Corporate Social Responsibility –A Case Study

Corporate Social Responsibility –a case study

By: CS. M. Sundar, Co. Secretary, Southern Spinners & Processors, Chennai

Provisions relating to CSR under the Companies Act, 2013

Every Company having :

net worth of rupees 500 crore or more, or

turnover of rupees 1000 crore or more or

net profit of rupees 5 crore or more

during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of 3 or more directors, out of which at least 1 director shall be an independent director.

The mandate of the said CSR committee shall be:

- to formulate and recommend to the Board, a Corporate Social Responsibility Policy, which

shall indicate the activities to be undertaken by the company as specified in Schedule VII;

- to recommend the amount of expenditure to be incurred on the activities referred to

above;

- to monitor the Corporate Social Responsibility Policy of the company from time to time

The Board of every company referred to above shall after taking into account the

recommendations made by CSR Committee:

- approve the CSR Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, and

- ensure that the activities as are included in CSR Policy of the company are undertaken by the company, and

- ensure that the company spends, in every financial year, at least two per cent of the average net profits.

• If the Company fails to spend such amount, the Board shall, in its report specify the reasons for not spending the amount.

• “Average net profit” shall be calculated in accordance with the provisions of section 198 of the 2013 Act.

CSR activities to include:

- eradicating extreme hunger and poverty

- promotion of education

- promoting gender equality and empowering women

- reducing child mortality and improving maternal health

- combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases

- ensuring environmental sustainability

- employment enhancing vocational skills

- social business projects

- contribution to the Prime Minister's National Relief Fund or any other fund set up by the

Central Government or the State Governments for socio-economic development and

relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other

backward classes, minorities and women; and

- such other matters as may be prescribed

• The 2013 Act provides that the company shall give preference to the local area and areas

around it where it operates

Meaning of “Corporate Social Responsibility”:

Corporate social responsibility is a business system that enables the production and distribution of wealth for the betterment of its stakeholders through the implementation and integration of ethical systems and sustainable management practices. The obligations of business to pursue those policies, to make those decisions or to follow those lines of action which are desirable in terms of the objectives and values of our society.

Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. In some models, a firm's implementation of CSR goes beyond compliance and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law." CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.

A Case Study -Recruitment of Management Trainees of CS/CMA profession or GET’s

On the context of the above mentioned subject of including the same under the head

(i) promotion of education; or (ii) employment enhancing vocational skills, the Companies Act, 2013 under Section 135(5) states that “ The Board of every company mentioned under sub-section (1) shall ensure that the company spends, in every financial year, at least 2% of the Average net profits of the company made during the 3 immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy;

Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities;”

Which means that the basic framework of a CSR policy of any company should be specifically aimed at development of areas which are economically weaker/ backward sections of the society. The “local area and areas around it where it operates” has been mentioned in the proviso to state that the urban areas/rural areas where company has established its industry must provide necessarily support for the upliftment of these weaker/ backward sections of the people living in these areas by providing them with proper education/ enhancing their vocational skills/ eradicating extreme hunger and poverty etc.,  or any other activity/activities as mentioned under Schedule VII of the Companies Act,2013 and as per draft rules notified on 09.09.2013.

If any company wants to include “the recruitment of Management Trainees under CS/CMA profession or even for the “recruitment of GET’s” it should be based on selecting persons from the areas which are economically weaker/ backward sections in the society. Otherwise, the purpose of framing CSR policy would be meaningless. CSR is a social obligation of any corporate towards contributing to the upliftment of the society in general.

CSR must be Corporate Social Responsibility and not Corporate Subjective Responsibility.

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These are my personal views and interpretation on the above subject matter. however, professional or other readers views  are solicited. -CS. Sundar
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CS Members may also contribute articles to this blog. we are very happy to note that in a short span of time, this blog is read by 400-500 friends every day.

publishing an article every day is like running a marathon. it will be a great help, if any interested cs member can contribute articles. that will also be a csr activity - to our profession :)
-cs.mohan kumar
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