Dear Readers,
Corporate Social Responsibility is a subject dear to me. In fact, since ages, I have been dreaming of taking a plunge in this sector.
Thus, I am following with interest the news that a standing committee which was reviewing the Companies Bill, has agreed to the proposal to make CSR mandatory for certain companies.
An extract of the news item from The Economic Times is below:
NEW DELHI: The government is likely to make it mandatory for big companies to earmark at least 2 per cent of their net profit for corporate social responsibility (CSR) activities in the new Companies Bill.
"The Ministry of Corporate Affairs has agreed that the Bill may now include provisions to... ensure that every year at least 2 per cent of its (companies') average net profits during the three immediately preceding financial years shall be spent on CSR activities," an official statement said.
The new provisions will apply to companies having a net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more, during a year. Directors will have to make suitable disclosures in this regard in their report to members, it added.
"... The committee feels that separate disclosures required to be made by companies in their Annual Report by way of CSR statement indicating the company policy as well as the specific steps taken there under will be a sufficient check on non-compliance," it said.
The ministry's statement comes after the Parliamentary Standing Committee on Finance presented its report on the new Companies Bill in the Lok Sabha.
It further said that in case a company does not have adequate profits or is not in a position to spend the prescribed amount on CSR activities, the directors would be required to give suitable reasons in their report to members.
The Companies Bill, 2009, was re-introduced in Parliament in August last year, after which it was sent to the Standing Committee for vetting. The revised Bill is expected to be presented in Parliament for passage in the Winter Session.
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In my column in The Economic Times, I had pointed out the need for uniform guidelines for CSR.
For instance, a CSR index could be created which would facilitate standardized reporting.
Further, perhaps donations in kind could also be included in the CSR target - say a computer manufacturer providing computers to government schools.
Lastly, shareholders could also contribute to the CSR initiative in a big way and must be encouraged to do so. The government must permit dividends to be deposited in the CSR account of the dividend paying company at the request of the shareholder (Currently dividends can be sent by cheque or credited electronically to the bank account of the shareholder). This small facilitating step would go a long way in boosting collections.
Have a nice Sunday and a great week ahead.
Photograph: This photograph was taken in Bangalore at the Lalbagh Botanical Gardens. Hibiscus signifies gentleness. CSR activities if done rightly, will help spread gentleness and kindness and goodness and we do need tons of this.
Best regards,
Lubna
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