Mumbai: Adi Godrej, chairman of the Godrej Group and president designate of the Confederation of Indian Industry, wants companies to cooperate with the government on a proposed law that will make corporate philanthropy mandatory.
The new Companies Act, tabled in Parliament on Wednesday, requires companies to earmark 2% of their average profits in the preceding three years towards corporate social responsibility (CSR) activities.
Adi Godrej. Photo by Bloomberg
Godrej supports the contentious provision. “What the Companies Act envisages is that there is a recommendatory level of 2% of profit after tax for corporate social responsibility and in case you’re not able to spend that much, you must explain it in your annual report,” Godrej said on the sidelines of the second annual conference of the Dalit Chamber of Commerce and Industry. “I think that’s a fairly reasonable provision and I personally do support it.”
Indian companies have for the large part opposed any mandatory CSR budgeting despite repeated suggestions by the government to make such spending compulsory.
Some have argued that a mandatory CSR requirement amounts to a tax and even annexation, and that it must be dealt with at the shareholder level rather than at the company level.
On affirmative action, Godrej said it should be voluntary.
Unlike in the US, where most Fortune 500 firms have aggressive affirmative action programmes, similar programmes don’t exist in India’s largest companies. Proposals have been mooted—and for the most part rejected—to impose some sort of reservation for the underprivileged in the private sector in India.
“Corporate India is very much in favour of affirmative action, but it is against any mandatory, compulsory or quota-related action. Corporate India is very supportive of affirmative action on a voluntary basis,” Godrej said, affirming the long-held line that Indian companies have taken.
Affirmative action should be done in a manner of encouraging inclusiveness, he said. “Reservation is not the solution. The best thing is to let the enterprise work, but corporate social responsibility should come into play and I’m sure it’ll add much more value than reservation,” he said.