Is mandatory CSR good?

P Chidambaram strongly feels that 2 per cent of the larger companies profit on CSR activities will have a multiplier effects in bringing much greater help. All companies with sizable business will be part of the CSR radar. This would apply to companies with a turnover of Rs. 1,000 crore and more, or networth of Rs 500 crore and more, or a net profit of Rs 5 crore and more. The new rules would be applicable from fiscal 2014 -15

CSR-1

However, there is still some strong debate on this, negating this mandate of CSR activities.

  • Mandatory CSR is contradictory.  Laws can only set minimum standards; but driving for an positive action is difficult for Law. For example, it will be difficult for any company to mandate to “build excellent school” or be “generous to the community”
  • The proposal would be an enforcement nightmare, still weakening an already bad situation where many laws are poorly enforced in India and further undermining respect for law. Interestingly, this CSR proposal even includes a loophole. If the 2 percent allocation is not made in a given fiscal year, the CSR committee has to submit an explanation to avoid being penalized. There is no discussion of what explanations would be legally valid, opening up much room for corruption and extortion.
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