But CSR is an obligation to the country
Wipro chief Azim Premji's nuanced stand on the new laws regarding corporate social responsibility rightly underlines the differences between a business tycoon's charitable activities and the initiatives his company undertakes to support social causes. While the former is a personal choice that cannot be imposed by the Government, the latter is a social duty, now mandated by law. On Thursday, Mr Premji made clear that while The Companies Act, 2013, passed last month, makes it compulsory for large corporates to spend a part of their profits on social development, the Government must not seek to compel philanthropy. Personal giving has to be “spontaneous”. It would have been easy to write off Mr Premji as a money-grubbing businessman complaining about the two per cent profit his firms now have to give to charity, had it not been for the fact that he is also one of the country's best-known philanthropists and a staunch supporter of CSR initiatives. His Azim Premji Foundation has been working to ensure universal education in India since 2001 while the Azim Premji University focuses on training education professionals; over the years, he has given away as much as 25 per cent of his personal wealth for the betterment of society. He is also the first Indian industry leader to sign the Giving Pledge, started by Bill Gates and Warren Buffet, to encourage the world's richest people to share their personal wealth. In other words, Mr Premji has more than just the moral authority to comment on matters of philanthropy, both individual and corporate. His reservations, therefore, about the two per cent stipulation — he worries that it may become a “tax” of sorts — should be considered.
The law should not be a restrictive or disruptive force but an enhancing one. To a large extent, the Companies Act of 2013, which replaces The Companies Act of 1956, tries to do that — especially with regard to corporate social responsibility, the framework for which has been ridden with loopholes. But with the new rules in place, India now has one of the world's most ambitious and progressive CSR policies. Of course, their effectiveness will be determined by their implementation, and while the Government will have a role to play in this, it is primarily the corporates which have to step up to the plate. India has a long history of CSR which goes back to the pre-industrial era when rich merchants donated to temples and helped out during famines etc; afterwards, big business families not only supported social initiatives (they still do) but also contributed to the freedom struggle. In recent years, however, India has not seen the kind of philanthropy that is common in the West — it is difficult to find the equivalent of the Bill and Melinda Gates Foundation, the Ford Foundation or the Rockefeller Foundation. This is primarily because the private sector doesn’t trust the public system which is often neither transparent nor accountable.