ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Corporate Social Responsibility in India

A Case of Government Overregulation?

Corporate Social Responsibility in India

Section 135 of the Companies Act, 2013 mandates companies with a particular turnover, networth, and net profit to spend 2% of their average net profit on corporate social responsibility, while Schedule VII of the act prescribes activities which shall be called as CSR activities. Within a span of six years, CSR rules have been amended multiple times and the central government has at different times added more activities, as well as two high-level committees on CSR. Is CSR in India facing a case of excessive overregulation, when it is basically voluntary in nature?

Corporate social responsibility (CSR) has become an important issue in the business world. There is an ongoing debate about the way CSR should be regulated. Different countries follow different ways to implement CSR. In many countries, CSR is self-regulated, while in others, it is regulated through a code of conduct, and in very few countries, it is enforced through specific legislation.1 The majority of the countries require disclosure on CSR and sustainability practices through company law or listing agreements of the stock exchange.2

The emergence of CSR legislation in some of the countries has raised a debate. Supporters of shareholders primacy model3 of corporate governance that holds shareholders interest as paramount, criticise CSR legislation, stating that deviation from this principle would jeopardise the interest of the business entity. Meanwhile, supporters of stakeholder theory4 welcome this new CSR legislative endeavour in a few countries, stating that the increased inequality, extreme poverty, hunger, climate change, etc, does not leave any option in front of the national governments except to make CSR mandatory. In 2019, even the Business Roundtable, an association of chief executive officers of leading corporations in the United States (US), redefined the purpose of a corporation as to benefit all stakeholders—customers, employees, suppliers, communities, and shareholders, moving away from shareholder primacy.5

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Updated On : 8th Jul, 2021

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