The companies bill
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The companies bill Document Transcript

  • 1. The Companies Bill, 2011 states that every company having net worth of Rs 500 crore or more, orturnover of Rs 1,000 crore or more or a net profit of Rs five crore or more during any financial yearshall constitute a Corporate Social Responsibility Committee of the Borad consisting of three or moredirectors, out of which at least one director shall be an independent director.The Boards report under sub-section (3) of section 134 shall disclose the composition of theCorporate Social Responsibility Committee.The Corporate Social Responsibility Committee shall,— • 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; Corporate Social Responsibility. • Recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and • Monitor the Corporate Social Responsibility Policy of the company from time to time.The Board of every company shall— • After taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the companys website, if any, in such manner as may be prescribed; • Ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.The Board will make every endeavour to ensure that the company spends, in every financial year, atleast two per cent of the average net profits of the company made during the three immediatelypreceding financial years, in pursuance of its Corporate Social Responsibility Policy:Provided that if the company fails to spend such amount, the Board shall in its report made underclause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.SCHEDULE VIIActivities which may be included by companies in their Corporate Social Responsibility Policies shouldbe relating to:— 1. Eradicating extreme hunger and poverty; 2. Promotion of education; 3. Promoting gender equality and empowering women; 4. Reducing child mortality and improving maternal health; 5. Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; 6. Ensuring environmental sustainability; 7. Employment enhancing vocational skills;
  • 2. 8. Social business projects; 9. Contribution to the Prime Ministers National Relief Fund or any other fund set up by the Central Government or the State Governments for socioeconomic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and 10. Such other matters as may be prescribedCorporate Social Responsibility (CSR) expressed variedly -- Corporate Conscience / CorporateCitizenship / Corporate Social Performance / Sustainable Business / Enterprise Social Responsibility /Business Responsibility, is altogether different from philanthropy.Though there are umpteen number of definitions but the best one seems to be of World BusinessCouncil for Sustainable Development which states "Corporate Social Responsibility is the continuingcommitment by business to behave ethically and contribute to economic development while improvingthe quality of life of the workforce and their families as well as of the local community and society atlarge".The Ministry of Corporate Affairs, Government of India, desires that the companies should cometogether and work along with the government in promoting inclusive growth in India, of which, CSR isan important component.In the present global scenario, it is not just the government or the regulators that have a role to play,but even corporate need to play an effective role to contribute to the country’s inclusive growth. The11th Five Year Plan defines inclusive growth as “a growth process which yields broad-based benefitsand ensures equality of opportunity for all”.A number of government programmes have since been initiated that imbibe the spirit of inclusiveness– the most popular among them being the National Rural Employment Guarantee Scheme. Even withits drawbacks the NREGS has given a push to inclusive growth.To quote Salman Khurshid, Minister of State for Corporate Affairs “…the corporate sector is standing inthe midst of a sustainability crisis that poses a threat to the very existence of business. What we havebefore us is a crossroad where one path leads us to inclusive growth and the other may lead to anunsustainable future. … the business sector also needs to take the responsibility of exhibiting sociallyresponsible business practices that ensure the distribution of wealth and well-being of thecommunities in which the business operates.”The Ministry of Corporate Affairs as CSR Guidelines state that; • The CSR initiatives of Indian companies should become integral parts of overall business policy and aligned with business goals. The guidelines set out six core elements for companies to address all stakeholders, including shareholders, employees, customers, suppliers, project affected people and society at large.
  • 3. • The CSR policies of companies should fully respect the rights of workers in the areas of workplace environment, career advancement, and freedom of association. Furthermore, companies should not employ child or forced labor, and should maintain equality of opportunities without discrimination. • Companies should respect human rights for all and avoid complicity with human rights abuses. Companies should adopt sustainable environmental policies that prevent pollution, recycle, manage and reduce waste, and manage natural resources in a sustainable manner. Corporate environmental policies should also address the challenges of climate change by adopting cleaner production methods and promoting energy efficiency and environmentally friendly technologies. • Finally, “companies should undertake activities for economic and social development of communities and geographical areas, particularly in the vicinity of their operations.” • In order to facilitate implementation of the CSR guidelines, “companies should disseminate information on CSR policy, activities and progress in a structured manner to all their stakeholders and the public at large through their website, annual reports, and other communication media”.Corporate Social Responsibility has gained significant importance across the corporate world overthe past few years. Some proactive and visionary companies have integrated their CSR initiatives intotheir functional structure. But these are very few. CSR initiatives need to spread far and wide as onlythen the businesses can become sustainable.CSR practices in construction companies assume significant role in view of this sector’s backward andforward linkages. At present CSR is by way of compulsion only as some portion of the profits is leviedas a labour cess which is meant to be spent on labour welfare activities.For the cement giant, ACC Ltd, long before corporate social responsibility came to be talked about as agood practice, it was imbued with a rich tradition of engaging with the community living around itsoperations by encouraging their active involvement in various development schemes. It is a belief thatstill endures. This approach and culture has to reach each and every companies, particular those who consumenatural resources, to put plough back some of their earning to uplift social structure and maintainecological balance.