Mandating Corporate Social Responsibility- The Next Leaky Cauldron?

Success in Careers | July 23, 2011 | Share

When Warren Buffet and Mr and Mrs. the Gates couplevisited landed down in India a couple of months back, they had their sights set firm on the one thing, one thing that has been “eschewed” by India Inc all these years- Corporate Social Responsibility, or in a more specific sense, Philanthropy. Recognizing the “immediate need” of Corporate India, ‘to look into the aspect of giving back’, both these billionaires, and I must say, Visionaries, hadve stepped on to the land of Ashoka and Harshavardhana, trying to give India, a taste of its own medicine.

No doubt that these two men have a phenomenal record of giving back to the society, but the conundrum that lies in front is whether their “words of wisdom” would be transformed into visible action, here in India. Buffett, worth an estimated $50 billion through his investment company Berkshire Hathaway, told Indian business leaders bluntly there was no conflict between making money and being philanthropic. “You can create jobs and be Santa Claus at the same time,” joked Buffett, who has pledged to donate 99 percent of his wealth. Bill Gates, heading the $33 billion Bill and Melinda Gates Foundation, echoed his views when he said “India has historically produced some of the most important philanthropists the world has known. I am certain it will continue to do so again”.

The two have tasted success in making corporate biggies like Mark Zuckerberg and Ted Turner pledge towards philanthropy, but from an Indian perspective, the scope of their charm seems to be innocuous. India Inc., the reason behind India’s astounding 8% GDP growth, seems to find fewer takers for this ambitious vision. Even as pink papers celebrate the stupendous success of the corporate India, many have wondered what the richest people in India — often criticised for their opulent displays of wealth — have actually done for the nation’s poor, estimated at a staggering 350 million?million.

Corporate Social Responsibility is not new to India. It has existed through the ages, and while the Tatas and Birlas have been harbingers, the Murthys and Mittals have followed suit. But the fact still remains that such philanthropic activities account to a meager 0.6% of the country’s GDP. These figures, seriously striking figures, bring a picture of stark reality that, reflects how little has been done to the most vital aspect plaguing India today. The Indian media also has not withheld itself from showcasing the reluctance of the conglomerates in helping alleviate poverty in the country where 455 million people earn less than $ 1 per day.

Several major CSR initiatives have been launched in India since the mid-1990s. The first among these was the “Desirable Corporate Governance: A Code”, established in April 1998. This was an initiative by the Confederation of Indian Industry (CII), India’s largest industry and business association. A National Foundation for Corporate Governance (NFCG) has been established by the Ministry of Corporate Affairs. The purpose of the National Foundation for Corporate Governance is to promote better corporate governance practices and raise the standard of corporate governance in India towards achieving stability and growth. These initiatives too have failed to elicit adequate response from the men who matter.

The crumbs on the platter:
A study found TATA group (67%) emerging as the most clued-in to CSR initiatives, followed by Infosys at 13%, ITC at 12%, Anil Ambani Reliance Group at 10%, Ambuja Cement at 9%, Microsoft at 7% and WIPRO, BILT and L&T at 6%. But, it was found that mainly people living in the vicinity of these organisations were beneficiaries.

Consider Jamshedpur, the home of Tata Steel and perhaps the world’s most successful company town. Tata Steel runs almost all the city’s institutions: these include a 980-bed hospital, a zoo, a giant sports stadium, academies for football, archery and athletics, golf courses and the local utility company. The company also employs 250 people to work with local tribesmen, to improve agriculture, health care and education, and regularly sends a hospital train farther into the hinterland. The city is remarkably well run by Indian standards, with broad avenues, green parks, reliable power and water that you can drink.

Tata Steel gently mocks all this corporate philanthropy with the slogan, “We also make steel”. This largesse has come under some strain in recent years. Tata Steel has reined back some activities (it no longer makes ice or shoes) and created a separate utility company. Tata Tea (now Tata Global Beverages) has sold its vast plantation in the Western Ghats where it was the biggest employer for more than a century. But rationalisation has not gone far by Western standards. The tea plantations were sold to former employees. But still, Tata Steel gave generous pensions to the thousands of workers it got rid of.

The ITC also found a way to wash of all its sins of killing thousands of people over the years, by extensive CSR initiatives like e-Choupal, a rural digital infrastructure project that has benefitted over a million farmers, women empowerment programmes, rural education initiative etc., which have successfully masked the demon behind.

The Azim Premji Foundation, garnering a lot of media glare, too has found refuge in starting Field education programmes and the upcoming Azim Premji University. Recently, Premji also announced a $2 billion fund for education programmes. How far it materializes is yet to be known.

Rohini Nilekani, wife of Infosys’s Nandan Nilekani, runs an education foundation — Nilekani has pledged a big portion of his wealth to philanthropy. Sunil Mittal’s Bharti Foundation promotes education for underprivileged children. HCL’s Shiv Nadar has reportedly donated a tenth of his estimated $4.2 billion wealth.

While the senior Ambani sibling, whose net profit for the third quarter of 2008-09 — despite volatility in oil prices — was still $778 million, doesn’t seem to have a high philanthropic profile, his younger brother’s Anil Dhirubahi Ambani Group (ADAG) manages an old age home in Mumbai and has recently pledged 25 percent of beds at the newly constructed, Rs 500-crore, state-of-the-art Kokilaben Dhirubhai Ambani hospital and medical research institute in Mumbai, for poor patients.

Does all this really showcase the true colours beneath the real picture?

For the thousands of crores that are minted by these corporate giants, the efforts that they have undertaken towards CSR, demonstrate nothing more than a miniscule. The Government on its part suddenly seems to have woken up from its slumber, and as a part of the proposed Companies Bill, envisions the corporate biggies to spend a meagre 2% of the average income of three years.

A committee, headed by former finance minister Yashwant Sinha, has suggested that companies with a net worth of Rs 500 crore or more, or those that have an annual turnover of at least Rs 1,000 crore, or companies with a net profit of Rs 5 crore or more, be covered by the norms. Our prime minister, from out of the blue, brought the issue out at a CII seminar, saying “Eschew conspicuous consumption, save more and waste less and care for those who are less privileged and less well-off and be role models of moderation and charity”.

Perhaps, the CSR would have better takers if the Government had announced incentives to companies that implemented CSR, rather than make it mandatory, it would have garnered an immense following. Regardless of what the Government has done or proposes to, CSR being made mandatory is one more cauldron that is all set to leak.

Compelling CSR- Calling for trouble:

Corporate Social Responsibility, defined as “the ethical behaviour of the company towards the society” is something which should be started per se and not something to be pressed on. If it is made a compulsion, there would always be those trying to sneak through the loopholes. It would result in an unprecedented publicity of the schemes that companies would supposedly undertake.

Also the mandatory norms could lead to a lot of money in the name of CSR being shifted towards corrupt activities or even branding exercises. Misrepresented audits, frenzied stock market curves, emergence of a new class of middlemen, and above all, defamation of the country in the name of philanthropy, through ads showcasing the country in bad light is the immediate outcome of such legislation.

Philanthropy would serve nothing more than an epitaph to the already plummeting ethics of business houses. A rat race would start amongst the biggies themselves, and in their thrust towards the materialistic goals, the bigger picture would remain out of their realm. The image of corporate becomes similar to that of politicians, except that they do not seek votes, instead a showcase of their plight towards the cameras. The legislations on competition would be defeated, and if something would prevail, then it would not be sense, but instead a pandemonium of sorts. The relentless epoch of corruption will continue to reign supreme, and myriad scams will rule the roost.

Come Buffet or Gates, India Inc is simply not ready to spend “considerably” on such social programmes. It would take eons of reckoning and rethinking before these companies succour to the call of the “Otherside Indian”. But if sense and rationale take over soon, let these Goliaths know- “Charity begins at home!”

Sammith Dixit