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Mandated corporate social responsibility in India?

February 6, 2012

I just read this interesting interview with Noshir Dadrawala, CEO of the Centre for the Advancement of Philanthropy, a Mumbai NGO focused on India’s nonprofit sector.  In this interview on Asian Greenhouses Philanthropy Advisory Network‘s site, Dadrawala talks about the proposed new Companies Act in India, the law governing corporations and corporate governance in India.  Here’s the key part:

According to Section 135, of [Companies Bill 2011]: “Every company with a net worth of Rs. 500 crore or more, or turnover of Rs. 1,000 crore or more, or net profit of Rs. 5 crore or more in a financial year will have to form a CSR [corporate social responsibility] committee, consisting of three or more directors, of which at least one would be an independent director. This committee will have to ensure that the company spends, in every financial year, at least two per cent of the average net profits made during the three immediately preceding years, towards CSR activities.

India’s corporate sector is dead-set against the bill, particularly the CSR provision, because they don’t want to be forced to give 2% of their profits to charity and they feel that government oversight will stifle business decision-making.  A representative quote from J.J. . Irani, former director of Tata Sons, says it all: “People will find ways to skirt anything that is mandated.”  Ouch – no wonder people have such little trust for institutions of any kind in India!

What do you all think?  Should India’s companies – many of whom are swimming in new wealth – be forced to give away a small portion of their profits?  Or is it up to businesses to make those decisions, especially during a time of increased business investment and economic growth?

2 Comments leave one →
  1. February 6, 2012 5:21 am

    CSR made mandatory takes away the whole concept of social responsibility. The business of business is business. Government should stay away from it, especially the Indian government.

  2. asridhar permalink*
    February 6, 2012 2:10 pm

    I think I agree with you, although the motivation from the bill may be coming from a feeling that the wealthy and/or corporations are not doing enough. This is where some genuine CSR campaigns might have forestalled government intervention.

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