Business of Business isn’t just to do Business

Why should corporates be forced to do something that the state ought to?

corporate_social_responsibilityBound by law to be “socially responsible,” following the new Companies Act 2013 that makes CSR mandatory, there’s a huge sense of dissent among corporates and expectedly so.

As the corporate world mostly views the business of business being to do business, social responsibility is perceived as being “primarily” the job of the state.

In keeping with Indo-American Chamber of Commerce’s (IACC) agenda, a day-long conference titled “Corporate Social Responsibility: The New Business Imperative” was held earlier last week at the Taj Mahal Palace and Towers in Mumbai.

The themes that the conference highlighted included “Decoding the new CSR Imperative,” “The CSR Mandate: A step in the right direction for corporate governance,” “CSR Challenges and Opportunities for Ensuring Inclusive Growth in India” and others.

The highlight of the conference was undoubtedly Director General and CEO, Indian Institute of Corporate Affairs, Dr. Bhaskar Chatterjee’s speech wherein the management practitioner spoke at length on how, as Secretary to the Government of India, he prepared and wrote the first comprehensive guidelines on CSR for the public sector. The theorist was best equipped to explain the nuances of Section 135 of the new Companies Act 2013 and the corresponding effect of the CSR Rules.

In what seems like an attempt to soften the blow of the new law, there is a provision under Section 135 (v) that reads: Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.

Dr. Bhaskar drew the attention of participants, mostly corporates, that an entity which may be unable to spend all of the two percent of the average net profit as calculated will only need to “specify the reasons for not spending the amount.” And, in that, the law wasn’t as strict as perceived.

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So, health-related activities or skill-enhancing programs catering to employees and / or their relatives will not qualify as CSR according to the new law: Which means, corporates extending these benefits to their workers will not be able to pass it off as CSR, and concurrently fail to get tax relief. It’s only a matter of time before such corporates begin to “cut down on costs” and ultimately put an end to such activities to the chagrin of their employees.

A lot of corporates tend to draw mileage out of worker-benefit endeavors to draw in manpower and elicit a favorable response from job seekers. With such activities failing to make the CSR mark, corporates will be left with little option but to pull back the employee benefits. Now, that translates into withdrawing health, social and travel benefits to employees are expected to be left sullen.

On the face of it, corporates have mostly been disgruntled with the new scheme of things. “It’s almost like a communist taxation pattern,” quipped a director attending the IACC Conference. “Why should corporates be forced to do something that the state ought to? It isn’t our job. We anyway do our bit for society, all the time. Why do we need a law for this,” he said, capturing the mood of corporates across the nation.

But then, if it’s left to the discretion of corporates, nothing will be done for social good. After all, the corporate world does feel that the business of business is to do business.

Gajanan Khergamker is an independent editor and legal counsel with over three decades of experience. He heads DraftCraft – an India-based media-legal think tank. His areas of expertise include policy, inclusion, foreign affairs, law and diversity. His firm’s website is www.draftcraft.in and he can be reached at gajanan@draftcraft.inRead other articles by Gajanan.