Legal Aspects of Business Project

MBA-General Amity Business School, Noida

Corporate Social Responsibility

Submitted to: Mrs Shinu Vig

Submitted by: Anvita Bhatnagar (B3) Renuka Chaudhary (B13) Nakul Arora(B23) Akshay Neelkantham(B33) Makrand Agrawal(B43) Amit Chahal(B53)

Certificate
This is to certify that Anvita Bhatnagar, Renuka chaudhary, Nakul Arora, Akshay Neelkantham, Makrand Agrawal and Amit Chahal all students of 1st year MBA General of Amity Business School have completed their Legal Aspect of Business project on Corporate Social Responsibility under my supervision. They have shown utmost sincerity in the completion of this project. I Mrs Shinu Vig hereby certify that this project confirms to the guidelines issued by the Amity Business School.

Mrs Shinu Vig

Acknowledgement
We would like to express our heartfelt gratitude towards our LAB teacher Mrs Shinu Vig for giving us the opportunity to work on the project. It was truly knowledgeable and enriching experience. Thank you once again maam for entrusting us with the project and for all the help and support throughout the project.

Anvita Bhatnagar (B43) Nakul Arora (B33) Makrand Agrawal(B43)

Renuka Chaudhary(B13) Akshay Neelkantham( B33) Amit Chahal(B53)

Index

Corporate social responsibility

Developing CSR takes a long time. There is no simple definition because CSR has no definite limits and it is voluntarily established. It is a trend which is focused on the change from short-term tasks to long-term tasks. In CSR companies behavior is such that inside needs and outside needs are covered. They contribute to tenable and acceptable growth and generally help to improve the overall situation of society. CSR integrates the attitudes, practices and procedures into the company strategy at the highest level of management. It requests a change from the profit only level to the wider level Three Ps people, planet, profit. The triple-bottom-line means that the company is focused on economic growth and environmental and social aspects of its activities. The company is a part of society and society influences it. There are a lot of definitions of CSR but here are the most well-known: CSR is a voluntary integration of the social and environmental aspects in the everyday company activities and relations with the stakeholders . CSR is a way of an enterprise which follows ethical, legal, commercial and social expectations . CSR is a continual obligation of companies to be ethical and contribute to economic growth and at the same time improve the quality of employees lives and their families and local and global society, . Three Fundamental Principles of CSR CSR is based on three fundamental principles. They are economic, social and environmental. Each part of CSR contains a lot of different activities depending on the type of enterprise and the requirements of stakeholders. Economic area: Transparent enterprise is expected from the company. A positive relationship with investors, customers, suppliers and others business partners is also expected. The impacts of the company on the economy at local, national and global levels are monitored.

Ethical codex creation Transparency

 Best practice management Corruption rejection Relation with stockholders Relation to customers / consumers Relation to suppliers Relation to investors Protection of intellectual property Social area : In the social area, behaviour is focused on the attitude to employees and on supporting the local community. The company influences the standard of living, health, safety, education and cultural development of citizens. The company is aware of its impact on the living and inanimate nature in the environment. This includes the ecosystem, land, air and water. There is an assumption that the company will protect nature and natural resources. Environmental area : Stakeholders Environmental groups Other environmental groups Environmental area CSR activities Environmentally friendly manufacturing, products and services Compliance with regulations and standards (ISO, EMAS, etc.) Environmentally friendly company policy (recycling, using of environmentally friendly products) Reduction of impacts on environment MAIN FEATURES OF CSR Triple-bottom-line economic, social and environmental. Voluntary all activities are done voluntarily. Stakeholders dialogue integration of all participants.

 Long-term period all activities are done over a long-term period. Credibility increasing company credibility. We have seen the business sector generating wealth and value for the shareholders in the last sixty years, but simultaneously we also have the problems of poverty, unemployment, illiteracy, malnutrition etc. facing the nation. The corporate growth is sometimes seen as widening the gap between the India and Bharat through its income skewing capability. This gap needs to be bridged. While the Government undertakes extensive developmental initiatives through a series of sectoral programs ,the business sector also needs to take the responsibility of exhibiting socially responsible business practices that ensures the distribution of wealth and well-being of the communities in which the business operate. The subject of Corporate Social Responsibility has evolved during last few decades from simple philanthropic activities to integrating the interest of the business with that of the communities in which it operates. By exhibiting socially, environmentally and ethically responsible behavior in governance of its operations, the business can generate value and long term sustainability for itself while making positive contribution in the betterment of the society. The subject of Corporate Social Responsibility has evolved during last few decades from simple philanthropic activities to integrating the interest of the business with that of the communities in which it operates. By exhibiting socially, environmentally and ethically responsible behavior in governance of its operations, the business can generate value and long term sustainability for itself while making positive contribution in the betterment of the society. .What is the importance of corporate social responsibility? 1) Organizations understanding their role in developing a society 2) Awareness among business houses, corporate bodies, and the people. Versatile, profitable, and dynamic businesses are the driving forces that build the economy of the country. We must remember that the growth of a country purely depends on the growth of the society and the people in the society. There is a close relationship between CSR and the law. The main instrument governments use to address a firms social, environmental and economic impacts is the law. Many countries have a wide range of laws, whether at the national, state or local levels of government, relating to consumers, workers, health and safety, human rights and environmental protection, bribery and corruption, corporate governance and taxation. A firms CSR approach should begin by ensuring full compliance with those laws already in place. No matter how good a CSR policy may be, failure to observe the

law will undermine other good efforts. Looking ahead, the CSR activities of firms can be seen as a proactive method of addressing potentially problematic conduct before it attracts legal attention. A key feature of the emerging CSR debate is the difference between a compliance mentality (i.e., only doing those things that are required) and a value driven mentality (i.e., using a CSR approach to innovate and seek new markets). Some commentators argue that a compliance-based approach does not help business, because it tends not to drive innovation and the out of the box thinking they see as necessary in the rapidly changing business world. That said, a number of specific legal aspects are worth mentioning. Performance reporting and the law: In many jurisdictions there are laws in place requiring firms in particular sectors to publicly disclose certain of their practices and activities. The U.K. Companies Act 2006, for example, requires publicly-listed companies to report on a number of specific issues where they are necessary to understanding the companys business. These include environmental matters (including the impact of the companys business on the environment), the companys employees, social and community issues, and risks through the company supply chains. Similar provisions also exist in France and across the EU. Corporate governance and disclosure: Social and environmental issues are increasingly being seen as integral components of the corporate governance agenda. In many countries firms issuing securities are required to publicly disclose their corporate governance practices and comply with local guidelines on the subject. A 2005 report by the international law firm Freshfields, Bruckhaus and Deringer concluded that under the current legal systems of many countries, directors might be in breach of their fiduciary duties if they did not take into account environmental, social and governance issues. Bribery: CSR also stresses that firms should adopt responsible practices wherever they operate. National laws making it illegal to bribe foreign officials to obtain or retain business on the subject are often based on the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the 2003 UN Convention Against Corruption. Requirements under different jurisdictions: It is important to be aware of the varying legal requirements of different countries. In the U.K., for example, legislation requires pension fund trustees to publish a comment in their investment statements on the extent to which their investment policies address social, ethical and environmental issues. As noted above, in European countries laws require companies to report on their social and environmental performance. In the U.S., a number of firms have been sued under the Alien Tort Claims Act (e.g., Doe v. Unocal), which raises the possibility that corporate liability could be

established through transnational civil litigation. The U.S. has also significantly revised its corporate governance legislation in recent years, in particular, passing the Sarbanes-Oxley Act in 2002 which establishes stricter standards for all U.S. public company boards, management and public accounting firms. At the United Nations, a Special Representative on Business and Human Rights to the Secretary General was appointed in July 2005. The Special Representative is expected to identify standards of corporate responsibility and accountability, enhance understanding and recognition of these standards, and issue recommendations on future United Nations work regarding business and human rights issues. Parliamentary engagement: Government interest in CSR issues takes many forms. Some governments have issued CSR guidance and play a wide range of partnering, facilitating and profiling roles. In some countries, parliaments have also become engaged. On 13 March 2007, the European Parliament adopted a resolution on CSR in which it expressed the view that increasing social and environmental responsibility by business, linked to the principle of corporate accountability, represents an essential element of the European social modelThe Australian government conducted two high-level enquiries into the relationship between business and CSR in 2006. The Parliamentary Joint Committee on Corporations and Financial Services enquiry Corporate Responsibility: Managing risk and creating value recommended the wide adoption of corporate responsibility, and urged industry associations to actively promote CSR to their members. The Corporations and Markets Advisory Committee report The Social Responsibility of Corporations, noted that CSR issues presented a conundrumbetween the business imperative and wider societal pressure. A balanced approach, it concluded, under which companies are judged according to their overall economic and other contributions and impacts, including how they manage social and environmental issues relevant to their business, is more productive and meaningful.A Spanish parliamentary subcommission also conducted a review into measures to promote CSR, and reported in 2006.

 Does Corporate Social Responsibility Increase Profits? It is generally held that corporate social responsibility (CSR) could increase company profits and thus most large companies are actively engaged in it. But few executives and managers are aware of the research on this important subject .The research does show that it may improve profits. However, linking profit growth to abstract variables that are frequently difficult to define is a challenging task. Most executives believe that CSR can improve profits. They understand that CSR can promote respect for their company in the marketplace which can result in higher sales, enhance employee loyalty and attract better personnel to the firm. Also, CSR activities focusing on sustainability issues may lower costs and improve efficiencies as well. An added advantage for public companies is that aggressive CSR activities may help them gain a possible listing in the FTSE or Dow Jones Sustainability Indexes, or other similar indices. This may enhance the companys stock price, making executives stock and stock options more profitable and shareholders happier. Advantages of CSR:

A good reputation makes it easier to recruit employees. Employees may stay longer, reducing the costs and disruption of recruitment and retraining. Employees are better motivated and more productive. CSR helps ensure you comply with regulatory requirements. Activities such as involvement with the local community are ideal opportunities to generate positive press coverage. Good relationships with local authorities make doing business easier. See the page in this guide on how to work with the local community. Understanding the wider impact of your business can help you develop new products and services. CSR can make you more competitive and reduces the risk of sudden damage to your reputation (and sales). Investors recognize this and are more willing to finance you. Disadvantages of CSR

Corporate social responsibility (CSR) is a prominent 21st century business ideology that heightens expectations of companies regarding social and environmental standards. The results of CSR compliance are generally viewed as a good thing by most companies. Challenges lie in allocating time and resources necessary to develop a CSR approach that meets governmental and social standards and achieves compliance with informal CSR guidelines related to social and environmental responsibility.

Role of Profit

One of the biggest features addressed by CSR is its intent to cause companies to recognize responsibilities to stakeholders outside of shareholders. This includes customers, communities, employees and suppliers. While proponents of CSR point out the long-term benefits of taking care of these core relationships, shareholders are often deterred at the notion that companies will invest in anything that does not create immediately obvious financial gain. With CSR, detecting measurable bottom line benefits is a challenge as social and environmental programs are hard to account for with regard to financial gain. Competitive Disadvantage

One of the most common arguments companies make when indicating reluctance to CSR policies is the disadvantage it causes against companies that do not. In other words, if company A does its part to invest resources to take care of its communities and the environment and company B does not, company B retains its resources, including money, for other business pursuits. Thus, without strict adherence industry wide, some companies argue that they cannot fall behind by putting money into CSR programs. Loss of Focus

A main driver at the onset of CSR was increased interest in making the customer a primary focus of business operations. This coincides with continued realization that customer retention and loyalty are keys to long-term business success. Detractors of CSR as a major component of corporate governance argue that guidelines have expanded beyond this basic initial emphasis. David Vogel points out in his "CSR Doesn't Pay" article for Forbes, that many companies that abide by CSR guidelines do so more from fear of public backlash than because they believe it is good for long-term business performance. He adds that most parties generally agree that taking care of customers is good in the long run, but expensive requirements in human rights, environmental sustainability and community development are too much to ask of many companies. Lasting Impact

How long CSR will remain a prominent business concern is a common question asked by those who argue against CSR as a major concern with corporate governance. According to the My Efficient Planet website, CSR has existed for more than 50 years. However, its prominence as a major business consideration has certainly increased in the 21st century due to heightened awareness of ethical issues in business and environmental preservation standards. Detractors argue that CSR emphasis is a short-

term fad in response to prominent scandals like Enron, and current interest in greenfriendly practices. Planning the CSR initiative A long-term Corporate Social Responsibility Plan needs to be prepared matching with the long-term business plan; This may be broken down into short-term and medium term plans, specifying activities to be undertaken, budgets allocated, responsibilities and authorities defined, and measurable results expected. Implementation The Plan must clarify implementation guidelines involving: Participation of Voluntary Organizations, Base-line Surveys Documentation of the experience Setting Up a CSR hub Monitoring and Evaluation.

Corporate Social Responsibility IN INDIA Among other countries India has one of the richest traditions of CSR. Much has been done in recent years to make Indian Entrepreneurs aware of social responsibility as an important segment of their business activity but CSR in India has yet to receive widespread recognition. If this goal has to be realised then the CSR approach of corporate has to be in line with their attitudes towards mainstream business- companies setting clear objectives, undertaking potential investments, measuring and reporting performance publicly. The four phases of CSR development in India: The history of CSR in India has its four phases which run parallel to India's historical development and has resulted in different approaches towards CSR. However the phases are not static and the features of each phase may overlap other phases. The First Phase In the first phase charity and philanthropy were the main drivers of CSR. Culture, religion, family values and tradition and industrialization had an influential effect on CSR. In the pre-industrialization period which lasted till 1850, wealthy merchants shared a part of their wealth with the wider society by way of setting up temples for a religious cause. Moreover these merchants helped the society in getting over phases of famine and epidemics by providing food from their godowns and money and thus securing an integral position in the society.With the arrival of the colonial rule in India from 1850s

onwards the approach towards CSR was changed. The industrial families of the 19th century such as Tata, Godrej, Bajaj, Modi, Birla, Singhania were strongly inclined towards economic as well as social considerations. However it has been observed that their efforts towards social as well as industrial development were not only driven selfless and religious motives but also influenced by caste groups and political objectives. The Second Phase In the second phase, during the independence movement, there was increased stress on Indian Industrialists to demonstrate their dedication towards the progress of the society. This was when Mahatma Gandhi introduced the notion of "trusteeship", according to which the industry leaders had to manage their wealth so as to benefit the common man. "I desire to end capitalism almost, if not quite, as much as the most advanced socialist. But our methods differ. My theory of trusteeship is no make-shift, certainly no camouflage. I am confident that it will survive all other theories." This was Gandhi's words which highlights his argument towards his concept of "trusteeship". Gandhi's influence put pressure on various Industrialists to act towards building the nation and its socio-economic development.[4] According to Gandhi, Indian companies were supposed to be the "temples of modern India". Under his influence businesses established trusts for schools and colleges and also helped in setting up training and scientific institutions. The operations of the trusts were largely in line with Gandhi's reforms which sought to abolish untouchability, encourage empowerment of women and rural development. The Third Phase The third phase of CSR (196080) had its relation to the element of "mixed economy", emergence of Public Sector Undertakings (PSUs) and laws relating labour and environmental standards. During this period the private sector was forced to take a backseat. The public sector was seen as the prime mover of development. Because of the stringent legal rules and regulations surrounding the activities of the private sector, the period was described as an "era of command and control". The policy of industrial licensing, high taxes and restrictions on the private sector led to corporate malpractices. This led to enactment of legislation regarding corporate governance, labour and environmental issues. PSUs were set up by the state to ensure suitable distribution of resources (wealth, food etc.) to the needy. However the public sector was effective only to a certain limited extent. This led to shift of expectation from the public to the private sector and their active involvement in the socio-economic development of the country became absolutely necessary. In 1965 Indian academicians, politicians and businessmen set up a national workshop on CSR aimed at reconciliation. They emphasized upon transparency, social accountability and regular stakeholder dialogues. In spite of such attempts the CSR failed to catch steam.

The Fourth Phase In the fourth phase (1980 until the present) Indian companies started abandoning their traditional engagement with CSR and integrated it into a sustainable business strategy. In 1990s the first initiation towards globalization and economic liberalization were undertaken. Controls and licensing system were partly done away with which gave a boost to the economy the signs of which are very evident today. Increased growth momentum of the economy helped Indian companies grow rapidly and this made them more willing and able to contribute towards social cause. Globalization has transformed India into an important destination in terms of production and manufacturing bases of TNCs are concerned. As Western markets are becoming more and more concerned about and labour and environmental standards in the developing countries, Indian companies who export and produce goods for the developed world need to pay a close attention to compliance with the international standards. With the rapidly changing corporate environment, more functional autonomy, operational freedom etc., CPSEs today are required to adopt CSR as a strategic tool for sustainable growth CSR in the present context, means not only investment of funds for social activities but also integration of business processes with social processes. In order to address the social needs of the community, viable projects need to be identified to meet its requirements. CPSEs may approach Corporate Social Responsibility as a professional management process with a long-term strategy integrating it with corporate strategies. CSR activities may be planned in parallel to the business plan, looking at every possible opportunity to link and integrate business plans with the social and environmental concerns available

INDIAS REGULATORY HISTORY: TRANSPLANTING CORPORATE LAW Indias current system of corporate governance is something of a hybrid. Like many post-colonial countries, when India first gained its independence in 1947, it opted for a socialist governance structure with many industries and enterprises controlled by the state.In 1991, however, India experienced a massive financial crisis. The IMF agreed to grant India the loans it needed if it would liberalize its economy and privatize most sectors.Since then, Indias economy has been growing at a rapid pace. To facilitate foreign direct investment, India has lifted most of its recently enacted corporate law from liberal American and British models. The economy is now functionally capitalist, although the constitution remains socialist.It is largely this divide between adeveloping,

once-socialist country with an impoverished populace and its booming, capitalistic aspirations that the 2011 Companies Bill attempts to navigate.

Corporate Missteps and Government Responses: From Bhopal to Dabhol:

The public health disaster at Bhopal and the human rights fiasco at Dabhol, form the backdrop for any discussion of corporate social responsibility in India. The Bhopal Disaster: Since the gas was highly toxic, the leak killed around 3,000 residents of the Madhya Pradesh state in its immediate aftermath; the long-term death toll is estimated at 20,000, with as many as 100,000 more suffering from crippling disabilities.Union Carbide eventually agreed to pay a $470 million settlement to the Indian government in 1989, although American executives continually refused toappear before Indian courts for criminal proceedings.Amnesty International report from 2004 claims that30% of claims for injuries have been rejected, around 16,000 claims [remained] outstanding, and most of the successful applicants received minimal amounts of compensation. The Dabhol Disaster: Ten years later, in 1993, Enron agreed to contract with the state government of Maharashtra to build a multimillion-dollar power plant in Dabhol; at the time, India was only able to provide power for five percent of its population.The plant was set to be the largest Foreign Direct Investment in India at the time.When the Indian public learned about the deal, there was massive protesting over handing foreign companies such a profitable venture rather than using local labor.180 peaceful protestors were allegedly beaten and arrested outside the companys gates.The price of fuel for the plant soared, and the Maharashtra government was unable to pay the required price for electricity. Enron sued on their contract, but the company, in the midst of its own scandal in the United States, had to declare bankruptcy in 2001 before the lawsuit reached a resolution. The Dabhol plant was subsequently bought by the state in an effort to save the project. THE PATH TO AND FROM MANDATORY CSR:

The 2009 Companies Bill and its 2011 counterpart represent the first major effort at comprehensively overhauling corporate law in India since 1956.It will be landmark legislation for a BRICS country, and the Indian legislature hopes that the Bill will pass through Parliament during the budget session in Spring 2012.As one might expect, the entire project is proceeding in the shadow of ever-growing foreign investment in India. The Bills Statement of Objects and Reasons dwells on growth and international

investment at some length;its authors seem painfully eager to impress the global business community. At the same time, the Bill proceeds in the wake of Bhopal and Dahbol, as well as the more recent Satyam accounting scandal (akin to an Indian version of Enron). Despite Indias current left-leaning government, the bill is extremely economically liberal and pro-business. The mandatory CSR proposal, then, seems something of a regulatory oddity, inserted by the finance committee after reviewing the Bill and adopted enthusiastically by a fledgling Minister of Corporate Affairs. As one of the few elements about the Bill that is uniquely Indian, its inception and context deserve some examination. The Bill observes that: The expansion and growth of the Indian economy has . . . generated considerable interest in the international investing community. However, there is a need for sustaining growth in a globalized and competitive environment. The increasing options and avenues for international business, trade and capital flows have made it imperative for the growing Indian economy to not only harness its entrepreneurial and economic resources efficiently but also to be competitive in attracting investment to sustain the impressive growth recorded by it in recent years. Many investors are also looking towards the statutory and regulatory framework for the corporate sector in the country while deciding on their investment options. Yet it is difficult, as a country battling with poverty and inequality, to absorb so many costs and risks without asking for anything in return. The LokSabhas legislative brief for the Bill highlights several major changes proposed in the Bill to achieve its liberalizing goals, as well as a few concessions in favor of the Indian people. The major aims of the Bill are to decrease regulation and to shift the onus of oversight onto shareholders. The Bill makes some effort to address corporategovernance in general through Western mechanisms such as formal, impartial audits and an increased number of independent directors on boards. The Bill, also allows shareholders to band together and file class action lawsuits, as this kind of tort framework is currently unavailable in India, and it establishes a National Company Law Tribunal to expeditiously handle these corporate lawsuits. It is, perhaps, worth noting that class action lawsuits will generally only be available to shareholders not to the average Indianand that companies themselves have long advocated for a more expeditious corporate law system, as it would reduce the uncertainty inherent in international litigation. The Bill, then, may be even more pro-business than it seems at first glance.

The Specter of Mandatory CSR

The changes listed in the previous Section were the major legal revisions laid out by the original Bill, as proposed by the Ministry of Corporate Affairs. The Bill then went to Indias Finance Committee for review before being reported to Parliament. The Finance Committee, perhaps realizing the popular backlash that might result from such an unabashedly pro-business bill, inserted several new clauses to make the bill slightly more pro-development. The original proposal required moderate-sized and large companies to set aside two percent of their profit margin averaged over the past three years on socially responsible expenditures. The proposal gave no guidance as to what corporate social responsibility meant in the context of the Bill, and provided no enforcement mechanism other than mandated reporting:In response to the Committees overwhelming concerns, the Ministry of Corporate Affairs have agreed that the Bill may now include provisions to mandate that every company having [(net worth of rupees 500 crore or more, or turnover of rupees 1000 crore or more)] or [a net profit of rupees 5 crore or more during a year] shall be required to formulate a CSR Policy to ensure that every year at least 2% of its average net profits during the three immediately preceding financial years shall be spent on CSR activities as may be approved and specified by the company. The directors shall be required to make suitable disclosures in this regard in their report to members. The Ministry wanted shareholders to be engaged in determining how to expend the CSR funds and envisioned a system in which each industry would contribute in a manner commensurate with their expertise. Chemical companies, for example, might undertake environmental initiatives, while IT companies could further technology education. The Minister, Murli Deora acknowledged readily that this was the first time and historically it may be the first time in the world that a country considered mandating expenditures for the public good, rather than simply taxing companies or leaving them to their own devices. He also acknowledged that there was an argument as to whether the Government should mandateanything, but the Ministry, at least initially, enthusiastically adopted the Committees mandatory proposal. Corporate Backlash:

Most of India Inc. was immediately up in arms. The Confederation of Indian Industry asserted, "The law should not specify any amount to be spent on CSR activities. It should be left to the decision of the board."Other companies echoed that sentiment, claiming that making CSR mandatory takes away from its core principles. What companies spend on community welfare, education, health, development and environmental activism is for them to decide.Infosys Technologies CEO Kris

Gopalakrishnan, the Managing Director of Sonata Software B. Ramaswamy, Wipro Chairman AzimPremji, and Piramal Group Chairman Ajay Pirama, all openly spoke out against the measure. Voluntary CSR in India, however, has a mixed track record at best. In 2006, despite its economic boom, India spent only $5 billion, or 0.6 percent of its GDPon corporate responsibility .Many companies claim to have CSR policies in place: eighty percent of the private multinationals and half of the private national companies inIndia.Yet most organizations cannot or will not report exactly how much they spend on CSR.They claim that there is no relationship between their profits and CSR, and that the board has a right to determine CSR spending on an ad hoc basis. The Bill now requires the boards of moderate-sized and large companies to convene a Corporate Social Responsibility Committee and to approve a Corporate Social Responsibility Policy. This policy must be disclosed and posted on the companys website. The Bill even gives some guidance as to what constitutes CSR, although the definition remains broad. Schedule VII of the Bill lists several possible genres of CSR expenditure, ranging from eradicating extreme hunger and poverty to promotion of education to ensuring environmental sustainability. The media expects the Bill to pass in the 2012 budget session. Indias proposal, while unusual, could be viewed as a reasonable effort at furthering development and equality while avoiding imposing additional taxes as such. THE EFFICACY OF MANDATORY CSR IN THE INDIAN CONTEXT:

The theoretical pressures, however, seem to have shaped the Indian proposal from its inception: on the one hand, the proposal acknowledges the realities of the global economys liberal economic bent and hence avoids excessive administrative red tape; on the other, it acknowledges the equally pressing necessity of facilitating development and avoiding inflammatory wealth disparities. Indias proposal may not be ideal, but it is, in some sense, an innovation born of economic necessity. As such, the unique nature of the proposal and the nuances of the political climate that produced it should not be ignored. The proposal may be the first in a new wave of creative capitalist solutions proposed by foreign legislatures to solve the problem of growing inequality in the wake of rapid economic growth.

Arguments Against Mandating CSR Spending:

These arguments fall into two categories: those that argue that mandatory CSR spending goes too far, and those that argue that mandatory CSR spending does not go far enough. Those, like Friedman, Hannsman, or Macey, who would argue that mandatory CSR spending goes too far, would insist that the proposal creates market inefficiencies that may damage the economy in the long run. India, after all, has been doing quite well under its liberal economic regime. Incredibly, its GDP has been increasing at a rate of almost eight percent per year.It is one of the fastest-growing economies in the world.Even the lower classes have benefited from privatization and globalization.Although millions of Indians remain in poverty, millions more have broken past the poverty line and are edging closer to a middle-class existence. Perhaps the most salient argument against mandatory spending is that it might put India at a competitive disadvantage in the global marketplace and might slow or reverse the countrys near-miraculous growth. Those who already have little might, contrary to the proposals aims, fall farther away from the prospect of a middle-class lifestyle. Even if we were to accept Greenfields premise that inequality is a market imperfection ,intervening at this early juncturebefore a country like India has developed sufficient wealthmight ultimately be counter-productive and may shrink the economy. Others would contend that the market does require intervention, and quickly. They would argue, that the proposal is not developed or regulatory enough. Without a coercive enforcement mechanism, it is unlikely that the law would garner sufficient compliance. In addition, the law does not specify in sufficient detail the desired target of CSR spending, so it is unclear exactly what compliance would entail. Since the law is so vague and does not envision any formal review process, it may barely add to the states regulatory capacity or legitimacy. In other words, mandatory CSR could remain largely voluntary. It might be preferable, some would say, to impose a tax so that the government would be actually obtain funding to reform its infrastructure in a systematic and democratic way. Arguments in Favor of Mandating CSR Spending:

The major advantage of mandating CSR spending, as opposed to levying additional taxes, would be the preservation of the companys autonomy in selecting how its funds are used. To some extent, the corporation would be free to invest its funds in the community directly or in a local non-profit or national NGO. Companies could use the money to further minimize externalities, beyond the requirements of environmental law, or they could choose to create positive externalities by building schools or providing workers with more comprehensive benefits. Knowing that each corporation might bring

two percent of its profits to the community for re-investment, community members might be far more enthusiastic about the potential of industry coming to their neighborhood. Re-investing in communities can build reputational legitimacy, trust, and reciprocity from which companies may ultimately benefit. If community members and other stakeholders feel that the company is extending its fiduciary duty to encompass their well being, then they may feel some positive duty to act in the companys best interest in return. Greenfield, for instance, asserts that when workers feel that they are being treated with respect and fairness, they require less monitoring to elicit their best efforts. The reduction in monitoring costs may ultimately reduce overhead and create a better work environment. Similarly, local residents who have been treated well by the company educated in its school or nursed in its hospitalare less likely to organize protests and create extra costs when and if the company does make a mistake. Most companies that have CSR programs (around fifty-six percent) spend their money locally. The vast majority invest in education (eighty-two percent) or health (eighty-one percent) or on the environment. Schools and hospitals, may simply engender more recognition, reciprocity, and good-will in communities since they are much more visible. Additionally, companies may invest their money more efficiently than the government would, and in ways that will inure to their long-term benefit. Investing in schools promises to have direct returns for the company. A more educated local workforce is certainly a boon to any industry, especially the information technology sector, which continues to grow in India. Given the level of corruption that persists in many developing countries, corporations may actually produce more impactful public goods than governments at a lower cost. The second major argument for mandatory CSR spending is that countries like India are desperately in need of funding for development. Hampered by a liberal and competitive global economy, it is difficult for them to impose steep taxes or comprehensive regulation. It makes good sense to require them to contribute to the public good primarily by making money, but secondarily by spending some portion of it on development. Two percent CSR spending would simply bring India in line with CSR expenditures in the United States,and the money for development is certainly more desperately needed in India, where at least one-fifth of citizens live in poverty and where the public health and education systems are famously dysfunctional. CONCLUSION:

State-driven corporate social responsibility cuts against the thrust of most current CSR practice and scholarship, which generally focus on voluntary business-driven initiatives and international agreements. Nevertheless, as the popularity of CSR surges, more and more national and international players will be seeking to harness the power of

corporate-funded investment in social welfare projects.As such, proponents of CSR and of development may want to encourage India to further develop this proposal and similar initiatives that are responsive to its current circumstances, rather than automatically rejecting ideas that do not fit neatly into pre-established intellectual categories. The proposal to increase social responsibility may bring governments one step closer to meeting the twin goals of sustaining growth while at the same time addressing troubling inequality Accordingly, Indias state-based proposal may represent merely the beginning of a new wave of development in the realm of corporate social responsibility. A product of unique historical exigencies, the proposal may represent a new type of solution to an increasingly pressing international problem. CSR Practices of Tata Group in India A Tata Company shall be committed to be a good corporate citizen not only in compliance with all relevant laws and regulations but also by actively assisting in the improvement of the quality of life of the people in the communities in which it operates with the objective of making them self reliant. Such social responsibility would comprises, to initiate and support community initiatives in the field of community health and family welfare, water management, vocational training, education and literacy and encourage application of modern scientific and managerial techniques and expertise. This will be reviewed periodically in consonance with national and regional priorities. The company would also not treat these activities as optional ones but would strive to incorporate them as integral part of its business plan. The company would also encourage volunteering amongst its employees and help them to work in the communities. Tata companies are encouraged to develop social accounting systems and to carry out social audit of their operations.

Benchmarking Corporate Social Responsibility A study on Benchmarking Corporate Social Responsibility Activities, by the Gas Authority of India Limited (GAIL), finds Tata Steel creating a benchmark in corporate social responsibility (CSR). The study has been based on Organisation Dynamics. The purpose of the study was to identify the best practices in CSR activities available in Tata Steel and enable GAIL to undertake the interventions more effectively and in a more focused manner. Tata Steel is a pioneer in the concept of CSR. It believes that the loyalty and commitment of its employees depends upon the quality of life they are provided with at work and at home. Consistent with the Group Purpose, Tata Steel has declared in its vision statement that it will constantly strive to improve the quality of life of the communities it serves through excellence in all facets of its activities. The company has received a number of awards in recognition of its CSR efforts. The most recent testimony to Tata Steels contribution is The Energy & Resources Institute (TERI) Award conferred on it in recognition of corporate leadership for good corporate citizenship and sustainable initiatives. Tata Steel is the only Indian company to have pledged to translate the Global Compact principles on human rights, labour and

environment into practice and was conferred the Global Business Coalition Award for Business Excellence in the Community for HIV /AIDS. Over the years, the nature of the companys involvement with the community has undergone a change. It has moved away from charity and dependence to empowerment and partnership. The many facets of Tata Steels efforts are medical and health services in the rural and semi-urban areas, sports, womens health and education, water harvesting and tribal development, relief and rehabilitation and income generation, among others. Tata Corps of Volunteers: Giving out the Best from Tata Employees Mission Statement We continue to evolve a common direction to enrich the Tata Way on social responsibility in order to strengthen out belief in serving the society, through all Tata employees in all our Companies, by working as volunteers, while also learning from the community. We constantly strive together to improve processes, to stretch capabilities, to share skills, expertise and talents, in order to build strong and self-reliant communities. We believe this enriches our personalities, improves our attitude towards life and makes us better citizens; and accordingly, better employees of our respective Companies. Tata Steels CSR Policy On unveiling Tata Steels Corporate Social Responsibility Policy, its Managing Director, Mr. B. Muthuraman, said; Tata Steel believes that the primary purpose of a business is to improve the quality of life of people. Tata Steel will volunteer its resources, to the extent it can reasonably afford, to sustain and improve the quality of life of the people of the areas in which it operates. Tata Steels commitment to its corporate social responsibility (CSR) also finds reflection in its adoption of the Corporate Citizenship Index, Tata Business Excellence Model and the Tata Index for Sustainable Development. Tata Steel spends 5-7 per cent of its profit after tax on several CSR initiatives. Broadly speaking, the companys CSR initiatives are spread across three core areas - employee welfare, the environment and the welfare of the community at large. Under this broad spectrum, diverse areas are covered. These include environment management, economic development, employee relations, civic amenities and community services, healthcare, sports and adventure, relief during natural calamities, education, arts and culture and social welfare. (a) Supports Social Welfare Organisations : To achieve its desired objectives in this regard, Tata Steel supports various social welfare organisations. They include the Tata Steel Rural Development Society, Tribal Cultural Society, Tata Steel Foundation for Family Initiatives, National Association for the Blind, Shishu Niketan, School of Hope, Centre for Hearing Impaired Children and the Indian Red Cross Society, East Singhbhum. Tata Steel has hosted 12 Lifeline Expresses in association with the Ministry of Railways, Impact India Foundation and the Government of Jharkhand. It has served over 50,000 people. Five thousand people have availed of surgical facilities and over 1,000 people received aids and appliances. In all, over seven Lakh rural and another

seven Lakh urban population have been benefited by the CSR activities of Tata Steel. CSR initiatives on the rural front include training in agriculture that is provided to villagers in the Saraikela Kharsawa area through the village development committees. In collaboration with the Ministry of Non-Conventional Energy and the Confederation of Indian Industry, focus is laid on renewable energy for rural livelihoods. Integrated wasteland development programmes have been taken up as also watershed development programmes for rain-fed areas. (b) Self-Help Groups (SHGs): The National Horticulture Mission programme that has been taken up in collaboration with the Government of Jharkhand has already benefited more than a thousand households. Over 500 self-help groups are currently operating under various poverty alleviation programmes. Of this, over 200 are engaged in activities of income generation thorough micro enterprises. Womens empowerment programmes through Self-Help Groups have been extended to 700 villages. Between 2003 and 2006, the maternal and infant survival project had a coverage area of 42 villages in Gamharia block in Seraikela Kharsawa even as a replication project was taken up in Rajnagar block. For providing portable water to rural communities 2,600 tube wells have been installed for the benefit of over four Lakh people. (c.) Healthcare Projects: Other CSR activities of Tata Steel include facilitation of child education, immunization and childcare, plantation activities, creation of awareness of AIDS, healthcare projects and promotion of sporting activities such as football and archery. In its 100th year, the Tata Steel Centenary Project has just been announced. (d) Economic Empowerment: A programme aimed at economic empowerment through improvised agriculture will be taken up in three backward tribal blocks in Jharkhand, Orissa and Chhattisgarh. A corpus of Rs 100 crore has been earmarked for the purpose and the programme is expected to benefit 40,000 tribal living in over 400 villages in these three States. Low key and Profile For Tata Steel, discharging its CSR mandate is something that is generally kept low key. And that is how the companys visionary founder wanted it to be, when he said that We do not claim to be more unselfish, more generous and more philanthropic than other people. But we think we started on sound and straightforward business principles, considering the interests of the shareholder, our own, and the health and welfare of the employees, the sure foundation of our prosperity.

Initiatives by the other Indian companies DLF building in India:

While DLF continues to create world-class infrastructure throughout India, it has not lost sight of its responsibilities as a change agent for accelerating the pace of social and economic transformation across various segments to complement the efforts of the government. Swapana Sarthak Informal School In fact DLF's first social responsibility interventions date back to the time that DLF was setting up the DLF township in Gurgaon when instead of turning a blind eye to the local problems, DLF decided to undertake internal development work in the villages of Nathupur, Chakarpur and Wazirabad by contributing through construction of internal village roads, additional rooms in the schools and internal village electrification. At around the same time, DLF initiated its first education initiative by setting up the Swapana Sarthak informal school for children of the construction workers. This school manned by trained volunteers conducts classes for children who are ill equipped to join regular school or those who cannot afford to do so. All children enrolled are provided with free uniforms, mid day meals and learning material. Starting from merely 10 students, the school today has on roll 220 students. Initially getting the children out of their homes and instilling a sense of personal hygiene and cleanliness was a challenge and the volunteers had to really work on them to ensure the present stat

DLF Learning Excellence Centres

Taking the education initiative ahead, DLF partnered with Pratham in May 2007 and set up DLF Learning Excellence Centres in 25 villages by involving the government schools, community teachers and introducing innovative teaching learning material. The main hurdles faced during the project were lack of adequate means of public transport and resistance from the local community to involve the women. However, these were overcome through a sustained education and awareness campaign conducted across the entire village community and by taking the village Panchayats into confidence. This is an ongoing project likely to benefit 1100 students over a period of one year. Rural Primary Health Centres In March 2007, DLF decided to focus on another hitherto neglected but vital area rural healthcare. It was decided to set up Rural Primary Health Centres in villages to provide free medical consultancy, health checkups and subsidized medicines to the villagers. The first Primary Health Centre was set up at Village Shikohpur in August 2007 in

association with an NGO Deepalaya. It is proposed to set up six such centres in the present financial year. Larsen & Toubro (L & T) Limited Considering that construction industry is the second largest employer in India after agriculture, employing about 32 million-strong workforce, L&T set out to regulate and promote Construction Vocational Training (CVT) in India by establishing a Construction Skills Training Institute (CSTI) on a 5.5 acre land, close to its Construction Division Headquarters at Manapakkam, Chennai. CSTI imparts, totally free of cost, basic training in formwork, carpentry, masonry, bar-bending, plumbing and sanitary, scaffolder and electrical wireman trades to a wide spectrum of the rural poor. As a result of the good response it received in Chennai, CSTI set up a branch at Panvel, Mumbai, initially offering training in formwork, carpentry and masonry trades. The Manapakkam and Panvel facilities together provide training to about 300 candidates annually who are inducted after a process of selection, the minimum qualification being tenth standard. Since inception, these two units have produced about 2,000 skilled workmen in various trades, with about sixty percent of them being deployed to L&Ts jobsites spread across the country. The success of this traininginitiative demonstrates that adoption of systematic training techniques are bound to yield efficient and skilled personnel in the shortest possible time, and in the power to convert the potential of the Rural Youth in Construction and upgrading Rural Economy in a small way.