Accounting Theory and Issues: Corporate Social Responsibility Analysis

This report provides an in-depth analysis of Corporate Social Responsibility (CSR) issues related to Kingfisher Airlines. It begins by defining CSR and then delves into an analysis of Kingfisher's CSR activities, highlighting instances of ethical violations and financial mismanagement. The report examines the company's actions, including the illicit loan transaction with United Spirits Limited (USL), and the resulting negative impact on its financial position. It then proposes the Global Reporting Initiative (GRI) framework as a suitable reporting strategy for Kingfisher Airlines, outlining its various components and benefits. Furthermore, the report connects the company's situation with Stakeholder Theory, emphasizing the importance of considering the interests of all stakeholders, and analyzing how Kingfisher's actions have affected them. The analysis highlights how the company's actions, such as the lack of transparency in financial reporting, have violated stakeholder interests. The report concludes with recommendations for improving CSR reporting and practices at Kingfisher Airlines.

Running head: ACCOUNTING THEORY AND ISSUES
Accounting Theory and Issues
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction......................................................................................................................................2
Definition of CSR............................................................................................................................2
Article Analysis...............................................................................................................................3
Reporting Framework......................................................................................................................4
Stakeholder Theory..........................................................................................................................6
Analysis based on Stakeholders Theory..........................................................................................8
Conclusion and Recommendations..................................................................................................9
References......................................................................................................................................10

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Introduction
The main aim of this report is to analyze and evaluate various aspects of Corporate Social
Responsibility (CSR) In Kingfisher Airlines. In today’s business world, business organizations
all over the world use to provide great regards on different aspects of CSR activities. CSR refers
to the form of the integration of corporate self-governance into the business model (Tai and
Chuang 2014). In the current business situation, the success of the business organizations largely
depends on the undertaken CSR activities of the business organizations. Thus, it has become the
responsibility of the business organizations to provide the details about their different CSR
activities (Suliman, Al-Khatib and Thomas 2016). The same aspect is also applicable for the
business operations of Kingfisher Airlines, as the company has also taken many initiatives as a
part of their CSR activities. The first part of the report shows the definition of CSR. After that,
this report shades light on the CSR related issues and initiatives of Kingfisher Airlines along
with the financial position of the company at that time. The next part of this report provides a
suggestions to Kingfisher Airlines about the implantation of one of the CSR reporting
framework. The next part of the report establishes a connection between one of major
stakeholders related theories with the selected article on Kingfisher Airlines. The next part
focuses on the analysis of the selected theory. Lastly, conclusion and recommendations are
provided based on the whole discussion of CSR reporting of Kingfisher Airlines.
Definition of CSR
Corporate Social Responsibility (CSR) refers to a particular business approach that
hugely contributes towards the sustainable development of the business organizations by
delivering their stakeholders with various economic, social and environmental benefits (Carroll

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2015). With the help of CSR reporting, business organizations gain more awareness about the
impact of their business operations on the society, environment and their stakeholders. CSR is
considered as a broad concept that deals with various aspects like human right, corporate
governance, health and safety of the employees, contamination of environment, working
condition within the organizations, contribution towards the economic development of the
countries and many others (Cheng, Ioannou and Serafeim 2014).
Article Analysis
India's Largest CSR Network. (2018). United Spirits Limited - a Case of Corporate Governance
Failure? - India's Largest CSR Network. [online] Available at: http://indiacsr.in/united-spirits-
limited-a-case-of-corporate-governance-failure/ [Accessed 19 Jan. 2018].
It needs to be mentioned that Kingfisher Airlines is well-known for the undertaking of
various CSR activities for the welfare of their stakeholders, community and environment. At the
same time, it needs to be mentioned that the company has to face major issues related with the
violation of the code of conducts of activities (Crane, Matten and Spence 2013). From different
sources, it can be seen that the company has undertaken some of the major initiatives as a part of
their CSR activities. First, the company has taken various activities for the welfare of the people
of the local community. Second, the company has established various healthcare units in all over
the country for taking care of the health of the people of community. Third, Kingfisher Airlines
founded Vittal Mallya Scientific Research Foundation that has been completely involved in the
mission called Science for Humanity. Apart from this, Kingfisher Airlines has introduced
numerous other initiatives as a part of their CSR activities. However, the article named “United
Spirits Limited – a Case of Corporate Governance Failure?” by India CSR Network indicates

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towards the violation of the major principle of CSR by Kingfisher Airlines and their parent
company United Spirit Limited (USL) (indiacsr.in 2018). As per the selected article, it can be
observed that in spite of the weak financial position of Kingfisher Airlines, USL provided the
company with a huge amount of loan. There is nothing unusual as the parent companies have the
right to provide financial support to their group companies (indiacsr.in 2018). However, the main
CSR related issue in this case is that both Kingfisher Airlines and USL have carried on this
transaction in an illicit manner in order to camouflage the financial position both the companies.
Under the principles of CSR, this action has violated the CSR principle, as it is an indication of
bad governance. For this reason, this particular aspect has violated the principles of transparency
and integrity. Most importantly, it needs to be mentioned that this action of Kingfisher Airlines
affected the financial position of the company in a bad manner as the financial position of the
company deteriorated. Decrease in gross margin can be seen at that that as the gross margin
became -121.8% from 21.1%. Massive fall can be seen in the net margin that is the net margin
became -859.9% from -63.8% (indiacsr.in 2018). Thus, it can be observed that violation of CSR
principle had a fatal effect on the financial position of Kingfisher Airlines.
Reporting Framework
From the above discussion, it can be observed that Kingfisher Airlines has been facing
major issues related with their CSR activities and reporting. For this reason, it is required for the
company to carry on their CSR activities in an appropriate way and it is the responsibility of the
company to report their various CSR activities in an effective manner (Fernandez-Feijoo,
Romero and Ruiz 2014). It can be seen that there are many frameworks available for the
effective reporting of CSR activities of the companies. Based on the problems faced by
Kingfisher Airlines, it can be suggested that the company need to adopt the strategy of Global

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Reporting Initiative (GRI) Framework as GRI Framework is an effective tool for the business
organization for the understanding and communication of several CSR related issues like climate
change, corporate governance, human rights, corruption and many others (globalreporting.org
2018).
Figure 1: Global Reporting Framework (GRI)
(Source: globalreporting.org 2018)
The main intention of GRI is to service as a form of generally accepted principles for the
reporting of various aspects like social, environmental and economic performance of the
companies; and organizations of different size, sector or location can use it (Toppin et al. 2012).
Thus, there will not be any problem for Kingfisher Airlines in using it. One of the major
components of GRI is the Sustainability Reporting Guideline that includes the principles for the
definition of the content of the report so that the quality of the report can be ensured. This aspect
includes the disclosure of standards for the performance indicators and other items for disclosure.

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It also provides in the reporting of certain technical items like the concept of fair value
measurement of the assets of the company and others. The next major item in GRI is the
Indicator Protocols. The existence of indicator protocols can be seen for measuring the
performance of each performance indicators (Fonseca, McAllister and Fitzpatrick 2014). All
these protocols have major importance providing definition, guidance for compilation and other
important information for ensuring the consistency of performance indicators’ interpretation. The
next major component of GRI is the Sector Supplements. This particular aspect provides
guidelines for the implementation of the principle of GRI in the CSR reports. In this aspect, it is
required for Kingfisher Airlines to use applicable sector supplements for the interpretation of
various aspects of CSR report (Arena and Azzone 2012). The last component of GRI is
Technical Protocols that provide guidance for the issue of CSR reports and to sets the boundary
of the report. Most importantly, it needs to be mentioned that these protocols play an integral part
in solving the issues related to CSR reporting in the companies. Thus, the above discussion
shows that the adoption of GRI will provide great help to the CSR reporting of Kingfisher
Airlines.
Stakeholder Theory
In the recent business environment, business organizations use to provide the
stakeholders with huge importance as the success of the business organizations largely depends
on the relation of the companies with their stakeholders. There is not any exception of this fact in
case of Kingfisher Airlines. Many authors provide various theories for the stakeholders of the
companies. One of such important theories is the Stakeholder Theory as large adoption of this
theory can be seen among the companies (Mainardes, Raposo and Alves 2012). According to the
stakeholders theory, the main purpose of the business organizations is to create value for their

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stakeholders as much as possible. In addition, according to this theory, in order to be successful
and sustainable for a long time, it is required for the company executives to consider and keep
the interest of their customers, suppliers, employees, shareholders, communities and others
(Gibson 2012). The developer of this theory, R. Edward Freeman has provided the argument that
it is not the responsibility of the organizational managers to consider answer to the shareholders.
Moreover, it is the responsibility of the shareholders and the stakeholders to take into
consideration any group or individual that can affect their interests in the organization or their
interests can be affected by the achievement of the goals and objectives of the firm. Thus, it can
be observed that stakeholder theory is an important part for the stakeholders of the companies.
Many authors all over the world have provided many positive arguments in favor of the
stakeholder theory. One of the major functions of stakeholder theory is the identification of
proper objectives for the business organizations. At the same time, the stakeholder theory take
into consideration the major ethical as well as economic issues related with the CSR of the
companies and to present them in the most effective manner (Marshall and Ramsay 2012). All
these aspects make the executives in operating the business organization in such a manner so that
they can be beneficial for the stakeholders of the companies. In this aspect, it needs to be
mentioned that the business organizations cannot ensure their survival by only from the
contribution of the shareholders as they need equal contribution from other stakeholders like
customers, employees, suppliers and others (Anikina and Chekalkina 2014). For this reason, it is
required for the company executives to provide importance in the interest of their other
stakeholders as major investment as this particular aspect has major impact on the financial and
sustainable performance of the business organizations. For this reason, providing importance and
keeping the interest of the stakeholders is an important aspect in increasing the overall wealth of

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the organizations. Hence, it is required for all the business organizations to take into
consideration the interest of their stakeholders.
Analysis based on Stakeholders Theory
It can be seen that the stakeholders theory is concerned with the financial well beings of
the stakeholders in the companies. From the selected article on the CSR practice of Kingfisher
Airlines, it can be seen that the company has taken loan from USL and both of them have done
this transaction in an illicit manner for manipulating the financial position of the companies
(indiacsr.in 2018). Thus, by applying the stakeholder theory in this situation, it can be observed
that the management of Kingfisher Airlines has deprived their stakeholders from knowing the
actual financial position of the company. According to the stakeholder theory, it is the right of
the stakeholders to know about the actual financial position of the company as the investors use
to make the investment decisions based on the financial position of the company (Fassin 2012).
Thus, it is required for Kingfisher Airlines to show all the necessary transactions in their
financial statements in order to make their stakeholders aware about the situation.
The above discussion about stakeholder theory states that the executives of the companies
are required to keep the interest of the company shareholders as well as the other stakeholders
like suppliers, customers, employees and others. The selected article about Kingfisher Airlines
states that the company has violated the transparency and integrity principles of CSR reporting
with their specific action. The concept of stakeholder theory states that it is the ethical
responsibility of the companies to keep the interest of their shareholders (Miles 2012). By this
aspect, it can also be stated that the specific action of Kingfisher Airlines has violated the ethical

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principles of CSR. Thus, based on the above discussion, it can be said that the CSR related issues
of Kingfisher Airlines could well be defined with the assistance of stakeholder theory.
Conclusion and Recommendations
From the above discussion, it can be observed that CSR has become an integral part of
the business operations of the companies that is a major determinant of the financial performance
of the companies. After that, the content of the selected article indicates towards the violation of
transparency and integrity principles of CSR. In addition, it can also be seen that the violation in
CSR principles has affected the financial position of the company. According to the above
discussion, the GRI for CSR reporting has been suggested to Kingfisher Airlines for their CSR
practices as the main components of GRI helps in the effective completion and reporting of
various CSR initiatives. As per the above discussion, the major layers of GRI are sustainability
reporting guidelines, indicator protocols, sector supplements and technical protocols. The above
discussion also states that the current CSR related problem of Kingfisher Airlines could be
analysed and evaluated with the help of Stakeholders theory. According to this theory, it is
required for the company executives to keep the interests of the stakeholders of their business.
However, the analysis of the selected article states that Kingfisher Airlines has failed to keep the
interest of their stakeholders by manipulating some major financial transactions.
Some recommendations are provided based on the above discussion:
 It is recommended to the executives of Kingfisher Airlines that they need to adopt the
principles and standards of GRI as a part of their CSR reporting initiatives as GRI will
make them in reporting their CSR initiatives in more effective manner.

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 It is recommended to the management of Kingfisher Airlines to follow the components of
Stakeholders Theory, as this will make them effectively keep the interest of their business
stakeholders.

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References
Anikina, I.D. and Chekalkina, A.A., 2014. Using the stakeholders theory in the development of
regional financial innovation strategy: harmonization or conflict of interests?. In The first
international conference on economic sciences (pp. 176-180).
Arena, M. and Azzone, G., 2012. A process-based operational framework for sustainability
reporting in SMEs. Journal of Small Business and Enterprise Development, 19(4), pp.669-686.
Carroll, A.B., 2015. Corporate social responsibility. Organizational dynamics, 44(2), pp.87-96.
Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to
finance. Strategic Management Journal, 35(1), pp.1-23.
Crane, A., Matten, D. and Spence, L.J., 2013. Corporate social responsibility in a global context.
Fassin, Y., 2012. Stakeholder management, reciprocity and stakeholder responsibility. Journal of
Business Ethics, 109(1), pp.83-96.
Fernandez-Feijoo, B., Romero, S. and Ruiz, S., 2014. Effect of stakeholders’ pressure on
transparency of sustainability reports within the GRI framework. Journal of Business
Ethics, 122(1), pp.53-63.
Fonseca, A., McAllister, M.L. and Fitzpatrick, P., 2014. Sustainability reporting among mining
corporations: a constructive critique of the GRI approach. Journal of Cleaner Production, 84,
pp.70-83.
Gibson, K., 2012. Stakeholders and sustainability: An evolving theory. Journal of Business
Ethics, 109(1), pp.15-25.