OMAR WAQQAS 760314-T131

WASEEM BAHADUR 870202-T216

Corporate Social Responsibility and Corporate Governance for Sustainable

Service Business

A Case Study of Zong (China Mobile Pakistan) and Telenor in Pakistan

Business Administration

Master‟s Thesis

30 ECTS

Term: HT 2010

Supervisors: Samuel Petros Sebhatu

Bo Enquist

1

ABSTRACT

In the last decade or so the climate of doing business changed dramatically, coming up with

many new dimensions of the business. A few of them are service dominant logic, corporate

social responsibility and corporate governance. The notion of a „business case‟ for corporate

sustainability has increasingly been used by the corporate sector, environmental

organizations, consultancies and by many others to seek justification for sustainability

strategies within organizations.

These concepts if not complete but must have major impact on all business decisions now a

days. No business can survive longer by disintegrating itself from these practices. So it has

become the need of the hour to understand these terms and incorporate them in business

social culture, to be part of responsible corporate citizenship in today‟s business world.

Moreover, the paper will try to study the level of CSR activities according to CSR pyramid in

terms of economical, legal, social and philanthropic aspects and these will be analyzed with

gathered data about companies under review. The research work undertaken will focus on

CSR and CG practices prevailing in telecom sector of Pakistan especially taking Zong as our

case study basis and Telenor for its comparison. The research will see the internal service

dimensions and will analyze if the business is based on five principles of value based service

business. The paper is qualitative in its nature, relying on the data obtained through

interviews regarding the companies under discussion.

2

ACKNOWLEDGEMENTS

We would like to take this opportunity to first of all thank Almighty Allah who has given us

the courage to do this thesis. Then our families back home who were very supportive and

encouraging in every up and down times during the tenure of this thesis so that to take up and

complete this thesis in time.

We would like to express our gratitude to our supervisors Bo Enquist and especially Samuel

Petros who guided us all the way and made it possible to successfully complete our thesis

project. They always assisted us in best possible manner with their professional insights and

experience on the subject matter.

In last we are thankful to all the people at different organizational levels in companies. In

Zong Mr. Usman was very helpful in guiding and providing the information relevant to our

thesis and at government level Mr. Kashif from Pakistan Telecommunication Authority who

has been very helpful in providing valuable comments about the topic despite of his busy

schedule and to all of our friends who helped us to complete this thesis successfully through

their positive suggestions and inputs all the time.

_________________ ________________

Omar Waqqas Waseem Bahadur

3

ABBREVIATIONS

KPMG Klynveld Peat Marwick Goerdeler

CML China Moile Limited

SECP Securities and Exchange Commission of Pakistan

PTA Pakistan Telecommunication Authority

CMPak China Mobile Pakistan

CSR Corporate Social Responsibility

CG Corporate Governance

SOX Sarbanes-Oxley

NYSE New York Stock Exchange

CEO Chief Executive Officer

COSO Committee of Sponsoring Organizations

GSM Global System for Mobile Communications

ICT Information Communication Technology

HR Human Resource

HRSI Human Resource Solutions International

SIG Special Interest Groups

SSDL Sustainable Service Dominant Logic

GRI Global Reporting Initiatives

NGO Non-Governmental Organization

MD Managing Director

IFRS Financial Reporting Standards

WBCSD World Business Council for Sustainable Development

4

MOU Memorandum of Understanding

GIEs Globally Integrated Enterprises

TBL Triple Bottom Line

5

TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION, RESEARCH BACKGROUND AND MOTIVATION 8

1.1 Introduction ................................................................................................................. 8

1.2 Research Background and Motivation ........................................................................ 8

1.3 Conceptual framework of Corporate Social Responsibility and Corporate

Governance .......................................................................................................................... 10

1.4 Research Purpose and Aim of study ......................................................................... 13

1.5 Research questions .................................................................................................... 13

CHAPTER 2 RESEARCH DESIGN AND METHODOLOGY ........................................ 14

2.1 Research Approach ................................................................................................... 14

2.1.1 Qualitative research method .............................................................................. 14

2.2 Research Method ....................................................................................................... 15

2.2.1 Case Study ......................................................................................................... 15

2.2.2 Data collection method ...................................................................................... 16

2.3 Reliability .................................................................................................................. 17

2.4 Limitations of research .............................................................................................. 17

CHAPTER 3 THEORETICAL FRAMEWORK ............................................................... 19

3.1 Sustainable development ........................................................................................... 19

3.2 Stakeholder Theory ................................................................................................... 20

3.3 Corporate Social Responsibility ................................................................................ 22

3.3.1 CSR Pyramid ..................................................................................................... 22

3.3.2 CSR and Corporate Image ................................................................................. 25

3.3.3 Tipple Bottom Line ............................................................................................ 25

3.4 Corporate Governance............................................................................................... 28

3.5 Integration of CSR and CG ....................................................................................... 30

3.6 Sustainable Service Business and Values Based Business ....................................... 31

3.6.1 Measuring internal service dimensions .............................................................. 31

6

3.6.2 Values Based Business ...................................................................................... 32

CHAPTER 4 EMPIRICAL STUDY .................................................................................... 34

4.1 Overview of Telecommunication Sector of Pakistan .............................................. 34

4.1.1 Subscriber wise- cellular market share .............................................................. 34

4.1.2 Telecom indicators ............................................................................................. 35

4.1.3 Economic Indicators .......................................................................................... 37

4.1.4 Cellular mobile infrastructure sharing ............................................................... 37

4.2 Company Profile ....................................................................................................... 39

4.2.1 CSR strategy and management .......................................................................... 41

4.2.2 CSR Strategy ...................................................................................................... 41

4.2.3 CSR Management .............................................................................................. 42

4.2.4 Stakeholder Engagement ................................................................................... 44

4.2.5 Corporate Governance ....................................................................................... 46

4.3 Comparative study of Zong with Telenor ...................................................................... 56

4.3.1 Offering mobile financial services ..................................................................... 56

4.3.2 Corporate Responsibility ................................................................................... 56

4.3.3 CSR Objective and strategy ............................................................................... 58

4.3.4 HR policies for employees at Zong: .................................................................. 59

4.3.5 Zong Initiatives regarding CSR development: .................................................. 60

4.3.6 Corporate Governance ....................................................................................... 61

4.4 Government‟s role in terms of CSR and CG............................................................. 61

CHAPTER 5 DISCUSSION AND ANALYSIS ......................................................................... 63

5.1 Stakeholder theory..................................................................................................... 63

5.2 Corporate Social Responsibility ................................................................................ 64

5.3 CSR Pyramid ............................................................................................................. 64

5.4 Triple Bottom Line .................................................................................................... 65

5.5 Corporate Governance............................................................................................... 66

5.6 Integration of CSR and CG ....................................................................................... 66

5.7 Sustainable Service Business and Values Based Business ....................................... 67

7

5.6.1 Measuring internal service dimensions of Zong ................................................ 67

5.6.2 Five principles for a sustainable values based service business ........................ 69

CHAPTER 6 CONCLUSION .................................................................................................... 73

Future research and recommendations................................................................................. 74

REFERENCES ....................................................................................................................... 76

Web sources ......................................................................................................................... 82

Annual Reports: ................................................................................................................... 83

Interviews ............................................................................................................................. 83

LIST OF FIGURES

Figure 1: Basic two-tier Stakeholder map 21

Figure 2: The Pyramid of Corporate Social Responsibility 24

Figure 3: Triple Bottom line 26

Figure 4: Subscriber wise- Cellular market share 35

Figure 5: History and Milestones: CSR Management at China Mobile 43

Figure 6: China Mobile Stakeholders 45

LIST OF TABLES

Table 1: Annual Cellular Subscribers 35

Table 2: Foreign Direct Investment in Telecom Sector 36

Table 3: Telecom Revenues 36

Table 4: Telecom Investment 36

APPENDIX .................................................................................................................................

8

CHAPTER 1 INTRODUCTION, RESEARCH BACKGROUND

AND MOTIVATION

1.1 Introduction

The paper will discuss about corporate social responsibility (CSR) and corporate governance

(CG) in telecom sector of Pakistan taking the case of Zong into the consideration. The first

chapter explains introduction, research background and motivation. It also includes

conceptual framework of CSR and CG, research purpose and aim of study and then research

questions. Chapter two contains research design and methodology which includes research

approach, research method, reliability and limitations of research. Chapter three is about

theoretical framework in which we discussed sustainable development, stakeholder theory,

corporate social responsibility, corporate governance, integration of CSR and CG, sustainable

service business and values based business. Chapter four relates to the empirical part in

which we have given overview of telecommunication sector of Pakistan, company profile,

comparative study of Zong with Telenor and government‟s role in terms of CSR and CG.

Chapter 5 consists of discussion and analysis of theories that were included in the research.

Chapter six is about conclusion whereas in last we discussed future research and

recommendations.

Business will play a pivotal role in meeting the sustainability challenges of the 21st century

(International Institute for Sustainable Development [IISD] 2010). For the business

community, sustainability is more than mere window dressing. By adopting sustainable

practices, companies can gain competitive edge, increase their market share and boost

shareholder value. The growing demand for green products has created many new markets in

which sharp eyed eco-entrepreneurs are reaping rewards (IISD 2010).

1.2 Research Background and Motivation

Presently businesses are facing competition while providing services to customers both

locally and internationally. At local and international level companies have to be concerned

about the standards and the competitors and about what they are providing to the customers.

Today companies are moving towards internationalization and in that they have to meet the

9

international standards to compete and succeed in the market. They also need to be concerned

about environment, social and economic aspects if they want to meet the current market

challenges. Companies are moving from products to services and are facing the issues of

environment, social and economic those are termed as Corporate Social Responsibility

(CSR). These three elements or factors are very important for any company that wants to

compete internationally and locally within the country.

CSR is ―A concept whereby companies integrate social and environmental concerns in their

business operations and interact with their stakeholders on a voluntary basis (Commission of

the European Communities 2006). This trend is clearly visible globally as more and more

business owners have started to pay attention for social implications of their activities.

Corporate social responsibility is a commitment by business towards ethical behavior (Moir

2001), when it all begins. It is not only about how companies manage the business processes

to produce but an overall positive impact on the society (Baker 2008).

Today those companies that are concerned with the Corporate Social Responsibility through

its business are known around the world in service sector. H&M, IKEA, Starbucks, Lego and

many other companies are working on the CSR aspects from years and are laying the

foundations of CSR practices. Moreover, another term that is also important in today‟s

business world is Corporate Governance (CG). Companies are following CG rules and

implementing them in their daily business routines and activities. Selznick (1994) argues that

governance is more than management and has to take account of all the interests that affect

the viability, competence and moral character of an enterprise. Both CSR and CG are the part

of today‟s successful businesses that has integrated them in their operations.

We have studied Corporate Social Responsibility (CSR) and Corporate Governance (CG) and

understood their importance in today‟s business world. We developed our interest in CSR and

CG codes, their use and importance therefore wanted to study them further through practical

example. Like some other countries of the world Pakistan is also a good place for business

investment in services and other fields, we have seen investments by renowned companies

that are working and known internationally. Many local and international companies in

Pakistan are also working on CSR and CG concepts and adapted them as they started their

operations. We have undertaken our research on two companies that are Zong (China

Mobiles Pakistan) and Telenor providing telecom services to the people of Pakistan. In

10

addition this report will focus on existing CSR and CG practices in both companies i.e. Zong

and Telenor in Pakistan. And we will be taking the case of Zong as a case study of our paper

and comparing it with the Telenor practices in terms of CSR and CG. In this way a qualitative

comparative study will be done.

1.3 Conceptual framework of Corporate Social Responsibility and

Corporate Governance

According to Blowfield and Frynas (2005) Corporate Social Responsibility can be used as an

umbrella term for a number of theories and practices all of which accepts the following: (a)

that companies have a responsibility for their impact on society and the natural environment,

sometimes away from legal compliance and the responsibility of individuals; (b) that

companies have a liability for the behavior of others with whom they do business (e.g. within

supply chains); and (c) that business needs to manage its relationship with wider society,

whether for reasons of commercial viability or to add value to society. This definition also

gives the link between business and society through CSR.

The trend is clearly visible globally as more and more business owners have started to work

on social implications of their activities. Corporate social responsibility is a commitment by

business towards ethical behavior (Moir 2001), when it all begins. It is not only about how

companies manage the business processes to produce an overall positive impact on the

society (Baker 2008). But, as Carroll (1979) describes, it covers all the four kinds of

responsibilities namely economic, legal, ethical and discretionary, which companies have to

make a strategic decision. The development of the involvement of companies and the

emergence of sustainability thinking in business together can be seen as a pro-active driving

force (Edvardsson & Enquist 2009).

CSR„s role in tackling problems concerning corporate responsibilities of a company and its

link with the society and environment has been a very controversial subject (Enquist et al.

2007). It is normally professed that CSR is not what is written in company„s code of conduct

or annual reports. That is only one portion of total CSR plans used by the company. In

general social responsibilities of an organization have to include all the three bottom lines:

Ecological, Economic and Social.

11

The notion of CSR is not novel to business world as commonly determined. Corporate social

responsibility was not difficult to understand as we all know that the debate on ―polluting

organizations started at least in the 1970´s, which afterwards recycling, fair trade market

practices, good governance, safe packaging, sustainable development, and accountability

comes into view (Vogel 2005). In the past companies have been practicing CSR but most of

the time it has been sighted as something to fill annual reports and corporate public relation

statements or super facial. In fact, it has never been taken effectively so as to make it part of

corporate business strategy. And we don„t have enough business cases to argue for (Vogel

2005).

Corporate social responsibility is not only about Philanthropy. The under lying theme of

corporate social responsibility is that business and society are interlinked rather that distinct

entities (Wood 1991). CSR is also concerned with economic, social and environmental

aspects and philanthropy is only a small part of social aspect. Corporate social responsibility

is fast gaining importance as more and more firms are realizing its value (Chaudhry &

Krishnan 2007). Recently, business owners all over the world have started to think in terms

of integrating CSR activities into their core business strategies and started to assess its

repercussions gravely. Kotler and Lee (2005) mentioned CSR has to guarantee competitive

advantage and strategic gains.

Based on literature reviews, internet research and interviews with company stakeholders this

study attempts to draw a comparative analysis between two telecom companies operating in

Pakistan‟s cellular communications industry. The focus is on how these companies

themselves identify issues as their corporate social responsibility and how these companies

plan to deal with such issues. This study also explores how these companies integrate CSR in

their strategic planning and overall business model. Further, this study also investigates what

strategies these company apply in order to implement their CSR initiatives and how their

outcome can be measured.

According to Mallin (2007) corporate governance is the way the companies govern their

businesses and this depends on which stage of corporate governance development are they.

Corporate governance development depends on many underlying theories. The main

affecting theories of corporate governance development are as agency theory which points

out the agency relationship between principal and agent where the principal delegates work to

12

the agent so when it comes to the corporations, principals are the owners and agents are the

directors of the corporations. The other theory is transaction cost economics which

determines a corporation as a governance structure. So the selection of a better governance

structure will streamline the interests of directors and shareholders. Stakeholder theory not

only focuses on the shareholders but takes a wider view and takes the perspective of

stakeholders into consideration and the governance structure of the corporation may have

some direct involvement of stakeholder groups (Mallin 2007). In stewardship theory the

directors are treated as the stewards of the corporation‟s assets and are considered to act in

the best interest of the shareholders. In class hegemony theory the directors of the corporation

view themselves as an elite and remain at the top of the corporations and supposed to include

and promote new directors considering how well they are suited for and in this elite group. In

managerial hegemony theory the management of the corporation with their knowledge of

business operations of the corporation may reasonably dominate the directors as to reduce the

influence of the directors in the corporation.

The main theory in above discussed theories is the agency theory which affects the

development of the corporate governance most but nowadays it looks that stakeholder theory

is more in lime light as corporations now becoming more and more aware of the fact that they

cannot perform in isolation without the interaction with their stakeholders and giving the

shareholder its due position in the affairs of the business of the corporation who is a very

pivotal stakeholder of a corporation (Mallin 2007).

Sustainable Service Business and Values Based Business are discussed in the paper to better

understand the concept of CSR and dimensions to measure the internal service quality of the

business as: helpfulness, promptness, communication, tangibles, professionalism, reliability,

confidentiality, flexibility, preparedness and consideration were used to see how good Zong

is implementing and working on these dimensions. Five principles of sustainable value based

service business were also used that are: Strong values drive customer value, CSR as a

strategy for sustainable service business, Values based service experience for co-creating

value, Values based service brand and communication for values resonance and Values based

service leadership for living the values and these were analyzed with reference to Zong.

13

1.4 Research Purpose and Aim of study

The main aim of this study is to assess corporate social responsibility and corporate

governance from a service business perspective in the case of Zong Pakistan. The paper will

assess how the principles of sustainability and corporate governance are incorporated into

everyday business activities of Zong. Comparison of Zong Pakistan with the Telenor in terms

of CSR and CG practices has done for the case analysis. Moreover, we looked into China

Mobile Limited (CML); the parent company of Zong Pakistan for better understanding of

CSR and CG perspectives.

The paper has analyzed how Zong is incorporating sustainable service research into their

business strategies and daily practices. This report will provide a chance to study the CSR

and CG in the telecom sector of Pakistan and their future will be discussed.

1.5 Research questions

The paper will try to look into the CSR and CG practices in Zong, compare it with Telenor

and will try to answer following questions through qualitative case study research:

What are the CSR and CG practices in Zong and its comparison with Telenor?

How CSR and CG practices can benefit the organization like Zong in providing better

services to their customers?

What are internal service dimensions and how they can be measured?

14

CHAPTER 2 RESEARCH DESIGN AND METHODOLOGY

2.1 Research Approach

This thesis is structured to follow a qualitative comparison of two case companies which have

a successful image of Corporate Social Responsibility (CSR) and Corporate Governance

(CG). We will be demonstrating and comparing their CSR and CG activities starting from

their intended strategies to their realized strategies.

Bryman and Bell (2007) describes that it is a research strategy that usually emphasizes words

rather than quantification in the collection and analysis of data. Also Maxwell (2005)

mentions that qualitative research approach emphasizes words rather than numbers and

focuses on specific situations or people.

Many researchers as Carroll (1999) in article Corporate Social Responsibility Evolution of a

Definitional Construct, Edvardsson, B. and Enquist B. in their article Values-based Service

for Sustainable Business: Lessons from IKEA (2009) and Sebhatu, S.P. in his paper

Corporate Social Responsibility for Sustainable Service Dominant Logic (2010) has used

qualitative research method for case study analysis. Therefore we have used the qualitative

research method in our research. This helped us to better understand about the

implementation of CSR and CG in the case study of Zong and Telenor because implications

of these practices are difficult to quantify. As we used the qualitative method, we used data

available through annual reports, online data on company‟s websites and through the

interviews and secondary data from different articles on the subject matter.

2.1.1 Qualitative research method

Bryman and Bell (2007) explains that the question of how well the case study fares in the

context of the research design criteria cited early, measurement validity, internal validity,

external validity, ecological validity, reliability and replicability - depends in large part on

how far the researcher feels that these are appropriate for the evaluation of case study

research. Therefore we considered the case study approach for our research paper.

15

2.2 Research Method

2.2.1 Case Study

A case study is one which investigates specific research questions that may be fairly loose to

begin with and which seeks a range of different kinds of evidence, evidence which is there in

the case setting, and which has to be abstracted and collated to get the best possible answers

to the research questions (Gillham 2000) further (Gerring 2004) argues that case study is a

thorough study of a lone component with an aim to simplify across a larger set of units

therefore case study is just not the way to analyze or model but it is a particular way of

defining cases.

Case study can be seen to satisfy three tenets of the qualitative method: describing,

understanding, and explaining. The literature contains numerous examples of applications of

the case study methodology. The body of literature in case study research is "primitive and

limited" (Yin 1994), in comparison to that of experimental or quasi-experimental research.

Case study evaluations can cover both process and outcomes, because they can include both

quantitative and qualitative data (Tellis 1997). Case studies can be theoretically exciting and

data rich (Cassell & Saymon 2004) and further it is mentioned that the case study is suited to

the research questions that are designed to analyze and study the organization in particular

context. Therefore case study method is used to study a particular example and gives the

results in that context.

Johnson (2007) in his paper “Stakeholder Dialogue for Sustainable Service”, Edvardsson and

Enquist (2009) in their book Values-based Service for Sustainable Business: Lessons from

IKEA and Sebhatu (2010) in his paper Corporate Social Responsibility for Sustainable

Service Dominant Logic, (Enquist et al. 2007) in the paper values-based service quality for

sustainable business have used the case study approach for the analysis in their research

papers.

Our research study is based on exploratory research that is mainly used in qualitative

approaches and involves the use of primary and secondary data through interviews,

observations, focus groups, articles, journals, periodicals to get up to date information.

Secondly, for our research we have used the deductive reasoning approach which states that

we start with theory then make the hypothesis which is followed by the observations and in

the last confirmation is made about the research (Bryman & Bell 2007). In our case the

16

research questions are made instead of hypothesis as we are using the qualitative research

methodology.

We have used the case study approach in our thesis and will try to come up with results to

support our questions. We feel that this approach is relevant to our research as it requires

deep insights into certain situation and also for studying the concepts of CSR and CG. In our

case we have taken two companies operating in same industry which are selected as case

studies with huge activity across diversified value added services range but with similar end

user base that are Zong (China Mobile Pakistan) and Telenor Pakistan.

2.2.2 Data collection method

Qualitative research method involves the interviewing, participant observations and

unstructured interviewing, because these methods are viewed as particularly helpful in the

generation of an intensive, detailed examination of a case (Bryman & Bell 2007).

According to Merriam (1988), qualitative data obtained from documents, interviews and

observations is based on qualitative case study method that is mostly relied on the above

methods of data collection. In this regard the data may come from different sources through

structuring the case studies that can be: participant-observation, physical artifacts, archival

records, documentation, interviews and direct observations. These are sources that can be

used to collect data and help in case study but all these sources are not relevant in every case

study. They change as per the case and requirement of study and available data to the

researcher (Yin 2002).

To make a study on these two case companies, we gathered the data by using primary and

secondary data. Mainly documented data in the form of written materials such as annual

reports, case studies in the similar filed, literature reviews, CSR annual reports of Zong and

Telenor and companies websites were used. Through comparative research design we will

focus on objects that are similar in some contexts and different in some contexts.

To find answers for research questions, analysis of data will be done by using comparative

research method. Mainly focus will be established to expose orderly structure and would be

on general findings to our topic which will be based on rational framework. We have used

deductive research approach for our case study analysis. Moreover we conducted several

interviews of both the company officials as well as government representatives from telecom

17

regulatory authority in Pakistan. These interviews were the basis of our case study which

gives an overall view of CSR and CG practices in both under discussion companies. In

interviews observation method was used and questions posed were open ended to have

maximum information from the respondents. The concepts of CSR and CG were introduced

to respondents before the start of interview so that they may answer the questions relevant to

our topic.

2.3 Reliability

One of the necessary requirement for a research paper is that it should be trustworthy and the

viewer may see it steady and dependable (Gummesson, 2000; Alvesson and Sköldberg,

2008).We have tried our best in collecting the data from reliable sources. We relied on

interviews for our analysis which are mainly based on our previous knowledge on the subject

matter. In interviews we tried to put open ended questions, to get maximum information

about our research areas. The information gathered through interviews was then validated

through different theories regarding CSR and CG.

2.4 Limitations of research

Information regarding CSR and CG normally is not well defined, explained and available in

not consistent formats over the company‟s websites and online sources. There are

internationally agreed formats like Global Reporting Initiatives (GRI) and International

Financial Reporting Standards (IFRS) used for CSR reporting but these are still not in vogue

and very few companies are using them in their annual reports.

Companies in general have less knowledge and awareness about CSR and CG; as a result we

were not able to get deep information through company representatives. As far as our case

study is concerned, Telenor and China Mobile both are big companies but Telenor is working

in Pakistan since 2005 and Zong (CM Pak) started its business in 2008. Both the companies

involve many external stakeholders including direct customers, indirect customers,

government, NGOs, suppliers and etc. that lead to difficulty in collecting data. At first we

intended to collect the secondary data over the internet from company‟s websites and primary

data by making qualitative research (interviews and discussions) but Zong has not given

anything relevant to CSR and CG on its website and no proper reports were available for this

purpose so we have to rely more on other sources.

18

As the result, we conducted the interviews of company officials and Pakistan

Telecommunication Authority (PTA) officials. Therefore to make our research more reliable,

we have focused on existing interview available online of Chief Executive Officer (CEO) and

Managing Director (MD) of Zong. Findings from our research would be based on our two

focused companies that may not depict the whole picture of entire population of telecom

sector of Pakistan.

19

CHAPTER 3 THEORETICAL FRAMEWORK

3.1 Sustainable development

The real meaning of sustainable development is a constant affiliation among human actions,

including the desires to get better their way of life and the sentiment of well being on one

hand, and the natural world‟s resources and ecosystem on the other. This concept aims not to

reduce the prospects for future generations to enjoy a quality of life at least as good as our

generations (Mintzer 1992).

According to The Bruntland Report (1987) economic development, social development and

environmental protection are the three dimensions that are concerned with the sustainable

development. As per World Business Council for Sustainable Development (WBCSD) “The

continuing commitment by business to behave ethically and contribute to economic

development while improving the quality of life of the workforce and their families as well as

the local community and society at large” 1

In 1981 Freer Spreckley first articulated the triple bottom line in a publication called 'Social

Audit - A Management Tool for Co-operative Working' as he described what Social

Enterprises should include in their performance measurement. The phrase was coined by

John Elkington in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st

Century Business (Brown et al. 2006).

This concept aims to not diminish the prospects for future generations to enjoy a quality of

life at least as good as our generations (Mintzer 1992). In our opinion sustainable

development is for the people itself, for everybody who uses the nature and wants to make

nature long lasting for next generation. Nowadays people are using the nature in both direct

and indirect ways which they may do not even know that they are going to destroy the

environment, nature which finally will reverse to harm human itself, if the people in this

generation do nothing. The influence of sustainable development is growing and accepted

1 www.wbscd.org

20

from all people. Moreover, due to the environmental issue, many researchers are concerning

about environment that many natural resources can be run out if we do not use it wisely.

According to social, environment and sustainability reporting and organizational value

creation by Gray (2006), organization can create value to the planet to be sustainable based

on the logic of economic development. That mentions about the value creation in

organization, we should consider the one who can cooperate together, that are the

stakeholders. It can be a group or individual affiliated to the organization, who perceive the

value, share interest that can be both internal and external of the organization. However

business sustainable society has complexity in implementing but it is the best solution to

persuade the organization into better ways.

3.2 Stakeholder Theory

Freeman (1984, pp. 25) explains about stakeholder as “any group or individual who can

affect or is affected by the achievement of the firm‟s objectives”. He also explains in his

article that those groups or individuals if not support the organization then the organization

will not be able to survive. Stakeholder theory not only concerns about maximizing the

shareholders profit but all other people who are concerned with the organization directly or

indirectly (Freeman 1984).

Further Freeman (1984) in his effort, Strategic Management: A Stakeholder Approach has

laid very fine ground for the stakeholder theory. Key (1999) mentions about the observable

fact that Freeman tries to clarify is the relationship with its external environment and

behavior within this environment of firm. Stakeholders are mainly distributed among two

groups as internal and external. Internal stakeholders mean the people within the firm while

external stakeholders refer to people or organizations outside of firm.

Donaldson and Preston (1995) developed stakeholder model although this model did not

mention an important stakeholder which is media. In figure 1 we can see media is also a

stakeholder of a firm given by (Freeman et al. 2008) where they talked about several

stakeholders instead of talking about only shareholders. They have distributed the model in

two circles one with external stakeholders that are government, competitors, consumer

advocate groups, special interest groups and media and internal stakeholders that influence a

company as suppliers, financiers, communities, customers and employees. Company must

identity its key stakeholders for the long term sustainability and profitability.

21

Figure 1 Basic two-tier Stakeholder map (Freeman et al. 2008, p.7)

Jensen (2001) has made a further improvement in the stakeholder theory which argues that all

stakeholders in a firm should be collectively taken by the managers of the firms but the point

is that theorists refuse to say about the interests of each stakeholder trade-offs. Moreover,

quantifiable objectives were not defined by any researcher that makes the managers

inexplicable for the CSR practices. Jensen (2001) mentions that, if value creation is the

overarching corporate goal process of creating value involves more than just simply holding

up value maximization as the organizational objective. It is just not that top management

makes a corporate statement or purpose but the need is to incorporate the value in to the

organization‟s mission and vision along with making a strategy for it. This in return will help

the organization to gain its objectives and compete in the market by providing value to the

investments of the organization‟s investors (Jensen 2001).

22

3.3 Corporate Social Responsibility

It is being noticed that Corporate Social Responsibility (CSR) has turn into an appealing

topic; so far there is no accurate definition for this term. With regard to its nature it is a multi-

disciplinary subject covering a broad range of issues in operating business. Different authors

have introduced different definitions; some of them are as follows:

Carroll (1991) argues that these four categories as economic, legal, ethical and philanthropic

of corporate social responsibilities can be represented as a pyramid, in which economic

responsibilities are the foundations upon which all other responsibilities are based and

without which they cannot be accomplished and philanthropic responsibilities are on the top

of the pyramid.

Blowfield and Frynas (2005) defines CSR, as an umbrella term for a variety of theories and

practices all of which recognize the following: (a) that companies have a responsibility for

their impact on society and the natural environment, sometimes beyond legal compliance and

the liability of individuals; (b) that companies have a responsibility for the behavior of others

with whom they do business (e.g. within supply chains); and that (c) business needs to

manage its relationship with wider society, whether for reasons of commercial feasibility, or

to add value for the society.

Corporate social responsibility (CSR) is a citizenship function with social, ethical and moral

responsibility among a company and its customers (Maignan & Ferrell, 2001).

These definitions are used to explain and understand the concept of CSR with other

definitions by other authors and are used in terms of action and responsibilities to society and

environment. This also explains about how an organization should apply social and

environmental implication in their business procedures.

3.3.1 CSR Pyramid

The development of CSR is widely spread around the world. Many companies are interested

in adopting CSR, From “Doing Good to Do Good” is the old style of CSR (Vogel 2005) ,

using CSR to build good reputations to the community, such as charity. So, this was more

into the top of the CSR pyramid called as philanthropic activities. And adopt into new CSR

practice from “Doing Good to Do Good” to be “Doing Good to Do Well” which are under

the core values of sustainable business by emphasizing on balancing between economical,

23

social, and environmental perspectives into the business. Therefore, CSR can be understood

as the voluntary integration of social and environmental concerns into business operations

and interactions with stakeholders (Enquist et al. 2006).

According to the pyramid of CSR as in figure 2, Carroll (1991) has mentioned four levels of

CSR that are economic responsibilities, legal responsibilities, ethical responsibilities and

philanthropic responsibilities from bottom to top respectively. The economic responsibility is

the foundational level on which all other levels are built. Organizations are mainly

considering the profit perspective here and at some point the idea of the profit motive has

transformed into a notion of maximum profits, and this has been an enduring value towards

organization. The next level is called legal responsibilities, this level is about to move

according to the laws and the codes of society and businesses. Main emphasis is to work

within the rules governed by the regulatory authorities and government. The third layer of the

pyramid is ethical responsibilities which refer towards conducting the business as per the

justice and ethical responsibilities with emphasis on fairness of business. By doing this the

stakeholders as social members embrace the organization even they are not involved in

enforcing the law. Mostly it is observed that companies are working more on this level at

larger scale by involving their employees and stakeholders. The last level of CSR practicing

is philanthropic responsibilities that focus on the corporate level of an organization as a

corporate citizen. Here company works towards the recourse contribution to the community

and to improve the quality of life. Society‟s expectations such as the welfare work, education

and arts support and contribution towards making the society good. This level is also

considered as important to managers and employees where they can participate in voluntary

and charitable activities in the society (Carroll 1991).

24

Figure 2 The Pyramid of Corporate Social Responsibility (Carroll 1991, p.42)

The pyramid of corporate social responsibility as in figure 2 and mentioned above is divided

into four levels. Starting from foundation step about economic performance, at the same time

business is expected to obey by law as the social codification of acceptable behavior. And

come to next level is the ethic responsible which is at its most fundamental level, this is the

obligation to do what is right, just and fair, and to avoid or minimize harm to stakeholder.

And the last step is the philanthropic that about the charitable expectation from social

responsibility wherein business in this time is expected to add financial and human resources

to the community and to improve the quality of life.

There are five key areas to focus on corporate activities to implement for good CSR, which

are financial performance, the treatment of the workforce, impact on the market place, impact

on environment, and commitment to promoting human rights. Furthermore, media as an

important stakeholder is focusing more on the environmental issues as fundamental. So if

firm is not able to fulfill the environmental and social responsibility, then the media acts by

25

spreading the news to the people. The response of the people towards the firm would be

negative that will harm the company‟s profit. The best way in the interest of the firm would

be to reduce the conflicts and increase confidence about the firm among their stakeholders as

a result this will protect their brands (Waddock & Bodwell 2007). Porter and Kramer (2006),

mentions about the philanthropic activities that is in decline but can be of competitive

advantage to the organization when used in a positive way that can lead towards long-term

sustainability. By using the CSR perspectives and considering it while providing at the same

time products in markets it can be beneficial to the company as well as to its stakeholders.

3.3.2 CSR and Corporate Image

This part will illustrate that how CSR and corporate image are interrelated. Morsing and

Beackmann (2006) agreed on adopting CSR actions so companies tries to focus on the

capability of value to make their company‟s identity and name by building its brand image or

building trust of stakeholders including customers, supplier, business partners and others.

Moreover, companies that are working and incorporating CSR practices in their business are

reporting the payback into their name and their bottom line. Therefore, in most of the big

corporations, it is seen as an essential tool for developing and improving the image of the

corporation in public. Also, annual reports highlighted with explanation of companies'

attempts to be fair, green and responsible which can be referred to as “Sustainable

Development Report” As the result, people who viewed annual reports will have positive

image about the company (Mattila 2009).

3.3.3 Tipple Bottom Line

Literature review shows that Triple Bottom Line (TBL) was first phrased by John Elkington

in 1994 and subsequently in 1997 in his book Cannibals with Forks: the Triple Bottom Line

of 21st Century Business (Elkington 2004). TBL term was used by Elkington in public,

together with an article in the California Management Review on „win–win–win‟ business

strategies (Elkington 1994), Sustainability‟s 1996 report Engaging Stakeholders and 1997

book Cannibals with Forks: The Triple Bottom Line of 21st Century Business (Elkington

1997). TBL focuses on three aspects namely economic, ecological and social. TBL notion

requires the responsibility of stakeholders rather than shareholders in order to increase the

organization‟s value. This also consists of its profitability, shareholder values and its social,

human and environmental capital (Savitz & Weber 2006). Moreover, it attempts to put

together not only the environmental and social aspects, but also the economic factors. TBL is

26

a complicated approach; many companies are only in start to discover the real repercussions

of its use and implementation. Also, it discusses about three important fundamentals together

as environmental responsibility, social equity and economic performance. By implementing

the TBL concept, several companies expect to be able to take more efficient and sustainable

method to manage business risks, handle the concerns of society and to identify new business

opportunities, as well as likely obstacles (Henriques & Richardson 2004).

Figure 3: Triple Bottom line (Source: Sustainability Assessment and Reporting

for the University of Michigan's 2002, p.8)

TBL is mainly divided into three spheres that are also interlinked together as shown in figure

3 and discussed below:

i. Economic

TBL refers to both economic and financial bottom lines. Financial is concerning about money

which is tangible, distributed and shared. On the other hand, economic is a concept that

embraces the relationships between policies decision, institution, theories and choices that

27

affects the production. Economic and social aspects cannot be separated and it is hard to

reject the vital relationships that guide the economic institutions (Porter 1998). The Economic

refers to the profits, cost savings, economic growth, research and development in an

organization. The profit characteristic needs to be considered by a firm as the real economic

benefit of the society. When economic aspect is integrated in social aspect (economic-social

aspects) they come up with business ethics, fair trade and worker rights as per figure 3. TBL

approach does not believe only in the organizational advantages but also the social profits

where the ethics, behaviors and practices are reflecting the profit maximization to maintain

the social and economic accountability and have a balance between economic and social

elements.

ii. Social

Social aspect of Triple Bottom Line refers to standard of living, education, community and

equal opportunity for all in the society. Furthermore the sustainable business helps towards

the development of community and the region. This also take account of monitoring the

labor, comply human rights, enhancing working conditions and making relationships with

and among labor, as well as considering any indications of social responsibility which is

achieved in the civil society movement (Bob 2002). In figure 3, the social-environmental

aspect discusses about environmental justice, natural resources stewardship locally &

globally in the sphere of TBL.

iii. Environmental

Environmental aspect includes natural resource use, environmental management, and

pollution prevention of air, water, land and waste as shown in figure 3. This element is

related to the advantages of nature in order to uphold the available resources. The aim is to do

no damage to environment and restrain environmental conditions as well as supervising and

cautiously utilizing energy and resources at the same time decreasing manufacturing waste

and contaminated materials before disposal so that the environment is safe and it is done in a

lawful way (Schaltegger et al. 2003). As in figure 3 environmental-economic aspect covers

energy efficiency, subsidies or incentives for use of natural resources that can help the

environmental resources to be sustainable and usable for the generations to come.

28

3.4 Corporate Governance

Mallin points out that there have been a number of high profile corporate collapses that have

arisen despite the fact that the annual reports of the firms showed true and fair view of the

business. These collapses have negative impacts on all stakeholders and on the society at

large. Why have such collapses occurred? What might be done to prevent such collapses

happening again? How can investor confidence be restored? The answers to all these

questions lie in good corporate governance; it can help prevent such collapses happening

again and restore investor‟s confidence (Mallin 2010). The importance of corporate

governance cannot be denied. It helps to ensure the reasonable and proper system of control

which works within a company so that the company‟s assets can be protected. It prevents any

one person to have too much power or influence which can hurt the business operations.

Corporate governance is concerned with the relationship between company‟s management,

the board of directors, shareholders and other stakeholders; stakeholder groups consists of

employees including coworkers, provider of credit, suppliers, customers, local communities,

non government organizations and government. It aims to ensure that the company is run for

the best interest of shareholders and stakeholders. Corporate governance encourages both

transparency and accountability which investors want in corporate management and in

corporate performance.

Cadbury states corporate governance is concerned with holding the balance between

economic and social goals and between individual and communal goals (Cadbury 1992).

There are two perspectives of CG mainly categorized as narrow and the broad point of view

of CG. The narrow perspective is related to governing the interactions between the

shareholders and the top management inside a corporation. These interactions are intervened

through the board of directors (Bradley, Schipani, Sundaram, & Walsh, 1999; Hart, 1995;

cited in Mehmood & Riaz, 2008, p.1). The other perspective that is broader reflection of CG

sights it other than the affiliation among shareholders and management of corporation. This

perspective of CG explains the interaction among various constituencies. These

constituencies consist of different stakeholders such as employees, shareholders, business

partners and host societies and the inter-relationships of all these entities (Bradley et al.,

1999; cited in Mehmood & Riaz, 2008, p.1). The broader view presents CG as a complex

phenomenon and this complexity increases with the series of corporate collapse of the current

29

decade across the world on the whole in Anglophone countries (Adams et al., 2001; Clarke,

2004b; Niskanen, 2005; cited in Mehmood & Riaz, p.1). Further Mehmood and Riaz (2008,

p.1) mentions that these types of collapses of the corporations not only affect the shareholders

and investors in monetary terms but also to employees resulting in their loss of jobs who were

directly or indirectly associated with these large corporations. This in return shows the bad

governance of collapsed corporations.

Governance is about steering and stewardship. It is an essential mechanism to help the

company attain its corporate objectives and monitoring performance. CG, specifically, more

concerned with the structures and processes associated with management, decision making

and control in organizations. To govern is to accept responsibility for the whole life of the

institution. Governance takes account of all the interests that affect the viability, competence

and moral character of an enterprise (Selznick 1994). Selznick (1996) in his Admin Science

Quarterly article argues on the structure of institutions and institutionalism.

Corporate governance is the system by which business corporations are directed and

controlled. It specifies the rights and responsibilities of the different participants in the

corporation, such as the board, managers, shareholders and other stakeholders. The term

corporate governance has become everyday‟s use in the financial press for a little more than a

decade but the theories underlying it are of much earlier date and from several disciplines

including finance, economics, accounting, law, management and organizational behavior

(Enquist 2010).

Selznick states that the two functions, management and governance, coexist and interact. To

govern is to accept responsibility for the whole life of the institution. Governance takes

account of all the interests that affect the viability, competence and moral character of an

enterprise (Selznick 1994).

Socially responsible investment involves taking into consideration the ethical, social and

environmental performance of companies selected for investment as well as their financial

performance. The basic strategies for socially responsible investment are engagement,

preference and screening (Mallin 2010).

30

3.5 Integration of CSR and CG

According to Palmisano (2006), businesses are changing in fundamental ways- structurally,

operationally, and culturally- in response to globalization and new technology; as a result, the

larger companies are no longer „multinational corporations‟ (MNCs), but globally integrated

enterprises (GIEs). He also suggests „global collaboration‟, whereby various stakeholders

interact in development and learning processes.

Abela and Murphy (2008) have found that S-D logic can be a positive development for

marketing ethics because it facilitates the seamless integration of ethical accountability into

marketing decision-making. Freeman et al. (2004) conclude that business and ethics should

be seen as connected. Selznick (1994) also argues that governance is more than management

and has to take account of all the interests that affect the viability, competence and moral

character of an enterprise.

As per Tricker (1984) in his book “International corporate governance” mentions the term

governance that is not only concerned with managing the business of the company but it is

giving an overall direction to the organization, with overseeing and controlling executive

actions of management and with satisfying legal expectations for accountability and

regulation through the interests that goes beyond the corporate boundaries. Here beyond the

corporate boundaries needs the integration of CG with other organizational goals like CSR.

According to Lusch and Vargo (2006), “Organizations exist to integrate and transform micro

specialized competences into complex services that are demanded in the marketplace but

becomes more apparent in its almost immediate restatement. All economic actors i.e.

individuals, households, firms, nations, etc. are resource integrators” (Lusch & Vargo 2006).

It is also apparent that the customers are the co-creators of value so CSR and CG are also

integrated like any other resource of the firm to give value to its stakeholders. According to

van den Berghe and Louche (2005), CG and CSR can work jointly to bring transparency,

honesty, and accountability in the organizational processes.

Marsigla and Falautano (2005) have recommended that corporate governance and corporate

social responsibility ideas are progressing from philanthropic activities to valid strategies to

recover the confidence of both society and clients at large. Jamali et al. (2008) discusses that

both CG and CSR are supposed to give ongoing benefits and ensures the continued existence

of the business. Further they mention that with respect to CG, when implemented in

31

organization helps to gain the interests of employees, managers, owners and other

stakeholders that in return gives long-lasting affects to the organizational profits (Jamali et al.

2008).

3.6 Sustainable Service Business and Values Based Business

According to Enquist et al. (2008) a value based business is based on different aspects of core

company values and basic values that lead a company in producing customer value and a

sustainable service business. To see how much a business is a sustainable service business we

need to measure its internal service dimensions.

3.6.1 Measuring internal service dimensions

Reynoso and Moores (1995) used internal service dimensions to measure the service quality

with the perspective of internal dynamics of an organization as an interrelation of customers

and suppliers working together to satisfy customers. These dimensions can be used to

measure service quality of any service oriented business like in our case it is Zong. According

to Reynoso and Moores (1995) internal service dimensions to measure the quality of a service

are as follows:

i. Helpfulness:

This is the willingness of the unit to help in a courteous, approachable manner. A group of

items originally assigned to responsiveness were segmented in three parts. The first

containing items about helpfulness appeared together with items of courtesy.

ii. Promptness:

It is the ability to provide the service promptly responding rapidly to service requests. The

second group of items from responsiveness was clearly related to this dimension.

iii. Communication:

To keep the internal customer informed and consult it about progress, problems or changes

which may impact upon its activities.

iv. Tangibles:

Tangibles are the condition and physical appearance of facilities, equipment, materials and

written information of the unit.

32

v. Professionalism:

These are skills, knowledge and experience that members of the unit require to provide the

service and to give advice.

vi. Reliability:

The ability of the unit to provide the internal service required on time and correctly, including

the provision of accurate information.

vii. Confidentiality:

The unit‟s handling of confidential information and delicate situations.

viii. Flexibility:

This is the willingness of the unit to respond flexibly to unexpected situations. This was

represented by a unique, highly loaded item originally assigned to responsiveness.

ix. Preparedness:

The internal organization and resources required by the unit to be able to provide the service.

x. Consideration:

It is the understanding, recognition, trust, and honesty of the unit towards internal customer.

3.6.2 Values Based Business

A value based business is a business which depends upon the core company values and takes

guidance from basic values to make the value for the customers through its operations

(Edvardsson & Enquist 2009).

3.6.2.1 Five principles for a sustainable values based service business

According to Edvardsson and Enquist (2009) in their book Values- based Service for

Sustainable Business: lessons from IKEA have mentioned that many companies are now well

aware of the repercussions of sustainable development and the important of values based

services when it comes to environment and social responsibility. Customer value focuses on

positive service experience, well recognized brand and proactive marketing way of

interaction. For this purpose companies has to remain near to their customers, understand

their needs and provide the solutions of their needs which are in-line with the values and

living standards of customers. Five principles for sustainable values based business are:

33

i. Strong values drive customer value

Values are dynamic and should be integrated in the business model. Values are used by

customers and other stakeholders when value is accessed. The values create relationships

with customers and so represent an important loyalty driver (Edvardsson and Enquist 2009).

ii. CSR as a strategy for sustainable service business

CSR is important for rethinking the role of any company in any industry. By using CSR in a

proactive way, companies think „laterally‟ in searching for „smart‟ solutions. The logic of

values thus drives the logic of value creation (Edvardsson and Enquist 2009).

iii. Values based service experience for co-creating value

Customers‟ experiences are formed during consumption of a service. When a customer‟s

basic requirements are met, other issues make a difference. These issues are often

understated, affective and values based (Edvardsson and Enquist 2009).

iv. Values based service brand and communication for values resonance

Brands are living expressions of what a company stands for. They communicate what its

products or services can do for people. However if a company overstates what its products

can do and fails to deliver as perceived by customers, this creates unfavorable reactions both

in the market and among the company‟s employees. Using CSR to secure a values based

service brand is more than only communication about CSR with the customers; rather it is

about using CSR as basis for strategy and insuring that the service brand and communication

with all stakeholders is in resonance with the company‟s values, the customers‟ values and

the values of the whole society (Edvardsson and Enquist 2009).

v. Values based service leadership for living the values

Leaders communicate through their interactions with employees, partners, suppliers and

customers. Authentic leaders spend time with customers and employees and learn from them

(Edvardsson and Enquist 2009).

34

CHAPTER 4 EMPIRICAL STUDY

4.1 Overview of Telecommunication Sector of Pakistan

4.1.1 Subscriber wise- cellular market share

As per the PTA annual report for the year 2010 the market share of different cellular

companies operating in Pakistan varies since their operations. Figure 4 shows the market

share of different cellular companies operating in Pakistan in year 2010, where Zong has

6.8% of market share that is very less as compared to the other companies. Mobilink is

market leader with 32.5 % of market share, Telenor has the 2nd

largest market share of 23.9%,

Ufone is having the market share of 19.7% and Warid is having 17.1% of total market share.

The least market share of Zong is mainly attributed to its newness in the market as we know

they started their operations in year 2008 (Zong 2010). So we think it will catch up to other

companies with passage of time if CSR strategies are adopted according to the company‟s

values.

Mr. Usman while mentioning about the market share of the company, says that as we are new

company in the market and it just passed couple of years of operations in Pakistan. We are

committed to increase the market share in coming years to compete with Ufone and Telenor.

He again stated that it takes time to come at the same level as other companies are but they

are ambitious and expecting to increase their market share with an increase of 5 to 8 percent

in coming couple of years.

He emphasized that they are marketing out products and branding the image of Zong in a

very result oriented way. They have allocated separate budgets for the branding of Zong and

are hoping to get positive results from it.

35

Figure 4: Subscriber wise- Cellular market share (PTA 2010, p.31)

4.1.2 Telecom indicators

i. Total Teledensity (%)

It includes fixed line, wireless loop and mobile users. According to latest update by PTA in

October 2010, it was 64.2%.

ii. Annual Cellular Subscribers

Mobilink Ufone Zong Instaphone Telenor Warid Total

32,202,548 19,549,100 6,704,288 0 23,798,221 16,931,687 99,185,844

Table 1: Annual Cellular Subscribers 2009-2010 (Source: PTA 2010, p.73)

iii. Annual Cellular Mobile Teledensity (%)

In October 2010, the annual cellular mobile teledensity has reached to 60.5%.

36

iv. Foreign Direct Investment in Telecom Sector:

(US $ million)

Year FDI in Telecom Total FDI Telecom (%) Share

2009-10 373.62 2,199.44 17.0

Table 2: Foreign Direct Investment in Telecom Sector 2009-2010 (PTA 2010, p.71)

v. Telecom Revenues:

(PKR Millions)

Year Cellular Local Loop LDI WLL VAS (Estimated) Total

2009-10 236,047 61,464 47,067 2,880 10,202 357,712

Table 3: Telecom Revenues 2009-2010 (Source: PTA 2010, p.70)

vi. Telecom Investment:

(US $ million)

Year Cellular LDI LL WLL Total

2009-10 908.8 183.1 22.5 23 1,137.4

Table 4: Telecom Investment 2009-2010(Source: PTA 2010, p.24)

37

4.1.3 Economic Indicators

According to the PTA annual report for the year 2010:

i. Telecom Sector shares in GDP (%)

The latest figure available is for year 2005-06 which shows 2 % share in GDP by the telecom

sector.

ii. GST/CED Collection from Telecom sector

The GST and CED collected from only mobile phone companies in year 2007-08 was PKR.

36.80 billion.

iii. Foreign Direct Investment

The total foreign direct investment in the country in the year 2007-08 was USD 5151.80

million out of which USD 1438.60 million was in telecom sector which comes to be 27.92 %

of the total foreign direct investment.

4.1.4 Cellular mobile infrastructure sharing

Tower/infrastructure sharing has long been a priority matter by Pakistan Telecommunication

Authority (PTA) and it strived hard to reach a workable agreement between all the operators.

Currently in Pakistan, tenancy ratio is 1.02 which means out of every 100 towers only two are

shared by operators. For this particular reason PTA and Cellular Mobile Operators (CMOs)

signed memorandum of understanding (MOU) for infrastructure sharing on August 2010 in

Karachi. It is expected that this cooperation will serve to support mutual interests resulting in

less human resource requirement for maintenance, lower fuel expenses, quality maintenance,

lower power consumption, an environmentally friendly appearance, better opportunities for

new service providers, public convenience and expanded coverage in line with international

best practices (PTA 2010).

Mr. X2 mentioned about the company‟s response towards the memorandum of understanding

(MOU) that focuses on the network sharing agreement between all network operators

2 Mr. X representative of Zong Pakistan, identity concealed due to confidentiality and anonymity reasons.

.

38

working in Pakistan. He mentioned that they are happy to do that and have participated in

signing the memorandum. He further said that this is a great initiative by PTA which will

reduce the number of network towers in country, will reduce costs to the company, helps

towards environment saving and is also important from the perspective of social

responsibility and development that the company is committed towards.

As per the requirement of Securities and Exchange Commission of Pakistan (SECP),

Companies (Corporate Social Responsibility) General Order, 2009, “every company shall

provide descriptive as well as monetary disclosures of the corporate social responsibility

activities undertaken by it during each financial year” (SECP 2010). So now it is regulatory

requirement for the companies to disclose CSR activities done in a financial year although it

is not mandatory.

The order also states, “The disclosure, wherever required, shall include but shall not be

limited to the following:

i. Corporate philanthropy

ii. Energy conservation

iii. Environmental conservation

iv. Community investment and welfare schemes

v. Consumer protection measures

vi. Welfare spending for under privileged classes

vii. Industrial relations

viii. Employment of special persons

ix. Occupational safety and health

x. Business ethics and anti corruption measures

xi. National cause donations

xii. Contribution to national exchequer

xiii. Rural development programs (SECP, 2010)

39

Full text of the order can be found in the Appendix.

When asked from the company representative regarding the Corporate Social Responsibility

general order, 2009 by SECP. He (MR. X3) mentioned that this law is not compulsory to

implement and follow and the SECP and PTA are not forcing the companies to implement it

in the company‟s policies and activities. But Zong is already working on the social

development of the country from the start of its business in Pakistan. As the parent company

China Mobiles is using CSR and is part of its policies, we are also working on it. We also

hope that in coming years we will also make it part of our policy.

4.2 Company Profile

China mobile is world‟s largest telecom operator with over 300 million customer base. The

company networks route 700 million text messages and handles 250 million calls every hour.

The company claims “one of the unique features of China mobile servicing excellence is to

customize its products, services and tariffs to suit the individual needs of its huge subscriber

base. There are hundreds of payment/tariff options to choose from according to one‟s usage

pattern, budgetary limitations and nature of use” (Zong 2010).

China mobile Pakistan (CM Pak) is first overseas subsidiary of China mobile

communications corporation (CMCC) that has the license to offer and operate voice, data and

all value added services across Pakistan (Zong 2010). China mobile Pakistan which is a

100% subsidiary of China mobile acquired the license from Millicom to operate GSM

network in Pakistan. CM Pak started with USD 700 million and so far invested additional

USD 800 million till the end of year 2008. CM Pak believes that their competitive edge

comes from the experience and expertise of running the world‟s largest telecom service and

the commitment they make to setting quality and customer relation standards (Zong 2010).

3 Mr. X representative of Zong Pakistan, identity concealed due to confidentiality and anonymity reasons.

.

40

With ambitious plans to cater to the fastest growing Pakistan‟s market and to win over the

ever demanding Pakistan‟s customer, it will be offering unprecedented coverage, voice and

data services as well as a wide range of tariff options to choose from (Zong 2010).

CM Pak's edge comes from the experience and expertise of running the world's largest

telecom service and the commitment they make to setting quality and customer relations

standards. CM Pak is geared to offer neatly packaged value added services (VAS) products

that will benefit the individuals, corporate as well as small businesses. Led by a team of

professionals from the field of cellular communication, CM Pak is determined to make its

mark in the Pakistan‟s market and to change the way people communicate (Zong 2010).

ZONG is the first International brand of China Mobile being launched in

Pakistan. It is meant to empower and liberate the people of Pakistan in every

nook and corner of the country. It will become a part of their hearts, their minds and bring

about a change in their lives that every one desired but few thought would be possible (Zong

2010).

The core essence of ZONG is to allow people to communicate at will without worrying about

tariffs, network coverage, capacity issues or congestion. ZONG will be supported by ground

breaking communications, trend setting customer service and an unmatched product offering

which will redefine rules of the game and establish ZONG as a serious contender for the

number one spot (Zong 2010).

ZONG commits to offer its customers with entertaining & innovative value added services

and will empower them by giving a wide variety of products, services & content to choose

from (Zong 2010).

Touching the 4 million figures, Zong is doing Above the Line (ATL) and Below the Line

(BTL) activities extensively. Trying to make service and rates as simple as possible, they are

relying on simple formula to enter in the Red Ocean, i-e, low price, extensive advertising and

far-reaching distribution channels. Zong is covering the cities of Gilgit, Hunza, Skardu,

Besharn and Sust. It has added over 2,000 sites since its launch and the network cell sites

have grown from about 900 to over 3,000 today. By the end of 2009, the cell sites are

targeted to grow over 10,000 (Zong 2010).

41

4.2.1 CSR strategy and management

Company adheres to their core corporate value “Responsibility Makes Perfection and our

CSR vision “With perfect sincerity and integrity, we will strive to fulfill our three

responsibilities: economic, social and environmental.” China Mobiles believe that only when

their business strategy aligns with their social responsibility efforts and CSR program then

company as a whole is sustainable. With a strong CSR management system, company has

ensured that key CSR performance indicators are fully integrated across their operations,

striking a balance between company‟s economic, social and environmental performance and

enabling sustainable growth for them as well as for stakeholders (CSR report 2009).

4.2.2 CSR Strategy

In 2009 China Mobiles followed the principles of “integration, focus and development” to

improve their CSR strategy. Integration is about ensuring that business and CSR strategy are

integrated so they can achieve their objective to grow together with companies key

stakeholders‟ (the “stakeholders”) sustainably; focus is about ensuring that the company

emphasize on issues that are material to their stakeholders and business; finally, development

is about ensuring that in implementing company‟s CSR programs, they contribute to the

development of society through innovative solutions based on key issues. CSR vision

remains highly consistent with corporate vision: “striving to become a creator of superior

qualities.” Looking forward, China Mobiles is actively pursuing the following “4 aspects of

quality innovation and excellence” (CSR report 2009):

i. Corporate Excellence:

Through reliable products and services and responsible business models, we achieve

sustainable business growth;

ii. Industry Leadership

Through innovation in market expansion, research and development, and partnership models,

we seek to set the standard in our industry and share value with our business partners;

iii. Contribute to Social Progress:

With our telecommunications technology and our desire to advance society, we seek to

generate and share value for society, contributing to social progress and the harmonious

development of society; and

42

iv. Environmental Advances:

China Mobiles as a parent company of Zong has minimized their own environmental impact

while also fully maximizing the power of mobile technology to promote resource

conservation and an environmentally-friendly society.

Looking forward, (CSR report 2009) company has designed six major CSR initiatives. At the

core of these six initiatives are several basic aspirations: to continuously innovate; to ensure

high-quality operations; to align our actions with the needs of stakeholders and drive toward

sustainability; to help narrow the digital divide to promote an information society and to

support local Chinese innovation; to develop solutions that meet the needs of society and the

environment; and to advance implementation of CSR management systems in a way that

ensures that our CSR vision, needs and targets are well integrated into daily operations –

creating a win-win for business growth and societal contribution. Company‟s six main CSR

initiatives for 2010 are laid down below:

o Narrowing the Digital Divide, Advancing Rural Development

o Action on Climate Change, Promoting a Low- Carbon Economy

o Information for Societal Impact, Developing an Information Society

o Caring for the Disadvantaged, Encouraging a Philanthropic Culture

o Responsible and Reliable Telecommunications, Protecting Consumer Rights

o Strengthening Sustainability Management, Improving Sustainable Performance

4.2.3 CSR Management

Since 2006 China Mobile have reviewed global standards and best practice and actively

sought to develop a scientific and systematic approach to CSR management. This has

improved sustainability performance at the company and for two consecutive years, company

has remained the first and only Mainland Chinese Company recognized on the Dow Jones

Sustainability Indexes (CSR report 2009). Figure 5 shows the history and milestones

achieved in CSR management by the company. To continue improving the quality of CSR

performance, company continued to develop, focus, and improve how CSR is integrated and

managed in every part of their business.

43

Figure 5: History and Milestones: CSR Management at China Mobile (Source: CSR report 2009, p.13)

i. Creating an Index to Assess Sustainability

Guided by the best international and domestic theories and practice, company established a

China Mobile Sustainability Indexes system in 2009, which allows them to comprehensively

assess their sustainability performance and potentials. The company completed their first

assessment using the indexes in 2009. Reviewing the performance of all 31 provincial

subsidiaries, those were fully examined and identified key weaknesses in their sustainability

capabilities and worked to drive towards a model for sustainability (CSR report 2009).

ii. Managing CSR Risk Factors, Improving Performance on Key Issues

In 2009, the company completed CSR risk management pilot projects to identify and improve

CSR performance on key issues. In promoting responsible business standards and

encouraging best practice in all aspects of business performance – from service development

to operational controls – the company ensured that actions across the companies align to three

main principles: profitability, rationalism and ethics.

The company created an inventory of CSR management risk factors that cover not only their

own operations but also the impact of their operations on key stakeholder groups that

effectively focus on CSR issues. In 2009, company rolled out its CSR Risk Management

system to 7 provincial subsidiaries. The company anticipates that it will be further promoted

in all 31 provincial subsidiaries by 2010 (CSR report 2009).

44

iii. Monitoring CSR Performance with a Closed- Loop System

In February 2009, company‟s CSR e-platform officially went online. The system allows the

company to track status of their CSR performance and implementation in „real time‟

throughout the year. In 2009 company approached business strategy planning and CSR

planning as one consolidated effort, ensuring that CSR projects and objectives are integrated

into the departments‟ performance evaluations, creating a “closed-loop” approach to CSR

management with respect to tracking performance and assessment (CSR report 2009).

iv. Establishing Policies for Consistent CSR Management

In August 2009, the company formally established their CSR Management Policies. The

Policies formally describe CSR accountability structures and communication mechanisms

between headquarters and its provincial subsidiaries to ensure consistent CSR management

across the company. Company received a first class award for Management Innovation in the

Chinese telecommunications industry for these policies (CSR report 2009).

The company will continue to build a culture of responsibility. They will gradually ensure

that responsible practice becomes a core part of the company and its employees. They will

diligently strive to improve the quality of its CSR efforts, continue to operate responsibly and

manage their risks and persist in developing innovative information solutions that benefit a

sustainable society and environment. Together, these efforts will improve the sustainability of

company‟s business. Furthermore, by thoroughly considering and integrating the needs of

key stakeholders into their operations and through regular global dialogue on critical CSR

issues, the company will continue to work towards achieving world-class CSR performance

(CSR report 2009).

4.2.4 Stakeholder Engagement

Stakeholder engagement is an interactive two-way dialogue that allows the company to work

with stakeholders towards common objectives. They believe that effective stakeholder

engagement allows them to do the following:

� Understand more deeply their impact as a business;

� Respond more quickly and directly to stakeholder concerns;

� Integrate stakeholder views when making critical business decisions;

45

� Better meet stakeholder needs; and

� Improve CSR performance in key areas.

Figure 6: China Mobile Stakeholders (Source: CSR report 2009, p.14)

The company has categorized their stakeholders as shown in figure 6 into 7 major groups:

customers, shareholders and investors, employees, government authorities and regulators,

value chain partners, industry peers and the public. Based on stakeholder type, they have

developed regular mechanisms for engaging with their stakeholders.

In 2009 company further improved their stakeholder engagement management system. This

year, in line with their most material CSR issues, they have focused on advancing

effectiveness. This is the foundation that is crucial for using dialogue to improve CSR

management and performance.

46

4.2.5 Corporate Governance

We were unable to find any corporate governance report at the level of Zong but we were

able to have the corporate governance report of China Mobile Company which is the parent

company of Zong. The corporate governance report of China Mobile Company states the goal

of the company is to enhance the corporate value, maintain sustainable long term

development and generate returns for the shareholders. To achieve these objectives, the

company has established good corporate governance practices following the principles of

sincerity, transparency, openness and efficiency and has implemented strong governance

structure and measures (CG report 2009). The participants involved in the practice of good

corporate governance includes shareholders, board of directors and its committees,

management and staff, internal audit, external auditors and other stakeholders including

customers, communities, peers, regulatory authorities etc. The company has improved

various policies, internal controls and other mechanisms. The company believes that

corporate governance goes hand in hand with corporate culture. High standards of corporate

governance are built on good corporate culture. Corporate governance principles and policies

can only be applied effectively and consistently when a corporate culture that emphasizes

honesty and integrity is built. Core value of the company is responsibility makes perfection

and the goal of the company is to achieve a harmonious development between enterprise;

industry, society and environment (CG report 2009).

The salient features of the corporate governance report of 2009 included, that the company

made full use of internal audit functions: the company took a risk awareness oriented

approach in carrying out audit work in close connection with new growth opportunities of the

company. Special focus was given to auditing and evaluating the company‟s IT risk and

client information security control risks and client privacy protection. The company further

strengthened the in-depth and professionalism of internal audit by actively applying computer

aided auditing techniques and tools (CG report 2009). The company built and applied a

unified internal audit information system, realized information support and efficiency

enhancement for the internal audit, its organization and management and improved the

supervision, assessment and service functions of the internal audit department. The company

strengthened legal risk management: For this company conducted an overall legal risk

evaluation on the operations, further improved the management system and established legal

review mechanism especially in areas such as market competition, corporate customer

47

businesses, data businesses and contract management. The company conducted internal

trainings on different laws and regulations including contract law, labor contract law and anti

monopoly law of China. Company is doing CSR management to achieve the on-going

improvement of CSR performance; the company launched the China Mobile Sustainability

Index System and completed the first full assessment of the sustainability capabilities. As per

the China Mobiles annual report 2009 The company completed the pilot work for the CSR

risk management and launched the China Mobile CSR Electronic Information Platform and

set out the CSR Management Measures. The company is listed both in Hong Kong and New

York stock exchanges so also required to follow the corporate governance practices under the

New York Stock Exchange (NYSE) listing standards (CG report 2009).

i. Compliance with code provisions of the code on corporate governance practices:

The company except the code provision that the roles of Chairman and Chief Executive

Officer should be separated and should not be performed by the same individual, has

complied with all code provisions of the code on corporate governance practices as set forth

in Appendix 14 to the Hong Kong listing rules in the financial year ended 31 December 2009.

The roles of Chairman and Chief Executive Officer of the company are performed by Mr.

Wang Jianzhou (CG report 2009).

The company believes that the combination of the roles of Chairman and Chief Executive

Officer can promote the efficient formulation and implementation of the company‟s strategies

which will enable the Group to seize business opportunities efficiently and promptly. The

company believes that through the supervision of the Board and its independent non

executive directors, checks and balances exist so that the interests of the shareholders are

adequately and fairly represented (CG report 2009).

ii. Shareholders:

The company‟s controlling shareholder is China Mobile (Hong Kong) Group Limited, which

as of 31 December 2009, indirectly held almost 74.22% of the company‟s share capital

through a wholly owned subsidiary, China Mobile Hong Kong (BVI) Limited. The remaining

share capital of almost 25.78% was held by public investors. The company uses a number of

formal channels to inform shareholders for the performance and operations of the company,

especially through annual and interim reports. The company announces interim, annual or

any major transactions in accordance with relevant analyst conferences, press conferences

48

and investor telephone conferences to explain the relevant results or major transactions to

shareholders, investors and the general public and to address any questions they may have

(CG report 2009).

In addition, the company adheres to the practice of voluntarily disclosing on a quarterly basis

certain key, unaudited operational and financial data and on a monthly basis the number of

customers on its website to further increase the Group‟s transparency and to provide

shareholders, investors and the general public with additional timely information so as to

facilitate their understanding of the Group‟s operations. The company also has high regard

for the annual general meetings of its shareholders and makes substantial efforts to enhance

communications between the board and the shareholders; the Board always makes efforts to

fully address any questions raised by shareholders (CG report 2009).

iii. The Board of Directors and the Board Committees:

The key responsibilities of the Board include, formulating the Group‟s overall strategies,

setting management targets, monitoring internal controls and financial management and

supervising the management‟s performance, while the day to day operations and management

are delegated by the Board to the executives of the company. The Board operates in

accordance with established practices including those relating to reporting and supervision

and is directly responsible for formulating the company‟s corporate governance guidelines.

The Board currently comprises of 13 directors. To ensure the timely disclosure of any change

of directors‟ personal information, the company has set up a specific communication channel

with each of directors. There is no financial, business, family or other material relationships

among members of the board (CG report 2009).

The company purchases directors‟ and officers‟ liabilities and pay for insurance on behalf of

its directors and officers and reviews the terms of such insurance annually. The company and

its directors including non-executive directors have not entered into any service contract with

a specified length of service. All directors are subject to retirement by rotation and re-election

at annual general meetings of company every three years. Board meetings are held at least

once a quarter and as and when required. The directors have disclosed to the company the

positions held by them in other listed public companies or organizations or associated

companies. The company has adopted the Model Code for Securities Transactions by

Directors of Listed Issuers, set out in Appendix 10 to the Hong Kong listing rules. The Model

49

Code is to regulate the directors‟ securities transactions. The board currently has three

principal board committees, which are the audit committee, the remuneration committee and

the nomination committee and all of which are comprised solely of independent non-

executive directors. Each of the board committees operates under its terms of reference (CG

report 2009).

a) Audit Committee:

The members of audit committee are independent directors. All members of the audit

committee have many years of finance and business management experience and expertise

and appropriate qualifications. The audit committees‟ primary responsibilities include among

other things making recommendation to the board on the appointment, reappointment and

removal of external auditors, approving the remuneration and terms of engagement of

external auditors, reviewing and monitoring external auditors‟ independence and objectivity

and the effectiveness of the audit process in accordance with applicable standards, developing

and implementing policies on the engagement of external auditors to provide non-audit

services, monitoring the integrity of financial statements of the company and the company‟s

reports and financial statements and overseeing the company‟s financial reporting system and

internal control procedures (CG report 2009).

b) Remuneration Committee:

The members of remuneration committee are also independent directors. The primary

responsibilities of the remuneration committee include among other things, determining the

remuneration packages of all executive directors and senior management, making

recommendations to the board on the remuneration of non-executive directors, reviewing and

approving performance based remuneration, ensuring that no director or any of his or her

associates is involved in deciding his or her own remuneration and making recommendations

to the board on the company‟s policy and structure for remuneration of employees including

salaries, incentive schemes and other stock plans (CG report 2009).

c) Nomination Committee:

The members of the company‟s nomination committee are all independent directors. The

primary responsibilities of the nomination committee include among other things, reviewing

on a regular basis the structure, size and composition of the board, identifying individuals

50

suitably qualified to become board members and assessing the independence of independent

non-executive directors (CG report 2009).

iv. Remuneration, Appointment and Rotation of Directors:

At this time the cash portion of senior management‟s remuneration consists of a fixed

monthly salary and a performance linked annual bonus. The award of the performance linked

annual bonus is tied to the attainment of key performance indicators or targets. In terms of

long term incentives, the company has adopted a share option scheme. Depending on their

ranking, members of the management are awarded different numbers of share options. The

remuneration of non-executive directors is determined in part by reference to the prevailing

market conditions and their workload of serving as non-executive directors and members of

the board committees of the company (CG report 2009).

Currently, executive directors are mainly selected internally within the Group from

executives who have considerable years of management experience and expertise in the

telecommunications industry, whereas for the identification of independent non-executive

directors, importance is attached to the individual‟s independence as well as his or her

experience and expertise in finance and business management. The nomination committee,

taking into consideration the requirements of the jurisdictions where the company is listed

and the structure and composition of the board, identifies, reviews and nominates with

diligence and care individuals suitably qualified as board members of the company before

making recommendations to the board for their final appointment (CG report 2009).

All newly appointed directors receive a comprehensive induction of directors‟ duties to make

sure that they have a proper understanding of the operations and business of the company;

and that they are fully aware of their responsibilities as a director, the listing rules of the stock

exchanges on which the company is listed, applicable laws, regulations, the operation and

governance policies of the company. All newly appointed directors are subject to election by

shareholders at the first general meeting after their appointment. Every director is subject to

retirement by rotation and needs to stand for re-election at least once every three years (CG

report 2009).

v. Management:

The task of the company‟s management is to implement the strategy and direction as

determined by the board and to take care of the day to day operations and functions of the

51

company. The division of responsibilities among the chief executive officer (CEO) and other

members of the senior management are set out. For the purpose of promoting honest and

ethical conduct and deterring wrongdoing, the company in 2004 adopted a code of ethics

which is applicable to chief executive officer, chief financial officer, deputy chief financial

officer, assistant chief financial officer and other designated senior officers of the Group, in

accordance with the requirements of the Sarbanes-Oxley act (SOX Act) (CG report 2009).

Under the code of ethics, in the event of a breach of such code, the company may take

appropriate preventive or disciplinary actions after consultation with the board. The code of

ethics has been filed with the US Securities and Exchange Commission. To prevent and

penalize corruption and bribery, the company has developed an anti-corruption system and

adopted employee code of conduct and an employee handbook to put all employees under

specific obligations as to the manner in which they should deal with issues such as integrity,

code of ethics and conflicts of interest (CG report 2009).

The company continued to pay equal emphasis in education, system and supervision as well

as prevention and penalty with focus on preventive measures. The company held 44 training

sessions with aggregating 2,046 disciplinary supervisory personnel attended (CG report

2009).

vi. Internal Audit:

The internal audit department of the company conducts independent, objective supervision

and assessment and provides consulting services in respect of the appropriateness,

compliance and effectiveness of the company‟s operational activities and internal controls by

applying systematic and standardized auditing procedures and methods and assists the

company in improving the effectiveness of corporate governance, risk management and

control process, with an aim to increasing its corporate value, improving its operations,

promoting its sustainable and healthy development as well as contributing to the achievement

of its strategic objectives (CG report 2009).

The company and its operating subsidiaries have set up internal audit departments, which

independently audit the business units of the company and its operating subsidiaries. The

head of the internal audit department of the company directly reports to the audit committee

which in turn, reports to the board regularly. The internal audit departments have unrestricted

access to all areas of the Group‟s business units, assets, records and personnel in the course of

52

conducting their work. The internal audit department of the company establishes an internal

audit scope and framework and carries out risk investigations on annual basis (CG report

2009).

According to the results of the risk investigations, the internal audit department formulates an

internal audit project rolling plan and an annual audit plan together with the audit committee,

reviews and approves the annual audit plan and resources allocation. The annual audit plan of

the internal audit department covers various areas, namely financial audit, internal control

audit, risk assessment, audit investigation and consultancy services. For financial audit, the

internal audit department audits and assesses the truthfulness, accuracy, compliance and

efficiency of the company‟s financial activities and financial information as well as the

management and utilization of the company‟s capital and assets (CG report 2009).

For internal control audit, the internal audit department audits and assesses the effectiveness

in the design and implementation of the company‟s internal control system. At the same time,

the internal audit department evaluates and assesses the risk management and control in the

Company‟s business processes and management mechanisms and conducts special projects

and investigations in response to requests from the Company‟s management or the Audit

Committee or if otherwise required. In addition, without prejudice to its independence, if

requested by the Company‟s management and as required by business needs, the internal

audit department provides management advice or consultancy services by making use of

audit resources and audit information to facilitate the Company‟s decision-making and

operational management (CG report 2009).

According to the requirements under section 404 of the SOX Act, the internal audit

department of the Company organizes and performs internal audit tests of the internal control

over financial reporting of the company, providing assurance for the company‟s management

in its issuance of the internal control assessment report. The internal audit department makes

improvement recommendations in respect of its findings in the course of the audits and

requests the management to undertake and to confirm the implementation plan, the methods

and the time. It regularly monitors the status of implementation of these recommendations to

ensure their completion. In 2009, the internal audit department of the Company further

strengthened the in-depth and professionalism of company‟s internal audit and enhanced its

supervision, assessment and service functions by:

53

Taking risk awareness oriented approach in carrying out the audit work in close

connection with new growth opportunities of the company. Particularly, focus was

given to auditing and evaluating the company‟s IT risks and client information

security control risks in order to improve client privacy protection;

adopted the effective audit approach to make an objective assessment of the efficiency

and effectiveness of the operational management of the company with an aim to

promoting the highly-efficient operation of the company;

further strengthened the in-depth and professionalism of its internal audit and

improved the capability and depth of identifying problems through the internal audit

process by actively applying computer-aided auditing techniques and tools so as to

enable the company to reveal operational risks promptly;

built and applied a unified internal audit information system to provide information

support for company‟s internal audit, its organization and management and improved

efficiency, and further enhanced the uniformity and standardization of company‟s

internal audit;

conducted risk evaluation on its seven core business processes, company‟s

management mechanism and encouraged relevant business units to adopt appropriate

risk control measures so as to improve their internal control risk framework, optimize

their business processes and reduce the risks arising from operational management

processes; and

optimized the organization and management of internal tests for compliance with the

SOX Act, strengthened the target and effectiveness of internal tests, placed emphasis

on key issues and areas of internal control over financial reporting, standardized test

methods and samples, enhanced the effectiveness of tests and encouraged business

units to continue to improve internal control over financial reporting (CG report

2009).

vii. External Auditors:

The company engaged Klynveld Peat Marwick Goerdeler (KPMG) as statutory auditors of

the company. In 2009 the principal services provided by KPMG were included:

Review of interim consolidated financial statements of the group.

54

Audit of annual consolidated financial statements of the group and annual financial

statements of its subsidiaries

Audit of the effectiveness of the company‟s internal control over financial reporting.

Apart from providing the above mentioned audit services to the Group, KPMG was also

engaged in providing other non-audit services to the group which were permitted under

section 404 of the SOX Act and pre-approved by the audit committee (CG report 2009).

viii. Other Stakeholders:

Good corporate governance practices require due concerns for the impact of the business

decisions on the shareholders as well as other relevant parties such as customers, local

communities, peers and regulatory authorities. The 2009 CSR report explains the philosophy

on corporate social responsibility and performance with respect to social and environmental

management about the company. The annual report and the CSR report illustrate the

company‟s efforts and development in the areas of industry development, community

advancement and environmental protection and also explain how the company fulfilled its

obligations towards employees, customers, environment, the local communities and other

stakeholders. The company focused on promoting the capability in maintaining sustainable

growth and promoted the integration between CSR and company‟s operations. The company

launched China Mobile Sustainability Index System and completed the first overall

evaluation of the sustainability capabilities of its 31 operating subsidiaries. The company

completed the pilot work for the CSR risk management and set in motion the standards,

principles and best practices of social responsibility. All of these have been integrated into

the company‟s business development and operational management. Also CSR risk

management regime has first been set up in 8 operating subsidiaries (CG report 2009).

ix. Internal Controls:

The board conducts regular reviews of the effectiveness of the group‟s internal controls to

reasonably ensure that the company is operating legally and that assets of the company are

safeguarded and to ensure the accuracy and reliability of the financial information that

company employs in its business or releases to the public. The scope of these reviews

includes among other things, business strategy, finance, operations, marketing and rules and

regulations. According to the provisions of section 404 of the SOX Act, the company‟s

55

management is responsible for establishing and maintaining internal control over financial

reporting. The company completed its internal control evaluation based on the control criteria

framework of the committee of sponsoring organizations (COSO) of the Treadway

commission titled internal control integrated framework. The company reviewed and

evaluated the reasonableness and effectiveness of its internal control design. This refined and

standardized the company‟s internal control. Company also implemented the construction of

management information system of internal control (CG report 2009).

x. Continuous evolvement of corporate governance:

This shows the company‟s commitment towards the implementation of the good corporate

governance practices in the company. It states that company will closely study the

development of corporate governance practices among the world‟s leading corporations,

future evolution of the relevant regulatory environment and the requirements of the investors

as an on-going basis. The company will also review and enhance its corporate governance

procedures and practices from time to time so that to ensure the long-term sustainable

development of company (CG report 2009).

The above discussion shows the China Mobile is committed to adopt the best practices across

its subsidiaries so it seems that Zong as a subsidiary of China Mobile will soon get a

comprehensive corporate governance model for implementation and adoption like its parent

company is already having in near future.

56

4.3 Comparative study of Zong with Telenor

Telenor is an example of a „globally integrated enterprise‟ in

which economic, environmental and social perspectives are

integrated in support of one another. Telenor Pakistan is 100%

owned by the Telenor group, an international provider of high quality voice, data, content and

communication services in 14 markets across Europe and Asia. Telenor group is among the

largest mobile operators in the world with over 195 million mobile subscriptions (Q3 2010)

and a workforce of approximately 34,000 employees across the world.

Telenor Pakistan is the country's single largest European investor, with investments in excess

of US$2 billion. It acquired a Global System for Mobile Communications (GSM) license in

2004 and began commercial operations on March 15, 2005. At the end of October 2010 it had

a reported subscriber base of 24.12 million and a market share of 24% making it the country's

second largest mobile operator.

4.3.1 Offering mobile financial services

Telenor Pakistan acquired 51% of Tameer Microfinance Bank in November 2008. In 2009 it

launched 'easypaisa' to become Pakistan's first telecom operator to partner with a bank to

offer mobile financial services across Pakistan.

i. Contributing towards Pakistan's economy

The Company continues to contribute to Pakistan's economy. It has created 2,500 direct and

25,000 plus indirect jobs and has a network of 29 sales & service centers, more than 250

franchises and some 150,000 retailers, thus providing a means to livelihood to thousands.

For 2009 it is estimated that Telenor Pakistan contributed Rs20 billion in various forms of

direct and indirect taxes to the economy of Pakistan (Telenor 2010).

4.3.2 Corporate Responsibility

Telenor Pakistan's flagship corporate responsibility program, Khuddar Pakistan, aims to

create dignified opportunities for persons with disabilities. The purpose is to become the most

57

disabled-friendly organization in Pakistan in terms of employment, service and community

support (Telenor 2010).

i. Environmentally conscious

Telenor Pakistan has taken and continues to implement a number of environmentally-friendly

initiatives. These include mainstreaming energy efficiency and alternate energy solutions and

implementing occupational health & safety practices that comply with international

standards. Telenor also using smart on-site equipment which includes standardized low

emission Gensets (generator systems).

ii. Zong’s role in social development of the country

Mr. Usman and Mr. X have highlighted very important and productive initiatives taken in

terms of social development by Zong as under:

We are proud to say that Zong is a responsible company in terms of social

development. Like in critical situations of earthquake, floods, drought, famine and

other natural disasters company is working at its best as a responsible company.

Last year due to the land sliding in the region of Atahbad, Gilgit Baltistan there

formed a natural lake. People of the area were not able to cross the lake due to lack of

facilities as the area was fully filled with natural lake. Zong distributed one truck of

useful things to people of the affected area.

Distributed many times to the flood affected people in the recent floods that affected

millions of people of Pakistan.

We organized employees to donate for refugees of Swat valley region by providing

food, blankets, tents and medicines.

Established scholarships at the Pakistan Engineering & Technology University to

encourage students with outstanding achievements in engineering and computer

sciences.

Donated to Edhi Foundation which is committed to public health and relief services.

58

Sponsored the China-Pakistan Friendship Youth Painting Competition hosted by the

All Pakistan-China Friendship Association.

Company has started to distribute free food items in the holy month of Ramadan to

800 poor people of Pakistan so that they can perform the fasting in a better way.

Blind people societies were also supported for the benefit of the blind people.

At the safety day Islamabad traffic police is also helped through printing of banners

and pamphlets for educating people for traffic rules.

Company is focusing on the viability, competence and moral character of enterprise in

the country.

Moreover, for new graduates Zong has initiated first time in Pakistan by providing

internship and student entrepreneurship program. In this program students were

provided by the connection Sims and were asked to sell them. They are given the

targets and on meeting these targets, students get the commission on the sales.

Another initiative taken by Zong is that we are providing the loan to employees who

want to continue their studies at master level. Those employees who worked for the

period of two years are provided with PKR 200, 000 for their studies as loan. This

initiative is very productive and we are working as a responsible company in Pakistan

in developing and promoting the education in the country.

4.3.3 CSR Objective and strategy

Telenor Pakistan is committed to being both an industry leader in the management and

implementation of corporate responsibility and to make this an integral part of their business

development.

i. Objectives

The three primary objectives for Telenor Pakistan's emphasis on corporate responsibility are:

Telenor Pakistan's customers shall be confident that the company runs its operations

in an ethically responsible manner.

59

Telenor Pakistan's employees shall be proud of the way in which the company

handles its social responsibility.

Telenor Pakistan‟s other stakeholders expecting high standards of social commitment

shall have high regard for the company (Telenor 2010).

ii. Strategy

Telenor Pakistan is committed to corporate responsibility in all its activities by making it an

integral part of the corporate culture. Our role in society is clear: We are here to help people

communicate. That goes for all the countries in which we operate (Telenor 2010).

iii. Respond to challenges

Telenor aims to understand and respond to the challenges that society is faced with, using

technology and competence to find innovative solutions. Telenor believes that they have

important contributions to make on key issues, such as alleviating poverty, combating climate

change and encouraging safe use of information communication technology (Telenor 2010).

iv. Build trusting relationships

Telenor Pakistan believes in building trusting relationships with their stakeholders and

demonstrates a readiness to help find solutions to the challenges they are facing. Telenor

wants their customers to be confident that the Telenor Pakistan runs its operations in a

responsible manner. The company wants investors expecting high standards of social and

environmental commitment to prefer Telenor. It works towards making its employees proud

of the way it does business. Efforts are based on Telenor's values; “Make it easy, keep

promises, be inspiring and be respectful” (Telenor 2010).

4.3.4 HR policies for employees at Zong:

When asked from the company representative of Zong Mr. Usman mentioned some of

company‟s policies regarding human resource (HR) that are building good relationship

between company and the employees who are one of the stakeholders in company. He

mentioned that:

60

HR policies are made after making market survey and comparison is done within the

telecom sector. After this the policy is designed for the employees of Zong regarding

HR.

Manpower is very important resource for the company and HR gives competitive

edge in terms of salary, facilities and work environment.

Every policy that is made in Zong is in the favor of company and employees like

medical policy, termination policy, education assistance and others.

Employees are hired directly by Zong at different departments and at call center the

employees are hired through third party contracts. But Zong also deals with the issues

and maintains the performance records of them. Human Resource Solutions

International (HRSI) and Human Resource Solutions (HRS) are the two companies

that provide human resource to the company. Proper standard procedures are followed

on hiring and firing the employees.

Gratuity is paid to the employees if they stays for 3 to 4 years in the company

according to their basic salary, and through the third party hiring as in case of HRSI

for call center if an employee resigns after completing one year then he/she is eligible

for gratuity of the company.

4.3.5 Zong Initiatives regarding CSR development:

When asked from the Zong representative regarding CSR development in the company Mr.

Y4 highlighted the following things regarding energy saving activities within the

organization:

As far as energy saving is concerned we are very conscious about it and especially

CEO has rolled out email to every department and employee to switch off the extra

lights and to shutdown systems properly while leaving office. Moreover, he is much

4 Mr. Y representative of Zong Pakistan identity concealed due to confidentiality and anonymity reasons.

.

61

concerned about the situation and sometime personally visits the departments and

check if policy is implemented and practiced in true letter and spirit or not.

As there are many other ways of saving energy by replacing the lights with energy

savers and proper installation of windows for natural light? But they cost more and as

we have already normal lights installed at offices so we are not replacing them but

trying to use minimum lights and save energy.

4.3.6 Corporate Governance

Telenor Pakistan considers good corporate governance to be an essential tool for achieving its

vision, value creation and strategic goals and for maintaining a healthy corporate culture.

Furthermore, good corporate governance is imperative for credibility and for access to

capital.

Company‟s corporate governance includes openness and transparency towards the company‟s

owners, the Board and group management, as well as other interested parties such as the

group‟s employees, customers, suppliers, creditors, public authorities and society in general.

Rules and procedures provide Telenor Pakistan with a sound platform for good corporate

governance and for the further development of a positive, responsible and robust corporate

culture.

The management is responsible for ensuring the existence of internal rules, procedures and

structures that can efficiently secure value creation for all stakeholders and where authority

and responsibilities are clearly set out and mutually understood (Telenor 2011).

4.4 Government’s role in terms of CSR and CG

As per S.R.O. 983(I)/2009 given by Securities and Exchange Commission of Pakistan

(SECP) governs the CSR practices within Pakistan. Full text of the S.R.O can be found in the

appendix. The salient features of the S.R.O requires to disclose corporate philanthropy,

energy conservation, environmental protection measures, community investment and welfare

schemes, consumer protection measures, welfare spending for under-privileged classes,

industrial relations, employment of special persons, occupational safety and health, business

ethics and anti-corruption measures, national-cause donations, contribution to national

62

exchequer and rural development programs undertaken by any organization registered with

SECP.

Pakistan Telecommunication Authority (PTA) is the regulatory authority that governs the

telecom sector in Pakistan. Mr. Kashif PTA‟s representative mentioned about the CG and

CSR when he was asked about it. He responded that mainly they are governing the telecom

companies regarding the licensing, pricing, customer packages and the customer service level

working within Pakistan. These concepts are newly adopted concepts in Pakistan and they are

not focusing on them as a PTA‟s mandate rather than companies own policies. CG and CSR

are the individual companies‟ steps or initiatives and PTA is not involved in them. However

if some company is working on it then it is appreciable and we encourage the individual

efforts by the companies but we cannot ask them for what they have done and what they did

not. PTA have seen that companies like Telenor is working much in this respect, they are

giving free food material, tents, blankets and sometimes cash amount to the affected people

of Pakistan at every time of need. PTA have also noticed that Telenor has installed turbines in

northern areas of Pakistan in the lakes and natural water falls to generate electricity for the

people and they also benefit their towers from that electricity. They are helping the poor and

needy people through every means at every level that is appreciable.

Zong might be doing things like that, as my personal information it is a new company and

they are working on these things but cannot say at what level and how much.

63

CHAPTER 5 DISCUSSION AND ANALYSIS

5.1 Stakeholder theory

Freeman (1984, pp. 25) explains about stakeholder as “any group or individual who can

affect or is affected by the achievement of the firm‟s objectives”. Donaldson and Preston

(1995) developed the stakeholder model although this model did not mention an important

stakeholder which is media.

In our case Zong is working on stakeholder engagement. It is dedicated towards the

involvement of stakeholders towards a common objective for the benefit to all. Moreover, the

parent company China Mobiles is committed and believes to understand the company‟s

impact as a business, helps in responding more quickly and directly to the shareholders‟

concerns, integrate stakeholder views when making critical business decisions, work to meet

stakeholder needs better and in the end to improve CSR performance in the key business

areas. These policies and activities are implemented throughout Zong in Pakistan as a

company‟s business standards (Mr. X5 Zong representative).

(Freeman 1984) in his model mentions several stakeholders instead of talking about only

shareholders. This model represents eleven fundamental stakeholders that influence a

company as governments, local community organizations, owners, consumer advocates,

customers, competitors, media, employees, Special Interest Groups (SIG), environmentalists

and suppliers. Company must identify its key stakeholders for the long term sustainability

and profitability. In this model an important stakeholder that is sometimes ignored is also

mentioned which is media. Media plays an important role in the company‟s performance and

helps the customers indirectly to get better services. Media highlights the issues, negligence

in performance and attracts the company‟s and other stakeholders in resolving these issues.

China Mobiles has defined its stakeholders into seven categories as customers, shareholders

and investors, government authorities and regulators, the public, industry peers, value chain

partners and employees. Based on stakeholder types the company has developed regular

5 Mr. X representative of Zong Pakistan, identity concealed due to confidentiality and anonymity reasons.

64

mechanism for engaging with its stakeholders. Here we want to highlight that China Mobiles

as Zong in Pakistan is missing important stakeholder that is media in their stakeholder model.

It needs to be considered and added as an eighth stakeholder in company‟s stakeholder

model.

5.2 Corporate Social Responsibility

Carroll (1991) argues that four categories as economic, legal, ethical and philanthropic of

corporate social responsibilities can be represented as a pyramid, in which economic

responsibilities are the foundations upon which all other responsibilities are based and

without which they cannot be accomplished and philanthropic responsibilities are on the top

of the pyramid.

CSR is given importance at the company policies and also the business practices (CSR report

2010) further in the report it is mentioned that company adheres to their core corporate value

“Responsibility Makes Perfection and our CSR vision “With perfect sincerity and integrity,

we will strive to fulfill our three responsibilities: economic, social and environmental.” Here

the company vision shows the commitment towards CSR at China Mobiles and its

subsidiaries in Pakistan and rest of the world. China Mobiles believe that only when their

business strategy aligns with their social responsibility efforts and CSR program then

company as a whole can be sustainable (CSR report 2009).

China Mobiles has adopted CSR strategy for its CSR vision, that is followed by the

principles; integration (ensuring of business and CSR strategy integration by involving key

stakeholders), focus (ensuring the focus of company on the issues that are material to

stakeholders and business) and development (ensuring that company‟s CSR programs

implementation is helping to the societal development). These principles were very

productive in achieving the vision of company (CSR report 2009). Moreover company is also

pursuing towards the four aspects of quality innovation and excellence that are corporate

excellence, industry leadership, contribute to social progress and environmental advances.

5.3 CSR Pyramid

According to the pyramid of CSR, Carroll (1991) has mentioned four levels of CSR that are

economic, legal, ethical and philanthropic responsibilities from bottom to top respectively.

65

The development of CSR is broadly spread around the world. Many companies are interested

in adopting CSR; From “Doing Good to Do Good” is the old style of CSR (Vogel 2005).

In the case of China Mobiles as a parent company and Zong as a subsidiary in Pakistan is also

focusing on these four levels that are discussed in CSR pyramid given by Carroll. In that

Zong is seen active in philanthropic activities in the society. Porter and Kramer (2006),

mentions about the philanthropic activities that is in decline but can be a competitive

advantage to the organization when used in a positive way that can lead towards long-term

sustainability. Company also participates in economic level of CSR pyramid by paying

proper duties and taxes to the government and on the other hand employing the manpower for

the functioning of the operations. When it comes to the legal aspect, company is fulfilling all

the legal requirements imposed by the government either it is SECP or PTA which both are

controlling and regulatory authorities. As per the company representative (Mr. X6) company

tries its best to be ethically responsible and works in the best interests of all the stakeholders.

5.4 Triple Bottom Line

According to Henriques and Richardson (2004) by implementing the TBL concept, several

companies expect to be able to take more efficient and sustainable method to manage

business risks, handle the concerns of society and to identify new business opportunities as

well as likely obstacles. TBL focuses on three aspects namely economic, ecological and

social. TBL notion requires the responsibility of stakeholders rather than shareholders in

order to increase the organization‟s value. This also consists of its profitability, shareholder

values and its social, human and environmental capital (Sawitz & Weber 2006).

Environmental, economic and social elements of triple bottom line are part of policies and the

work done by China Mobiles and also Zong in Pakistan. We have observed and noticed these

activities in Pakistan by Zong and which are worth mentionable. Company has designed six

CSR initiatives that are; narrowing the digital divide, advancing rural development, action on

climate change, promoting a low- carbon economy, information for societal impact,

developing an information society, caring for the disadvantaged, encouraging a philanthropic

6 Mr. X representative of Zong Pakistan, identity concealed due to confidentiality and anonymity reasons.

66

culture, responsible and reliable telecommunications, protecting consumer rights,

strengthening sustainability management, improving sustainable performance (CSR 2010).

Economic element is also considered in the company and its operations. Company is giving

its due share towards economic development with the launch of Zong in Pakistan. This has

not only resulted in increase in foreign direct investment but also contributed in economic

development of the country through provision of tax payment and increase in job

opportunities for the local talent.

Social element relates to standard of living of people in society, education and provision of

equal opportunity for the masses. Zong in achieving excellence in business is striving hard to

align its services according to the need of people. Zong is improving living standards of

people by providing them better job opportunities and better telecom services on the other

hand. The company is also helping their employees to get further education by providing

loans for this purpose (Mr. Usman).

5.5 Corporate Governance

According to Palmisano (2006), businesses are changing in fundamental ways structurally,

operationally and culturally in response to globalization and new technology; as a result, the

larger companies are no longer „multinational corporations‟ (MNCs) but Globally Integrated

Enterprises (GIEs). Selznick (1994) also argues that governance is more than management

and has to take account of all the interests that affect viability, competence and moral

character of an enterprise.

The corporate governance report of China Mobile Company states the goal of the company is

to enhance corporate values, maintain sustainable long term development and generate

returns for the shareholders. To obtain the objectives of corporate governance China Mobiles

has incorporated some of important principles like honesty, transparency, efficiency and

openness (CG report 2009).

5.6 Integration of CSR and CG

According to van den Berghe and Louche (2005), CG and CSR can work jointly to bring

transparency, honesty, and accountability in the organizational processes. This phenomenon

can also be observed in an organization like Zong where corporate social responsibility and

67

corporate governance practices are acted upon simultaneously to achieve organizational goals

and satisfy the involved stakeholders.

5.7 Sustainable Service Business and Values Based Business

Sustainable service business and values based business are new dimensions in today‟s

business world. For this purpose internal service dimensions of Zong were measured and five

principles for value based services were analyzed with respect to our case study.

5.6.1 Measuring internal service dimensions of Zong

The service quality of Zong can be measured through the following dimensions as discussed

in theoretical part given by Reynoso and Moores (1995):

I. Helpfulness

Zong is working towards increasing service level at their best. Company call center is

providing services 24/7, franchises and customer service centers at different locations across

country are also providing service to its customers by handling customer‟s complaints and

providing information about the company‟s services and products. The employees at front

end are committed to provide best customer services and help. It is felt from the interviews

and reading user blogs that some customers are not happy with some services and in some

cases due to improper response of employees as they were not helpful and not providing

necessary information.

II. Timeliness

As far as timeliness dimension is concerned, it is the time customer complaint is resolved

and how long customer has to wait for activation of his subscriber identification module

(SIM) after purchase, timely delivery of information required by the customer and waiting of

customer over the customer services helpline. These things are very important towards

customer service and customer retention. Zong is trying to deliver these services with the aim

to provide best customer services. However there is still room for improvement as the

customer complaints are too much and the response towards complaints is less, they are not

timely resolved (Company employee).

III. Communication

Communication is another important dimension in service delivery. Companies‟ use different

medium of communication like electronic media and print media by different advertisements

68

and promotions. Zong is investing in different mediums of communication to cater its

customer‟s in best possible manner. Its advertisements are according to the PTA laws and are

also showing the local culture in better way. Company is also targeting its customers in

effective way and is able to increase it‟s customers from the first year of operations that is 6.8

% subscribers in the market. Company is not targeting its competitors directly through its

advertisements in print media and is working in a responsible manner.

IV. Tangibles

Tangibles are also the part of Zong operations and company has managed it in a better way.

Company is providing better and competitive packages and offering mobile handset at a very

reasonable price with the packages. Company has many sales and distribution franchises

which portray the company image and brand by displaying company‟s unique artifacts in all

of its outlets.

V. Reliability

Reliability is concerned with the network. Call quality, call connectivity and call duration are

important factors in this regard. Zong is working hard to meet these challenges in today‟s

competitive environment in country where other service providers are already able to tackle

these things. There are issues in call quality, connectivity and duration in Zong network in

most of the areas of Pakistan. Mostly those areas that are far from main cities face these

problems and there are many customers‟ complaints in that context.

VI. Professionalism

Zong has hired professional employees and its HR department is working well in training and

development of newly hired employees. Also regular training and updates on different

policies and packages are delivered as per the company‟s demands.

VII. Confidentiality

This is another important dimension when we talk about the best service level by any service

provider. The information available to the company employees about the customer‟s needs to

be kept confidential and not to be shared with anyone who is not concerned and even not with

anyone outside of the organization. Zong has better control in this regard and company made

it sure to have the customers‟ records confidential.

69

VIII. Preparedness

This dimension is concerned with the level of readiness and how thoroughly customer is

satisfied when he contacts the service center. Important is that the employee is prepared

enough through training about delivering right information to the customer; he or she is ready

to cater the complaint and can give solution of the problem.

IX. Consideration

Company consideration towards the customer in regard to the services promised. It is

important to provide the claimed services to the customers. Market competition has increased

the customer demands and expectations; however Zong is currently fighting to secure its

market share in the market.

X. Flexibility

There is employee empowerment to some extend which enables them to be flexible in

unforeseen situations. For instance the team leaders and team co-coordinators at call center

are empowered in a way that they can make some decisions without referring to managers.

This increases the service quality and decreases the service delivery time.

5.6.2 Five principles for a sustainable values based service business

According to Edvardsson and Enquist (2009) in their book Values- based Service for

Sustainable Business: lessons from IKEA, have discussed five principles for sustainable

values based business as follows:

i. Strong values drive customer value

Values are dynamic and should be integrated in the business model. Values are used by

customers and other stakeholders when value is accessed. The values create relationships

with customers and so represent an important loyalty driver (Edvardsson & Enquist 2009).

Mr. Usman mentioned about the values and said that Zong is also having strong values and in

use by customers, staff, partner‟s suppliers and shareholders. We believe in strong company

values that derive it towards the customer value and in return makes a satisfied customer.

ii. CSR as a strategy for sustainable service business

CSR is important for rethinking the role of any company in any industry. By using CSR in a

proactive way, companies think „laterally‟ in search for „smart‟ solutions. The logic of values

thus drives the logic of value creation (Edvardsson & Enquist 2009). Zong is using the

70

principles of “integration, focus, and development” as a CSR strategy to be a sustainable

business. According to company representative, Zong is among the developing companies in

Pakistan with the aim of sustainable business that is seen in the form of social responsibility

that company is doing in terms of social development. We helped the people of Pakistan

when they were affected by flood and earthquake in recent years. Moreover we also started

different social programs for the benefit of students and people of Pakistan that are the part of

our social development programs.

iii. Values based service experience for co-creating value

Customers‟ experiences are formed during consumption of a service. When a customer‟s

basic requirements are met, other issues make a difference. These issues are often

understated, affective and values based (Edvardsson & Enquist 2009). As far as telecom

companies are concerned there is no such experience room available for the customers where

they can test drive the services. But the customer service centers and franchises play the role

as of experience rooms. Customers come and interact with the front desk officers to co-create

the services and value is co-created when a customer‟s uses the service of a particular

telecom operator.

Zong representative Mr. X mentioned about the service centers and franchises are playing

very important role in making experience of services good for customers. Customers are

given proper information and guidance on the products and services offered by the company.

Moreover, the environment is also created on well defined standards so that they also present

good image of the company and in result increases the customer value. Here in these outlets

customer experiences the service and buys the SIM for usage. After using it he may comes up

with suggestions and problems that he faced during the use of service. These suggestions or

problems are properly noted and are used in improving the quality and standards of service.

iv. Values based service brand and communication for values resonance

Brands are living expressions of what a company stands for and communicate what its

products or services can do for customers. However if a company overemphasize about its

products can do and then fails to deliver as perceived by the customers, this generate

inauspicious reactions both in market and among company‟s employees. Using CSR to

secure a values based service brand is more than only communication about CSR with the

customers; rather it is about using CSR as basis for policy and indemnify that the service

71

brand and communication with all stake holders is in line with the company‟s values, the

customers‟ values and the values of the whole society (Edvardsson & Enquist 2009).

As per the company‟s representative about branding of product, he said its promotion and

standards were set for each product and service. He mentioned that Zong communicates its

values through available channels for interaction according to the local values of the

customers. Zong is providing satisfactory services to the customers as per their perception

and promises only what the company can deliver; it is not exaggerating the services too much

that the company cannot meet. Company is using proper channels to search what customers

want and what other companies in the market are providing, therefore company is offering

the competitive services and promoting its brand accordingly.

v. Values based service leadership for living the values

Leaders communicate through their interactions with employees, partners, suppliers and

customers. Authentic leaders spend time with customers and employees and learn from them

(Edvardsson & Enquist 2009).

Mr. Usman mentioned about leadership role in company and said that leadership is well

prepared and has knowledge what customers require from the company. Leadership is

involved in customers through direct interaction in call centers and with employees on

regular basis. Zong leadership is committed to impart its values to its employees for the

maximization of customer satisfaction.

Moreover, Mr. Kashif mentioned about PTA‟s role towards service quality. He mentioned

that PTA is working for the improvement of service level for customers in all telecom

companies working in Pakistan. There are codes for commercial practice and codes for

service agreement which form the basis for the measurement of service quality with others

elements too. If we talk about the code for commercial practice we work in a way that

companies are working ethically and according to culture of the country. The advertisements

are providing the true picture of the Pakistan culture and are not targeting or maligning the

competitors.

Secondly we are also looking into service agreement forms that are filled by customers

properly so that all the necessary information required are taken while making agreement.

Then we also look in billing of post paid customers, and then we measure the companies as

72

per their key performance indicators (KPI) that are used to measure their performance.

Quality of call and service level is also given importance, we are focusing more on calls

when a customer is calling over the helpline for guidance or complain, we do supervise if the

complaints received were resolved in correct and timely manner or not.

He further mentioned that they have seen that Zong has improved its service level from the

previous years and in few years of its operations Zong has achieved a good standard in terms

of service, customers‟ responses are good. Company is offering many products and packages

for the end users that are attracting them towards it and also the price level of the services are

competitive and launch of Zong has increased market competition on a higher level. We hope

and will see that Zong would be one of the best companies in Pakistan in terms of service

level and in terms of customer base.

73

CHAPTER 6 CONCLUSION

In our thesis we have presented the concepts of corporate social responsibility and corporate

governance with a special focus on telecom sector of Pakistan, taking the case of Zong in

comparison of Telenor Pakistan. CSR and CG are relatively new terms in market when it

comes to the companies like Zong as it is new in the market but its parent company is well

established i.e. China mobiles so Zong can benefit from its parent company when it comes to

the implementation of CSR and CG practices in the organization.

The qualitative study was based on investigation of CSR and CG in two telecom business

organizations namely Zong and Telenor not whole but to some extent demonstrate the

situation of Pakistan telecom market where people are affected by product and service

friendliness in case of usability, affordability and value addition in return of money they pay.

Most of the customers do not have the understanding of CSR and CG concepts and as a result

there is much less pressure on any company regarding their role as sustainable and ethical

business entities. The NGOs are also working on other aspects of society as the country was

struck by floods, earth quake and other social and economic turmoil.

Zong and Telenor have played their role in disasters like flood and earthquakes by providing

financial assistance and material help to affected people. The concern is however integration

of CSR and CG in the company‟s strategic business decisions and operational frameworks. It

has been observed that much of the things are documented with less connection with the real

world just for the sake of having reports and can be seen on the company‟s websites. These

documentations are done in a complex manner to satisfy the regulatory and business needs of

the company. The interviews revealed that many of the company representatives were also

not aware of the concepts of CSR and CG. They thought philanthropic activities to be CSR.

In contrast, the situation of corporate governance was better and company representatives

knew about it as the Pakistan based codes are used in complex manner and followed as far as

shareholder‟s interests are concerned. The corporate governance code of Pakistan does not

consider the posting of global reporting initiatives (GRI) report along with annual report. This

could be one of the reasons that the data about CSR and CG is not available on Zong‟s

website. Whereas some of the data reports about CG and CSR are available on the corporate

website of Telenor. Telenor has done more in the area of corporate responsibility by

74

controlling their carbon emissions, having social uplift programs like youth leadership,

responsible music, khuddar Pakistan (giving consultation to disable people to boost their

talent), and corporate volunteerism with a global commitment.

At last, this paper is one of the first stepping stones for a long journey to look into the area of

CSR and CG practices in Pakistan. The focus of paper was telecom market. For this purpose

specifically two companies were selected for analysis. Therefore, further investigation is

needed in this regard in other companies and in other industries as well. There is a dire need

to increase awareness among the common man to steer the corporations for a better

responsible future of business sector and viewing society as a key stakeholder for the

business practices in the country.

Future research and recommendations

The fields of corporate governance and corporate social responsibility are novel when it

comes to the telecom and many other sectors of Pakistan. There are many dimensions of CSR

and CG in businesses so there is need of more research in these fields as Sebhatu (2010)

suggesting new researchers that sustainable business and sustainable service dominant logic

(SSDL) to be researched. This is also applicable for telecom sector of Pakistan to work in the

areas to see implications of these issues on businesses and society at large.

CSR and CG are new for the companies like Zong, although they are working on these

strategies but they need to be more proactive in this regard. Zong should not follow the

strategies of their competitors like Telenor or other telecom companies in the market to get

the maximum response from the customers and should adopt strategies of its parent company

China Mobiles. Although every company recognizes the need to be socially responsible but it

made the difference when it comes to properly market and conveying the message to all its

stakeholders. This is the point where we see Zong to be lacking behind Telenor. Zong need

much more to do in terms of CSR and CG, especially when it comes to the marketing and

communicating of these two factors.

Zong has many contributions towards the philanthropic activities for the society but we were

unable to find information on the company‟s website. Therefore, we recommend Zong to be

more focused in publishing and advertising side of its CSR activities. When we logon the

75

website of Zong we do not see anything related to CSR or CG but on the other hand Telenor

is disseminating information regarding flood relief efforts and corporate responsibility

policies and reports to show the company‟s image to be corporate social responsible citizen.

So we recommend Zong to take steps which can enable them to convey CSR and CG

information about the company. Corporate ethics can be seen on the website of Telenor

having the CEO‟s message, objectives and strategy, corporate governance and code of

conduct but no such information was available on the website of Zong. Zong should illustrate

its CSR and CG parameters. Telenor talks about the value creation for its all stakeholder but

we have seen no such thing in Zong. The company never mentioned the value for the

customers, what to talk about the co-creation of the value. So we recommend that Zong

should focus on this perspective that how a customer could be a co-creator of value so that

Zong could become better service provider for its customers.

Although every cellular company in Pakistan claims to be environment friendly but we

observed them to be less dynamic in efforts to achieve the same. For example PTA has

announced the use of same telecom tower by every operator so that environment friendly

surroundings can be managed throughout the country especially in the densely populated

metropolitans but we have seen no initiatives from the companies. So it is recommended that

Zong should take the first step and play its part in the achievement of this goal.

Finally the integration of CSR thinking into service business creates a values-based image. So

CSR and CG practices can be integrated by the businesses like Zong to create value for its

stakeholders resulting in sustainable society for generations to come.

76

REFERENCES

Abela, A.V. & Murphy, P.E. (2008). Marketing with Integrity: ethics and the service

dominant logic for marketing. Journal of the Academy of Marketing Science, 36(1), 39-53.

Alvesson, M. & Sköldberg, K. (2008). Reflexive methodology: new vistas for qualitative

research. (2nd

ed.). London, SAGE.

Baker, M (2008). Corporate Social Responsibility-What does it mean? [Online]. Available:

http://www.mallenbaker.net/csr/definition.php [2010-12-10].

Berghe, L.V. den, & Louche, C. (2005). The link between corporate governance and

corporate social responsibility in insurance. Geneva Papers on Risk & Insurance, 30(3), 425-

442.

Blowfield, M. and Frynas, J.G. (2005). Setting New Agendas: Critical Perspectives on

Corporate Social Responsibility in the Developing World. International Affairs, [Online],

81(3), 499-513.

Brown, D., Dillard, J. & Marshall, R.S. (2006). Triple Bottom Line: A business metaphor for

a social construct. Barcelona, Departament d'Economia de l'Empresa. [Online]. Available:

http://www.recercat.net/bitstream/2072/2223/1/UABDT06-2.pdf [2010-12-24].

Bruntland, G. (ed.) (1987). Our common future: The World Commission on Environment and

Development. Oxford, Oxford University Press. [Online]. Available:

http://alcor.concordia.ca/~raojw/crd/reference/reference001377.html [2010-12-25].

Bryman, A. & Bell E. (2007). Business Research Methods. (2nd

ed.). New York, Oxford

University Press.

Cadbury (1992). Report of the committee on the Financial aspects of corporate governance.

London, Gee Publications. [Online]. Available:

http://www.ecgi.org/codes/documents/cadbury.pdf [2010-12-29].

Carroll, A.B. (1991). The Pyramid of Corporate Social Responsibility towards the Moral

Management of Organizational Stakeholders. Business Horizons, 34, 39-48.

77

Carroll, A.B. (1979). A Three-dimensional Conceptual Model of Corporate Performance.

Academy of Management Review, 4(4), 497-505.

Carroll, A.B. (1999). Corporate Social Responsibility: Evolution of a Definitional Construct.

Business & Society, 38(3), 268-295.

Cassell, C. & Symon, G. (2004). Essential guide to qualitative methods in organizational

research. [Online]. London, Sage Publications. Available:

http://www.google.com/books?hl=sv&lr=&id=1rPSA16gxIwC&oi=fnd&pg=PA11&dq=Cass

ell+%26+Symon+2004+case+study&ots=QoqSZU3mbJ&sig=e6hH3KeggiH9l8kU4F8Ci9I9

MYg#v=onepage&q&f=false [2010-12-26].

Chaudhry, K. & Krishnan, V.R. (2007). Impact of Corporate Social Responsibility and

Tranformational Leadership on Brand Community: An Experimental Study. Global Business

Review, 8(2), 205-220.

Donaldson, T. & Preston, L.E. (1995). The stakeholder theory of the corporation: concepts,

evidence, and implications. Academy of Management Review, 20(1), 63-91.

Edvardsson, B. & Enquist, B. (2009). Values-based Service for Sustainable Business:

Lessons from IKEA. Abingdon, Routledge.

Elkington, J. (2004). Enter the Triple Bottom Line. [Online]. Available:

http://www.johnelkington.com/TBL-elkington-chapter.pdf [2011-02-20].

Elkington, J. (1997). Cannibals with forks: the triple bottom line of 21st century business.

Oxford, Captsone Publishing.

Enquist, B., Johnson, M. & Skålén, P. (2006). Adoption of Corporate Social Responsibility-

Incorporating a Stakeholder Perspective. Qualitative Research in Accounting and

Management, 3(3), 188-207.

Enquist, B. (2010). Corporate Governance, FEAD17 Corporate Governance. Karlstad

University, unpublished.

Enquist, B., Edvardsson, B. & Sebhatu, S.P. (2007). Values Based Service Quality for

Sustainable Business. Managing Service Quality, 17(4), 385-403.

78

Enquist, B., Edvardsson, B. & Sebhatu, S.P. (2008). Corporate Social Responsibility for

Charity or for Service Business? The Asian Journal of Quality, 9(1), 55-67.

European Commission (2006). Implementing the partnership for growth and jobs: making

Europe a pole of excellence on corporate social responsibility. Brussels: Commission of the

European Communities. [Online]. Available: http://eur-

lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52006DC0136:EN:NOT [2010-12-

15].

Freeman, R.E., Harrison, J.S., & Wicks, A.C. (2008). Managing for Stakeholders: Survival,

Reputation, and Success. New Haven, CT, USA: Yale University Press. [Online]. Available:

http://site.ebrary.com/lib/kaubib/Doc?id=10315690&ppg=4 [2011-01-03].

Freeman, R. E. (1984). Strategic management: A stakeholder approach. [Online]. New York,

Cambridge University Press. pp. 25. Available: Google books [2011-02-02].

Freeman, R.E., Wicks, A.C., & Parmar, B. (2004). Stakeholder Theory and “The Corporate

Objective Revisited”. Organization Science, 15(3), 364-369.

Gerring, J. (2004). What Is a Case Study and What Is It Good for? American Political

Science Review, [Online], 98(2), 341-354. Available: http://www.jstor.org/stable/4145316

[2010-12-25].

Gillham, B. (2000). Case study research methods. [Online]. Available:

http://www.google.com/books?id=B0UdlaxwiX0C&printsec=frontcover&hl=sv&source=gbs

_ge_summary_r&cad=0#v=onepage&q&f=false [2011-02-25].

Gray, R. (2006). Social, environmental and sustainability reporting and organizational value

creation? Whose value? Whose creation? Accounting, Auditing & Accountability Journal.

Emerald, 19(6), 793-819.

Gummesson, E. (2000). Qualitative methods in management research. (2nd

ed.).Thousand

Oaks, CA., SAGE.

Henriques, A. & Richardson, J. (2004). The Triple Bottom Line: Does It All Add Up?:

Assessing the Sustainability of Business and CSR. London, Earthscan Publications

Limited.[Online]. Available: http://issuu.com/irothko/docs/henriques.the-triple-bottom-line--

-does-it-all-add [2010-12-20].

79

International Institute for Sustainable Development [IISD] (2010). Business and Sustainable

Development. [Online] Available: http://www.iisd.org/business/ [2010-11-17]

Jamali, D., Safieddine, A.M. & Rabbath, A. (2008). Corporate governance and corporate

social responsibility synergies and interrelationships. Highfield Southampton, Blackwell

Publishing Ltd., 16(5), pp.443-459.

Jensen, M. C. (2001). Value Maximization, Stakeholder Theory, and the Corporate Objective

Function. Journal of Applied Corporate Finance, 14(3), 8-21.

Johnson, M. (2007). Stakeholder Dialogue for Sustainable Service. Diss. Karlstad:

Universitetstryckeriet, Karlstad Universitet.

Key, S. (1999). Toward a new theory of the firm: a critique of stakeholder “theory”.

Management Decision, 37(4), 317-328.

Kotler, P. & Lee, N. (2005). Corporate Social Responsibility: Doing the most Good for Your

Company and Your Cause. New Jersey, John Wiley & Sons, Inc.

Lusch, R.F. & Vargo S.L. (2006). The service dominant logic of marketing; Reactions,

reflections and refinements. Marketing Theory, 6(3), 281-288.

Marsiglia, E., & Falautano, I. (2005). Corporate social responsibility and sustainability

challenges for a Bancassurance company. The Geneva papers, Palgrave Macmillan Journals,

30(3), 485-497.

Maignan, I., Ferrell, O.C, & Hult, T. (1999). „Corporate Citizenship: Cultural Antecedents

and Business Benefits‟. Journal of the Academy of Marketing Science, 27(4), 455–469.

Mallin, C.A. (2007). Corporate Governance. (2nd

ed.). New York, Oxford Press.

Mallin, C.A. (2010). Corporate Governance. (3rd

ed.). New York, Oxford Press.

Mattila, M. (2009). Corporate social responsibility and Image in organizations: for the

insider or the outsiders? Social Responsibility Journal, 5(4), 540-549.

Maxwell, J.A. (2005). Qualitative Research Design-An Interactive Approach. (2nd ed.).

Thousand Oaks: SAGE Publications, Inc.

80

Maignan, I. & Ferrell, O.C. (2001). Corporate citizenship as a marketing instrument.

European Journal of Marketing, 35(3/4), 457–484.

Mehmood & Riaz, Z. (2008). Using Case Study Research Method to Emergent Relations of

Corporate Governance and Social Responsibility. Journal of Quality and Technology

Management, IV(1), p. 9-20.

Merriam, S.B. (1988). Case study research in education: A qualitative approach. San

Francisco: Jossey-Bass Inc.

Mintzer, I.M. (1992). Confronting Climate Change: Risks, Implications and Responses. (ed).

[Online]. Cambridge, Cambridge University Press.

Moir, L. (2001). What do we mean by corporate social responsibility? Corporate

Governance, 1(2), 16-22.

Morsing, M. and Beckmann, S.C. (Eds.) (2006). Strategic CSR Communication. Copenhagen:

DJØF Publications. 301 pages.

Noon, K.M. (2010). Pakistan Telecom and Mobile Sector, Comparison of UFONE,

MOBILINK, WARID, TELENOR, ZONG. Dash Planet. Weblog. [Online] Available:

http://www.dashplanet.com/articles/telecom/pakistan-telecom-mobile-sector-comparison-of-ufone-

mobilink-warid-telenor-zong [2010-12-20].

Palmisano, S.J. (2006). The globally integrated enterprise. Foreign Affairs, 85(3), 127-136.

Porter, M. (1998). Cluster and the new economics of competition. [Online]. Harvard Business

Review, 77-90. Available:

http://www.wellbeingcluster.at/magazin/00/artikel/28775/doc/d/porterstudie.pdf?ok=j [2010-

12-28].

Porter, M.E. & Kramer, M.R. (2006). Strategy and Society: The Link Between Competitive

Advantage and Corporate Social Responsibility. Harvard Business Review, 84(12), 78–

92,163.

Reynoso, J. & Moores, B. (1995). "Towards the measurement of internal service quality".

International Journal of Service Industry Management, 6(3), 64-83.

81

Russell, D.L. (2006). Rethinking Sustainability-The technology Link. [Online]. Available:

http://chenected.aiche.org/wp-content/uploads/2010/10/Rethinking-Sustainability-Final.pdf

[2010-12-27].

Schaltegger, S., Burritt, R., & Petersen, H. (2003). An Introduction to Corporate

Environmental Management: Striving for Sustainability. Nursery Street, Greenleaf Publishing

Ltd.

Savitz, A.W. & Weber, K. (2006). The Triple Bottom Line” How Today‟s Best-Run

Companies Are Achieving Economic, Social, and Environmental Success- and How You Can

Too.[Online]. San Francisco, CA, Jossey-Bass.

Sebhatu, S.P. (2010). Corporate Social Responsibility for Sustainable Service Dominant

Logic. Diss. Karlstad: Universitetstryckeriet, Karlstad Universitet.

Selznick, P. (1996). “Institutionalism „old‟ and „new‟”. Administrative Science Quarterly,

4(2), 270-277.

Selznick, P. (1994). Moral Commonwealth: Social Society and the Promise of Community.

Berkeley, CA, University of California Press.

Tellis, W. (1997). Introduction to Case Study. The Qualitative Report, [Online], 3(2).

Available: http://www.nova.edu/ssss/QR/QR3-2/tellis1.html/ [2010-12-25].

Tricker, R.I. (1984). International Corporate Governance. Englewood Cliffs NJ, Prentice

Hall, pp. 6-7.

Vogel, D. (2005). The Market for Virtue: The Potential and Limits of Corporate Social

Responsibility. Washington DC: Brooking Institution Press.

Waddock, S. & Bodwell, C. (2007). Total Responsibility Management: The Manual.

Sheffield: Greenleaf Publishing.

Willard, B. (2002). The Sustainability Advantage: Seven Business Case Benefits of a Triple

Bottom Line. British Columbia, New society publisher.

Wood, D.J. (1991). Corporate Social Performance Revisited. Academy of Management

Review, 16(4), 691-718.

82

Yin, R.K. (2002). Case Study Research. Design and Methods. (3rd

ed.). Applied social

research method series Volume 5. California: Sage Publications.

Yin, R.K. (1994). Case study research: Design and methods. (2nd ed.). Beverly Hills, CA:

Sage Publishing.

Zong (2010). China Mobile Communications Corporation. Available:

http://zong.com.pk/aboutus_ccmc.html [2010-12-05].

Zong (2010). China Mobile Pakistan. Available: http://zong.com.pk/aboutus_cmpak.html [2010-

12-05].

Zong (2010). Zong. Available: http://zong.com.pk/aboutus_zong.html [2010-12-05].

Web sources

http://www.iisd.org/business/ [2010-11-17]

http://zong.com.pk/aboutus_ccmc.html [2010-12-05]

http://zong.com.pk/aboutus_cmpak.html [2010-12-05]

http://zong.com.pk/aboutus_zong.html [2010-12-05]

http://www.dashplanet.com/articles/telecom/pakistan-telecom-mobile-sector-comparison-of-

ufone-mobilink-warid-telenor-zong [2010-12-20]

http://www.chinamobileltd.com/images/pdf/2010/ar/2009_a_full.pdf [2010-12-20]

83

Annual Reports:

China Mobile Limited [CML] (2009). CHINA MOBILE LIMITED, Annual report 2009.

[Online]. Available: http://www.chinamobileltd.com/images/pdf/2010/ar/2009_a_full.pdf

[2010-11-20].

China Mobile Limited [CML] (2009). Growing together harmoniously. The change: building

a responsible future, CSR report. [Online]. Available:

http://www.chinamobileltd.com/images/pdf/2010/csr/2010_csr_e.pdf [2010-10-29].

Pakistan Telecommunication Authority [PTA] (2010). Pakistan Telecommunication

Authority, Annual report 2009-2010. [Online] Available: http://www.pta.gov.pk/annual-

reports/pta_ann_rep_2010.pdf [2010-11-10].

Securities and exchange commission of Pakistan [SECP] (2010). Annual report 2009-2010.

[Online]. Available: http://www.secp.gov.pk/annual_reports.asp#10 [2010-09-23].

Interviews

Interview held with Mr. Muhammad Usman Khan, Senior Officer HR, OD & Operational

Excellence Team at CM Pak Ltd. Headquarters Islamabad by Waseem Bahadur in December

2010.

Interview held with Mr. Kashif Jawed, PSO to Chairman at PTA Headquarters Islamabad,

Pakistan by Waseem Bahadur in January 2011.

Interview held with Mr. X (Name withheld), Commercial Department at PTA Headquarters

Islamabad, Pakistan by Waseem Bahadur in December 2010.

Interview held with Mr. Y (Name withheld), Marketing Department at CM Pak Ltd.

Headquarters Islamabad by Waseem Bahadur in January 2011.

84

APPENDIX

THE GAZETTE OF PAKISTAN

EXTRAORDINARY

PART II

Statutory Notifications (S.R.O)

Securities and Exchange Commission of Pakistan

NOTIFICATION

Islamabad, the November 16, 2009

S.R.O. 983(I)/2009.- In exercise of powers conferred by sub-section (1) of section 246 of the

Companies Ordinance, 1984 (XLVII of 1984) delegated vide S.R.O 659(I)/2009 dated July 14,

2009, the Commissioner (Company Law Division) is pleased to issue the following General

Order, namely:-

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY)

GENERAL ORDER, 2009

1. Short title, application and commencement.- (1) This General Order shall be called the

Companies (Corporate Social Responsibility) General Order, 2009.

(2) It shall be applicable on all the public companies from the financial year beginning on or after

July 1, 2009.

(3) Words and expressions used but not defined in this General Order shall have the same

meaning as are assigned to them in the Companies Ordinance, 1984 (the Ordinance).

2. Obligations under the law- (1) Every company shall provide descriptive as well as monetary

disclosures of the Corporate Social Responsibility activities undertaken by it during each

financial year.

(2) Such disclosures shall be made in the directors‟ report to the shareholders annexed to the

annual audited accounts. The disclosure of such activities will be in addition to the disclosure

requirements already mentioned in the Ordinance.

(3) The disclosures, wherever required, shall include, but shall not be limited to the following:

(i) corporate philanthropy

(ii) energy conservation

(iii) environmental protection measures

85

(iv) community investment and welfare schemes

(v) consumer protection measures

(vi) welfare spending for under-privileged classes

(vii) industrial relations

(viii) employment of special persons

(ix) occupational safety and health

(x) business ethics and anti-corruption measures

(xi) national-cause donations

(xii) contribution to national exchequer

(xiii) rural development programmes.

(4) It shall be the duty of every person referred to in sub-section (2) of section 246 of the

Ordinance to comply with the provisions of this General Order.

No. CLD/RD/602(34)/2009

(Salman Ali Shaikh)

Commissioner (CLD)

Interview questions

1st Interview

Zong reports to which authority?

How Zong is participating in economic development?

Are SIMs and recharging cards used by Zong are sustainable or not?

How company is working in terms of social development?

What policies are taken or applied regarding HR?

Regarding energy saving as part of sustainable development what Zong is doing?

2nd

Interview

What role PTA is playing towards CG and CSR?

Are there any codes of CSR and CG available for telecom sector?

86

How PTA measures service quality of telecom companies?

3rd

Interview

Zong reports to which authority?

How Zong is participating in economic development?

Are SIMs and recharging cards used by Zong are sustainable or not?

How company is working in terms of social development?

What policies are taken or applied regarding HR?

Regarding energy saving as part of sustainable development what Zong is doing?

4th

Interview

Zong reports to which authority?

How Zong is participating in economic development?

Are SIMs and recharging cards used by Zong are sustainable or not?

How company is working in terms of social development?

What policies are taken or applied regarding HR?

Regarding energy saving as part of sustainable development what Zong is doing?