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Perceptions of Corporate Social Responsibility in

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Journal of Knowledge Globalisation Vol 1, No. 1, Spring

Perceptions of Corporate Social Responsibility in India:

An Empirical Study

Authors: Dr Mahabir Narwal.♣

♣
Dr Tejinder Sharma

The goodness of an act is not judged solely by the goodness of

the results produced but by the praiseworthiness of the
intentions, which motivate it.
– Kant

Introduction
At the dawn of industrial revolution, the prime objective of the business firms
was to earn more profit. Fostered by socio-political and technological
changes, including the establishment of democracy, various sections of the
society started questioning laissez faire approach of business. There has been
a growing acceptance of the plea that business should be responsible to the
society. The business enterprise, which makes use of the resources of the
society and depends on it for its functioning, should contribute to enhance the
welfare of the society. Business, being one of the dominant institutions of the
present day market-led-economy, wields considerable influence on the
resources of the society and plays an important role in the process of socio-
economic and cultural modernization. Being organically linked to the wider
socio-economic and cultural system, it cannot distance itself from its
commitment to the society, particularly in a developing country like India.
The basic idea of corporate social responsibility is that business and society
are inter-woven rather than distinct entities, therefore, society has certain
expectation for appropriate business behaviour and outcomes (Wood, 1991).
The concept of social responsibility was visualized during the early part of the
twentieth century. Clark (1916) was among the pioneers to observe that if men
are responsible for the known results of their actions, business responsibilities

♣
The authors are faculty members in Department of Commerce, Kurukshetra University,
Kurukshetra, INDIA. Emails: mnarwal@rediffmail.com &sharmatejinder@yahoo.com
must include the known results of business dealings, whether or not law has
recognized these. In an article published in The Economist in 1926, the
drawbacks of limited liability of the companies were highlighted. Supporting
this 70-year-old conceptualization, Broberg (1996) observed that the limited
liability imparts a sense of limited responsibility on the part of the business
firms. However, now there is increasing awareness that a company, which
works only in order to benefit itself, might harm other groups in the society.
Today, partly due to the interdependencies of many groups in our society, the
social involvement of business has increased (Koontz and Weihrich, 1998).
In the modern times, companies should exercise socially responsible
behaviour voluntarily; otherwise they might be forced to do so. The society, in
general, has definite perception on CSR, which needs to be understood. A
clear understanding of the societal perception on CSR shall enable the
companies to design and position their social responsibility activities
accordingly.

Literature Review.

The extensive literature on the subject has been categorized as a set of views
on CSR and the societal perception of CSR.

Views on CSR
Despite acknowledging the significance of CSR, there is a lack of consensus
on the very meaning of CSR. The simplest classification of views on CSR
shows the existence of atleast two viewpoints, which can be called as classical
and modern.
The classical view considers social responsibility as being incompatible with a
free economy (Friedman, 1962 & 1970). The proponents of this view hold that
business managers have a single responsibility towards the shareholders. All
their endeavours must uphold an undeterred commitment to maximizing
shareholders’ value. Managers, acting as the agents of the shareholders, have

2
no mandate to embark on socially responsible projects that do not enhance the
income generating ability of the firm. Further, the managers are experts in
business activities and their expertise cannot be channelized to social
responsibility. Pava (1996) finds Friedman’s arguments as both rigorous and
somewhat convincing. Numerous economists, accountants, sociologists,
corporate managers and social critics, either explicitly or implicitly, accept a
similar view on social responsibility. At best, the advocates of the classical
view uphold that corporate goals must be based on a broad social consensus.
This classical view of CSR is similar to the Agency Theory. The premise
underlying Agency Theory is that the firms exist to maximize the wealth of the
owners; therefore, other stakeholders (including charity recipients) are
important only to the extent they are instrumental in maximizing shareholders’
wealth (Seifert et.al, 2003). Agency theory argues that managers act as the
agent between the shareholders and the organization. According to this theory,
all other stakeholders of business are largely irrelevant and if they benefit
from the business then this is co-incidental to the activities of management in
running the business to serve shareholders (Crowther, et.al, 2005).
The advocates of the modern concept uphold that business must think beyond
the shareholders value and must not ignore its ethical and moral
responsibilities. Shareholders are not the only participants of the business
operations. Therefore, business must not confine its allegiance towards the
shareholders only, but also should be responsible towards the stakeholders at
large. Freeman’s (1984) stakeholder model of social responsibility is often
taken as a modern viewpoint on corporate social responsibility. This model
upholds that a firm’s social responsibilities consist of the sum of its obligation
towards a specific set of stakeholders i.e. the shareholders, customers,
employees, suppliers and the communities in which the firm operates. Brown
& Dacin (1997) consider CSR as the company’s status and activities with
respect (i.e. responsiveness) to its perceived societal obligations. McGee
(1998) advocated a proactive social responsiveness view, which articulates a
company’s long-term role in a dynamic social system. L’ Etang (1995) finds

3
CSR as an ongoing process, constantly monitoring the environment and
relationship and not a fixed mission in relation to specific groups with a
predetermined priority that remains static.

Societal Perception of CSR

Besides shareholders, there exist several non-shareholder interests in a
business firm. Farrar (1991) has divided these interest groups into five
categories – investors, outside creditors, employees, consumers and publics.
While the first three groups find their representation in the business firms in
some way or another, the last two usually go unrepresented. By virtue of their
representation in the firm, the first three are able to extract responsible
behaviour, but the unrepresented interest groups may find it otherwise. Most
of the literature on perception of CSR is either conceptual or based on the
empirical research done on business managers (Quazi and O’Brien, 2000; and
Singh et al., 1980, etc.) or the consumers (Sen and Bhattacharya, 2001; Brown
and Dacin, 1997; and Ellen, Mohr and Webb, 2000, etc.). These studies
suggest that there is a positive relationship between a company’s CSR actions
and its goodwill. A company’s CSR record, instead of providing information
about the attributes or overall quality of the products, creates a general context
for consumers’ evaluation. The general perception of the society towards CSR
has not evolved much interest of the researchers. Literature shows that in
India only a few empirical studies (Singh et al., 1980; and Upadhyay 1976)
have been made to assess the state of CSR. Even these studies relied on the
data generated from the business managers and not the society in general. A
decade prior to the economic liberalization, Singh et al. (1980) find that
corporate actions are perceived to be predominantly profit maximizing,
followed by calculative behaviour.

Research Problem
Considering the importance of CSR, its general perception in the minds of the
people needs to be understood. Most of the Indian research on CSR has been
done before 1991 i.e. before the economic reforms. Liberalization of economy

4
has provided the society with a plethora of goods and services and lot of
information. The present day Indian society is more aware and informed and
is in the state of transition from old values to newer ones. In the changing
times, the societal perception on CSR needs to be studied again. The specific
research question being addressed in the paper is:
“How does the informed society, in general, perceive CSR actions of
business?”
An understanding of the societal perception of CSR activities would help the
corporates to position their CSR programmes more effectively in order to
generate a favourable image in the society. Their CSR actions would reflect
greater sincerity and would be better poised to achieve the societal as well as
business goals.
Research Methodology
Theoretical framework was developed from the secondary data, comprising of
the published literature. In line with the research problem, primary data was
generated by a survey, conducted on the population of North Haryana. A
structured questionnaire was used to generate primary data.

Questionnaire Design
A questionnaire was developed, on the basis of the variables related to
corporate social responsibility as identified from the literature. Table –1
shows, the variables identified for the questionnaire and their literature
sources:
Table 1
Variables related to CSR
Sr.
Variables/Issues Keyword Literature Source
No.
Being a part of the society, business Part of Koontz and Weihrich (1998)
1
must be responsible to it system
Even doing routine business properly Routine Jones (1999), and Robertson
2
is an act of social responsibility exercise and Nicholson (1996)
3 Social responsibility should be a Planned Jones (1999)

5
 planned activity and not arbitrary activity
Goodwill of a firm increases by Goodwill Sen & Bhattacharya (2001),
4
being socially responsible and Brown & Dacin (1997)
Social obligations of business are SR Focus Quazi & O’Brien (2000), and
5
even important than profits Singhapakdi et al. (1996)
If survival is at stake then business Ignore SR Friedman (1962), and
6
must forget social responsibility Singhapakdi et al. (1996)
Social Responsibility leads to a Trade-off Friedman (1962)
7
trade-off in profits
Social responsibility is an eyewash Cover-up Singh et al. (1980)
8
and firms undertake it as a cover-up

The variables were put in the form of 17 statements and the respondents were
asked to record their opinion on a 5-point Likert-type interval scale i.e.
strongly agree, agree, neutral, disagree, and strongly disagree. The
questionnaire also contained questions on the demographic profile of the
respondents.
A pilot survey was conducted on 30 respondents and the 3 statements were
dropped as the respondents found it difficult to record their opinion on these.
The language was also refined to make it more understandable. The final
questionnaire (Annexure –I)contained 17 question-items relating to CSR and
four relating to the demographic profile of the respondents.

Sampling
Quota sampling method was used to generate primary data, controlling the
sample for sex, age, income and education. The data was taken from a sample
of 187 respondents (91 females and 96 males) of Ambala, Kurukshetra,
Karnal, and Jind districts of North Haryana (a state in North India). The
sample was representative of the demographic variables such as sex, age and
income and skewness.

6
Data Analysis and Findings

Since the questionnaire contained 17 question-items, each related to any of the

eight variables as mentioned in Table-1, the number of question- items was
reduced by clubbing similar statements.
Eight variables, thus derived were subjected to factor analysis by using
Principal Component Method with unities in diagonal (Hotelling, 1935).
Following the recommendation of Kaiser (1960), the extraction of factors was
stopped when Eigen value (latent roots) came to be less than 1.00. Three
factors were obtained, whose Eigen value exceeded 1.00. A total variance of
53.962 (Table-2) is accounted for by these three factors. The extracted factors
were rotated in accordance with the criterion of Kaiser’s (1958) Varimax
Procedure. Factor loadings greater than 0.30 are found significant at .05 level
(Herman, 1960). The communalities, which give the proportion of variance
for each of the original variables (denoted by h2), are ranging from 0.229 to
0.743 (Table-3). One variable i.e. routine exercise was dropped on account of
low communalities.

Table 2
Eigen value with cumulative percentage of variance

Components Eigen value %age of variance Cumulative %age

of variance
1 1.771 22.143 22.143
2 1.285 16.060 38.203
3 1.610 15.759 53.962

Table 3
Rotated Component Matrix

Variables Components h2

7
 1 2 3
Planned activity 0.309 0.210 0.632 .540
Trade-off 0.192 0.761 – 0.096 .626
Goodwill 0.621 – 0.004 0.117 .399
Cover-up – 0.383 0.715 0.072 .663
SR Focus 0.739 0.003 – 0.081 .553
Part of system 0.694 0.027 0.285 .564
Ignore SR 0.097 0.277 – 0.811 .743
Routine exercise 0.262 0.268 0.297 .229

Each of the factors derived by analysis of data, represents a particular outlook

of the respondents towards various issues of social responsibility and is
explained in the following interpretation of the factors.

Factor – I
High positive loadings have been observed on three variables - social
obligation of business are even important than profits; being a part of the
society, business must be responsible to it; and goodwill of a firm increases by
being socially responsible.
Objective Viewpoint

Sr. No. Variables Factor Loadings

1 SR Focus 0.739
2 Part of System 0.694
3 Goodwill 0.621

Each of these variables represents an optimistic, suave and an unbiased

viewpoint, avoiding any of the extremes. Hence, this factor is labeled as
objective viewpoint. On the basis of this factor, it can be concluded that the
corporates should have an undeterred commitment towards social
responsibility, imbibing it as a part of their system. This factor also shows that

8
the society takes a positive view of the SR activities, which may help the
companies in their long-term survival and competitiveness.

Factor – II
In this factor also, high positive loadings are observed on the variables- social
responsibility leads to a trade-off in profits; and social responsibility is
eyewash and firms undertake it as a cover-up. Both these statements reflect an
element of doubt in the activities of social responsibility. Respondents
upholding these views look upon the expenditure on social responsibility
activities as wasteful, which erode the profits of the company. They doubt the
very intention of undertaking these activities and even believe that these do

Skeptical Viewpoint

Sr. No. Variables Factor Loadings

1 Trade-off 0.761
2 Cover-up 0.715

not make any substantial contribution to the society and are an eyewash.
Keeping in view the nature of these variables, this factor is labeled as
skeptical viewpoint.
Factor – III
This factor comprises of two highly loaded variables - one loaded negatively
and the other loaded positively. A high negative loading is observed for the
variable – if survival is at stake then business must forget social responsibility.
At the same time, a high positive loading is observed for the variable – social
responsibility should be a planned activity not arbitrary.

Ethical Viewpoint

Sr. No. Variables Factor Loadings

9
 1 Ignore SR – 0.811
2 Planned activity 0.632

A high negative loading shows that the respondents have not endorsed the
idea, as suggested in the variable. They seem to uphold that even in turbulent
times, when the survival of a firm is at stake, it must not ignore/forget social
responsibility. Even during the time of crisis, a socially responsible behaviour
is expected from the business. This might be the reason that the respondents
have supported the idea of social responsibility being a part of the mission of a
company and an essential ingredient of their planning exercise. This
viewpoint upholds a sense of morality/ethical behaviour on the part of
business. Henceforth, this factor is labeled as ethical viewpoint.

Discussion
Three distinct viewpoints emerge out of the data analysis – objective, skeptical
and ethical. Being the first factor, objective viewpoint has emerged as the
most important one, replacing skeptical viewpoint, as was reported by Singh
et al. (1980). They had conducted their research in pre-liberalization days,
when business was subject to tremendous regulations. The general perception
on CSR activities that the business undertakes them to avail tax exemptions
and other government incentives, and the social service motive was missing.
The skeptical viewpoint on CSR was most dominant in those times. However,
a decade of liberalization has reduced controls and the society as well as the
business is beginning to undertake SR activities voluntarily. There is a
positive perception of CSR activities in the society, indicating a paradigm
shift in the societal perception on CSR.
Morality and ethics still occupy an important place in the society and draws
the boundaries for the business to function. It lays down normative behaviour
for the firms to act, thereby supporting Pava’s (1996) hypothesis. Morality
and ethics guide the business activities to being more socially responsible.

Conclusions

10
The societal perception on CSR activities of business is changing from
skeptical to objective. Liberalization of economy has reduced the regulatory
framework imposed by the state, but has increased self-regulation by the
business itself. Business is no longer viewed as selfish endeavour of profit
maximization. Society takes a positive view of their actions and expects a
responsible and ethical behaviour. The process of integration of the society
and business has begun and business has to reinforce the positive momentum
to strengthen the confidence in the society.

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14
 QUESTIONNAIRE
Section 1(Demographic Profile)

Name and Address of Respondent ________________________________

________________________________

Age _________________

Educational Qualification _______________________

Male/Female _________________________

Approximately Monthly Family Income (in Rs.)
(i) < 5,000 (iii) 10,000-15,000
(ii) 5,000-10,000 (iv) >15,000

Section II (Views on Corporate Social Responsibility)

Please indicate your opinion on the following statements:
Statements Strongly Agree Neutral Dis Strongly
agree agree disagree

Business is a part of the society and it ( ) ( ) ( ) ( ) ( )
must respond to social issues

People buy the products of a socially ( ) ( ) ( ) ( ) ( )
responsible companies

By being socially responsible, a ( ) ( ) ( ) ( ) ( )
company’s good will increases

Social responsibility expenditure must ( ) ( ) ( ) ( ) ( )
be incurred even when the firm is not
making profit

By ignoring social responsibility, a ( ) ( ) ( ) ( ) ( )
business can increase its profit

Even doing routine business properly is ( ) ( ) ( ) ( ) ( )
an act of social responsibility

Social activities should be planned and ( ) ( ) ( ) ( ) ( )
not arbitrary

15
 Statements Strongly Agree Neutral Dis Strongly
agree agree disagree

Socially responsible behaviour by firm ( ) ( ) ( ) ( ) ( )
is often a cover-up for inferior product
offering

Firms that devote resources towards ( ) ( ) ( ) ( ) ( )
socially responsible actions have fewer
resources available for increasing
employee effectiveness

A company can be both socially ( ) ( ) ( ) ( ) ( )
responsible and manufacture products of
high value

Firms engaged in socially responsible ( ) ( ) ( ) ( ) ( )
behaviour to compensate for inferior
product offerings

The socially responsible manager must ( ) ( ) ( ) ( ) ( )
occasionally place the interests of the
society over the interests of the company

Business has a social responsibility ( ) ( ) ( ) ( ) ( )
beyond making a profit

If survival of a business enterprises is at ( ) ( ) ( ) ( ) ( )
stake ,then you must forget about social
responsibility

Corporate planning and goal setting ( ) ( ) ( ) ( ) ( )
session should include discussions of
social responsibility

Social responsibility and profitability ( ) ( ) ( ) ( ) ( )
can be compatible

Overall effectiveness of a business can ( ) ( ) ( ) ( ) ( )
be determined to a great extent by the
degree to which it is socially responsible

16
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