How to be good
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Can the government compel business to be virtuous? The Companies Bill, recently passed in the Lok Sabha, has outlined exactly what it expects from large corporations. No less than 2 per cent of their profits are to be used for socially responsible action. Companies of a certain girth, which have a turnover of over Rs 1,000 crore, value over Rs 500 crore and average net profit of Rs 5 crore in the last three years, have to set up internal committees to choose and oversee socially responsible projects, and if they fail to spend the earmarked money in any year, offer a convincing explanation. Obviously, this cuts into the company's right to use its profit in its own interest, as well as shareholders' dividends. Rather than seeking to encourage corporate social responsibility (CSR), which is implicitly understood by companies now, the bill wants to enforce it.
This is not to say that companies do not have an ethical obligation to society. The idea of CSR has been attacked from left and right. Some believe that it reveals a lack of trust in capitalism and confusion about how it works. They argue that no special efforts are needed, that seemingly self-interested companies in competitive markets end up serving the common good. Others, profoundly distrustful of business, think of CSR as an elaborate scam to make rapacious companies look benevolent and socially responsible. These poles of opinion apart, CSR is simply a part of the way business willingly works, including in India. Many large companies talk grandly of a "triple bottom line" — people, planet and profit — that includes social and environmental concerns as part of their mission. Given that the costs they often impose on the environment and community are often hard to calculate, these gestures of compensation are certainly significant.