Can Business Regulation Stimulate Responsible Corporate Conduct Gathering

Can Business Regulation Stimulate Responsible Corporate Conduct ? Gathering Evidence from a Few Indian States Regional Dialogue (NORTHERN INDIA) Exploring the interplay between Business Regulation & Corporate Conduct in India (BRCC Project) 12 th July 2011, Jaipur

Aspects of Business Regulation and Corporate Conduct Sameer Chaturvedi CUTS International 2

Presentation Theme Business Regulation and Business Performance ◦ Assessing Business Performance – Global ◦ Assessing Business Performance – Inter-State (India) Business Regulation and Corporate Conduct ◦ Aspects of Business Regulation ◦ Corporate Conduct – Global and National Evolution ◦ Aspects of Corporate Conduct Stakeholder Interaction Framework 3

Business Regulation and Business Performance Government acts as articulator, enabler, facilitator, regulator, gap-filler and buffer Business deploys capital, engages labour, produce goods and generate profit that is re-invested. Regulatory implications - business, growth, development and equity Effective Regulation ~ Better Business Performance 4

Dimensions of Business Regulation Time Volume Predictability Consistenc y Business Regulation Cost Frequenc y Interface Jurisdiction 5

Assessing Business Performance 6

Highlights from Doing Business Report (WB & IFC) 2011 India’s overall Rank – 134 (out of 183) Getting Credit– 32 nd, Protecting Investors - 44 th Enforcing Contracts - 182 nd, Construction Permits – 177 th, Starting Business – 165 th, Taxes – 164 th Registering Property: India - 5 procedures, takes 44 days; Turkey- 6 procedures, takes 6 days. Enforcing Contracts, - 1420 days in India; 406 days in China; 281 days in Russia; 230 days in Korea Taxation Payments (No. ) – In India 56 in a year, in China & France only 7 payments in a year Closing Business - 7 yrs in India & 1. 7 yrs in China Recovery rate (closing a business) - India is 16. 3%, 36. 4% in China, 81. 7% in Korea & 92. 7% in Japan 7

Inter-state Variations in India – Highlights from Doing Business India Report (WB & IFC) 2009 Not much variation in starting business – Maximum is 41 days (Kochi) & Minimum is 30 days (Noida) Construction Permits - takes 37 procedures in Mumbai, as against 15 in Ahmedabad, Bengaluru and Chennai 258 days for construction permits in Kolkata, as against Bengaluru, where the same work gets done in 97 days Registering Property - 126 days in Bhubaneshwar whereas it takes 24 days in Jaipur In Bengaluru, a firm has to bear 32. 5% cost of claim in enforcing contracts, whereas in Patna it is 17% It requires 10. 8 years to close a business in Kolkata, whereas in Ahmadabad, the time spent for such formalities is 6. 8 years. 8

Aspects of Business Regulation “Conscious adoption one set of activities (that are considered legal or/and moral) as well as deliberate abandonment of another set of activities (that are considered illegal or/and immoral)” Typologies of Regulation: ◦ Public Regulation, ◦ Co-regulation ◦ Self Regulation 9

Evolution of Concept Globally 1948 – Universal Declaration on Human Rights 1997 – SA 8000 (Social Accountability International) 1998 -2006 – Global Reporting Initiative (G 3) 2000 – Millennium Declaration 2000 – United Nations Global Compact 2001 – OECD Guidelines for MNEs 2003 – UN Norms on Responsibilities of TNCs and other Businesses on Human Rights 2010 – Guidance on Social Responsibility 10

Evolution of Concept Nationally Mahatma Gandhi’s notion of large Businesses as ‘Trusts’ 1950 -60: Nehruvian mixed economy model, private sector with responsibility in development Individual Code of Conducts & Responsibility 1991 Liberalization reforms, raised expectations 2007 – Guidelines on Corporate Governance for Central Public Sector Enterprises, Go. I 2009 – Voluntary Guidelines on Corporate Governance and Corporate Social Responsibility 2010 - Guidelines on Corporate Social Responsibility for Central PSE, Go. I 2011 – Guidelines on Social, Environmental and 11

Aspects of Corporate Conduct Facets - corporate governance, corporate social responsibility, fair trade, labour norms, credibility charters, integrity codes, embodiment of green business practices, accountability initiatives, proactive disclosures, stakeholder engagements… Determinants of Corporate Conduct ◦ Internal ◦ Operational ◦ External 12

Stakeholder Interaction Framework 13

Thank You! 14