Business Regulation & Corporate Conduct: Evidence from Indian States

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

2. Aspects of Business Regulation and Corporate ConductSameer ChaturvediCUTS International

3. 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

4. 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

5. Dimensions of Business Regulation

6. Assessing Business Performance

7. Highlights from Doing Business Report (WB & IFC) 2011 • India’s overall Rank – 134 (out of 183) • Getting Credit– 32nd, Protecting Investors - 44th • Enforcing Contracts - 182nd, Construction Permits – 177th, Starting Business – 165th, Taxes – 164th • 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

8. 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.

9. 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

10. Evolution of Concept Globally • 1948 – Universal Declaration on Human Rights • 1997 – SA 8000 (Social Accountability International) • 1998-2006 – Global Reporting Initiative (G3) • 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 ISO 26000 • 2011 - Guiding Principles on Business and Human Rights

11. 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, GoI • 2009 – Voluntary Guidelines on Corporate Governance and Corporate Social Responsibility • 2010 - Guidelines on Corporate Social Responsibility for Central PSE, GoI • 2011 – Guidelines on Social, Environmental and Economic Responsibilities of Business

12. 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

13. Stakeholder Interaction Framework

14. Thank You!