Criminalising the corporates

By setting CSR targets and declaring shortfalls as criminal offence, the focus will shift from genuine outcomes to mere spending

AuthorPublished: 20th Aug 2019  12:13 amUpdated: 19th Aug 2019  9:27 pm

In a nation where wealth creation is often sneered at as a guilt-ridden pursuit, feeding into the rich versus poor binary narrative, any punitive measures against the corporate sector in the name of corporate social responsibility (CSR) will only add fuel to the fire. On one hand Prime Minister Narendra Modi declared during his Independence Day address that wealth creation is a national service and wealth creators should be honoured, his government on other hand formulated a regressive law making it a criminal offence — punishable with three years in jail — for big companies that fail to spend 2% of their profits on what the government defines as CSR. Such thoughtless restrictions would do greater harm to society. The government is sadly mistaken if jail terms and hefty fines would do the trick. CSR spending was voluntary in the past. By setting the targets and declaring the shortfalls as a criminal offence, the focus will shift from genuine outcomes to mere spending, with adverse results. Moreover, the new law does not amount to honouring wealth creators, as desired by the Prime Minister, but pillorying them. If the same logic is extended to Union Ministers and officials of various ministries over budgeted spending, the results would be disastrous. For a responsible corporate player, creating wealth through high-quality accountability to customers, shareholders, staff and suppliers is the highest form of social responsibility. Many companies fail in all these respects.

The answer does not lie in forced donations to NGOs in mandated areas like education, gender justice, environment, and poverty alleviation. Many shady businessmen run trusts to launder black money. It is possible that many corporate promoters give CSR donations to their own NGOs and then recycle the cash back to themselves. The whole concept of CSR needs rethinking. The donations approach, with spending targets for corporations, is certainly not the right way to go about it. Unethical and criminal corporate houses must be held accountable for their wrong deeds. This would help improve corporate governance in the country, rather than forcing the corporations to fund what the government should be funding. Unfortunately, the present focus is now on how much money one gives to what cause but the question of how one makes that money is totally ignored. Ideally, CSR must be a voluntary activity, since many profitable companies already fulfil their fundamental social responsibility. Any activity that makes a positive social impact must be counted as a CSR instead of the top-down approach by government authorities. The Injeti Srinivas panel recently came up with an apt recommendation that allows carry-forward of the unspent CSR balances for three to five years and creating a specific, designated fund for unspent money.

 

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