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The Corporation in a Global Society

• Introduction
• Factors Facilitating Globalisation
• Role of Multinational Corporations
• Caux Round Table
• Key Global Issues for Business
• Corporate Governance, a Pre-requisite for Globalisation

Introduction

With the World Trade Organisation (WTO) playing an active role and its hundred and odd members opening up their economies, globalisation is moving forward relentlessly, with freer movement of people, capital, jobs, trade and information. Global businesses operate in an essentially borderless society and have considerable power to effect change, while internationally the direct role of nation states is diminishing. In this fast changing scenario, there is an urgent need for a sustained dialogue, initially among senior business leaders from around the world, to define the critical role of the corporation in a global society.

 

Growth of Global Corporations

In the second half of the 20th Century, international business has become an important economic force. Today few, if any, countries can claim to be economically self-sufficient. Even India with its vast human and natural resources, cannot insulate herself from the world economy and though there was tremendous political opposition from within, she was constrained to open up her economy and join the WTO. In every country, developing or developed, international business touch people’s lives daily.

Most business enterprises, big or small, are drawn to conduct business across national borders today. They may be purchasing raw materials from foreign suppliers, assembling products from components made in several countries, or selling finished goods or services to customers in other nations. With the passage of time and more and more countries removing or reducing trade barriers, the number of firms affected by international competition keeps on increasing every day. In our day-to-day life we consume goods and services that have an international character about them—clothes, books, CDs, computers and soft drinks. Many MNCs have subsidiaries, affiliates and joint venture partners in most of the developing countries so much so, in some cases, the number of foreign employees of these corporations may exceed that of the home country.

Factors Facilitating Globalisation

Many factors have come to play a facilitating role in recent times to promote and foster international trade. Many developing countries adopted protectionist policies and raised huge tariff barriers for decades to protect their vulnerable home industries from foreign goods. Global business opportunities were also limited by poor communication facilities, slow development of infrastructure, inordinate delays in travel and shipping and a host of non-tariff barriers raised by many countries. Today, people can reach any place on the globe in one day and international communication is instantaneous. “Business operations can be managed effectively simultaneously.” Resources are sometimes more plentiful and less costly in other countries; labour may be cheaper; taxes may be lower. In some cases, it may be even beneficial if the weather is better.”¹

At the beginning of the 21st century, nations are most closely linked to one another than ever before through trade in goods and services, through flow of capital, through movement of labour—though to a limited extent—and through investments in each other’s economies. There are several factors that have played a key role in promoting international trade in recent times. These are:

1. Falling trade barriers: Liberalisation of trade has been recently accelerated as a result of free trade agreements, emergence of trade blocs and the facilitating role played by international organisations such as the World Trade Organisation, International Monetary Fund and the World Bank.
2. Political reforms have opened-up new frontiers: As pointed out by James Post et al (1999), the former communist nations of Eastern Europe are now open to doing business around the world. Millions of people in these countries are now able to take advantage of goods and services that global commerce provides in an open and free market place. There have been other factors such as the re-unification of East and West Germany, the enormous growth in global tourism and transport and communications have also added to this stupendous growth in world trade.
3. More developing nations joining the bandwagon of global business: Several countries such as Taiwan, Thailand, Malaysia, Singapore and Indonesia have been growing rapidly in recent years in addition to the industrial prowess of Japan and South Korea in the Asia Pacific region. Recently, China, India, Brazil and Russia have emerged as successful global players and in turn have invited business across the world to invest in them.
4. Emergence of new technologies and businesses spanning continents: New technologies and business based on them such as computer hardware and software, pharmaceuticals, communications that have worldwide investments and markets, have brought about a tremendous transformation in fostering world trade. Like wise, business process outsourcing (BPO) and several IT-enabled services have widened the horizons of international business opportunities.
5. Faster transport and communications: Thanks to the Open Air Policies adopted by many countries, distances have been reduced and movement of people and products has become much faster, thus catering to the whims and fancies of the modern consumers. Besides, faster transport and communication have quickened the processes of production by moving the factors to the centres that manufacture the finished products.
6. Special features of modern production: Modern production is such that various spares and components are produced in countries which enjoy economies of scale, division of labour and comparative cost advantage and then assembled at a location which enjoy cheap labour with great skill and expertise. In the case of watches, clocks and even diamonds this happens. This reduces cost, widens the market and promotes international business.

Doing Business in a Diverse World

Time was when corporations doing business in many countries considered the country of their origin as the major source of their capital, revenues and personnel. Under this ethnocentric perspective, the home country’s laws were viewed as dominant but nowadays companies have understood that they should consider the entire world as their home and have to adopt their business practices to different environments and cultures while sticking to global identity and policies. Under this geocentric perspective, firms develop managers at all levels from a worldwide pool of talent and seek to use the best people for all jobs regardless of where they come from. In fact, in recent times transnational corporations which used to deploy men from their home countries in senior management positions in their subsidiaries in India and elsewhere, have started recruiting their future managers from topnotch Indian educational academies such as the IIMs and IITs to man their units worldwide. Banking companies like Citibank and Standard Chartered Bank and firms like Bata and Hindustan Lever Ltd. have a number of Indian managerial personnel not only manning their subdiaries, but even their parent organisations. In this context, James E. Post et al. have this to say: “Companies such as IBM, General Electric, and Exxon have long histories of bringing their managers from, around the world to meetings and workshops for the purpose of broadening everyone’s understanding of the world in which their company operates. At Dow Chemical, technical specialists from plants around the world are connected by information technology and physically meet several times each year to discuss advances in science and technology. European firms such as Nestle (Switzerland), ABB (Asea, Brown, Boveri, a Swedish—Swiss company) and Unilever (Great Britain—Netherlands) have led the way towards internationally diverse corporate board membership.”²

 

However, in the making of the geocentric outlook, it is not the size of the firm that matters, but the geographic location and awareness of the social and cultural characteristics of the firm’s stakeholders that reinforce the importance of an open approach to cultural differences. “To be a global company in the modern economy is to build a geocentric perspective into the very fibre of the business organisation.” (James E. Post et al.).

For instance, when Nestle and Unilever carry on business in the Indian subcontinent, they face different political systems: India has a vibrant democracy, Pakistan, most often a dictatorship and Bangladesh, a fledgling and brittle democracy. In terms of economic systems too, there are substantial variations which are reflected in the kinds of economic policies they pursue. Though all these countries are supposed to have a common culture, their divergent religious and linguistic affinities bring in considerable variations in the manner they live and consume things. With different socio-economic and political environment, legal framework, institutional set-up, fiscal, monetary and commercial policies, factor endowments, production techniques, nature of products and consumption habits, these companies will have to acclimatise themselves not only to the existing realities of each of these countries, but also to be prepared to fine-tune their policies and business strategies to the fast moving changes that occur in these dynamic societies. As commerce becomes more global, with customers, suppliers, and competitors from other nations and cultures, managers have to understand and appreciate how diverse socio-economic systems affect the markets and the socio-political environment of business and act accordingly, if they have to be successful in their global business.

Role of Multinational Corporations

Businesses in the present global society are carried on by multinational or transnational corporations, most of which are based in developed countries. “multinational corporations” are business entities that operate in more than one country. The name “multinational corporation” is distinct from “international corporation”. The latter name was used in the 1960s to identify a company with a strong national identification. The home market was the company’s primary focus. Overseas operations were usually carried out by wholly owned subsidiaries controlled by home country nationals. By the 1980s, international corporations had evolved into more globally oriented companies. While still maintaining a domestic identity and a central office in the country where it was incorporated, a multinational corporation now aims to maximise its profits on a worldwide basis. The corporation is so large and extended that it may be outside the control of a single government. Besides subsidiaries, a multinational corporation may have joint ventures with individual companies, either in its home country or foreign countries.

 

Excessive Economic Clout

Global business does not function in a vacuum. It operates within the context of international and, where necessary, regional rules and regulations set up by appropriate governmental agents. Global business is dominated by multinational corporations that have their businesses spread across continents. According to a study conducted by Sarah Anderson and John Cavanagh for Corporate Watch 2000, the world’s top 2000 corporates have combined sales that are far greater than a quarter of the world’s economic activity and are bigger than the combined economies of all countries minus the biggest 9, i.e., they surpass the combined economies of 182 countries. The surprising thing about the inequities these corporations have brought about in the world economy is the fact that of the 100 largest economies in the world, 51 are global corporations; only 49 are countries. A study by the Institute for Policy Studies (IPS) indicates that 200 giant corporations, most of which are larger than many national economies, now control well over a quarter of the world’s economic activity. For instance, Philip Morris is larger than New Zealand, and operates in 170 countries. Instead of creating an integrated global village, these firms are weaving webs of production, consumption, and finance that bring economic benefits to, at most, a third of the world’s people. Two-thirds of the world (the bottom 20 per cent of the rich countries and the bottom 80 per cent of the poor countries) are either left out, marginalised or hurt by these webs of activity.³

Current Issues—Multinational Corporations

Multinational corporations face many of the same issues as domestic companies² such as maximising profits, meeting customer demands, and adapting to technological changes. In addition, multinational corporations must stay current with trends and events in the various countries where they operate. Political reforms in South Africa, economic liberalisation in India and social trends in Europe are examples of matters that are important to corporations operating in these countries.

Accountability is also an issue multinational corporations face. Because they are so large, multinational corporations can, and sometimes have, exerted questionable political and economic power in some countries. As a result, critics view multinational corporations suspiciously and sometimes seek to have host countries impose restrictions on them. They have also aroused intense distrust among socialist-oriented parties as exploiters of the wealth of the developing countries. Since almost all the MNCs are also incorporated in the US or countries in Europe which were once colonial powers that impoverished the colonies for centuries, the MNCs are considered as neo-colonial powers that continue to exploit these erstwhile colonies economically.

Caux Round Table

In the context of promoting world trade in a principled manner, the Caux Round Table (CRT) has done yeomen service. The CRT, an international network of principled business leaders working to promote a moral capitalism was founded in 1986 by Frederick Phillips, former President of Phillips Electronics and Oliver Giscard d’Estaing, former Vice-Chairman of INSEAD, as means of reducing escalating trade tensions. In due course of time, the CRT began focussing attention on the importance of global corporate social responsibility in reducing social and economic threats to world peace and stability.

CRT Principles for Business

The CRT advocates implementation of its Principles for Business through which principled capitalism can flourish and sustainable and socially responsible prosperity can become the foundation for a fair, free and transparent global society. The CRT goal is sustained profitability within ethical framework of social responsibility.

At the company level, the Caux Round Table advocates implementation of the CRT Principles for Business as the cornerstone of principled business leadership. The CRT Principles apply fundamental ethical norms to business decision-making. A specially designed process for incorporating the CRT Principles into the culture of a corporation, the self-assessment and improvement process, is available for companies to use. Ethical training for corporate boards of directors and new ethics curriculum for business schools are being developed.

To promote better outcomes for globalisation, the Caux Round Table is working to raise the level of awareness of senior business leaders, and elite opinion around the world about new opportunities to attack global poverty. These include legal and regulatory changes in developing countries that will improve the environment for productive investment of foreign and domestic equity capital. The Caux Round Table is working in alliance with global business leaders, international institutions and policy makers to improve investment environments in selected developing countries by suggesting certain Principles for governments and the adoption of the 12 core “best practice” standards for transparent management of national financial institutions.

 

The CRT Principles for Business were formally launched in 1994, and presented at the United Nations World Summit on Social Development in 1995. The CRT principles for business articulate a comprehensive set of ethical norms for business operating internationally or across multiple cultures. The CRT principles for business emerged from a series of dialogues catalysed by the Caux Round Table during the late 1980s and early 1990s. They are the product of collaboration between executives from Europe, Japan and the United States, and were fashioned in a document called “The Minnesota Principles”. The CRT principles for business are recognised by many as the most comprehensive statement of responsible business practice ever formulated by business leaders for business leaders.

The goal of the CRT is to diffuse its suggested principles, standards, benchmarks, management concepts and practices, and understanding of a moral capitalism as widely as possible.

The formation of the Caux Round Table was a significant step taken by senior business leaders to address global issues affected by the performance and conduct of international business. Deeply concerned with the issue of promoting solutions to the tensions arising from trade imbalances, the CRT has monitored the continuing changes in the economic and political landscape, and its influence has grown through the formulation and wide circulation of its principles for business. Global business stands at the crossroads of the fundamental changes taking place in the world. The CRT believes that business has a crucial role to play in helping to identify and promote solutions to issues that impede the development of a society that is more prosperous, sustainable and equitable. Globalisation facilitating free movement of people, capital, jobs, trade and information and businesses operate in a borderless manner and with the role of nation states becoming less important leads to the development of “soft” laws, i.e., the effect of international conventions and bilateral treaties being used by NGO’s as representing society’s expectations of conduct, in advance of their adoption into the laws of individual nation states. As reluctant as some corporations have traditionally been to go beyond their operational objectives, the time has come for the roles of corporations, governments and other institutions to be significantly redefined—a time for new partnerships and greater cooperation on a global level.

International Business Issues

Simultaneous efforts to promote free trade and protect domestic industry from foreign competition is one of the most pressing issues in international business today. Intellectual property rights is another important issue. International business is hindered when companies fear that their patents, trademarks and industrial secrets will be violated abroad. Countries which fail to protect these rights may be shunned, and consequently may suffer from lack of foreign investment and access to cutting edge technology. Efforts at environmental protection are another international business issue. In the business context, this issue centres, in part, on the extent natural resources in less-developed countries could be exploited for the benefit of developed countries. For example, should Filipino’s forests be destroyed to satisfy the Japanese demand for lumber is a much debated issue. International business is business conducted across national boundaries. It is therefore concerned with political, economic, social and cultural conditions in a variety of countries. As technology improves international communications and transportation links, international business and international corporate activities will expand.

 

Need for Dialogue on the Role of the Corporation

With the onset of globalisation and the business corporation spreading its wings outside the home country, there is an urgent need for a sustained dialogue, initially among senior business leaders from around the world, and then including leaders of governments and other institutions, to define the critical role of the corporation in a global society. The rules of the game are fast changing. Whether in the physical, social or economic environment, business leaders can no longer rely solely on past traditions, established strategies or earlier expectations of society. For such a dialogue to be fruitful, it requires a common framework and guidelines. The following beliefs can be considered as a framework for that discussion:

• The primary responsibility of the corporation is to conduct its operations proficiently, i.e., to be technologically innovative, competitive and financially sound.
• Corporations must be increasingly responsive to issues affecting the physical, social and economic environments not only because of their impact on business performance but also out of a pro-active sense of responsibility to all constituencies served.
• Corporations need to consider the balance between the short-term interests of shareholders and the longer-term interests of the enterprise and its stakeholders.
• Meeting traditional objectives and performance criteria is not sufficient. Voluntary standards which exceed the requirements of prevailing law and regulations are necessary to the development of sustainable practices. Society’s “license or franchise to operate” has to be earned.
• Corporations should lead by example through business practices that are ethical, transparent, and that reflect a commitment to human dignity, political, economic freedoms and preservation of the planet.
• Corporations cannot act alone but should seek to address key societal issues through cooperative efforts with governments, civil society including other institutions and local communities.

In such a dialogue, the following issues should be given precedence:

• The employment issue
• Sustainable practices and values
• Trust, honesty and transparency
• Collaboration and partnerships for action

These issues need to be examined in the context of the fundamental social, economic, political and technological changes taking place throughout the world today.

Global Economic and Political Environment

Some commentators suggest that we are at a major turning point in history—a time that occurs only once every hundred years or so, when adequate vision is lacking, leadership is weak, new technology sweeps across nations, gaps widen between people, laws and institutions break down, values weaken, crime and corruption increase, and human relations falter. Such factors inherently threaten world peace, stability and prosperity, while business globalisation is accelerating in both the historically major economies and the strong new economies. The period since the CRT was founded has encompassed the completion of the General Agreement on Tariffs and Trade (GATT) agreement, strongly endorsed by CRT participants, and the formation of the WTO. Other developments include the completion of the single European Market, the formation of North American Free Trade Agreement (NAFTA) and the Association of South East Asian Nations (ASEAN) agreements. The collapse of communism in central and eastern Europe has created both opportunities and challenges.

The emergence of India and China as major economies, together with the resurgent growth of the Tiger economies, has generated unprecedented prosperity and industrial muscle. The emergence of market economies challenges expanding global businesses to help enable those markets to reach their potential and to enhance the prosperity of their populations. Threats to a prosperous and sustainable society include the gulf between the rich and the poor, between the successfully industrialised nations and their less developed neighbours. Social unrest and discontent are increased by religious fanaticism and organised crime. Unlawful immigration is a destabilising influence as those without money, jobs, knowledge or opportunity are attracted to centres of prosperity. The flood of migration of Sikhs to the USA and UK in the aftermath of Blue Star Operations and later the Delhi riots following Indira Gandhi’s assassination, and large-scale migration to Europe of Sri Lankan Tamils following the continued strife between the government and the LTTE are cases in point. Business leaders rightly see major opportunities for access to new markets, for the wider utilisation of intellectual property and technology, and for new investment. But they are also faced with formidable challenges to reduce the attendant risks.

Public Awareness and Scrutiny

At the same time, there has been a revolution in communication, itself the source of huge new global business operations. With easier and more immediate access to information, and the stimulus of media analysis, public interest in the conduct of business has intensified. Sophisticated media presentation focusses particular issues and heightens concern, especially where perceptions develop that the public interest is threatened or power is being abused. Demands increase for greater transparency and for effective public scrutiny. Society expects corporations to be accountable, not just in traditional areas of financial performance, but across all functions that have an impact on the physical, social and economic environments. Society’s confidence is undermined by ignorance and suspicion but reinforced by information and understanding. Without confidence, society can be expected to review its “license” or “franchise” for business to operate. It exercises its sanction through legislation and regulations, the facility of choice in the market place, actions of pressure groups, and corrosive public criticism of targeted sectors, corporations or key position holders.

Recent campaigns on top executive compensation, environmental performance, employment conditions, sale of arms, and customer service standards provide evidence of the potentially harmful effects of public alienation. Conversely, companies that have addressed the challenges openly have been able to win public support even while undertaking major changes involving restructuring, adoption of new technologies sometimes seen as threatening, and in resolving highly controversial issues such as disposal of toxic waste. Increasingly, competitive advantage and customer loyalty are achieved through providing access and dialogue and demonstrating genuine concern for the needs of communities and the public interest.

Technological Challenges and Opportunities

Never in the chequered history of the human race, has there been such an explosive growth of technology in such a short span of time as it is now. Technological innovations have brought in changes that are immense in manufacturing, transport and communications, information and knowledge management, pharmaceuticals and biotechnology, banking and financial management and in a host of other spheres. The impact of these innovations on business and industry, as in other walks of life, is immeasurable. Methods and processes of production have been shortened, distances reduced, time taken lessened in every human endeavour. Business and trade have become global. The world itself has become so small as to be called the “global village”. In this fast-changing environment—social, political, economic and governmental—corporations have to adopt themselves faster, reckon competition and work out successful survival strategies. Even while they have to swim against the rising costs of technology-induced processes and changes, they have to acclimatise themselves to newly evolving corporate cultures and governance practices. Values keep changing and corproates have to be in the vanguard of these changes to succeed in their business. If challenges arising out of technological innovations are many, opportunities too are plentiful. An ever-increasing global market, large scale manufacturing with its attendant economies of scale and lowered costs, escalating profits and a chance of becoming transnational corporate players are not too small a gain for the corporates to ignore.

The Physical Environment

Business has increasingly faced several challenges with regard to its effects on the physical environment and its sustainability. It is in this area that issues have become most globalised and inter governmental conventions and NGOs have had significant influence. Increasing awareness on this issue has reshaped legislations around the world and has led to the formation of new international institutions, with a huge impact on the policies and practices of businesses and their representative organisations. There are few remaining international corporations that have not published statements of environmental, safety and health policies while significant sectors have adopted a coherent voluntary worldwide code of responsible practice. Considerable progress has been made in disclosure, and in introducing reporting and verification procedures. Although many aspects of environmental concern still await scientific verification, the concept of a voluntary precautionary approach has evolved, coupled with significant public commitments on performance goals. Science and emerging technology have enabled business to take many beneficial initiatives in areas such as efficient agriculture, safe water and hygienic food processing. However, maturing public attitudes introduce new challenges in terms of what is acceptable in the public interest. The adoption of unfamiliar risks raises deep public concern. Important examples include the application of biotechnology and pesticides in agriculture and use of additives and radiation in food preservation. Business must make both practical and ethical decisions on the adoption of risk, its assessment and communication to its constituencies.

The Social Environment

Population growth, and consequent unemployment, increasing inequalities between the rich and the poor, public health, immigration flows and social disorder interact to affect the conditions in which business develops. The prevailing political framework determines whether the responses are subject to command economy rule, to free market economies or to what are called mixed economies. Education and training are the precursors to economic development, and most political regimes give these high priority. However, the resources required to ensure efficient delivery may be inadequate, depending upon the general economic climate and social infrastructure. A natural consequence of successful business activity is that employment opportunities and wealth are created, together with an increasingly cohesive and supportive social fabric. Successful business, however, depends upon its efficiency, competitiveness and its flexibility to adapt to changes in the marketplace. In the global market, even the most enduring businesses have to adapt, through measures affecting employment levels and disposition. Significant factors include changes in demand, new technology and the emergence of competition.

Key Global Issues for Business

All of these developments have far-reaching consequences. Some favour business and others threaten it. But none can be ignored. The CRT affirms that the primary purpose of the corporation is to manage its business effectively. In doing so, however, global business cannot assert that “the only business of business is business”. It should seize the opportunity to be an active participant in contributing to greater peace, stability and prosperity. Many business leaders have recognised the implications of globalisation for their corporations and have given increasing attention to the social concerns. A broadening consensus has developed that business has a responsibility towards the communities it serves and depends upon, to contribute beyond the strict requirements of the law, and beyond the needs of self-protection. Participants in the CRT affirm this perspective, and seek to define the responsibility of global corporations in relation to certain key issues.

 

1.  The employment dilemma: The CRT has addressed the need for job creation regularly. It involves a complex set of issues with far-reaching implications both in industrialised and developing nations. Resolution of the global employment dilemma may be fundamental to reducing risks of social upheaval and to finding solutions to other key global issues. One of the greatest strengths of business has been and must continue to be job creation, even as restructuring of current activities continues. Country after country has decided that increased private sector employment is the linchpin to sustainable economic growth. Business has a responsibility to provide working conditions that respect each employee’s health and dignity, and to provide jobs and compensation that improve the living conditions of workers and their families. But some crucial questions must be answered:

• What can and should be the role of business in promoting job creation?
• What responsibility should business take for promoting flexibility and employability?
• What is its role in seeking to change regulations which inhibit change in employment practices or impose administrative burdens that threaten competitive employment?
• What steps must be taken to assist those without jobs?
• Is it true, as some suggest, that technological advances of recent years have eliminated more jobs than they have created? Or, on the contrary, does the problem lie in protectionism and resistance to change?
• What rectifying actions can be taken?

Within a wider social and economic context, business also needs to address questions such as:

• The gulf between the rich and the poor within nations and between successfully developed and less developed economies;
• The urgent need in developing nations for the rule of law, necessary infrastructure nurturing of a new work ethic and other measures to assure sustainable development of a market economy; and
• The impact of increased immigration and freer trade agreements upon all sectors of societies, both within developed and developing nations.

Global business leaders and their counterparts in governments must draw from past successes to develop policies that promote job creation, review regulatory constraints that inhibit job creation, and consider new risk-sharing between business and government. Above all, business leaders need to identify the factors which promote creativity and innovation and inspire confidence in enterprise rather than resorting to protectionism.

2.  Sustainable practices and values: It is widely understood by people now that shorter-term performance criterion have to be balanced against longer-term considerations involving the effects of business on its environment and thus its sustainability. While laws and conventions focus particular provisions for the conduct of business, there is a growing consensus that attitudes, standards and practices must exceed legal requirements. Business needs to monitor the impact of its products and services and to stand for values with which society will identify. Extending the practice of many corporations which already publish their general principles for the conduct of their business, and of a large number which publish their policies and performance in areas of safety, health, the physical environment and energy efficiency, how should business define its role in areas such as:

• Resource management
• Technology transfer
• Human exploitation
• Employee development
• Illicit substances and their abuse
• The family
• Encouragement of sound values in society.

Business will have to determine the extent and scope of its responsibility in such sensitive areas, and find the right balance alongside other institutions involved.

3.  Trust, honesty and transparency: It is the considered belief of CRT and other such similar organisations that business, as well as the professions, have a duty to the rest of society to be trustworthy, honest and transparent in their dealings. Public suspicion of business motives and behaviour is a negative influence which can lead to restrictive legislation and can threaten job creation and other potential benefits to society. A loss of trust may result in a virtual revocation of business’ “license” or “franchise” to operate in the public interest. Communications technology and the media intensify the call for information and explanation. To obtain trust worldwide business practices must satisfy the perceptions of society as to what is ethical. Global businesses should not participate in or condone bribery, money laundering or other corrupt practices but should cooperate with others to eliminate them. Some of the key questions to be addressed include the following:

• What are the practical obstacles to greater openness and transparency?
• What is a right balance between pro-active and reactive measures to achieve public understanding of the standards of business and its performance?
• How should business leaders approach the problem of corruption, given the diversity of cultures?
• How can business engage in sustained dialogue with all its constituencies to define shared responsibilities for resolving issues?

4.  Collaboration and partnerships for action: The CRT believes that solutions to complex global issues require the cooperative efforts of business, government and other institutions. Working alone, these powerful players are likely to fail. Working together, they can apply local models to international situations and find multifaceted solutions to complex problems. The partnership developed in many cities where businesses collaborate with local authorities, central government, education, emergency services and special interest groups could be adapted to global initiatives. Although the difficulties in achieving effective collaboration are likely to be daunting, business needs to take the initiative and persevere in this process. Business needs to consider its role and approach in in the following aspects:

• Working out a coherent strategy for addressing global problems
• Establishing a constructive business network embracing its principal world centres
• Initiating dialogue with relevant public institutions
• Mounting and funding agreed initiatives and action programmes.
• Monitoring and reviewing progress and outcomes.

Corporate Governance—A Prerequisitie for Globalisation

If India wants to ensure that as a crisis of the same proportion experienced by Southeast Asia never occurs here, and if Indian companies want to be globally competitive in the new millennium, then good governance is an utmost necessity. The East Asian crises occurred due to the lack of public governance and corporate governance. “Singapore suffered the least because it had good governance rules in place.” Public governance involves setting up of regulatory bodies and a legal framework, the establishment of institutions that ensures transparency. Rule of law and a proper financial system are essential. The first requirement of corporate governance is professional management. Even in family-owned companies, where family members often hold the highest offices in companies, it is imperative that such family members are professionally qualified and competent for the office they hold.

 

Few companies will voluntarily adopt “corporate governance codes” because in their perception these will add to their costs without bringing much tangible benefits and hence the government must regulate their adoption. Government must take the lead in this regard and enforce corporate governance through institutions.

If the government fails to enforce governance codes, then businessmen must themselves take the initiative out of self-discipline. It will be best if private sector companies and public sector enterprises act in concert in this respect. Even if the government or public sector enterprises are not interested, private sector companies must adopt global corporate governance standards, because “globalisation demands good corporate governance.” After all, globalisation is likely to benefit private sector corporations more than public sector enterprises.

Some analysts are very pessimistic and even suggest that Indian companies should not globalise until good governance rules are put in place, as otherwise India would go the East Asian way. In East Asia, all the good work built up over ten years and more was destroyed in a matter of weeks, simply because the necessary framework was not there. If Indian companies want to globalise, they must adopt good corporate governance standards. One reason why Indian infotech companies were able to raise funds in the markets abroad such as Nasdaq was because they had adopted global corporate governance standards that satisfied the American investors.

Another area of concern in the country as elsewhere is the lack of independent auditors. In the present times, it is imperative to have independent auditors who are reputed and above board. Due to the distrust in Indian auditors, most of the multinational companies have insisted that the parent company’s auditor should also audit the subsidiary companies in India, often at much higher costs. One of the problems with corporate governance is the fact that different regions have different economic philosophies. “In the US, the only concern is increasing the shareholders’ value, in Continental Europe it is creating employment, while in Japan, the companies worked in tandem with the government as per the national strategy. Thus, it is very difficult to have a universal governance code, but there are minimum standards that all companies worldwide can and must adopt.”⁴

• Business issues
• Caux round table
• Diverse world
• Economic environment
• Facilitating globalisation
• Global corporations
• Multinational corporations
• Partnership for action
• Physical environment
• Political environment
• Prerequisite for globalisation
• Public awareness
• Scrutiny
• Economic clout
• Social environment
• Sustainable practices
• Employment dilemma
• Technological challenges

1. What are the factors responsible for the emergence of global corporations?
2. What are the challenges and opportunities in doing business in a diverse world?
3. What role does multinational corporations play in the economies of low income countries?
4. Discuss briefly the emergence of the Caux Round Table and the CRT Principles for Business.
5. Justify the need for dialogue on the role of the corporation as a growing global society.
6. Discuss briefly the key global business issues and the means to address them effectively.

• George, Richard T. De “Corporate Moral Responsibility: The Bhopal Incident”. http://www.angelo.edu/events/university_symposium/archive.htm
• “Environmental Bad Guys”, http://lists.essential.org/corp-focus
• “When the People Speak, the Corporations Squeak”, http://lists.essential.org/corp-focus
• “The Criminal Element”, http://lists.essential.org/corp-focus
• “The Critical Role of the Corporation in a Global Society—A Position Paper of The Caux Round Table (CRT)”, Global Virtue Ethics Review.
• “The Future of Corporate Governance”, http://www.globalchange.com/corporategovernance.htm
• Sinha, Ashutosh “Xeroxing Corruption”. http://www.corpwatchindia.org/news/PND.jsp?articleid=2764