CB BureauLeading dailies of the country on February 10 reported that the new Companies Bill would probably make it mandatory for companies to spend two per cent of their profits towards CSR.
For corporate India, this is a surprise development from the office of corporate affairs minister Murli Deora, who has just joined office. Earlier, when Salman Khurshid was heading the corporate affairs ministry, he had only talked about compulsory reporting of CSR initiatives and had never stressed on the mandatory spends.
Salman Khurshid had only suggested that the recommendations of the parliamentary standing committee be seriously considered. The committee had proposed that companies with a turnover of Rs 1,000 crore or net profit of Rs 5 crore or more should allocate two per cent of their net profit towards CSR. These recommendations, say sources, have now been accepted by the Murli Deora-led ministry of company affairs.
On November 4, 2010, a CauseBecause news story carried Salman Khurshid’s statement assuring that it would not be compulsory for companies to set aside two per cent of their profits for CSR purposes.
‘What we are doing is not a directive. We are working on a target. First it was purely voluntary. Now it is going to be subject to non-compliance. Next it could be something more. Right now, explanations will have to be given in the directors’ report (about) why the CSR target was not met. You can say it is not entirely voluntary, might say it is not mandatory. It is in-between somewhere,’ Khurshid had said.
On October 11, 2010, CauseBecause had reported that Khurshid was not keen on making CSR compulsory and would not have any mandate on it in the new Companies Bill. He had said, ‘I think CSR is a way of doing business. It is not just setting aside a certain amount, but is a part of the business itself. All such issues must be reflected in the formulation on CSR when the bill finally gets passed by parliament. This is what we are working on.’
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In September 2010, Sunil Bharti Mittal, chairman, Bahrti Telecom, had said that CSR should only be voluntary and should not be imposed on companies by the government.
Mittal, as head of CII, had said, ‘We at CII are already working to develop a code of conduct that will ask members if they are giving healthcare benefits, participating in the education of their employees’ children… But yes, CII is not going to mandate that a certain percentage of a company’s profits should be used for corporate social responsibility initiatives.’
In November 2010, CauseBecause had written about industry chambers led by CII vociferously opposing the proposed move to make it binding upon companies to set aside two per cent of their profits for CSR activities.
Adi Godrej, managing director at Godrej group, at a show on CNBC-TV18, had said that CSR should not be pushed forcefully but should be practised wilfully.
‘Philanthropic organizations should be allowed to operate freely. When governments start controlling, things don’t work as well as when people are motivated to do these things,’ Godrej had stated.
‘I don’t think anything should be made mandatory because it then becomes very cosmetic. I think there needs to be a realization from corporate India that they have to necessarily engage in this because without that their businesses themselves are not sort of exuding good governance,’ said Kiran Mazumdar Shaw, CMD, Biocon Ltd, at the same show.
She added, ‘The whole thing is: how the markets look at companies in terms of their CSR initiatives will be a better way of getting people to engage in CSR activities than making it mandatory – because I have seen it that when R&D was just engaged in because it was a good tax break, nothing happened. But when people really start believing in R&D, everything is possible.’
Nitin Paranjpe, MD and CEO, HUL, said, ‘I am not in favour. I don’t know what will be achieved…In a large measure, the act of running the business and the act of doing social good are mutually independent things.’