Corporate Social Responsibility: Towards Sustainable Welfare.

Sustainable Welfare

TODAY, about 300 multinationals control 25% of the world’s assets. Indian companies currently comprise only a fraction of this number. However, with our economy coming of age, more and more of them will lay claim to this elite list.

While this is truly a matter of great pride, we must remember that there rests an equally momentous responsibility on us to give back to the society that has nurtured our growth. Today, most companies contribute to society by means of well-defined corporate citizenship initiatives executed by their not-for-profit trusts and foundations. However, we believe it is important for corporations to look beyond charity and redefine the act of ‘giving back’. Corporations must look at cultivating and encouraging social entrepreneurship in society with the same degree of focus and energy that keeps profitable businesses running.

As companies with a conscience, the onus is on us to lead the initiative to reform. We must recognise that the power to initiate change lies with the youth, particularly as most employees across organisations are today under the age of 30.

Youth have found empowerment in the ubiquity of technology and the democratisation of online media, among other factors in today’s world. In India, we see more and more people voicing a need to do their bit for governance, policy-making and improving civic systems. Most important, they want to be agents of change by making a positive difference. Many of these people have path-breaking ideas for social change but not always the means and resources to take them to fruition. Often, their dreams go unrealised for lack of support or guidance.

With the right push, imagine the transformation their ideas could bring to the economy, society and the environment. Think of the difference they could make by channelling the energy of the youth towards improving education or healthcare.

Companies are accountable to society, not just their shareholders. They must look beyond the current performance yardstick of shareholder impact and profits. Creating a culture of leadership is a pressing need, particularly to ensure that our social values keep pace with economic growth. The onus is on companies to catalyse this process by broadening their horizons on social commitment. Corporates should augment their current charity efforts and utilise their business experience, acumen and capabilities to provide the required impetus to social entrepreneurship and make social development efforts scaleable and sustainable.

The case for social entrepreneurship has never been stronger. For both companies and individuals, there is an urgent need to evolve a systematic approach to addressing social issues by applying a combination of inspired effort and strategic thinking. This also means pushing the boundaries of corporate social responsibility by making the act of giving sustainable for both benefactors and beneficiaries.

What we have before us is the perfect opportunity for corporations to step in and empathise with social entrepreneurs. The challenges faced by social entrepreneurs are similar to those faced by any fledgling company. With our wealth of experience, the corporate sector is capable of extending support to entrepreneurs by advising them on processes, quality parameters, building scale, enshrining values and ethics, exploiting market potential and fine-tuning financial performance.

Being entrepreneurs ourselves, we can easily recognise that an organised initiative has greater potential for social impact than fragmented efforts in social entrepreneurship. The key to success lies in reaching out to motivated individuals by offering access to a network of successful entrepreneurs along with a framework for evaluating social ideas, exploring funding sources and models, and charting a roadmap for the successful execution of their plans.

The emphasis must be on selecting social ideas that are sustainable, profitable and suitable to be implemented through a clear business plan. Participating in such an initiative will give young corporate professionals a taste of entrepreneurship beyond what their job roles can offer them. They will learn how to evaluate ideas, build business cases, seek funding, learn governance mechanisms, etc. At Infosys, they have already set the ball rolling. INFYi is an Infosys initiative focused on providing young entrepreneurs with an opportunity to make a positive social impact and seeks to combine professional excellence with social conscience.

Tips to tally year-end accounts.

Tips to tally year-end accounts

MANY small business owners have to manage with minimal staff strength. They often leave the function of transactions, record keeping and accounting to inexperienced staff. Depending on how the accounting documents are filed and kept, the accounting personnel may face the following three scenarios:

FIRST SCENARIO — THE WORST CASE

Here, the owners have little or no knowledge of accounting and transactions record keeping. No accounting records or transaction records listing are kept. No separate recording of receipts and payments made. All the accounting documents, including receipts and invoices, are in a mess. Before you bring order to the accounts, the three steps to follow are: sort all the accounting documents by types and in chronological order; identify any obvious missing documents and take action to get a copy, and key in transactions in the accounts.

Start with the cheque butts and bank statements by entering transactions into the cash book and the relevant accounts in the general ledger. Since there was no recording of transactions throughout the whole financial year, it serves little purpose now, if you chose to record the transactions the conventional way to the books of original entry (Sales day book, purchase day book) and then post the transactions to the general ledger.

Before closing all the accounts and preparing the balance sheet and income statement, identify the credit transactions. Use journal entries to record and post these credit transactions in the respective accounts in the general ledger. Also, the financial year end inventory balance is required to be ascertained.

SECOND SCENARIO — MODERATE CASES

Accounting documents are filed by types and in chronological order. No cash book was maintained but a listing or book, which was used to record and describe each receipt and payment was maintained. In a way, this serves the role of cash receipts journal and cash payment journal. You need to go through the receipts and payments listing and segregate all the transactions into the respective types or groups and compute the total of each type or group of the transactions in accordance with the general ledger accounts items.

You just need to post the total of each type or groups of transactions by way of journal entries the cash account and the respective general ledger accounts. This should be performed month-by-month and also ensure the bank reconciliation is also performed month-by-month.

THIRD SCENARIO — ORGANISED AND GOOD TRANSACTIONS RECORD KEEPING

Cash book is used to record all receipts and payments and proper columns in the cash book are used to record each type of group of transactions in accordance with the accounts items in the general ledger. In these cases, the total of each column in the cash book is readily available at the end of each month. Most likely the monthly bank reconciliation statements are also prepared. You just need to record the total of each column in the cash book in the general ledger using journal entries.

Reference:
Adapted from www.learnaccounting.wordpress.com

It Pays Rich Dividends To Stay Ethical.

It Pays Rich Dividends To STAY ETHICAL

It May Be Painful In The Short Term, But A Strong Ethical Code Is What Builds Lasting Value For A Start-Up.

“It is better to lose a billion dollars than a good night’s sleep.” NR Narayana Murthy

IT TOOK place nearly a decade ago, but is still fresh in the mind of R Satya Narayanan, founder of Career Launcher. Officials from the income-tax department were scrutinising the account books of his online education services firm, when an officer suggested he planned to disallow some expenses and impose tax on them. Mr Narayanan argued the expenses deserved to be tax-free, but the officer didn’t agree. After much haggling, the officer suggested he could allow the expenses if a certain sum was paid to him. It was the entrepreneur’s moment of truth. He had to decide whether to pay the bribe and get rid of the headache, or refuse and face the consequences.

“It is one thing to talk about ethics, but quite another to deal with it when you come face-to-face with such a situation,” recalls Mr Narayanan, whose fledgling firm was then still trying to find its feet on a modest revenue of Rs 4 crore. His company needed to move fast, and focus on growth. It simply could not afford to lose valuable time and energy on income tax procedures and litigation. The tax official must have reckoned he had the firm cornered and Mr Narayanan would simply pay up.

But Mr Narayanan disappointed the official. “I said I want to build the company on certain values. So, I told him you are not the final authority. We will appeal and see, but we won’t pay,” says Mr Narayanan. The officer disallowed the expenses and slapped a tax demand, but Career Launcher accepted the challenge. It won an 18-month long legal battle and got the decision reversed. Mr Narayanan believes the incident sent a strong message to everybody concerned: The taxmen knew this company can’t be bullied and the employees knew that there was no place for unethical practices here. Today, Career Launcher has an annual revenue of Rs 70 crore, operates from 130 locations and serves 50,000 students each year. Honesty has not dragged down the company’s growth, but has reinforced it.

The biggest question before most start-up entrepreneurs in India is how to tackle corruption in the government and a propensity for unethical behaviour among, at least, a section of employees, vendors, customers, competitors and everybody else. Unfortunately, many business leaders choose the easier answer. They factor in some amount of cheating at all levels and start playing by the system. They vigorously take part in cutting corners — be it in taxes, product quality, paying out liabilities or in their treatment of employees. They bribe their way through. They cheat to avoid being cheated. In the short term, these practices save money and thus look attractive. With everybody else also in the game, it becomes easy to justify one’s poor conduct by blaming it on the society.

In the long term, however, this race to the bottom hits back with a cancerous force. Employees figure out that the boss has lost the moral high-ground and start imitating the entrepreneur in their own dealings with the company. It may start as an inflated expense bill or a quickly stolen long-distance call, but the cheating spreads in scope and reach. Customers, government officials, shareholders and all other stakeholders imbibe the poisonous spirit and resort to I-Squeal-Before-You-Do game. Exploitation becomes the norm and the company self-destructs. Some victims end in the start-up stage, while others hold on longer and go bust only after they become Enrons or Arthur Andersons. But fail they do.

“It may be the tougher path, the road less travelled, but good ethics is an important element for long-term survival,” says Satish Doshi, founder-chairman of Executive Recruiters Association, and a fellow of the Computer Society of India. “What it means to an organisation is that you don’t need to look from behind the shoulders of people to see if there are any vested interests at play. Ethics build a trust-based environment.”

To build this ecosystem within one’s company, an entrepreneur must start by formally writing down a code of conduct for all employees and be the first to start practising it, say experts. Such a code of conduct must be fully aligned with the personal value system of the entrepreneur and it helps if one is honest to start with. “It is painful to see entrepreneurs say they are in business to make money. I tell them, first define what is money,” says MS Pillai, founder of Sadhana Centre for Management and Leadership Development, and a member of The Indus Entrepreneurs. “Is it just the currency notes or is it the wealth of goodwill and respect you build for your company?”

Mr Pillai says an entrepreneur must check if he or she has the “inner stamina” to sustain an ethical business and if not, should stay out of business. Great companies have built this strength among their entire workforce and do not tolerate any violation. Mr Pillai cited the example of a fast-moving consumer goods company, one of the largest in India, which sacked a general manager for accepting a forbidden Diwali gift. A reputed vehicle maker sacked two top performers for touching women colleagues in an indecent way at a cocktail party. Both these decisions came less than 24 hours of the violations. “The message to the employees was loud and clear. There will be no compromise if certain things take place,” recalls Mr Pillai.

Just like financial, marketing or production plans are written down, a company needs to write down its ethical policy too, say business mentors. This will communicate the code of conduct across the organisation, offer an objective frame of reference and stipulate proper responses for specific situations that arise. For this reason, a code of conduct is a highly customised document for each company, reflecting its own peculiar needs.

The right time for a start-up to institute of a code of conduct is before the first employee is hired, say human resource veterans. It may be easy for an owner to hire like-minded people when the company is small, but the personalised approach won’t work once staffing reaches double-digits. Thus, a strong human resource head must be employed as the company’s gatekeeper to avoid bringing in dissonant attitudes in the first place. Wipro is a good example of a company that follows this approach. It puts candidates through a test of honesty by verifying their testimonials. It not only denies employment to those who had forged documents, but also hands them over to the police. Nowadays, candidates with less than proper documents fear walking into Wipro’s campus.

Mr Doshi says a successful code of conduct starts with a top-down approach. It all starts with the actions of the entrepreneur. The set of all choices that the leader makes, eventually becomes the code and culture of the company. However, it should not stay top-down for ever. There should also be a feedback system that lets employees shape the nuances of the code and take the firm’s objectives further. “The code has to evolve but you won’t evolve it all the time. We at Career Launcher evolved our code until we were 40 people. When we arrived at that number we got down to broadcasting and implementing it. Of course, we are alive to feedback that will make the code better suited to our company,” says Mr Narayanan. The ethical code is a generic guide based on values and principles, but a code of conduct is the specific dos and don’ts of corporate behaviour. So, it helps to start by defining the business’ value system and then get down to finding answers for specific situations that may arise. Mr Pillai defines business ethics as management by truth, transparency, partnership and collaboration. Mr Narayanan says the value system of his firm is founded on five pillars: risk-taking, openness, ownership, honesty and commitment, and innovation.

The biggest danger for a start-up, or for any company for that matter, is to have a code of conduct, but not implement it vigorously. There are many companies that have one set of rules on paper and another set of rules in practice. Again, this deception may prove profitable in the short term but over time, all those coming into contact with the firm will realise its true worth and pay it back in its own coin. As big companies realised that markets reward companies seen as ethical, they have unleashed a marketing propaganda to manage their image along ethical lines, without changing their core business practices. The fashionable concept of Corporate Social Responsibility, or CSR, as spin doctors call it, comes in handy. What started as a theme for good corporate behaviour that must start with reforming core business processes, has now become the buzzword for donations, tree-planting, sponsorships and other trivial exercises. Genuine CSR must begin by making benign products and selling them ethically. Hence, a code of conduct is not merely a smart marketing tool, but a deeper value that guarantees all stakeholders a predictable, fair and uncompromising behaviour pattern. The reward for the entrepreneur is a good night’s sleep.

Article Resource:
Author: Srinivasan S. is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".