Mandatory CSR is morally reprehensible, logically repugnant, and economically wasteful
Compulsory CSR also flies in the face of Make in India programme.
Of all the sins perpetrated by the political class against private enterprise in this century, the most conspicuous and insidious has been mandatory corporate social responsibility (CSR). Since sin always has consequences, mandatory CSR has also resulted in making regulation heavier and nastier. This has just augmented the burden of compliances for India Inc.
"The Ministry of Corporate Affairs (MCA) is sending out notices seeking details of how and on what CSR funds are being disbursed, say people familiar with the issue, adding officials want to check if corporate social work is actually happening," said a report on Saturday.
The Companies Act, 2013, stipulates that the companies with net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more shall be required to spend 2 per cent of their three-year average profits to help society in such causes as healthcare, education, poverty alleviation, environment, and rural development. The stipulation is morally reprehensible, logically repugnant, and economically wasteful.
Making CSR mandatory is morally reprehensible because it tends to colonize the conscience of businesspersons. It is something that even the cruellest tyrants did not do; they terrorized and chained their subjects, tortured their bodies, and slaughtered millions. Some Muslim rulers even forcibly converted the infidels under their control, but even they didn't try to control the thoughts, feelings, and emotions of their subjects. This is the most conspicuous and insidious feature of the measure that India Inc has to suffer.
Since time immemorial, it is philosophers, thinkers, writers, religious leaders, saints, etc., who have shaped the conscience and ethics of peoples, communities, cultures, and civilizations all over the world. They have preached virtue, righteous conduct, charity, et al; they have taught, lectured, sermonized, even harangued their followers to stick to what they regarded as the right path. But they have always persuaded rather than coerced the people. This is how various faiths, belief and value systems, and moral imperatives have evolved.
But it is in India, and that too in the 21st century, that something as evil as state-enforced philanthropy has come into being. For this is what mandatory CSR spending amounts to. India is the only country in the world where this monstrosity has surfaced.
In a way, compulsory CSR desecrates philanthropy, a noble human instinct. Over 25 centuries ago, a prince gave all the luxuries in order to redeem his fellow men and women. This is how Siddhartha Gautam became Lord Buddha. The command came from his heart, not from his father, the king (who actually was not happy with his son's renunciation). Similarly, innumerable Europeans forsook their comfortable lives to serve humanity as Christian missionaries in Africa and Asia-against without any government order. Not long ago, millions of youngsters embraced that socialism or communism (mistakenly) believing that this would end misery in the world. In rich countries, tycoons donate huge amounts to set up foundations and charities. Indian business houses too have been working to make the country a better place. Therefore, there is no reason that our government should compel big business to become philanthropic.
The report quoted Arun Nanda, former executive director at the Mahindra Group who switched tracks in 2010 to focus on the social sector. According to him, CSR has to come from the heart, not from government diktat: "If you look not just at Mahindra & Mahindra's work but also at what the Tata Trusts have been doing, it started much before CSR became obligatory. If it is in your DNA, it is done with the right intent and the purpose is met."
But our political masters want to ignore this simple truth. In this context, it is worth remembering Kahlil Gibran's famous poem, The Prophet. Gibran's protagonist told the people of Orphalese, "Your children are not your children," and enlightened them how children "are the sons and daughters of Life's longing for itself." Our rulers tell the captains of Indian industry, "Your conscience is not your conscience," and then go on making CSR an essential requirement.
Mandatory CSR is also logically repugnant because if the state welfarism, it should be carrying it out itself; it can't shirt its responsibility to businessmen. It is like a man marrying and having children-and expecting somebody else to take care of his family.
Further, it is economically wasteful, for it leads to more compliances which result in the unnecessary allocation of a company's time, money, and energy into an activity that doesn't add a penny to the bottom line. As it is, compliances are numerous and onerous; businesspersons, especially in the small and medium sector, are grumbling about them. Now the authorities will also be breathing down the neck of industrialists for not having spent or not having properly spent money on CSR.
In a nutshell, compulsory CSR is not only ethically repugnant but also this flies in the face of Make in India programme. And it surely is not a measure that would enhance the ease of doing business.
(Ravi Shanker Kapoor is a journalist and author. He has spent around 25 years in the media. As a freelance journalist, Kapoor has written for a number of leading publications. He has written four books on Indian politics and its associated institutions.)
(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)