There is a heated debate on corporate social responsibility. Here’s why it won’t help to force the issue
BY SANJAY JHA
ED, Dale Carnegie Training, India
A FRIEND applied for a corporate social responsibility (CSR) job in a controversial corporate behemoth frequently in the news for acquisitive gains. Armed with global qualifications, she approached them with insuperable aplomb. She was ticked off in unequivocal terms: “CSR is just a cosmetic social obligation. Your esoteric degree is superfluous.” She is still devastated by that brazen revelation.
The government has added fuel to the fire by posturing potentiality of mandatory CSR spends. It forgets that this would intrinsically interfere with their natural propensity for profit maximisation. It will not work. But the very fact that a legislative fiat is contemplated manifests the lamentable disinterestedness of the private sector to corporate philanthropy.
Forced measures encourage crafty circumvention. I foresee companies using Shah Rukh Khan to distribute red roses to the terminally ill and it becoming an event-management exercise for brand building. Worse, they will earn tax breaks.
Besides Warren Buffet and Bill Gates, there are others like George Soros, William Hilton and Jon Huntsman who have made sizeable contributions without regulatory invitations. The available statistics that India has 55 dollar billionaires and 1.15 lakh millionaires is incomplete without noting that only 10 percent of the country’s charity funds come from individuals and corporates.
Several firms have become large corporate entities on account of generous tax holidays and public land given as a private asset at throwaway prices. In contrast, their real contribution to society is comparatively minuscule. For all the hype, IT/ITES provides direct employment to just about two million.
A large part of CSR initiatives are artfully masqueraded and make it back to the balancesheet. Every rupee spent is usually quid pro quo. CSR is usually monetised, there must be a return on charitable investment. Ethical proposition, fair trade and sustainability dominate boardroom deliberations. If charity begins at home, sadly it ends there as well.
2010-11 has turned out to be a watershed because the private sector has joined the august list of usual suspects — politicians, bureaucrats, et al. Thus the abrupt emergence of social do-gooders, a desperate attempt to protect their company image and distance themselves from their much-denigrated co-brothers.
Per capita income is not a manifestation of redistributive justice but the skewed representation of disproportionate ownership of assets. The GDP-sellers of India do so with extraordinary vigour quoting some 24-year-old equity analyst of Goldman Sachs. But the rising gap between the rich and the rest is widening, and it should worry not just the government but the powerful business class as the repercussions of a social backlash can be catastrophic.
Only 10 percent of India’s charity funds come from individuals and corporates
Growth-obsessed economists continuously propagate the theory that abundant riches will invariably have a trickle-down effect; the truth is that it rarely occurs. While we gloat over disputable figures on poverty alleviation, the real serious threat of an unequal society is quietly glossed over. So the often paraded maxim: push the bottom of the pyramid upwards without dragging down the upper echelons. Poverty, in reality, should never be measured in percentages, but in actual head-count.
What worsens corporate credibility is the widely held knowledge that several wealthcreators have got super-rich by greasing palms and rent seeking. But you will rarely find them doing serious self-investigation in matters that impact their shareholder value. Unfortunately, there is life beyond fractional ownership of private islands.
Ideally, what India needs is differential corporate tax rates (like for individuals), and higher public spending from incremental collections. And the vigorous celebration of those few for whom CSR is not merely a three-letter word.