in our subsequent issues, through the e-mail ID :[email protected]
Please See Guidelines for Authors & Contributors Call for Case Studies
Subscription Rates : (See last pages)
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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
SMJV's CKSV Institute of Management, Vadodara, India
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
SMJV's CKSV Institute of Management, Vadodara, India
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
operative banks and their view regarding attitude of Management
Table 2 :
(Source: Structured questionnaire)
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.
Hypothesis using two- way Anova
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
(5 % level of significance)
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)
SMJV's CKSV Institute of Management, Vadodara, India
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
Source of Variation SS DF F F Crit
Rows(Bank)
Columns(Leadership quality)
Error
Total
MS
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
Table 3 :
(Source: Structured questionnaire)
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.
Hypothesis using two- way Anova
Setting of Hypothesis (Ho):
There is no significant difference among the employees within various co-operative banks and their view regarding non-financial
incentives provided by the bank.
Setting of Alternate Hypothesis (H1):
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
(5 % level of significance)
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)
SMJV's CKSV Institute of Management, Vadodara, India
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
Source of Variation SS DF F F Crit
Rows(Bank)
Columns(Non Financial Incentive)
Error
Total
MS
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
6
Table 4 :
(Source: Structured questionnaire)
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.
Hypothesis using two- way Anova
Setting of Hypothesis (Ho):
There is no significant difference among the employees within various co operative banks and their view regarding current efficiency of
the bank.
Setting of Alternate Hypothesis (H1):
There is significant difference among the employees within various co operative banks and their view regarding current efficiency of the
bank.
Anova Table 4
(5 % level of significance)
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
Data analysis and interpretation
Customer perspective
Table 5 : Is bank liquid enough to pay off their funds whenever required? (Bank-wise distribution)
(Source: Structured questionnaire)
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.
Hypothesis using two- way Anova
Setting of Hypothesis (Ho):
There is no significant difference among the customers within various co operative banks and their view regarding bank liquidity.
Setting of Alternate Hypothesis (H1):
There is significant difference among the customers within various co operative banks and their view regarding bank liquidity.
Anova Table 5
(5 % level of significance)
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.
SMJV's CKSV Institute of Management, Vadodara, India
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
F CritFMSDFSSSource of Variation
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
Table 6 :
(Source: Structured questionnaire)
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
Hypothesis using two- way Anova
Setting of Hypothesis (Ho):
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.
Setting of Alternate Hypothesis (H1):
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
(5 % level of significance)
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)
SMJV's CKSV Institute of Management, Vadodara, India
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
F CritFMSDFSSSource of Variation
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
9
banks and the loan facilities availed by them.
Table 7 :
(Source: Structured questionnaire)
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.
Hypothesis using two- way Anova
Setting of Hypothesis (Ho):
There is no significant difference among the customers within various co operative banks and their view regarding employee efficiency.
Setting of Alternate Hypothesis (H1):
There is significant difference among the customers within various co operative banks and their view regarding employee efficiency.
Anova Table 7
(5 % level of significance)
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
F CritFMSDFSSSource of Variation
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
Hypothesis using two- way Anova
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
(5 % level of significance)
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)
SMJV's CKSV Institute of Management, Vadodara, India
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
F CritFMSDFSSSource of Variation
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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.
Bibliography
1. Belaisch, Ag., Kodres, L., Levy, J., and A. Ubide (2001) “Euro-Area Banking at the Crossroads”, IMF Working Paper, WP/01/28, IMF
2. Berger, A. Goldberg, A. and L. White (2001a) The Effects on Dynamic Changes in Bank Competition on the Supply of Small
Business Credit, European Finance Review 5
3. Berger, A., Klapper, L. and G. Udell (2001b) The Ability of Banks to Lend to Informationally Opaque Small Businesses. Journal of
Banking and Finance, Vol. 25, 12
4. Commission of the European Union (2001) Co-operatives in Enterprise Europe, Consultation paper, Brussels
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5. Eichengreen B., and H., Gibson (2001) Greek Banking at the Dawn of the New Millennium, Centre for Economic Policy Research
Discussion Paper Series, CEPR
6. Emmons, William R. and Frank R. Schmid (2000) Banks VS. Credit Unions: Dynamic Competition in Local Markets. Federal Reserve
Bank of St. Louis Working Paper Series, Working Paper 2000-006A, February. http://www.stls.frb.org/research/wp/2000-006html
7. Emmons, William R. and Frank R. Schmid (1999a) Credit Unions and the Common Bond. Federal Reserve Bank of St. Louis Review,
September/October, pp. 41-64
8. ESOMAR (1997) Harmonisation of Social-demographics: The Development of the ESOMAR European Social Grade. Amsterdam,
The Netherlands (www.esomar.nl)
9. European Central Bank (2001) “Bank concentration and retail interest rates”, Working Paper Series, July 2001.
10. EC (1997) Rural Developments, Situation and Outlook, CAP 2000 Working Documents, DG VI, Luxemburg
11. Farinha, L. and J. Santos (2002) Switching from Single to Multiple Bank lending relationships: Determinants and Implications,
Journal of Financial Intermediation, pp. 124-151
12. Ferguson, C. and D. Mckillop (1997) “The strategic Development of Credit Unions”, UK: Wiley
13. Frankel, L., Almeyda, G., Ashe, J. Dettweiller, J. K. (1999) Bridging the Gap: Co-operative Development Organisations and Private
and Voluntary Organisations in Microfinance. U.S. Agency for International Development, Bureau for Humanitarian Response, Co-
operative Development Office, June 7, 1999
14. Fuller, D. (1998) Credit Union Development: Financial Inclusion and Exclusion. Geoforum, Vol 29, No. 2, pp. 145-157
15. ILO (2001) Promotion of Cooperatives. Report V (1), International Labour Office, Geneva
16. Institute of Economic and Industrial Research (IOVE), Meeting on the subject: Banks and enterprises in view the Eurocurrency,
Athens June 1996
17. Leyshon, A., and N. Thrift (1995) Geographies of financial exclusion-financial abandonment in Britain and the United States.
Transactions of the Institute of British Geographers, Vol. 20 (3), pp. 312-341
18. Leyshon, A. and N. Thrift (1993) The Restructuring of the UK Financial Services Industry in the 1990s: A Reversal of Fortune?
Journal of Rural Studies, Vol. 9 (3) pp. 223-241
19. Martin, R. and R. Minns (1995) Undermining the Financial Basis of Regions: The Spatial Structure and Implications of the UK
Pension Fund System. Regional Studies, Vol. 29.2, pp. 125-144
20. McArthur, A., McGregor, A., and R. Stewart (1993) Credit Unions and Low-Income Communities. Urban Studies, Vol. 30, No.2, pp.
399-416.
21. McKillop, D., Ferguson, C. and G. O'Rourke (1997) A Typology for Credit Unions, The International Co-operative Review, ICA, Vol.
90, No.1, pp. 39-47
22. NSSG – National Statistics Service of Greece (2001) Population Census, Athens
23. OECD (2003) The Non-Profit Sector in a Changing Economy. OECD Publications, Paris
24. OECD (2001) OECD Territorial Outlook – Territorial Economy, OECD Publications, Paris
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26. OECD (1994) Creating Rural Indicators for Shaping Territorial Policy. OECD Publications, Paris
27. Papageorgiou, C. (2004) Sustainable Co-operative Economics. Theory and Practice. Athens: Stamoulis
28. Pratt, D.J., Leyshon, A. and N. Thrift (1996) Financial Exclusion in the 1990s: The Changing Geography of UK retail financial
services. Working Paper on Producer Services No. 34, University of Birmingham and University of Bristol.
29. Prodi (2002) Addressing speech of Mr Romano Prodi at the European Co-operative Convention “Co-operative Added Value”,
Brussels, 13 February 2002
30. Ray, C. (2000) Endogenous Socio-economic Development in the European Union – Issues of Evaluation. Journal of Rural Studies,
16, pp. 447-458
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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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
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
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SMJV's CKSV Institute of Management, Vadodara, India
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
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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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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.
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
22 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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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
SMJV's CKSV Institute of Management, Vadodara, India
24 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
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25Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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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
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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
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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
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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
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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
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SMJV's CKSV Institute of Management, Vadodara, India
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.
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
33Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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34 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
level of significance is 5.991. Hence the null hypothesis is
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
level of significance is 3.841. Hence the null hypothesis is
rejected i.e. consumer behaviour towards comfort is not
independent of gender.
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
The tabulated value of ÷2 for 2 degrees of freedom at 5 percent
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.
Here ÷2 = 1.4058 Here, the 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
accepted i.e. consumer behaviour towards design is
independent of gender.
Neither Agreenor Disagree (%)
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
Neither Agreenor Disagree (%)
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
SMJV's CKSV Institute of Management, Vadodara, India
35Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
6. H : Consumer behaviour towards UNIQUENESS is 0
independent of gender.
H : Consumer behaviour towards UNIQUENESS is not 1
independent of gender.
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
independent of gender.
H : Consumer behaviour towards STORE IMAGE is not 1
independent of gender.
Here ÷2 = 0.3739 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 store image is
independent of gender.
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
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 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
Neither Agreenor Disagree (%)
Group
Strongly Agree (%)
Total(%)
Male
70
Female 30
Total 100
Agree (%)
SMJV's CKSV Institute of Management, Vadodara, India
36 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
(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.
SMJV's CKSV Institute of Management, Vadodara, India
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.
38 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
39Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
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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 :
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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
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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
43Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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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.
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Core Values Enacted ValuesStructural Support Team Interaction
KNOWLEDGE CULTURE
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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.
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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.
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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.
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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
50 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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51Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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52 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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53Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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54 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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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untapped-market/732418/
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?
SMJV's CKSV Institute of Management, Vadodara, India
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SMJV's CKSV Institute of Management, Vadodara, India
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.
57Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
58 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
59Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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)
SMJV's CKSV Institute of Management, Vadodara, India
60 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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Empirical Investigation of FIIs' Role in the Indian Equity
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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
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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
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14. Ramanaiah, M. (2007). Foreign Institutional Investors and
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between stock return with respect to exchange rate and FII:
evidence from India.
SMJV's CKSV Institute of Management, Vadodara, India
61Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
62 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
Pearson CorrelationSig.(2-tailed)N
.352(**)
1
.975(**)
.670(**)
.769(**)
.888(**)
.684(**)
.000 .000 .000 .000 .000 .000
2471 2471 2471 2471 2471 2471 2471
.852(**)
.000
d_SENSEX
Pearson CorrelationSig.(2-tailed)N
.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
Pearson CorrelationSig.(2-tailed)N
.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
Pearson CorrelationSig.(2-tailed)N
.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
Pearson CorrelationSig.(2-tailed)N
.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
Pearson CorrelationSig.(2-tailed)N
.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
SMJV's CKSV Institute of Management, Vadodara, India
63Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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)
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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
65Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
Level of significance = 0.05
Interpretation
From the ANOVA table we have found that there is a significant
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
H0: There is no significant difference in the perception of security
& 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
H0: There is no significant difference in the perception of security
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
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 age group people.
As per education qualification
H0: There is no significant difference in the perception of security
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
SMJV's CKSV Institute of Management, Vadodara, India
66 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
Sr.No. Factors Significant value
1
security and privacy
0.000
2
trust
0.000
3
innovativeness
0.336
4
familiarity
0.067
5 awareness 0.002
Sr.No. Factors Significant value
1
security and privacy
0.000
2
trust
0.000
3
innovativeness
0.000
4
familiarity
0.000
5 awareness 0.000
Sr.No. Factors Significant value
1
security and privacy
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
SMJV's CKSV Institute of Management, Vadodara, India
Level of significance = 0.05
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
Education Qualification
SSC HSC Graduation Post Graduation
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.
• There is a significant difference in the perception of security &
SMJV's CKSV Institute of Management, Vadodara, India
68 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
• There is a significant difference in the perception of security &
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
Education Qualification
SSC HSC Graduation Post Graduation
3.500
3.250
3.000
2.750
2.500
2.250
Mea
n of
Aw
aren
ess
Under Matriculate
Education Qualification
SSC HSC Graduation Post Graduation
3.200
3.000
2.800
2.600
2.400
2.200
2.000
Mea
n of
Inno
vativ
enes
s
Under Matriculate
Education Qualification
SSC HSC Graduation Post Graduation
SMJV's CKSV Institute of Management, Vadodara, India
69Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
71Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
SMJV's CKSV Institute of Management, Vadodara, India
72 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
73Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
SMJV's CKSV Institute of Management, Vadodara, India
74 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
• 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
76 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
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SMJV's CKSV Institute of Management, Vadodara, India
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
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SMJV's CKSV Institute of Management, Vadodara, India
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.
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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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
• 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)
82 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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 (%)
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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(%)
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
87
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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
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www.sebi.gov.in
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
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Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
89Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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%
SMJV's CKSV Institute of Management, Vadodara, India
90 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
91Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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%
SMJV's CKSV Institute of Management, Vadodara, India
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
92 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
93Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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/
SMJV's CKSV Institute of Management, Vadodara, India
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
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Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
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
95Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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96 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
transactions approved 10 12 22 19
Category C
transactions approved 3 3 4 4
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).
Category A – Projects with potential significant adverse social or
environmental impacts that is diverse, irreversible or
unprecedented;
Category B – Projects with potential limited adverse social and
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.
• 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,
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97Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
• 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,
SMJV's CKSV Institute of Management, Vadodara, India
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
98 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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99Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
• 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
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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
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Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
101Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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102 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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103Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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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dilemmas”, Journal of Business Ethics, 17 (12): 1325-1335.2. Berl, R. L., & Shannon, J. R. (1997), “Are we teaching ethics in marketing? : A survey of students' attitudes and
perceptions”, Journal of Business Ethics, 16 (10): 1059-1075.3. Bishop, T. (1992), “Including business ethics into an undergraduate curriculum”, Journal of Business Ethics, 11: 291-299.4. Burke, F., & Carlson, P. J. (1998), “Lessons learned from ethics in the classroom: Exploring student growth in flexibility,
complexity and comprehension”, Journal of Business Ethics,17 (11): 1179-1187.5. Byerly, R. T., Dave, D., & Medlin, B. D. (2002), “Ethics in business program curricula: An empirical investigation of the
attitudes and perceptions of United States students”, International Journal of Management, 19 (2): 357-365.6. Clark, C. K. (2003), “Reviewing the value of ethics education”, Pennsylvania CPA Journal, 74 (2), 18-19.7. Cowton, C. J. and J. Cummins: 2003, _Teaching Business Ethics in UK Higher Education: Progress and Prospects,
Teaching Business Ethics 7, 37–54.8. David, F. R., Anderson, L. M., & Lawrimore, K. W. (1990),“Perspectives on business ethics in management education”, S.A.M.
Advanced Management Journal, 55(4): 26-32.9. Elmore, R. C., Rezaee, Z., & Szendi, J. Z. (2001), “Ethical behavior in higher educational institutions : The role of the code of c onduct”, Journal of Business Ethics, 30 (2): 171-183.10. Enderle, G.: 1997, _A Worldwide Survey of Business Ethics in the 1990s_, Journal of Business Ethics 16, 1475-1483.
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11. Gautschi III, F., & Jones, T. M. (1998), “Enhancing the ability of business students to recognize ethical issues: An empirical assessment of the effectiveness of a course in business ethics”, Journal of Business Ethics, 17 (2): 205-216.
12. Hosmer, L. T.: 1999, _Somebody Out There Doesn't Like Us : A Study of the Position and Respect of Business Ethics at Schools of Business Administration, Journal of Business Ethics 22, 91–106.
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business degree in a British university : Implications for business ethics curriculum design”, Journal of Business Ethics, 48(1): 7-20.
15. Mahin, L. (1998), “Critical thinking and business ethics”, Business Communication Quarterly, 61 (3): 74-78.16. Nasher, F. B., & Ruhe, J. (2001), “Putting American pragmatism to work in the classroom”, Journal of Business Ethics, 34 (3):
317-330.17. Oddo, A. R. (1997), “A framework for teaching business ethics”, Journal of Business Ethics, 16 (3): 293-297.18. Park, H. (1998), “Can business ethics be taught? : A new model of business ethics education”, Journal of Business Ethics, 17 (9):
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Business Ethics, 11: 225-229.20. Sims, R., & Brinkmann, J. (2003), “Business ethics curriculum design: Suggestions and illustrations”, Teaching Business Ethics,
7: 69-86.21. Zych, J. M. (1999), “Including ethical issues with managerial decision making in the classroom: Product support program
decisions”, Journal of Business Ethics, 18(3): 255-266
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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
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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
106 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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107Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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108 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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109Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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110 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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111Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
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112 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
• 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.
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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
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Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
114 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
115Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
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116 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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117Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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118 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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119Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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
121Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
122 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
123Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
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
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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
125Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
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126 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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127Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
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128 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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
SMJV's CKSV Institute of Management, Vadodara, India
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
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Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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.
130 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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131Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
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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132
GUIDELINES FOR AUTHORS/CONTRIBUTORS
SMJV's CKSV Institute of Management, Vadodara, India
Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
AUTHOR GUIDELINES FOR WRITING CASE STUDY
133Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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.
134 Sankalpa : Journal of Management & Research ♣ Volume 2 ♣ Issue 1 ♣ January 2012
SMJV's CKSV Institute of Management, Vadodara, India
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
SMJV's CKSV Institute of Management, Vadodara, India
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Sankalpa : Journal of Management & Research
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