The Hindu Business Line : Meeting the CSR obligations

In the absence of a well-defined and authentic statement of standards, there is no framework by which a company can be held accountable for its failure in meeting its social responsibilities.

The business corporation is a fascinating phenomenon. It is an economic institution independent of the State. It goes on even after its promoters and progenitors pass away. It endures through many generations. While a business corporation is an economic institution, it is important to know what it is not. It is not a political institution. It is not a religious association. It is not a welfare trust.

Basic duties

There are some fundamental responsibilities, which a business corporation must discharge. First, it must satisfy its most important constituency — the customers — by supplying them with goods and services of real value. Second, a business corporation must provide a reasonable return on investment to its proprietors. Third, a business corporation must create additional wealth for the society in which it operates. If a company does not create any wealth, it will go into debt or consume its own capital. Fourth, a business corporation must create additional job opportunities.

Apart from these basic duties, a business corporation is also required to meet some social obligations. The issue of corporate social responsibility first surfaced in the US in the 1960s. However, so far, there has been no clear-cut definition of CSR. Unlike social responsibility, corporate legal responsibility is relatively clear. Companies discharge their legal responsibilities when they comply with what the law requires or refrain from doing what the law forbids. So also, moral responsibility is fairly well established. Corporates fulfil their moral responsibilities when they adhere to or abstain from what ethics and morality approve or disapprove.

Social responsibilities

In the absence of a well-defined and authentic statement of standards, there is no framework by which a company can be held accountable for its failure in meeting its social responsibilities. For example, does a company have a social responsibility to earn profit? Perhaps, yes. Companies are created by their promoters to make a profit. But is there a limit? Do companies that make an astronomical profit violate the principle of social responsibility?

Consumers and shareholders coexist in the same society. In fact, the same person wears two different hats — one as the consumer, and one as the shareholder. Whose interest, or which interest, should the corporate support? Social responsibilities are ambiguous. They are composed of an amalgam of moral ideals and legal strictures formulated by different action groups to meet their individual goals and objectives.

Moral commitment

There is a clear moral commitment — a kind of social responsibility - that a company must provide its employees with a decent living wage. However, what constitutes a decent living wage may vary from place to place.

It will depend on the cost and the standard of living prevalent at each place. There is no moral rectitude that what a business corporation pays its employees at Madurai must be the same as it pays its employees at Mumbai.

Of course, there must not be any adverse discrimination based on gender, caste, religion, and so on. Further, it is important that the principle of parity be maintained with reference to the purchasing power of the living wage. In other words, the living wage at Madurai or Mumbai must be adequate to obtain the same quantity and quality of goods and services necessary to meet the basic needs of the employees.

(The author is a Chennai-based freelance writer.)

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