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Published : December 19, 2013 | Author : Harshini
Category : Company Law | Total Views : 5995 | Rating :

  
Harshini
* Harshini Jhothiraman * Salai Varun Isai Azhaghan IInd Year student of, SOEL, Chennai
 

 Corporate Social Responsibility

The one and only obligation of business is to maximize its profits while engaging in "open and free competition without deception or fraud." -Milton Friedman


There has been a significant increase in interest in Corporate Social Responsibility

(CSR) in recent years and it is now regarded to be at its most prevalent representing an important topic for research. Many scholars are of the view that CSR is generally related to legal and social norms where few disagree calling it an image building tool. On the other hand, there is speculation if it is an action beyond legal sanctions - sometimes called "voluntarism" - ought to qualify as socially responsible action. To understand and analyze the concept of CSR, three words are to be carefully interpreted. These are, ‘corporate’, ‘social’, and ‘responsible’. To elaborate it, CSR refers to the obligations corporations have towards society part of which they exist, Moreover the role of CSR lies beyond these boundaries. CSR is comprehended differently by different people.

CSR is no new concept that happened to boom after the growth of industrialization.CSR was a concept that existed years ago when philosophers in the pre-Christian era had publicly proclaimed to follow safe, ethical and moral business practices and to make charity. The idea of helping the poor and disadvantaged can be cited in much ancient literature and backed my many religions across the globe. CSR is a concept which formed a part of religious preaching. For example, Muslims followed the tradition of saving parts of one’s money income to give the poor and the disadvantaged, which is popularly known as “Zakaat”. The Sikhs followed the concept of “Daashaant” like the Hindus followed “Dharmada”.

Recent history narrates that there was a large scale boycott of consumers who refused to purchase the slave harvested goods back in the 1790s. Though the word CSR was not explicitly used, it was implicitly followed by the morality that stirred every action of people. The term came to popular use later towards the 1970s and 1990s and institutions and people fully recognized and supported it. In 1977 less than half of the Fortune 500 firms explicitly specified Corporate Social Responsibility in their annual reports. In the late 1990s, almost 90 percent Fortune 500 firms adopted CSR as an essential target in their organizational goals and this accelerated their CSR activities in annual reports (Boli and Hartsuiker, 2001). As Goyder puts it, “Industry in the 20th century can no longer be regarded as a private arrangement for enriching shareholders. It has become a joint enterprise in which workers, management, consumers, the locality, govt. and trade union officials all play a part. If the system which we know by the name private enterprise is to continue, some way must be found to embrace many interests whom we go to make up industry in a common purpose.”

Philip Kotler and Nancy Lee (2005) define CSR as “a commitment to improve community well being through discretionary business practices and contributions of corporate resources” According to Bowen, ―CSR refers to the obligations of businessmen to consistently follow and abide those policies to make decisions or to adopt those relations which are in accordance to terms of the objectives and values of our society. The operational view which reflects an element of commitment in the form of corporate actions and policies of CSR is revealed in a firm‘s social performance. This can be evaluated by a firm’s management of interacting relationship and its impact over the society with the CSR policies and actions.

There are always two sides to a coin and this is the same case for the concept of CSR. As there are people who praise it has not been deprived of it fair share of critics. American economist Milton Friedman published an article in the New York Times Sunday Magazine entitled ―The Social Responsibility of Business is to increase profitswhich briefs that corporate entities’ ultimate aim to increase their profits is a bigger priority than to account for any other social, economical and environmental concerns. Yet, CSR has the ability to add positive value and brand equity to a corporation by enabling it to demonstrate its potential as a ―good corporate citizen which is very much essential in increasing the value of the stakeholders and everything else that goes by it as profits alone cannot achieve any of the above said. It is the duty of the entities to give back what it takes from the same.

Sometimes few theories such as the stakeholder theory and the corporate citizenship theory enunciate that CSR can go to the extent of using the resources of the corporate entity in such a way that it can deprive the stakeholders denying them any special claim, for a greater human cause, a part of humanity from misery. Corporate citizenship theories take as their starting point the idea that business enterprises are a part of society. From there they emphasize business enterprises' "role in respecting and defending human rights and in contributing to social welfare and human development within society" suggesting that the shareholder do not hold any prima faice claim over the corporate resources to alleviate an unfavorable situation among the poor and deprived.

The Concept Of Corporate Social Responsibility
The concept of Corporate Social Responsibility has been viewed differently by different scholars. The inability of the governments worldwide to protect its subjects and to provide security has lead to renewed public expectations that corporations have public responsibilities. What led to such expectations and are these public responsibilities undertaken by corporations called the Corporate Social Responsibility? Socially responsible behavior has been described as ‘action that goes beyond the legal or regulatory minimum standard with the end of some perceived social good rather than the maximization of profits’. The ingredients of the above mentioned socially responsible behavior has been categorized into many groups namely;-

1. The society or the community within which the corporation or the company operates or serves
2. The suppliers of the corporation
3. Employees and Workers of the Corporation
4. The consumers which the corporation serves
5. The environment where the company exists and where it operates

Parkinson’s view on Corporate Social Responsibility:-

Parkinson differentiates between rational responsibility and social activism. He states that ration responsibility refers to the support or the aid provided to groups namely the employees, consumers, customers and suppliers to the corporation. On the other hand, social activism aids or provides assistance to even groups which do not fall within the scope of the company’s business operations and activities. It is an effort by the companies to address and sort out social issues that crop up independently and hence is an extension of the corporate activity in a non-commercial arena. However these both can always overlapping activities. Parkinson further adds that there is no further real conflict between profit maximization and socially responsible behavior. He claims that such philanthropic activities cause no controversy. However, problem will arise when the philanthropic behavior is not a response to exterior or interior forces which ultimately aims only at profit maximization of the company. Parkinson concludes that the content of company codes, attitudes of the directors and managers of the company and the mode in which the company spends their financial resources will state that there has not been any shift away from profit maximization object in the corporate world.

Structure Of A Corporation
The word company is derived from the Latin word, ‘’Companis’’ where ‘’Comp’’ means together and ‘’Panis’’ means bread. The word, ‘’Companis’’ originally meant an association of persons who took their meals together. It is called a corporate because the persons composing it are made into one single body by incorporating it with accordance with law. The word corporation is derived from a Latin word, ‘’Corpus’’ which means body. Tracing the etymology, it can be concluded that a corporation (corpus-body) is a legal person created by a process other than natural birth. Moreover, a company is vested with a corporate personality which is distinct from its members. In Salomon v Salomon and Co. Ltd, it has been clearly established that once a company has been validly constituted under law, it is distinct from its members. A company is separate from its owners, “No member can claim himself to be the owner of the company’s property during its existence or in its winding up’’. A company is thus a juristic person. Therefore, a question may arise if a legal person has any obligation towards the society? To sort out such queries, let’s examine section 172 of the Companies Act, 2006

172: Duty to promote the success of the company
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—

(a) The likely consequences of any decision in the long term,

(b) The interests of the company's employees,

(c) The need to foster the company's business relationships with suppliers, customers and others,

(d) The impact of the company's operations on the community and the environment,

(e) The desirability of the company maintaining a reputation for high standards of business conduct, and

(f) The need to act fairly as between members of the company.

(2) Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.

(3) The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.

Observing sub clauses (a) (b) (c) (d) and (e) it can be decided that this particular provision related to corporate social responsibility beyond doubt. Particularly, clause (d) which explicitly emphasizes on the impact of a company on the community and environment. So, here the director of the company takes a foot further to protect rather promotes the status of the community in general. Unfortunately, the scope of this has not been defined properly. The provision does not relate to the company’s CSR program. Without the scope being defined properly, the provision could not be properly interpreted and thus cannot be precisely linked to corporate social responsibility. However, the mere aspect of such a section itself is an adumbration to denote the importance of CSR in England. Also according to Section 417 an annual business review is to be given to its members for them to assess how the directors have performed their duty according to section 172. Thus, Section 417 compliments section 172.The review is to quote the principal risks and uncertainties facing the company. Unfortunately, there have been allegations of unreliable CSR reports.

While in India, there is no separate statue, act or any provision that deals with Corporate Social Responsibility (CSR) in the Companies Act 1956. The Vedanta case is a classic example where it has continuously ported itself as communities and its employees in mining sites at Niyamgiri. It has also periodically submitted CSR reports with this regard. But, NGO reports narrate an entirely contradicting story. Whether the company can be legally challenged is another issue. Ultimately, Companies must adopt CSR before they legally learn their lessons.

However, the Indian legislature has identified the requirement of such a statute and therefore in the Companies Bill, 2012 it has provided for a provision of CSR under Clause 135.Under this clause all those companies having net worth Rs. 500 crore or more, or turnover of Rs. 1000 crore or more or net profit of rupees five crore or more during any financial year is required to constitute a CSR Committee of the Board consisting of three or more Directors, including at least one Independent Director, for matter relating to CSR in such a way that the company would spend at least 2 per cent of its average net profits of its last three years on specified CSR activities. This is a very intelligent move by the Indian Legislators where the maximum limit and the quantum of amount have been explicitly stated so as to be spent on CSR activities. It would have been more effective if any statue could explain the ambit of the word ‘’CSR activities’’ or there can be chances of judicial cleavages with this regard.

Corporate Social Responsibility And Neo American Model Of Company Law
To comprehensively understand and analyze the how CSR and a nation’s Company law is related it becomes essential to critically examine different laws. The Company laws of England, America and South Africa embody what has been referred to as the Neo American model of Capitalism which is contrary to the Rhine model in Japan and Western Europe.Under this, the concept is that since the companies exist as the property of the shareholders, shareholders have the right to insist that the company runs for their benefit. The separation of ownership and control has led to the need for company law to protect and promote the needs of the shareholders. However, there are constraints which curtail the ability of the companies to use its funds for philanthropic ends called the ultra vires doctrine.

The Ultra Vires Doctrine
The object clause sets the main objectives of the company which exists in the memorandum of association. These activities specified in the memorandum can however be altered by a special resolution in terms of both South African and English Company law. This doctrine results in many hardships to innocent third parties and hence has made it very cumbersome. The English Companies Act no longer limits the Company’s capacity in that the validity of that act can no longer be questioned on grounds of lack of capacity.This amendment ahs made the company to be bound by the transaction and thus has been exigent in promoting CSR. Also transactions done outside the scope of the directors but beneficial to the company can be ratified.

Section 36 of the South African Company’s Act states;-
‘’No act of a company shall be void by reason only of the fact that the company was without capacity or power so to act or because the directors had no authority to perform that act on behalf of the company by reason only of the sad fact and except as between the company and its directors neither the company nor any other person may in any other legal proceedings assert or rely upon any such lack of capacity or power or authority’’

Therefore, despite the validity of ultra vires the transaction the directors in the South African law are still liable to the company. The modern trend however has have broadly drafted objects clauses so that most activities will not be deemed ultravires by law.Insofar as philanthropic acts that fall outside the objects clause are concerned, the law will in order to protect the interest of the company and indirectly the interests of the shareholders, hold directors responsible for such acts liable for any loss.

Corporate Social Responsibility – A Myth Or Reality
The concept of myth has to be understood before determining if CSR is a myth or not. The definition of myth is highly necessary. ‘.... always refers to the event alleged to have taken place long ago. But what gives myth an operational value is that specific pattern described it’s timeless, it explains the present and the past as well as the future’ Samizdat stated that ‘Myth provides answers to certain needs in a given society to fills certain function’

The prominence CSR is gaining these years has been due to the result of many evident factors. One reason being, the corporate excesses are being disclosed through media and internet have increased the awareness of the social behavior of the corporations which are indirectly influencing the corporations to adopt a socially friendly behavior pattern. However, there is a heating argument if CSR is reality or if it’s just another cover up. Most corporations in the world have started distinguishing themselves from the so called ‘rogue corporations’. Rouge Corporations are those which are manifested by their misbehaviors. Such distinguishment or distancing has been classified as Corporate Social responsibility. Albeit CSR being a prominent issue in the corporate world, there is still ambiguity as to what exactly constitutes CSR. ‘CSR can be called a concept in which the companies unite social and environmental issues in their business and commercial operations and also in their interaction with shareholders on voluntary basis.’

Today almost all corporations have claimed to be concerned with a variety of stakeholders. Certain stakeholder is considered to be recognized and considered by all corporations in the world such as shareholders, customers and employees. Albeit CSR involves a concern with several stakeholders to a business there are several problems with this research in identifying social responsible behavior.

1. The concern or the attention is mainly provided to powerful stakeholders and not those who merely have a connection with the corporation. Only those who have the power to influence the organisation are given the primary focus. Thus, the workers, customers and employees who have very limited power do not receive the attention. Thus, CSR becomes a rich man’s show.

2. It is essential for CSR to be voluntary. But, No research can actually indicate to what extent the act of CSR is voluntary. The extent to which an action is taken cannot also be measured.

3. Claiming a concern is very different to actually exhibiting that concern through actions.

Public Interest is an essential ingredient for CSR. Unfortunately, Public interest is not homogenous but heterogeneous. It has become factionalized into various numerous groups and sub groups that what may be an interest for one may not be an interest for another. Parkinson (2003) in the Continental European tradition , as Portugal Corporations ( Galp and Caixa Geral de Depositors) are regarded as partially public bodies , with constituencies that extend beyond to other groups such as traders , employees ( retirement plans and other benefits) , local communities and trade unions( with strikes and public contests).

The Agency Theory
The agency theory argues that managers merely act as custodians of the organization and its operational activities and places upon them the burden of managing in the best interest of owners of that business. This theory states that all other stakeholders hold no value to the corporation. The primary focus relies only upon the shareholders. Thus, the myth of CSR is not completely revealed. CSR is merely a structure of a firm’s strategy and the reality is that the corporations have not changed their behavior and the managers have been aiming only to create value for their shareholders. This remains to be the ultimate aim of the corporations and not public interest. CSR was introduced and included in annual reports, corporate reports and practices primarily because of legal enforcements and legal sanctions. The element of public interest does not exist here in this case, claiming Corporate Social Responsibility to be a myth. Public image is another reason behind calling Corporate Social Responsibility a myth. Corporations undertake actions driven by the desire to enhance the reputation of the company and to provide a very positive public image. These actions are driven by ulterior motives. This also distances corporations from communities and the public which they serve. Thus, there is no need for a Corporate Social Responsibility.

Arguments Against Corporate Social Responsibility
Corporate Social responsibility has been called a blessing to the modern world yet on the contrary many critics call CSR an ‘’Iceberg’’ as it is invincible and it is just an ‘’image management’’. As state earlier it is a defense strategy to enhance the reputation of the corporation. Studies reveal that over 80% of corporate CSR decision-makers were very confident in the ability of good CSR practice to deliver branding and employee benefits. Corporate social responsibility is used as a tool to develop public relations. CSR helps company sell. It helps them reach important target markets which are actually their ulterior motives behind their philanthropic activities. In a world where media plays a crucial role, the charity activities of the corporation are enhanced and a vibrant brand royalty is created. This ultimately gives them an upper advantage while dealing with prospective consumers and this would promote profit maximization. The evil element in CSR can be illustrated by the case study of Nike in the United States of America. The suit was filed by a social activist by the name Mark Kasky against the public relation campaign of the company. The Supreme Court of United States of America in this case held that the company did not have any right so as to avoid criticism.

CSR is also accused of being a sly strategy to avoid regulations. It is stated by the critics that regulations would actually hamper the activities which the corporations perform beyond legal necessities. The regulations are criticized by multinational corporations stating that it would discourage them from allotting time, financial resources and social activities towards charitable and philanthropic activities.

Corporations have also attempted to lobby against international regulations. They have destroyed the attempts of international regulations. For example; ICC has lobbied against the emission targets stated in the Kyoto Protocol at the climate summits and it vehemently argued stating that the UN in no way can interfere, regulate and measure the way the companies fulfill what they have promised. Another illustration is that the BASD was launched in 2001 along with the ICC and WBCSD to promote the highest participation of the business community in the Johannesburg Earth Summit in 2002. BASD succeeded in opposing and also preventing the steps and initiatives to achieve binding international regulation of corporations through introduction of voluntary mechanisms. Considering various arguments against Corporate Social Responsibility, it is still a dilemma to determine if it is a boon or a ban to the community at large. However, it is always wise to observe both sides of a coin.

Case Study
Tata Group: With a spanning business and philanthropic landscape Tata Group is a multinational conglomeration which was started as a trading company by Jaksetic Tata in 1868. It has diversified in wide ranging activities, operating more than 80 companies. Under Ratan Tata, the group went through major organizational phases — rationalization, globalization, and now innovation, as it aims to reach a reported $500 billion in revenues by 2020-21, approximately the size of the multinational corporation Walmart. Nearly more than half of the equity of the parent firm is held by philanthropic trusts provided by the founders of the Company. The Tata Group was presented with the Carnegie Medal of Philanthropy in 2007 acknowledging its various charitable activities among various other awards in the past. The Tata Group is guided by the words of JRD Tata, "No success or achievement in material terms is worthwhile unless it serves the needs or interests of the country and its people." Tata Sons gives away around 8-14% of the profits for the purpose of various social activities through the trusts. Even when the economy was unstable in the 1990’s, the spending of the group towards social activities did not decrease. It increased from Rs 670 million in 1997-98 to Rs 1.36 billion in 1999-2000. In the year 2004, Tata Steel group alone allocated Rs 45 crore on social services. From supporting Gandhiji’s campaign in South Africa against racial discrimination to health, sports, educational infrastructure, SHG’s, socioeconomic empowerment measures in various states, government assistance during natural calamities, research facilities and funding, introducing labor welfare laws till the contribution in 26/11 attack on Taj Hotel, Mumbai and many more. With regard to business strategy, in order to ensure the sustainability of activities carried out, the Tata Power follows the Triple Bottom-line Approach thereby adding to the economic value to the livelihood of the members of the community, environmental conservation and improving health and urban development. The Company also made amendments to of the Articles of Association thereby including new article the scope of which relates to the societal and ethical responsibilities of the company to prospective consumers, workers and employees, shareholders, society at large and the local community. Another amendment was made to the Clause 10 of the Code of Conduct to further recognize CSR. Corporate Social Responsibility highlighted in its eight key business processes identified by TISCO's management which was considered exigent to the sustained development of the company. With approximately 66% of the profits from the investment branch of Tata sons goes to charity and numerous other initiatives, being the nation’s largest employment producer to listing some of its affiliates on Wall Street, Tata Group is huge success and a brilliant example for CSR from India. Jamshed Irani, the Director of Tata Sons Ltd, says, "The Tata credo is that 'give back to the people what you have earned from them'.

Inference:

The TATA case study is well suited to the Parkinson’s theory of Corporate Social Responsibility. Despite the lack of any separate legislation for CSR in India the TATA groups have engaged in a great deal of charity works. According to Parkinson Rational activism and Social activism are two different things as social activism takes a step further to protect and promote the interests of not juts its stakeholders but also the general community. He also added the philanthropic activities may not conflict with profit maximization. Likewise, the TATA groups two third share are owned by philanthropic trusts and around 10% of the profits are spent for social and charitable activities. Inspire of all such spending TATA has been one of the richest corporations in India and also one of the riches in the world. Thus, the case study of TATA groups clearly explains the Parkinson’s view that even if the company spends their financial resources, there need not be any shift away from profit maximization object in the corporate world.

Tesco:
Tesco is the world’s second largest multinational grocery store after Walmart by profits with its mark in 12 countries. The company was founded by Sir Jack Cohen in the year 1919 utilizing his World War I service bonus. The company expanded largely through acquit ion of other grocery chains and diversified its service to finance, telecommunication, clothing and other non food items and stood with an increased profit of £2.8 billion for the financial year 2007-08.

Tesco ventured into CSR in the late 1980s with an initiative titled 'Charity of the Year'.

Tesco, considering CSR an integral part of its corporate framework, chalked out several internal and external activities. The company

Internally, Tesco focused mainly on resource conservation at the stores with respect to water and electricity. They started with recycling various products such as mobile phones, Christmas greetings, organic products, usage of biodegradable bags and also contributed to charity. They also provided for employment diversity, safe working conditions, and pension schemes for employees and health care facilities. All the initiatives taken by Tesco were through a virtuous cycle. Their activities involved the consumers, intermediaries and the employees. For example, when they started the ‘computer for schools’ scheme in 1992, they mobilized their funds by giving vouchers at the stores when the consumers purchased products. They largely addressed environmental issues, for example, to try and reduce the carbon foot print, sell products that are not tested on animals etc and also community issues by regenerating employment in the community through training programs, health care and educational facilities. Apart from this, they also focused on sports, sponsoring Tesco Cup, a football competition for youngsters. As is evident, with regard to CSR, they show much of their focus is on external activities yet, their internal activity with regard to CSR is compensated by its partnership dialog with its trade unions which stands out as a good example of CSR. They have also been regarded as one of the first fully commercial business entity that has funded UNICEF in one of its campaigns. On its CSR efforts, Tesco says, "As a responsible Company, Tesco works hard to bring real benefits to the communities we serve, the environment and the economy. This is recognized through our inclusion in the FTSE4 Good and Dow Jones Sustainability indices." Tesco has also ventured into India with the help of the Tata Group to set up a whole sale business in Mumbai along with its limited presence in Bangalore.

Inference: Thus, CSR can be deemed to the secret behind the success of TESCO. To make the above mentioned statement agreeable, the activities of TESCO can be linked to its increased reputation. The computer for ‘’education programmed’’ initiated by TESCO would have helped children to a great extend building in the minds of the general public a very strong trust and TESCO which had a wide number of grocery stores was benefited from the public as groceries are something everybody needs. Sponsoring for the TESCO cupis another concrete example where it not only served as a told of advertisement but also an instrument to build in minds of several people, a strong trust. This trust would evidently reflect upon TESCO’s profits. Section 172 – ‘’duty to promote the success of the company’’ has been well applied in the case of TESCO. Here, the directors of TESCO have done a considerable work in protecting interest of the employees, suppliers and the community in general. Thus, these are not considered to be ‘’ultra vires’’ as it is actually expected out of the English Law itself. Thus, CSR was and is one of the main secret behind its commendable success in the markets.

Ambuja Cements
Gujarat Ambuja Cement was set up in 1986.It started its plants are Chandrapur, Maharashtra. The company has grown 10 times in the last 4 years. Now, it is currently the third largest cement company with capacity of 12.5mn tonnes. The revenue of the corporation is excess of 2500 crores. The Corporate Social Responsibility of Ambhuja Cement started with a simple initiative of providing basic infrastructure for villagers in a place called Kodinar and few surroundings in Gujarat, Western India. When this turned out to be a success, the company multiplied their CSR activities with enhanced eagerness and enthusiasm. Thus, this small initiative spread to 350 rural villages in 7 backward states in India. This helped in achieving a balanced growth which is highly essential in a country like India where the resources are partially distributed throughout the country. Another important move of Ambuja cement was unleashing of women power. Women are considered a very weaker and vulnerable sex in India. Providing job opportunities for women by Ambuja Cement has been a tremendous step towards development of women empowerment. The following are the company’s initiatives:

1. Natural Resource Management: The main focus of the corporation is to manage natural resources such as designing an integrated water shed development programme.

2. Salinity Mitigation : Gujarat Coastal Salinity Programme in collaboration with TATA groups had been devised

3. Agricultural Development: The Company has taken several steps to aid agriculture since it is the major occupation in India and there is scarcity in food crops.

4. Heath Care: The Company focused on HIV AIDS awareness programmes. Medical camps were organised regularly by the corporation to treat the sick in the nearby localities.

Inference: Such activities had enhanced the public image of the company in India and have become the most profitable cement manufacture in India and the lowest cost producer. Ambuja cements reveals to us how exactly CSR is used as an instrument or a strategy or a visionary plan which targets the bull’s eye profit which is done with many other organizational goals. Ambuja cements have clearly disclosed the fact that it may not actually be enough for companies to serve consumers with their products but also to maintain cordial relationships with people, community and the natural environment which will alone help them to move higher beyond a point and grow over time for a sustained period. Therefore this case study helps us to understand how a corporation to be successful in the long run must contribute towards the well being of the society and environment.

Conclusion
Economic history shows us that corporate social interactions take place in a dynamic, unpredictable and extremely complex politico-economic environment.As the number of companies enter the multinational field is rapidly increases, and the general public becomes more knowledgeable regarding the social and environmental conditions in developing countries, the need for a considerable, open, transparent disclosure of corporate conduct will eventually increase. Since they play a very important role in shaping the consumer and the government forces the actual nature of interactions of corporate entities with the society must be more comprehensively analyzed to deal effectively with CSR.

Any mandatory governance reforms intended to spur more corporate altruism are almost sure to have general institutional costs within the corporate system itself. The main criteria that would be the deciding point is whether the any benefit of a reform will exceed costs. One approach a corporation can use when arriving at an ethical decision concerning its philanthropic efforts would be to consider the utilitarian calculation, comparing the costs and benefits of a decision when deciding to make contributions to nonprofit causes. The deciding factor for the above posed question will arise from one’s social and political beliefs. While there are two sides to the same coin, some claim that it is economically justifiable and the others argue that it is not socially beneficial in all circumstances. Leaving alone the above argument with respect to the social responsibility, economically speaking, there is a necessity to develop a suitable framework for a proper analysis of the situation to implement CSR. The social choice perspective may require radically novel economic and political frameworks within which to judge CSRIf corporations are to be tapped as a resource for confronting and responding to social problems, courts must extend the limits on the valid exercise of director discretion to include the power to make decisions which advance the public interest at a marginal profit cost to the corporation.

It has to be kept in mind that it is not just the profit motive that the corporate entity has, it is also the obligation to satisfy the various stakeholders of the company that also constitutes the consumers, government policies etc. but on the other hand the entity also has advantages venturing into and taking upon itself the task of philanthropic activities. It helps the corporate business to build a positive goodwill and rapport with the consumers thereby attracting more and more, thereby increasing the sales and thus the profit. The margin of money spent on such activities must be made sure to be less than what is earned, or it would end in a corporate suicide. Every situation must be economically tested, and such a properly tested report on the issue will have to be considered to for the activities the company will have to undertake to promote its philanthropic activities for the community’s cause.
**********
[1] Hereinafter referred to as ‘CSR’.

# Young, S and Thyil V 2009. Governance, employees and CSR: Integration is the key to unlocking value. Asia Pacific Journal of Human Resources, Volume 47, Issue 2, pages 167; Park S. And Lee S. (2009) Financial Rewards for Social Responsibility Cornell Hospitality Quarterly Volume 50, Issue 2, pages 168-79; Gulyas A. (2009) Corporate Social Responsibility in the British Media Industries – Preliminary Findings Media, Culture & Society, Volume31, Issue 4, Pages 657-68; McGehee N., Wattanakamolchai S., Perdue R. and Calvert E. (2009) Corporate Social Responsibility within the U.S. Lodging Industry: An Exploratory Study Journal of Hospitality & Tourism Research, Volume 3, Issue 3, Pages 417-3.

# Renneboog L., Horst J. and Zhang C. (2008) Socially Responsible Investments: Institutional Aspects, Performance and Investor Behavior Journal of Banking & Finance Volume 32, Pages 1723-42

# Burton B. and Goldsby M. (2009) Corporate Social Responsibility Orientation, Goals and Behavior: A Study of Small Business Owners Business & Society, Volume 48, Issue 1, Pages 88-104.

# See, eg. Christopher D. Stone (1980) The Place of Enterprise Liability in the Control of Corporate Conduct The Yale Law Journal Vol. 90, Issue 1 Page. 1-77

# Robert Lekachman (1977) Taming the Giant Corporation. Political Science Quarterly Vol. 92, Issue 1, Pages 153-154

# See, .g. Engel (1979), An Approach to Corporate Social Responsibility, 32 Stanford Law Review, Volume1, Pages 5-11.

# Ministry of Corporate Affairs Associated Chambers of Commerce & Industry of India, KPMG--India, 2008. Corporate Social Responsibility: Towards a Sustainable Future. 1st Ed. New Delhi: Associated Chambers of Commerce and Industry of India.

# Ibid.

# Goyder, M, Centre for Tomorrow's Company, 2003. Redefining CSR: From the Rhetoric of Accountability to the Reality of Earning Trust. UK: Tomorrow's Company

# Bowen, H. R, 1953 Social responsibilities of the businessman New York: Harper & Row

# Wood, D.J. , Towards improving corporate social performance (Business Horizons, Volume. 34 Issue. 4, World Business Council for Sustainable Development 1991) Pages. 66-73

# Friedman, M. (1970) the social responsibility of business is to increase its profits. New York Sunday Times Magazine

# Jeurissen, R. (2004). Institutional Conditions of Corporate Citizenship. Journal of Business Ethics, Issue 53, Pages 87-96.

# Donaldson. T (2009) A Tribute to Thomas W. Dunfee a Leader in the Field of Business Ethics, Journal of Business Ethics, Volume. 88, Issue4,pages. 553-560

# Garriga E and Melé D (2004) Corporate Social Responsibility Theories: Mapping the Territory Journal of Business Ethics Vol. 53, No. 1/2, pages 51-71

# Slaughter (1997) Corporate Social Responsibility- A new Perspective The Company Lawyer Vol. 18 , pages. 321

# Parkinson, J.E, 1995. Corporate Power and Responsibility Issues in the Theory of Company Law. 1st ed. UK: Clarendon Press.

# Ibid 15

# Ibid 17

# [1897] AC 22

# R.T. Perumal v. John Deavin And Anr AIR 1960 Mad 43

# Section 172 of the Companies Act 2006

# Forbes India Magazine - All Eyes On Govt Vs Vedanta Case. 2013. Forbes India Magazine - All Eyes On Govt Vs Vedanta Case. [ONLINE] Available at: http://forbesindia.com/article/special/all-eyes-on-govt-vs-vedanta-case/34539/1. [Accessed 13 August 2013].

# Corporate Social Responsibility and the Existing Companies Law Press information Bureau, Govt. Of India (2012) [ONLINE] available at : http://www.pib.nic.in/newsite/erelease.aspx?relid=95362 [Accessed 13 August 2013]

# Caroline Bradley(1995), Corporate Power and Control in the 1990s: The Transnational Dimension, Oxford Journal of Legal Studies, Vol. 15, No. 2, pp. 269-279

# Companies Act 1989 5108 inserting SS 35-35B into Companies Act of 1985

# S.35(3) of English Companies Act of 1989 specifically provides for this

# Section 61 of Companies Act 1973

# Slaughter (1997) Corporate Social Responsibility – A new Perspective The Company Lawyer, Vol. 18, page 326.

# Financial institution owned by Portugal state

# Secchi, Davide , 2007. Utilitarian, managerial and relational theories of corporate social responsibility. International Journal of Management Reviews, Volume 9 Issue 4, 347–373.

# The International Chamber of Commerce

# Business Action for Sustainable Development

# World Business Council on Sustainable Development

# Innovation is a Journey with a Compass, may21,2012 www.financialexpress.com

# Variorum (2004), Multi- Disciplinary e-Research Journal Vol. 1, Issue-4.

# Forerunners in corporate social responsibility , March 16, 2005 | The Indian Express, www.tata.com

# 2013 [ONLINE] Available at:http://www.tatapower.com/sustainability/pdf/csr-annual-report-2009-10.pdf. [Accessed 13 August 2013].

# "Company shall be mindful of its social and moral responsibilities to consumers, employees, shareholders, society and the local community. To institutionalize the CSR charter, a clause on this was put into the group's 'Code of Conduct.

# Srivastava A Negi R, Mishra V, Pandey S(2012) Corporate Social Responsibility: A Case Study Of TATA Group, Ios journals Volume 3, Issue 5, Page 17-27.; Pednekar. Mahesh, C, 2005. Corporate Social Responsibility & Business Strategy - A case study on the Tata Group under Mr.RatanTata. Research Student. Rajasthan: JJT University

# Free Case Study | Tesco's Corporate Social Responsibility Initiatives. 2013. Free Case Study | Tesco's Corporate Social Responsibility Initiatives. [ONLINE] Available at: http://www.ibscdc.org/Free Cases/Tesco's Corporate Social Responsibility Initiatives p4.htm. [Accessed 13 August 2013].

# Iyer. A (2003) The Missing Dynamic: Corporations, Individuals and Contracts Journal of Business Ethics, Vol. 67, No. 4 Pages. 393-406

# Robertson, D. C. and N. Nicholson 1996, 'Expressions of Corporate Social Responsibility U.K. Firms', Journal of Business Ethics Volume 15, Issue 10, Pages 1095-1106.

# EngelD (1979) an Approach to Corporate Social Responsibility: Stanford Law Review, Volume. 32, Issue 1Page. 1-98

# Wulfson. M (2001) The Ethics of Corporate Social Responsibility and Philanthropic Ventures, Journal of Business Ethics, Vol. 29, No. 1/2, Pages 135-146.

# Mashaw J (1984) Corporate Social Responsibility: Comments on the Legal and Economic Context of a Continuing Debate: Yale Law & Policy Review, Volume. 3, Issue 1, Pages. 114-129

# Herald Co. v. Seawell: A New Corporate Social Responsibility (1973) University of Pennsylvania Law Review Volume. 121, Issue 5, Pages 1157-1169

The  author can be reached at: harshinij@legalserviceindia.com

Writing award This article has been Awarded Certificate of Excellence for Original Legal Research work by our Penal of Judges



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what are the laws related to gold? from gujarat

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