India Inc dismisses proposal for mandatory CSR

Also raises other concerns over new companies bill


Sweta Ranjan | February 17, 2011

Corporate affairs minister Murli Deora
Corporate affairs minister Murli Deora

India Inc has rejected the government's move to make corporate social responsibility mandatory and force companies to earmark 2 percent of their profits for the same.

Corporate affairs minister Murli Deora said, after an interactive session with representatives of the industry on Thursday, "We have extensively discussed the issue of mandatory CSR. The industry seems to happily accept this mandate but no decision has yet been taken on this." The minister added, "As per my opinion, 2 percent levy on social responsibility should be made mandatory."

Contrary to the minister's claims, however, representatives of the industry seemed united in rejecting the suggestion outright. Suresh C Senapaty, executive director and CFO, Wipro, said, "It should not be made mandatory. We suggest adequate disclosure of the CSR but making it mandatory would lead to another scam."

IL&FS Environment Infrastructure and Services Ltd, CFO S N Mukherjee also felt that the mandatory 2% CSR would not work well. "Industry is bound to be dissatisfied with this kind of step. We would appreciate if voluntary CSR is there,” he said.
Industry bodies CII, FICCI and Assocham too strongly opposed the move towards mandatory CSR. Many representatives of corporate india present in the interactive session even said they did not know what exactly CSR meant. "What happens if there is no profit in a particular year,” was just one of the vexing points of debate. 
Deora, along with his junior minister RPN Singh and secretary MCA D K Mittal met with the corporate representatives to discuss revision in the companies law.
Besides CSR, issues relating to independent directors, such as their empanelment with the ministry, remuneration and tenure were also discussed. Sources say the industry did not accept the idea of restricted number of independent directors. The companies demanded "freedom to companies" over remuneration as well. The proposed tenure of a maximum six years was also outrightly opposed by the industry.
The industry expressed concern over the rotation of auditors as well, arguing that it takes at least two years for an auditor to understand the company and its processes. The same happened over  the International Financial Rating Standards (IFRS) as the industry felt it was not compatible with the system prevalent in India.



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