Tuesday, April 5, 2011

Government proposes corporate houses’ dispose


Will CSR go for a toss as the government dithers on making it mandatory for the industrial houses to set aside 2 per cent of earnings for social causes

Amitabh Shukla / New Delhi

The proposal of the government to corporate houses that they earmark at least two per cent of their earnings for Corporate Social Responsibility (CSR) has few takers amongst the captains of industry in the country.

Wipro Chairman Azim Premji, who has himself earmarked a substantial chunk of his personal wealth for charity, has come out strongly against the idea of formulating laws on mandatory spending by industry on CSR.

“I don't think you generate CSR by putting statutory requirements. I think there is enough social consciousness among the larger companies to drive it on the basis of what they consider their responsibility,” he said at a joint press conference in the Capital with philanthropists Bill Gates, Melinda Gates and Warren Buffett.

Premji was responding to a question on the government’s plan to make it mandatory for corporates to spend 2% of their average income of three years as part of the proposed Companies Bill. “My concern is that you get legislation...and a lot of abuse takes place from that legislation in terms of what you define as CSR and what you define as branding. I would be against it,” he added. The IT Czar, however, said that the government is welcome to issue such a proposal “as a guideline rather than as a mandate or rather than as legislation”.

Corporate houses have been opposing the proposed move to fix a threshold for CSR spending in the form of a mandatory legislation. Minister for Corporate Affairs Murli Deora had earlier said the government is willing to have a discussion on the matter with industry triggering comments by the industrial houses and prominent industrialists.

However, Buffett, who also addressed the press conference refused to comment on the issue. “I know nothing about this tax matter,” said Buffett, the multi-billionaire American philanthropist who is in the country to mobilize opinion and impress upon the industrialists to donate their earnings for charity.

Sources indicated that the government is unlikely to make it mandatory for the companies to spend on CSR. The new Companies Bill, which is on the Board for a while, is likely to make a mention asking companies to spend upto 2% of their net profits on CSR but may not make it legally binding. Interestingly, the Parliamentary Standing Committee, headed by former Finance Minister Yashwant Sinha, with which the Bill has been lying, wants CSR spending and philanthropic activity to be legally binding. The committee argued that companies which have a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore should set aside 2% of their average net profits for the last three financial years for CSR.

Several rounds of discussions have already been held with the corporate houses, industry associations and industrialists to find a way out. Industry bodies had earlier said that spending on CSR is critical but making it mandatory for firms may not result in best practices. They point out that several companies are already doing it and there was no need to bring in legislation for this purpose. Those against the legislation insist that making it a law would be tantamount to a new control and going back to the licence raj.

Ironically, the stand of the industrial houses comes at a time when the civil society groups have found that a large number of corporate houses do not spend anything on society from which they earn their mega millions. While some large houses indeed spend more than 2 percent on CSR, there are others who consider this spending an exercise in futility and want social entrepreneurship to create lasting wealth instead of earmarking an amount for specific work.

Even as the debate on CSR spending raged on American Warren Buffet who is traveling the world over to promote a culture of giving, arrived in India and asked the industrialists to come forward for charity.

The Berkshire Hathaway chairman and Microsoft’s Bill Gates, the two who who have routinely topped global rich lists for years, have been making efforts to encourage other billionaires to give to social causes.

Called “The Giving Pledge”, more than $125 billion from mostly American billionaires, have been pledged so far. Both Buffet and Gates themselves have pledged most of their own wealth to the Gates foundation. At a press conference later Thursday evening, the Gates and Buffett answered questions about the work of the Bill and Melinda Gates Foundation and their mission to promote giving.

Buffett said he was enthused by the response he received from Indian entrepreneurs. “There was exceptional participation and candour. We certainly experienced great enthusiasm. What form it will take will be seen in days to come,” he added.

Those whom Buffett met in India included top industrialists from groups like the Tatas, Piramals, GMR, Godrej, Britannia Industries, Monnet Ispat and Energy, HSBC, HDFC, Bajaj Auto, Max India, Dabur amongst others. Except the GMR, no group has so far come out openly on pledging their wealth for social causes.

“There was a tremendous give-and-take in the session. It is clear that there is some great thing going on about philanthropy,” Gates said. He spoke of the country's history of philanthropy and its tradition in the country.

Asked whether any of the 70 rich people had pledged their wealth for good reasons, Buffett, said the experience was enthusiastic but a follow-up remained to be seen. “The U.S. receives 2 per cent of its Gross Domestic Product from philanthropy and we hope it would increase in the coming years. India will also see an increase in the number of givers. The people in the room were enthusiastic,” he added.

“We heard many people having made a lot of money in India and willing to give it back to society but were still looking for a way to do so,” Melinda Gates, co-founder of the Foundation said.

Azim Premji, founder of Azim Premji Foundation, said he was completely committed to supporting the larger ambition of catalysing social change to build a better society. ashukla.mail@gmail.com

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