Corporate Social Responsibility under companies act – a new method for political bribery, and soft launching of the Lobbying groups.

Corporate Social Responsibility under companies act – a new method for political bribery, and soft launching of the Lobbying groups.    (Dtd 20/9/2013)

This week we will discuss on the subject of Social responsibilities. I believe as a human being, we everybody have some kind of responsibilities to the society. As these society as large made us as we are now. In short I will say “the way we are now is because the society made us as we are now”. I am very much proud to say

that I am a product of a Government School and involved in the social activities from the childhood days.  The charitable trusts in the country also have its own contributions on the social developments of the country, so as the individual contributions by the citizens in the country.

Normally the social responsibilities are the main duty of the Government. If you ask me what it means, my answer will be “the government is having the full responsibility to safeguard the life and asset of the citizen and provide the necessary services to its citizen in every sense.  The government has the responsibility to ensure the basic services like education, health, and other basic requirements are served/ available to the common public with reasonable cost.”

I would like to invite your attention on section 135 in the companies bill 2012 passed by the parliament.

The synopsis of the section as follows:

·         Every company having net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more or a net profit of Rs 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board.

·         The Corporate Social Responsibility Committee shall formulate, recommend the amount of expenditure and monitor the execution of the Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company

·         Spend every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years.

·         Company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities.

·         If the company fails to spend such amount, specify the reasons for not spending the amount in the Annual report.

In the first looking of the act, it seems a good attempt to invite the corporate houses for the social development of the country. Provided the corporate houses will creatively participate in the social activities.

But I would like to bring your attention that the previous announcement in the union budget that the political parties are not allowed to take donation above Rs 20,000/- as cash. Also remember the other sections in the companies act which handles the political donations.

In my opinion many of the companies will comply with this law by paying the amount to the charitable organizations which can safeguard their interests.

Now let us see the charity sector in India. In our country there are above 1,200,000 (1.2 million)   charitable organizations existing. In November 2011, the national audit authority published a damning report showing that only 3.5 percent of the NGOs which received grants from the environment ministry completed their projects.

After this CSR responsibility put on the corporate, we can see the increased number of registration of charitable trusts. And if I am not wrong, most of the charitable trusts will be by the politicians.

After reading the guidelines on the suggested activities of CSR, I have a doubt on the agenda of the government; all the government commitments are mentioned under the CSR. Like, Eradicate Extreme Hunger and Poverty, Achieve Universal Primary Education, Promote Gender Equality and Empower Women, Reduce Child Mortality, Improve Maternal Health, Combat HIV/AIDS, Malaria and other diseases, Ensure Environmental Sustainability etc….

So what will be the purpose of a government, if all these activities can do by the corporate? If the government properly collects due tax amounts and gradually remove the tax and other benefits given to these corporate houses, with that money itself we can achieve these goals.

Like in America, in near future India will see the birth and growth of the corporate lobbying groups. The soft launching is taken place.

(As per the existing companies act there is a limitations for paying the political donations by the companies. Hope with this section the corporate can manage it!!)

This will be a new method to pay the bribery in India. The RTI activists has to be very much alert!!

[Note:  if the price of commodities increased government has nothing to do on it. Go and ask the businessmen….. a cabinet minister answered to a question.]

CA Vinod Valooparambil