The New Companies Bill: Government does a ‘Houdini escape’ on its responsibilities!

CSR, in the global context, has generally been a pragmatic response to  consumer and civil society pressures. It has mainly been focused on Trans-National Corporations (TNCs) serving Northern markets but often operating in Southern countries. Accusations by governments and civil society alike, of environmental pollution, human rights abuses, and exploitation of labour in supply chains, has pressured companies into becoming more environmentally and socially responsible. However, companies have quickly recognised the strategic value of being more responsible and are beginning to align products and business relationships, in particular through their supply chains.

In the developing nations, the huge urban-rural, are not divided and dealing with complex development issues makes the task mammoth for the Government. The private sector is often seen as a driver of exclusionary processes rather than a partner in improving the health and welfare of socially-excluded populations. However, private-sector initiatives and partnerships—collectively labelled corporate social responsibility (CSR) initiatives—may be able to positively impact social status, earning potential, and access to services and resources for socially-excluded populations.

For the new generation of corporate leaders in both developed and developing countries, optimisation of profits is the key, rather than the maximisation of profit. Hence there is a shift from accountability to shareholders to accountability to stakeholders (including employees, consumers and affected communities).

In India, though the private sector acknowledges the challenges faced by the Government, making social responsibility mandatory for the companies only makes them suspicious of the intent. Even Mr. Azim Premji one of the best known philanthropists of our country sees lack of clarity in the intention of the government. He feels that the two divergent views on the cap may unnecessarily create ‘Micky Mouse’ games in terms of what the companies intend to do in this regard.

Let me put this straight for record …Government’s strategic intent as we marketers say has a hounding mind-set not that of collaborative that the social sector so desperately needs.This attitude of we tell you what and how to do it is going unchallenged in the name of doing good. Divergent views are dismissed in the larger social good, those who do express will be made to feel/held guilty.

Allow me to address the key stipulations:

  • Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
  • The Corporate Social Responsibility Committee shall—

(a) Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company

(b) Recommend the amount of expenditure to be incurred on the activities

(c) Monitor the Corporate Social Responsibility Policy from time to time.

  • The Board of every company shall make every endeavour to ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

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FACT – 60% of the stock market wealth is in the hands of top 100 companies, the rest 40% belongs to the mid and small cap companies . A substantial number of these listed companies are facing a downhill performance …not solely of their doing but largely because the government has failed in providing the basics of encouraging growth in the small and medium size sectors. Abysmal infrastructure, lack of banking in the hinterlands, unskilled labour, lack of education, skewed taxation structure, lack of labour policy, so on and so forth.

Given the current and projected economic scenario these Companies are facing multiple challenges of, overheads, margins, bottom line…..daily conversation around the conference table is where and how to look for additional growth to deliver better numbers and meet shareholder expectations. How to further control costs and risk of cutting jobs?

And in such times we are being asked to plan and strategize “Social Good” under strict prescribed norms and regulation. This situation could be summed up through this hindi proverb -“Ghar mein choolah jaley na, jalen miyanji chalen samaj sudhar“.

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The miyanji here is the government…. sure you want to create a social mindset amongst corporate /companies. Shouldn’t social consciousnesses begin at one’s doorstep? Before demanding a mindset, isn’t there a need to first set an example by credibility and transparency in the operations of the various ministries? If not all, at least the ones that claim to be dealing with the social development agenda- Social Welfare, Human Resource Development, Women and Child Development, Health and Family Welfare, Environment, Rural Development and the list goes on. When was the last time we saw an audited report of the schemes initiated by some of these ministries? What has worked,what hasn’t and why? Instead we have been riddled with scams each larger than the previous one.

Even if a fraction of the mind boggling scam amount was put into the Government Social responsibility programme, the results would have been mind blowing. Instead, cash strapped Government is now looking for 2% hafta from companies for 3 preceding financial years irrespective of the current company performance in the adverse circumstances created due to poor governance!!!

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6 thoughts on “The New Companies Bill: Government does a ‘Houdini escape’ on its responsibilities!

  1. Totally agree. . Besides abdicating responsibilities it has no accountability too . After 60 years as a free country ,it is a shame that one in three malnourished children are in India .

  2. Hi Annie,

    Given the state of affairs on primary health in our country , passing of the Food Bill is in the right direction. However with everybody eyeing the general assembly elections this year ..I doubt whether the opposition will give the govt this advantage. As a result the country waits.. and sits inthe bottom of the heap in world statistics.

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