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RAJIV GANDHI NATIONAL UNIVERSITY OF LAW, PUNJAB
PATIALA-147001
2011







FINAL DRAFT
A Project Report Submitted in the Partial Fulfillment of Paper Sixth of VII
Semester B.A., LL.B (Hons.) Course on


CORPORATE SOCIAL RESPONSIBILITY: ISSUES AND PERSPECTIVE IN
THE LIGHT OF COMPANIES BILL, 2009



SUPERVISED BY: SUBMITTED BY:
Gurneet Singh Dhaliwal Himanshu Meena
Assistant ProIessor oI law B.A. LL.B (Hons.)
RGNUL, Patiala



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SUPERVISOR`S CERTIFICATE

This is to certiIy that the Project Entitled: Corporate Social Responsibility: issues and perspectives
in the light of companies bill, 2009` submitted to the Rajiv Gandhi National University oI Law,
Punjab, Patiala in completion oI the requirements Ior the degree oI B.A., LLB Course, is an original
and bonaIide research work carried out by Mr. Himanshu Meena under my supervision and
guidance. No part oI this study has been submitted to any University Ior the award oI any Degree or
Diploma whatsoever.



_______________________
Mr Gurneet S|ngh Dha||wa|
(Ass|stant rofessor of Law)









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CANDIDATES` CERTIFICATE
This is to certiIy that the project on the topic 'Corporate Social Responsibility. issues and
perspective in light of Companies Bill, 2009 is purely based on bona Iide research work carried
by me under the guidance and supervision oI Mr. Gurneet Singh Dhaliwal and the same has not
been submitted anywhere Ior any purpose whatsoever.

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ACKNOWLEDGEMENTS

On the completion oI this project, I would like to place on record my sincere gratitude towards all those
people who have been instrumental in its making.
Firstly, I would like to thank Mr. Gurneet Singh Dhaliwal (Asst. Professor of Law) Ior providing me
with such an interesting topic to research and Ior helping me with the research and Ior always attending
on all my queries and doubts regarding the same.
I also owe sincere gratitude to the staII at library and the computer lab Ior always helping in the process
oI Iinding material and other sources Ior research.
And last but not the least I thank my Iamily and Iriends Ior supporting me throughout in my endeavors.


Himanhu Meena

Roll. No. 364

Rajiv Gandhi National University of Law

Punjab, Patiala







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TABLE OF CONTENTS

TITLE PAGE.......................................I
SUPERVISOR CERTIFICATE...... .....................................II
ACKNOWLEDGEMENT..................................................III
TABLE OF CONTENTS...............................................IV
Chapter I Introduction.................................07
1.1 Introductory...................................07
1.2 Aim and objective........................................07
1.3 Scope and Limitation..............................07
1.4 Research methodology.......................................07
1.5 Importance oI the topic..............................07
1.6 Corporate Social Responsibility..................................08
1.7 Historical background................................12
Chapter II Corporate Social Responsibility: where to from here?..............................................15

2.1 Introduction...............................15

2.2 United Nations treaties as a Ioundation Ior CSR...................15

2.3 International legislative developments..................... ..16

Chapter III Corporate Social Responsibility: Indian Legal Perspective...........18

3.1 Introduction................................18

3.2 Several major CSR initiatives have been launched in India.............19
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3.3 Child Labour and Right oI Organization.....................19

3.4 Labour law..................................20

3.5 The Environment..............................20

3.6 Right to inIormation and corruption........................21

Chapter IV: Corporate Social Responsibility: Issues and Perspectives........22

4.1 Introduction...............................22

4.2 Advantages oI CSR............................22

4.3 International CSR standards and Guidelines...................23

4.4 CSR the Indian scenario..........................29

4.5 Corporate scandals.............................29

Chapter V: Companies Bill, 2009..............................31

5.1 Report oI the standing Committee on Finance, on the Companies Bill, 2009.......31

5.2 Panel views on Companies Bill, 2009.......................35

Chapter VI: Corporate Social Responsibility in light of Companies Bill, 2009......37

Chapter VII: Conclusion and Suggestions.....................38

Bibliography:................................40

References:.................................41


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CHAPTER 1: INTRODUCTION


1.1INTRODUCTION:
Corporate social responsibility (CSR) is an obligation, beyond that required by the law and
economics, Ior a Iirm to pursue long term goals that are good Ior society. The continuing
commitment by business to behave ethically and contribute to economic development while
improving the quality oI liIe oI the workIorce and their Iamilies as well as that oI the local
community and society at large. About how a company manages its business process to produce
an overall positive impact on society

1.2 AIMS AND OBJECTIVE:
The aims and objective oI the project is to discuss all area oI Corporate Social Responsibility, its
beneIits in present and Iuture. The main object oI the project is to discuss the Corporate Social
Responsibility, its issue and perspective in the light oI Companies Bill, 2009.

1.3 SCOPE AND LIMITATION OF THE PROJECT:
The scope oI this project is limited to analyzing the Ilaws in the Corporate Social Responsibility:
issues and perspective in the light oI Companies Bill, 2009 and providing Ior suggestive
measures relating to it

1.4 RESEARCH METHODOLOGY:
The sources used Ior research herein are secondary sources oI data collection such as books and
various journals have been used with the help oI the access to the library and the soItware.
Moreover, the latest inIormation was also taken Irom various newspapers and journals.
1.5 IMPORTANCE OF THE TOPICE:
The project is analytical as well as descriptive in nature. However, majority oI the part oI the
project is analytical and suggestive in nature. The aim oI the project is to explore and analyse
CSR and Iinding lacunae in it. The object oI the project is to analyse and provide suggestive
measures so as to overcome the various Ilaws in it.

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1.6 CORPORATE SOCIAL RESPONSIBILITY:
Your business doesn`t exist in isolation, simply as a way oI making money. Your employees
depend on your business. Customers, suppliers and the local community are all aIIected by you
and what you do. Your products, and the way you make them, have an impact on the
environment.
Corporate social responsibility (CSR) takes all this in to account and can help you create and
maintain eIIective relationships with your stakeholders. It isn`t about being 'right on, or
mounting an expensive publicity exercise. It means taking a responsible attitude, going beyond
the minimum legal requirements and Iollowing straightIorward principles that apply whatever
the size oI your business. This guide explains how you can exploit the beneIits that CSR can
bring to your bottom line. The GFC and associated controversies exposing unethical and
irresponsible behavior oI corporate executives and senior managers has bewildered the
community.
1
As the global Iinancial crisis starts to touch the lives oI all oI us through rising
unemployment,
2
reduced wage growth
3
and collapsing asset values
4
bewilderment is
transIorming into anger. Yet apparently disconnected Irom the reality oI recent events
resistance remains toward taking a more coercive approach to corporate governance

1
Arising Irom the GFC arguably the most conspicuous instance oI corporate irresponsibility has been the patently
excessive and, as it turned out, maniIestly undeserved salary packages oI Iinancial sector
executives who received huge payments prior to, and Ior some, subsequent to their companies being
bailed out by American taxpayers. It has been generally accepted that the GFC is in large part an
outcome oI attempts to make proIits by way oI reckless and irresponsible Iunctioning by the
investment bankers/institutions and their top Iunctionaries. The collapse oI some oI these corporations,
in particular Lehman Brothers, Goldman Sachs and Morgan Stanley, precipitated the unraveling oI
other highly geared and unstable Iinancial institutions including, in Australia, Storm Financial Group
and Opus Prime et. al. See The World Economic Outlook, Crisis and Recovery, 22 April 2009.
Available at http://www.im I.org/external/pubs/It/weo/20 09/0 1/index.htm~ (accessed 23 April 2009).
2
The International Monetary Fund predicts unemployment in Australia will rise Irom 6.8 per cent in 2009 to 7.8 per
cent in 2010. See The World Economic Outlook, Crisis and Recovery, 22 April 2009.
3
The Reserve Bank oI Australian board meeting minutes Ior 7 April 2009 included a statement predicting: '.wage
growth to moderate in the period ahead. See: http://www.rba.gov.au/ Monetary
Policy/RBABoardMinutes/2009/070409.html~ (accessed 22 April 2009)
4
In Australia the All Ordinaries index has Iallen, as at 21 November 2008, approximately 53 Irom the 1
November 2007 high. As at 2 March 2009 the New York Stock Exchange`s Dow Jones Index has
Iallen below 7,000 Ior the Iirst time since 1997. House prices in Australia have Iallen 3 since 2007
and some predict they will Iall up to 20 in the period to 2010. US house prices are reported to have
Iallen by 50 or more Irom peak values in some markets. Sources: www.comsec.com.au~; and the
Economist Intelligence Unit www.iec.com~.

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by, Ior example, requiring that companies behave ethically, avoid harm to others and
take into account impacts on the community and environment arising Irom their
actions.
5
The proIound irresponsibility` to which Barack Obama reIers highlights the
importance oI corporate responsibility, and the impact oI its absence. Previously
viewed as a soIt or peripheral issue this area oI corporate governance has been shown
by the GFC to be absolutely crucial to global social, economic and political stability.
Within this context the devastating consequences oI the GFC has brought the
shareholder primacy model, the very orienting principle oI corporate governance, into
question. The scale and long term impact oI the GFC strongly suggests that iI we wish
to continue achieving economic growth and iI we want to ensure that growth is
sustainable, corporate governance will need to integrate sustainable practices into the core oI
company operations. For this to occur the true costs oI corporate actions will need to be reported
and accounted Ior both Iinancial and non-Iinancial. Yet this will require no less than the
dominant shareholder primacy perspective to change and Ior corporate governance to embrace an
approach generally described as enlightened shareholder value.`
6
While this essay uses the term
corporate social responsibility or CSR, similar terms are oIten used to describe the same idea -
that is a process whereby a company considers and manages the long-term impact oI its
decisions on its stakeholders.
7
The question - who is reasonably considered a stakeholder, gives
rise to a plethora oI possible answers.
8
This essay will not directly engage in the debate
concerning shareholder versus stakeholder theory other than to acknowledge that members oI the
community, other than the shareholders oI corporations, have a stake in corporate activities and
that they thereIore should be regarded as stakeholders whose interests should be taken into
account.
9
Taking leads Irom approaches taken in overseas jurisdictions; this essay considers how

3
See Lumsden, Andrew J. and Friedman, Saul, Corporate Social Responsibility: The Case Ior a SelI Regulatory
Model. Company & Securities Law Journal, 2007; Sydney Law School Research Paper No. 07/34, et al. Resistance
to companies having a social responsibility beyond serving the interest oI their stockholders can be traced to views
Iirst expressed Milton Freidman, in A Freidman Doctrine the Social Responsibility oI Business Is to Increase
ProIits, N.Y Times, September 13 1970 6 Magazine
6
Horrigan, Bryan, Corporate Social Responsibility in the 21st Century, Edward Elgar Publishing, UK,(2009)
|unpublished|, Chapter 7, p36
7
This essay, while acknowledging there are diIIerent understandings oI what constitutes corporate social
responsibility` vis-a-vis corporate citizenship, corporate responsibility, corporate sustainability, triple bottom line
reporting and/or corporate citizenship, encompasses each oI these principles within the rubric oI the term corporate
social responsibility`.
8
The most authoritative deIinition oI a stakeholder is that recently Iormulated United NationsNormson the
Responsibilities oI Transnational Corporations and Other Business Enterprises with Regard to Human Rights.http
://ww w.unhch r.ch/hurido cda/hurido ca.nsI/(Symbol) /E.CN.4.Sub.2.2003.12.Rev.2.En~ (accessed 8 June 2009)
9
Stakeholders in certain situations might include the employees and contractors, customers and suppliers, the
community, the society, the environment, even Iuture generations.
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the values embodied in CSR are already applied within the sphere oI corporate governance.
Existing voluntary CSR initiatives will be explored, as well as the reasons that the business
community and the government have given Ior continuing to maintain the voluntary status oI
these initiatives. Various international CSR indices are considered, in particular the Global
Reporting Initiative or GRI, which has emerged as the leading international Iramework Ior
voluntary CSR and sustainability reporting. The community now increasingly expects
corporations to act with a view to the common good and in a manner responsive to all oI those
stakeholders within its sphere oI inIluence.
10
While voluntary soIt law initiatives have an
important role, there is apathy and resistance to change in the business community to bring about
the necessary modiIications in corporate culture voluntarily.
11
Adoption oI a universal CSR
standard will only happen iI Governments lead the way. This essay concludes that when the
world economy recovers Irom the GFC governments should resolve to take a more coercive
approach to CSR with an eye to long term sustainability and the collective good.


1.7 DEFINITION OF CSR:

CSR: Corporate,` Social,` and Responsibility.` In broad terms, CSR relates to responsibilities
corporations have towards society within which they are based and operate, not denying the Iact
that the purview oI CSR goes much beyond this. CSR is comprehended diIIerently by diIIerent
people.
!hilip Kotler and Nancy Lee (2005).
'A commitment to improve community well being through discretionary business practices and
contributions oI corporate resources
'A way companies manage the business processes to produce an overall positive impact on
society.
World Business Council for Sustainable Development.


10
Femke de Man, Tracking the gap between societal expectations oI companies and perceived CSR perIormance,
Boston College Center Ior Corporate Citizenship, September 2007. GlobeScan conducted a report in 2007 on
citizens` expectations oI companies` CSR activities Iinding that people in developed and developing nations have
high expectations oI companies, see www.bcccc.net~.
11
See Parliament oI Australia, Parliamentary Joint Committee on Corporations and Financial Services, Corporate
Responsibility: Managing Risk and Creating Value, June 2006 at 7.1, where submissions and views on the
appropriateness oI current reporting requirements were highly polarized with corporations and business associations
almost unanimously agreed that the current arrangements are appropriate whereas NGOs in general agreed that there
was scope Ior improvement

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'Corporate Social Responsibility is the continuing commitment by business to behave ethically
and contribute to economic development while improving the quality oI liIe oI the workIorce and
their Iamilies as well as oI the local community and society at large.
Corporate responsibility. an aspiration in need of definition.
DeIinitions oI what constitutes corporate social responsibility vary in their scope and
emphasis. Most stress the responsibility oI corporations beyond their shareholders to a
much wider group oI stakeholders.
12
Key Ieatures oI CSR include reporting on and
being responsible Ior upholding agreed social, environmental and ethical corporate
standards.
13
CSR is also described in terms oI a company considering, managing and
balancing the economic, social and environmental impacts oI its activities.
14

Various deIinitions Ior CSR were considered by the Australian Government in two
reports that speciIically dealt with CSR and corporate governance. The Iirst was Irom
the Federal Parliamentary Joint Committee on Corporations and Financial Services
entitled Corporate responsibility: Managing risk and creating value (the PJCCFS
Report) and a second entitled the social responsibility oI corporations Irom the
Corporations and Markets Advisory Committee
15
(the CAMAC Report). These reports
reIlect the diIIerent approaches to deIining CSR. The PJCCFS Report described corporate social
responsibility in terms oI:
'A company considering, managing and balancing the economic, social and Environmental
impacts oI its activities. It is about companies assessing and managing risks, pursuing
opportunities and creating corporate value, in areas beyond what would traditionally be regarded
as a company`s core business. It is also about companies taking an enlightened selI-interest`
approach to considering the legitimate interests oI a company`s stakeholders.
16


12
See Bottomley, Stephen; The constitutional corporation: rethinking corporate governance, Ashgate Publishing,
Ltd., 2007 and Corporate Law and Accountability Research Group, October 2006, Working Paper No. 4
13
See Anderson, Helen and Landau, Ingrid,; Corporate Social Responsibility in Australia: A Review, Corporate
Law and Accountability Research Group, October 2006, Working Paper No. 4 quoting M Glazebrook, Corporate
Citizenship and Action Research: An Australian Perspective` (Paris: International Association oI Business and
Society Proceedings, 1999) 1205; M Sweeney et al, Social Reporting and Australian Banks: Endorsement or
Pretence to the Triple Bottom Line?` (2001) 4 Journal oI Corporate Citizenship 91. There have been a number oI
inquiries into corporate responsibility.
14
Anderson, Helen and Landau, Ingrid,; Corporate Social Responsibility in Australia: A Review, Corporate Law
and Accountability Research Group, October 2006, Working Paper No. 4
13
Corporations and Markets Advisory Committee, The Social Responsibilities oI Corporations, December, 2006,
(CAMAC Report).

16
The PJCCFS Report at 27. The concept oI 'enlightened shareholder value` is examined below in thecontext oI
s172 oI the UK Corporation law.

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1.8 HISTORICAL BACKGROUND OF CSR:
The concept oI CSR in India is not new, the term may be. The process though acclaimed
recently, has been Iollowed since ancient times albeit inIormally. Philosophers like Kautilya
Irom India and pre-Christian era philosophers in the West preached and promoted ethical
principles while doing business. The concept oI helping the poor and disadvantaged was cited in
much oI the ancient literature. The idea was also supported by several religions where it has been
intertwined with religious laws. 'Zakaat, Iollowed by Muslims, is donation Irom one`s earnings
which is speciIically given to the poor and disadvantaged. Similarly Hindus Iollow the principle
oI 'Dhramada and Sikhs the 'Daashaant. In the global context, the recent history goes back to
the seventeenth century when in 1790, England witnessed the Iirst large scale consumer boycott
over the issue oI slave harvested sugar which Iinally Iorced importer to have Iree-labor saucing.
In India, in the pre-independence era, the businesses which pioneered industrialization along
with Iighting Ior independence also Iollowed the idea. They put the idea into action by setting up
charitable Ioundations, educational and healthcare institutions, and trusts Ior community
development. The donations either monetary or otherwise were sporadic activities oI charity or
philanthropy that were taken out oI personal savings which neither belonged to the shareholders
nor did it constitute an integral part oI business. The term CSR itselI came in to common use in
the early 1970s although it was seldom abbreviated. By late 1990s, the concept was Iully
recognized; people and institutions across all sections oI society started supporting it. This can be
corroborated by the Iact the while in 1977 less than halI oI the Fortune 500 Iirms even mentioned
CSR in their annual reports,
17
by the end oI 1990, approximately 90 percent Iortune 500 Iirms
embraced CSR as an essential element in their organizational goals, and actively promoted their
CSR activities in annual reports. 'The phrase Corporate Social Responsibility was coined in
1953 with the publication oI Bowen's Social Responsibility oI Businessmen (Corporate watch
report, 2006). The evolution oI CSR is as old as trade and business Ior any oI corporation.
18

Industrialization and impact oI business on the society led to completely new vision. By 80`s and
90`s academic CSR was taken into discussion.
19
The Iirst company to implement CSR was Shell
in 1998.(Corporate watch report, 2006) With well inIormed and educated general people it has
become threat to the corporate and CSR is the solution to it. 1990 was CSR as a standard
industry with companies like Price Walter house Copper and KPMG. CSR evolved beyond code

17
Jerome F. Sheestack., 'Corporate Social Responsibility in a Changing Corporate World in Ramon Mullerat, ed.,
Corporate Social Responsibility: The Corporate Governance oI the 21st Century, (The Hague: Kluwer Law
International,, 2005), p.98

18
Antonio Gaspar, 'Possible Role oI the Multilateral Investment Fund (miI) in the area oI Corporate Social
Responsibility ,Multilateral Investment Fund, Inter-American Development Bank, Washington, 2003, p. 3.

19
Ibid.
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oI conduct and reporting it started taking initiative in NGO`s, multitasked holder, ethical trading.
(Corporate watch report, 2006).
The role oI corporate by and large has been understood in terms oI a commercial business
paradigm oI thinking that Iocuses purely on economic parameters oI success. As corporate have
been regarded as institutions that cater to the market demand by providing products and services,
and have the onus Ior creating wealth and jobs, their market position has traditionally been a
Iunction oI Iinancial perIormance and proIitability. However, over the past Iew years, as a
consequence oI rising globalization and pressing ecological issues, the perception oI the role oI
corporate in the broader societal context within which it operates, has been altered. Stakeholders
(employees, Community, Suppliers and Shareholders) today are redeIining the role oI corporate
taking into account the corporate` broader responsibility towards society and environment,
beyond economic perIormance, and are evaluating whether they are conducting their role in an
ethical and socially responsible manner. As a result oI this shiIt, many Iorums, institutions and
corporate are endorsing the term Corporate Social Responsibility (CSR).
20
They use the term to
deIine organization`s commitment to the society and the environment within which it operates.
The World Business Council on Sustainable Development`s
21

(WBCSD) report was titled Corporate Social Responsibility:
Making Good Business Sense and the OECD Guidelines Ior 1 Multi-National Enterprises which
includes a discussion on how CSR is emerging as a global business standard.
22
Further, there is a
global eIIort towards reinIorcing CSR programmes and initiatives through local and international
schemes that try to identiIy best in-class perIormers.
rguments for socially-responsible behavior:
O It is the ethical thing to do
O It improves the Iirm` public image
O It is necessary in order to avoid excessive regulation
O Socially responsible actions can be proIitable
O Improved social environment will be beneIicial to the Iirm
O It will be attractive to some investors
O It can increase employee motivation
O It helps to corrects social problems caused by business

20
For Iurther inIormation see M. Porter and M. Kramer, The Competitive Advantage oI Corporate Philanthropy`,
Harvard Business Review, December 2002, pp. 57-69.

21
This is increasingly becoming an important issue also Ior developing countries and thus anticipating the Iuture
demand Ior such qualities in their product-service oIIerings can provide companies with a strategic advantage and
competitive edge.

22
For an exhaustive overview oI the business possibilities related to the poorest tier oI the population see Prahalad
C.K. and S.L. Hart, 'The Fortune at the Bottom oI the Pyramid, StrategyBusiness, Issue 26, Iirst quarter 2002, pp.
1-14.
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CSR behavior can benefit the firm in several ways.
O It aids the attraction and retention oI staII
O It attracts green and ethical investment
O It attracts ethically conscious customers
O It can lead to a reduction in costs through re-cycling
O It diIIerentiates the Iirm Irom its competitor and can be a source oI competitive advantage
O It can lead to increased proIitability in the long run.

Corporate Social Responsibility (CSR) is a concept whereby organizations consider the interests
oI society by taking responsibility Ior the impact oI their activities on customers, employees,
shareholders, communities and the environment in all aspects oI their operation.
23
This
obligation is seen to extend beyond the statutory obligation to comply with legislation and sees
organizations voluntarily taking Iurther steps to improve the quality oI liIe Ior employees and
their Iamilies as well as Ior the local community and society at large.
24
With businesses Iocusing
on generating proIits,
25
sustainability was not a popular concern among companies up until
recently.
26
Now, in an era oI globalization, multinational corporations and local business are no
longer able to conduct destructive and unethical practices, such as polluting the environment,
without attracting negative Ieedback Irom the general public. With increased media attention,
pressure Irom non-governmental organizations, and rapid global inIormation sharing, there is a
surging demand Irom civil society, consumers, governments, and others Ior corporations to
conduct sustainable business practice.






23
GRI is a global reporting initiative providing widely accepted indicators Ior sustainable reporting. For Iurther
inIormation, visit www.globalreporting.org.

24
The un Global Compact is the world`s largest CSR initiative, providing a global network and a learning tool Ior
companies. Facilitated by the United Nations, it entails companies complying with ten globally accepted principles
in the areas oI human rights, labour issues, environmental impact and corruption. For Iurther inIormation, visit
www.unglobalcompact.org
.
25
A A1000s is part oI the Account Ability 1000 Series and oIIers process guidelines which cover reporting and
accountability mechanism in the areas oI social, environmental and economic perIormance. For Iurther inIormation,
visit www.accountability.org.uk

26
J. Collier and R. Esteban, 'Corporate Social Responsibility and Employee Commitment, Business Ethics: A
European Review, Vol. 16, No. 1 2007, pp. 19-33.
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CHAPTER 2: CORPORATE SOCIAL RESPONSIBILITY: WHERE TO
FROM HERE?


2.1 INTRODUCTION:

Corporations, oIten more than governments, are today`s dominant institution. Corporations
Ieature in all aspects oI social, political and economic liIe - private and public, business and non-
business, large and small enterprises. As the size and inIluence oI corporations grows, the
Iramework and eIIectiveness oI corporate governance regimes assumes wide ranging socio-
economic and political impacts. Inappropriate and outdated approaches to corporate governance
including structural incentives Ior corporations to not take into account the interests oI
stakeholders and to ignore externalities will, and has, undermined our quality oI liIe and eroded
economic growth in the long term. How can the law shape and exert inIluence upon corporate
conduct? II company law prescribed a diIIerent norm to the shareholder primacy model, would
diIIerent corporate practices and conduct Iollow?

2.2 UNITED NATIONS TREATIES AS A FOUNDATION FOR CSR:

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The Universal Declaration oI Human Rights 1948 (UDHR) applies to all organ|s| oI society`
27

and as such has relevance to the regulation oI corporate governance. The UDHR touches on a
range oI issues relevant to CSR although a consensus on the exact nature oI the applicable rights
and duties has not yet been achieved.
28
However the UDHR, as a declaration, is not legally
binding. United Nations (UN) conventions codiIying the UDHR do however produce legally
binding obligations on signatory states, although these do not apply directly to corporations.
29

There are a range oI UN conventions that include speciIic rights relevant to CSR such as the
right to work, the right to a minimum wage
30
, to Iorm trade unions
31
and to a healthy and saIe
workplace.
32
There are also a number oI other non-binding international declarations concerning
environmental rights and sustainable development. While not legally binding on corporations,
and thus more inspirational than mandatory, international conventions explicitly acknowledge
the role that companies, along with governments, have in promoting environmental and human
rights, key aspects oI CSR. These conventions are also oI signiIicance as a number oI the CSR
reporting Irameworks, such as the UN Global Compact and the Global Reporting Initiative, are
written to be complementary to, and reinIorce, the existing international legal Iramework,
including the ILO Conventions, the UNDHR and major environmental treaties.

2.3 INTERNATIONAL LEGISLATIVE DEVELOPMENTS:


27
See the preamble oI the Universal Declaration oI Human Rights 1948 (UDHR): '.every individual and every
organ oI society, keeping this Declaration constantly in mind, shall strive by teaching and education to promote
respect Ior these rights and Ireedoms and by progressive measures, national and international, to secure their
universal and eIIective recognition and observance, both among the peoples oI Member States themselves and
among the peoples oI territories under their jurisdiction. See also Article 29(1) oI UDHR: 'Everyone has duties to
the community in which alone the Iree and Iull development oI his personality is possible.
28
The UDHR encompasses a broad range oI rights including the right to Ireedom oI thought, conscience and
religion, Ireedom oI peaceIul assembly and association, the right to just and Iavorable conditions oI work and the
right to an adequate standard oI living. The preamble to the UDHR notes that it is: a common standard oI
achievement Ior all peoples and all nations, to the end that every individual and 'every organ oI society. It is
arguable that the UDHR and that as such they are called upon to promote, respect and secure the recognition oI these
rights, particularly those directly applicable to business.
29
The two key human rights covenants are the International Covenant on Economic, Social and Cultural Rights
(1966) and the International Covenant on Civil and Political Rights (1966).
30
ILO Convention No. 131 (Minimum Wage-Fixing Convention).

31
Article 8 oI the International Covenant on Economic, Social and Cultural Rights, Adopted and by the UN General
Assembly resolution 2200A (XXI) oI 16 December 1966.
32
Article 7 oI the International Covenant on Economic, Social and Cultural Rights

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At the nation state level a number oI overseas jurisdictions have begun to redeIine the
orthodoxy oI shareholder primacy by regulating that company must report on social
and environmental issues and in doing so have regard to a wider group oI stakeholder
interests. In the United Kingdom, where there has been a Minister Ior Corporate
Social Responsibility since 2000, there is a legislated requirement Ior certain British
companies to produce an annual publicly available Operating and Financial Review
(OFR) addressing 'other stakeholders.
33
The OFR is meant to provide an assessment
oI a corporation`s perIormance and the main trends and developments aIIecting the
perIormance and position oI the company now and in the Iuture.
34
The law adopts an
enlightened shareholder value` approach under which a director must, in promoting
the company, have regard to Iactors such as the long-term consequences oI business
decisions and the impact oI the company`s activities on employees, the community
and the environment. Despite the UK Government`s aspiration to redeIine the
corporate purpose by beginning to regulate CSR, and that 84 oI UK companies
report on CSR, certain quarters oI the UK business and legal community regard it as
business as usual`. While the CSR Ieatures introduced into UK corporate law are still new, and
as such largely untested, it is unlikely to be last we hear oI CSR Irom the UK.
Across the European Union there are varying versions oI CSR regulation and the uptake oI the
GRI is high.
35
For example in France since 2002 all companies listed on the premier Marche are
asked to release an annual triple bottom line perIormance report disclosing social and
environmental issues in annual reports. The report assesses the company against a template oI
social and environmental issues but it does not include sanctions Ior non-compliance with the
disclosure requirements. In Demark, since 1 January 2009, the largest Danish companies,
investors and state owned companies are required to include inIormation on CSR in their annual
Iinancial reports. The CSR report must include inIormation on companies` policies Ior CSR or
socially responsible investments, inIormation on how such policies are implemented in practice,
inIormation on what results have been obtained so Iar and management`s expectations Ior the
Iuture with regard to CSR. Again there is no sanction Ior non-compliance and iI a company has
no CSR policy they merely state inIormation to that eIIect explicitly in their annual Iinancial

33
Directors oI all listed companies in the UK must prepare an operating and Iinancial review (OFR) Ior Iinancial
years which begin on or aIter 1 April 2005
34
While the law states that directors should primarily address the OFR to shareholders it also explicitly states that
inIormation in the OFR will also be oI interest to 'other stakeholders including: employees, suppliers, customers,
regulators and other users oI reports and accounts such as those particularly interested in the environment and
broader community.
33
Williams, Cynthia A.; Ruth V. Aguilera (2008). "Corporate Social Responsibility in a Comparative Perspective".
in Crane, A., et al. The OxIord Handbook oI Corporate Social Responsibility. OxIord: OxIord University Press.

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report. In South AIrica all companies listed on the Johannesburg Stock Exchange are requested
to comply with codes based on the Global Reporting Initiative (GRI) guidelines Ior disclosing
social and environmental perIormance. Companies are requested to report annually on the nature
and extent oI its social, transIormation, ethical, saIety, health, and environmental management
policies and practices. KMPG`s 2008 International Survey oI Corporate Social Responsibility
claims that CSR has gone mainstream citing the rate oI reporting among the largest 100
companies in 22 countries as 45 percent, with the highest numbers in Japan with 88 percent61
and the UK with 84 percent. Integration oI corporate responsibility inIormation into annual
reports is also said to be on the rise in France, Norway, Switzerland, Brazil, and South AIrica.
While CSR is still in its inIancy, among our key trading partners and political allies, CSR
reporting has moved beyond the experimental stage. For the majority oI major comparable
jurisdictions CSR is now a legitimate and growing part oI good corporate governance








CHAPTER 3: CORPORATE SOCIAL RESPONSIBILITY: INDIAN
LEGAL PERSPECTIVE



3.1 INTRODUCTON:
'Corporate Social Responsibility Practices in India sets a realistic agenda oI grassroots
development through alliances and partnerships with sustainable development approaches. At the
heart oI solution lies intrinsic coming together oI all stakeholders in shaping up a distinct route
Ior an equitable and just social order.... - Indu Jain (Chairperson, The Times oI India Group )


In recent years Corporate Social Responsibility (CSR) has gained growing recognition as a new
and emerging Iorm oI governance in business. It is already established in a global context, with
international reIerence standards set by the United Nations, Organization Ior Economic Co-
operation and Development (OECD) guidelines and International Labour Organization (ILO)
conventions. It is almost a truism that the adequacy and the quality oI corporate governance
shape the growth and the Iuture oI any capital market and economy

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The World Business Council Ior Sustainable Development in its publication "Making Good
Business Sense" by Lord Holme and Richard Watts, used the Iollowing deIinition. "Corporate
Social Responsibility is the continuing commitment by business to behave ethically and
contribute to economic development while improving the quality oI liIe oI the workIorce and
their Iamilies as well as oI the local community and society at large"

CSR has become increasingly prominent in the Indian corporate scenario because organizations
have realized that besides growing their businesses it is also vital to build trustworthy and
sustainable relationships with the community at large. This is one oI the key drivers oI CSR
programs
36


3.2 SEVERAL MAJOR CSR INITIATIVES HAVE BEEN LAUNCHED IN INDIA:
Since the mid-1990s. Among these is the Iirst voluntary code oI corporate governance,
'Desirable Corporate Governance: A Code, established in April 1998. This was an initiative by
the ConIederation oI Indian Industry (CII), India`s largest industry and business association.
37

A National Foundation Ior Corporate Governance (NFCG) has been established by the Ministry
oI Corporate AIIairs. This is a partnership with the ConIederation oI Indian Industry (CII), the
Institute oI Company Secretaries oI India (ICSI) and the Institute oI Chartered Accountants oI
India (ICAI). The purpose oI the National Foundation Ior Corporate Governance is to promote
better corporate governance practices and raise the standard oI corporate governance in India
towards achieving stability and growth .Another reason Iuelling this rapid adoption oI CSR is the
state oI the Indian society. Though India is one oI the Iastest growing economies, socio-
economic problems like poverty, illiteracy, lack oI healthcare etc. are still ubiquitous and the
government has limited resources to tackle these challenges. CSR is not a new concept in India.
Corporates like the Tata Group, the Aditya Birla Group, and Indian Oil Corporation, to name a

36
Ishikawa, K. (1985), What is Total Quality Control?: The Japanese Way, Prentice-Hall, Englewood CliIIs, NJ,
trans. by D.J. Lu, (2002).Kaoru Ishikawa (Ishikawa Kaoru ) (1915-1989) was a Japanese University proIessor and
inIluential quality management innovator best known in North America Ior the Ishikawa or cause and eIIect diagram
(also known as Fishbone Diagram) that are used in the analysis oI industrial process. Ishikawa has emphasized
include the seven Quality Control tools. As per his view and respecting the ideas that suggested by him-'' The Iirst
concern oI a company is the happiness oI the people connected to it".



37
Leonard, D., McAdam, R. (2003), "Corporate social responsibility", Quality Progress: ASQ Magazine, No.
October, pp.27-32.
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Iew, have been involved in serving the community ever since their inception. It has become an
integral part oI the corporate strategy.
38


3.3 CHILD LABOUR AND RIGHT OF ORGANIZATION:

India is member oI the International Labour Organization, and has ratiIied 40 oI the ILO
conventions. However, India has not ratiIied Iour oI the ILO core conventions:

4 087 Freedom oI Association and Protection oI the Right to Organize (1948)
4 098 Right to Organize and Collective Bargaining (1949)
4 138 Minimum Age Convention (1973)
4 182 Elimination oI the Worst Forms oI Child Labour (1999)

India`s domestic law on child labour, Child Labour (!rohibition and Regulation) Act (1986), ban
employment oI children in some dangerous occupations, such as Iactories and mines, and
regulate the working conditions in others.
39
According to this law, anyone above the age oI 14
will be regarded as an adult and will not protected by the child labour regulations.

According to UNICEF, insuIIicient attention has been given in India to eliminate the worst Iorms
oI child labour. The 1986 child labour law does not cover children in all sectors. India has the
world`s highest number oI child labourers under14 years.


3.4 LABOUR LAWS:

India has altogether ratiIied 333 labour laws. . One challenge is that 90 oI the Indian labour is
in the inIormal sector, which is not protected by the labour regulations. Most Indian states have
enIorced an act Ior minimum wages Ior labourers in scheduled employment, as stipulated in the
Minimum Wage Act Irom 1948. The ways these laws are supervised and implemented, vary.
Sub-contracts are common in India. One challenge is that 90 oI the Indian labour is in the
inIormal sector, which is not protected by the labour regulations.
Most Indian states have enIorced an act Ior minimum wages Ior labourers in scheduled
employment, as stipulated in the Minimum Wage Act Irom 1948. However, the minimum wage is
oIten not paid. According to ILO, labour under minimum wage is considered a Iorm oI Iorced
labour. According to ILO estimates, there are more than one million Iorced labourers in India,
particularly in the southern part. Many oI these are children.

38
See the accompanying paper in this series on SR and small and medium-sized enterprises Ior
Iurther discussion oI this issue.

39
This suggests that it would be worthwhile considering whether 'compliance with local legislation should Iorm
one element oI any Iuture standard.
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India was in 1976 the Iirst country in the South Asian region to enact legislation against bonded
labour. Contract labour in India is another complex area. The contract workers do not get the
same protection and beneIits as permanent workers. Many work as contract labour Ior longer
periods oI time. Although the ILO Conventions related to Iorce Labour have been ratiIied,
certain Iorms oI bonded labour still persists, especially in the inIormal sector.

India has enacted legislation that prohibits discrimination due to gender, religion, ethnicity or
caste. Again, the record oI implementation is varied. ILO has observed some violations in India`s
implementation oI the Discrimination (Employment and Occupation) Convention, (No 111, Irom
1958). This convention obligates the state parties to hinder discrimination due to e.g caste or
gender, such as diIIerent salary scales and labour conditions.


3.5 THE ENVIRONMENT:

The main law on environment and production is The Environment (Protection) Act (1986). The
responsibility Ior environmental governance is shared between the corporations and the
government. Many Indian institutions have come up with voluntary guidelines on environmental
Iriendly practice. The main law on environment and production is The Environment (!rotection)
Act (1986). This law gives the central government the authority to protect and improve
environmental quality, as well as control and reduce pollution Irom all sources.
The responsibility Ior environmental governance is shared between the corporations and the
government. Many Indian institutions have come up with voluntary guidelines on environmental
Iriendly practice.
40
Among these is a partnership on voluntary pollution control, developed by
the Indian Ministry oI Environment and Forests together with the industrial sector. Other
initiatives include the Energy EIIicient Initiative by the Indian Chamber oI Commerce, the
Indian Ecomark and the Clean Technology initiative by the ConIederation oI Indian Industry and
others.

With regard to the implementation oI environmental laws, a challenge has been lack oI
knowledge on how to IulIil the laws in practice. There are also weaknesses in the implementation
and control mechanisms, The budget and inIrastructure Ior control has not been suIIicient,
although greatly improved over the last years.


3.6 RIGHT TO INFORMATION AND CORRUPTION:


40
Cragg Wesley LLhlcs Codes CorporaLlons and Lhe Challenge of CloballzaLlon 2003 Coel 8an Culde Lo
lnsLrumenLs of CorporaLe 8esponslblllLy An overvlew of 16 Lools for labour fund LrusLees 2003

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In the Transparency International Corruption Perceptions Index in 2008 in was ranked as number
85 out oI 180 countries. The biggest problems were Iound in regards to politics and governance.
According to a Global Compact report, there are low levels oI government capacity Ior law
enIorcement and implementation in India, causing relatively high levels oI corruption.
n 2005, Right to information (RT) act was established, This law gives the general public right
to government inIormation, and is meant to promote transparency and responsibility in the work
oI all governmental institutions.

The introduction oI RTI has led to changes in the transparency regarding establishment and
implementation oI strategies, programmes and laws.
41
It is also opening Ior access to inIormation
in areas where the authorities have leIt out important aspects, and give the public a possibly to
require important inIormation. RTI is additionally an important tool in regards to environmental
management.










CHAPTER 4: CORPORATE SOCIAL RESPONSIBILITY: ISSUES AND
PERSPECTIVES


4.1 INTROCUTION:

Globalization has inIluenced trade all over the world; companies have looked Ior new
opportunities in doing business outside their home country. In recent years Corporate Social
Responsibility (CSR) has gained growing recognition as a new and emerging Iorm oI
governance in business.
42
It is already established in a global context, with international
reIerence standards set by the United Nations, Organization Ior Economic Co-operation and
Development (OECD) guidelines and International Labour Organization (ILO) conventions.
With brand value and reputation increasingly being seen as one oI a company`s most valuable
assets, CSR is now seen as building loyalty and trust amongst shareholders, employees and
customers1. CSR applies to a wide variety oI company activities, especially in enterprises that

41
lor more lnformaLlon wwwlloorg LasL vlslLed 20Lh november 2008
42
8ohman Anna and MlnLer Craham lnLernaLlonal lnlLlaLlves Lo romoLe 8esponslble 8uslness Confuslon or
Coherence? lnLernaLlonal 8uslness leaders lorum 2007
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operate multi-nationally in very diIIerent social and environmental settings. This Paper Iirst
explains about the advantages oI CSR, then discusses about the International Legal Regimes
which govern CSR, and how they are helpIul Ior the eIIective implementation oI CSR in the
present global era, next part oI the paper explains CSR Indian scenario and Iinally ends with a
conclusion.

4.2 ADVANTAGES OF CSR

CSR is closely linked with the principle oI sustainable development, which argues that
enterprises should make decisions based not only on Iinancial Iactors such as proIits or dividends
but also based on immediate and long term social and environmental consequences oI its
activities. CSR has a signiIicant role in controlling the perils oI uncontrolled development,
satisIying the needs oI the present generation and at the same time ensuring that the resources oI
Iuture generations is not jeopardized2. Companies are more willing to report on their
contributions to the maintenance oI a sound environment, a healthier society or more ethical
business practices through both internal and external action within the countries in which they
operate.
43
The area oIten lacking is CSR reporting in the area oI labor rights and relations. One
oI the prime concerns oI CSR should be the quality oI industrial relations within a company.
It must be a contradiction in terms Ior a Iirm that Iails to apply collective agreements or respect
employment contracts to be regarded as `socially responsible`. One oI the most signiIicant issues
within the CSR agenda concerns the dynamic relationship between CSR and good public
governance. The limits both to corporate accountability through law and to voluntary` CSR-
related actions by businesses lie with the public good governance agenda. Legislation to deal
with worst case instances oI irresponsible behaviour and to set a minimum Iloor Ior business
conduct will not work in the absence oI eIIective drivers Ior business implementation and
enIorcement, whether they are market-based, or a result oI enIorcement through the state.


4.3 INTERNATIONAL CSR STANDARDS AND GUIDELINES
44
:
1. ILO Tripartite Declaration oI Principles Concerning Multinational Enterprises and Social
Policy
2. OECD Guidelines Ior Multinational Enterprises
3. UN Global Compact
4. The Universal Declaration oI Human Rights

ILO tripartite declaration of principles concerning multinational enterprises and social
policy:-
The ILO is the Iirst specialized agency oI the UN in 1946. It is the only 'tripartite United
Nations agency, bringing together representatives oI governments, employers and workers to

43
CLCu CorporaLe 8esponslblllLy rlvaLe lnlLlaLlves and ubllc Coals CLCu 2001
44
lor more lnformaLlon wwwoecdorg/daf/lnvesLmenL/guldellnes LasL vlslLed 12Lh CcLober 2008

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shape policies and programmes jointly. Its mission, scope, audience, governance and its relation
with other instruments is brieIly described below.
The purpose oI the Declaration is to encourage the positive contribution which MNEs can make
to economic and social progress, and to minimize and resolve diIIiculties arising Irom their
operations. The Declaration was one oI earliest international instruments covering the social
dimension oI business.
45
It was negotiated between the employees, employers and workers in the
year 1977. The Declaration sets out principles in the Iield oI general policies, employment, and
training, conditions oI work and liIe and industrial relations. All government, employer and
worker organizations are recommended to observe the principles on a voluntary basis.
46


The main areas covered by the Declaration are.
General policies (obey national laws and respect international standards)
Employment (employment promotion; equality oI opportunity and treatment; security oI
employment)
Training (policy development Ior vocational training, skills Iormation)
Conditions oI Work and LiIe (wages, beneIits, conditions oI work; minimum age; saIety and
health)
Industrial Relations (Ireedom oI association and right to organize; collective bargaining;
consultation; grievances; settlement oI disputes).
The Declaration was revised in 2000 to include the Fundamental Principles and Rights at Work.
It was Iurther revised in 2006 to update reIerences to other ILO instruments. During this update,
the list oI ILO Conventions that member States are invited to ratiIy was extended to all the
Iundamental ILO Conventions.
47
Moreover, a speciIic recommendation was added to encourage
enterprises, both multinational and national, to take immediate and eIIective measures within
their own competence to secure the prohibition and elimination oI the worst Iorms oI child
labour, as a matter oI urgency.
Multinational enterprises are a key audience; the Declaration`s principles regarding the social
aspects oI MNEs are also Ior use by small and medium enterprises, as well as by governments,
employers and workers organizations. All the parties are encouraged to contribute to the
realization oI the ILO Declaration on Fundamental Principles and Rights at Work. In addition,
governments are urged to ratiIy, along with the conventions already reIerenced, the minimum
age and child labour conventions. The ILO undertakes periodic surveys on the implementation oI
the MNE Declaration. It does not have a membership structure, so it does not require that user
organizations report their use oI the Declaration.
The ILO established a subcommittee oI the Committee on Legal Issues and International Labour
Standards oI the ILO Governing Body to oversee the Declaration, and to discuss ILO policy

43
CLCu ollcles for romoLlng 8esponslble 8uslness ConducL ln ollcy lramework for lnvesLmenL A 8evlew of
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46
CLCu ChapLer 7 ollcles for romoLlng 8esponslble 8uslness ConducL ln ollcy lramework for lnvesLmenL
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47
unlLed naLlons Puman 8lghLs Councll romoLlon and roLecLlon of All Puman 8lghLs Clvll ollLlcal Lconomlc
Soclal and CulLural 8lghLs lncludlng Lhe 8lghL Lo uevelopmenL roLecL 8especL and 8emedy a lramework for
8uslness and Puman 8lghLs 8eporL of Lhe Speclal 8epresenLaLlve of Lhe SecreLaryCeneral 2008
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concerning CSR issues4. The ILO Iocuses on improved inIormation collection, analysis and
dissemination, and coherent action, drawing on its tripartite strength and bringing together
contributions Irom all parts oI the organization. It also conducts surveys on use oI the
Declaration. The MNE Declaration includes procedures Ior the examination oI disputes
concerning its application. The ILO also has a standing tripartite committee on Freedom oI
Association, which deals with complaints concerning Ireedom oI association and collective
bargaining. The MNE Declaration is unique in providing clear guidance oI how companies and
governments can work together, to help advance national and local economic and social
development goals advocating public-private partnerships long beIore the term existed. The
MNE Declaration also encourages dialogue between home and host countries Ior Ioreign direct
investment, linking CSR initiatives to a broader dialogue concerning trade and investment. By
situating CSR in the broader context oI government policies which critically impact enterprise
decisions, the MNE Declaration emphasizes that CSR is an important complement to
government regulation, but never a substitute.
The MNE Declaration reIerences other authoritative international instruments, such as the
Universal Declaration oI Human Rights. As a result oI the thematic and sectoral complimentarily
oI the ILO Declaration and the OECD Guidelines, there is a good collaborative relationship
between the two organizations. In June 2008 they will jointly host a ConIerence on CSR, aimed
at promoting responsible business conduct in the globalizing economy. The MNE Declaration
also reIerences instruments such as the Millennium Development Goals and the UN Global
Compact. ILO is establishing a helpdesk Ior companies, industry initiatives and employers,
workers and governments to promote Iull and accurate inclusion oI the principles oI the MNE
Declaration.

OECD guidelines for multinational enterprises:-
The OECD MNE Guidelines are subscribed to by all thirty members oI the Organization Ior
Economic Co-operation and Development (OECD). A Iurther ten non-member countries
(Argentina, Brazil, Chile, Egypt, Estonia, Israel, Latvia, Lithuania, Romania, and Slovenia) have
also adhered to the Guidelines. Four additional applications Ior adherence are currently under
consideration by the OECD5. The Business and Industry Advisory Committee (BIAC) and the
Trade Union Advisory Committee (TUAC) were involved in their development and endorse the
Guidelines. OECD Watch, a coalition oI more than 65 civil society organizations, also supports
the Guidelines. The Guidelines have been reIerenced by the UN Security Council and other
interested non-OECD bodies.
The purpose oI the OECD MNE Guidelines is to oIIer a balanced, multilaterally-endorsed, and
comprehensive Code that expresses the shared values oI adhering governments. They are
'recommendations jointly addressed by governments to multinational enterprises that provide
'principles and standards oI good practice consistent with applicable laws. By providing a clear
set oI expectations, the Guidelines seek to encourage the positive contributions multinational
companies can make to economic, environmental and social progress6.
The Guidelines comprise a set oI voluntary recommendations in all the major areas oI corporate
citizenship, including employment and industrial relations, human rights, environment,
inIormation disclosure, combating bribery, consumer interests, science and technology,
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competition, and taxation. They Iorm part oI a broader OECD investment instrument,
48
the
Declaration on International Investment and Multinational Enterprises, which is designed to
promote direct investment and international economic development and growth. Implementation
oI the Guidelines involves a unique combination oI binding and voluntary elements7. Adhering
governments commit to promote them among multinational enterprises operating in or Irom their
territories. The instrument`s distinctive implementation mechanisms include the operations oI
National Contact Points (NCP), which are government oIIices charged with advancing the
Guidelines and handling enquiries in the national context. NCPs also support a unique mediation
and conciliation procedure called 'speciIic instances involving claims that the Guidelines
have not been respected. Since 2000, some 160 such speciIic instances have been considered by
the NCPs. This process may be engaged whether or not a company has recognized the
Guidelines.
While the Guidelines are primarily addressed to MNEs, they are not aimed at introducing
diIIerences oI treatment between multinational and domestic enterprises. Accordingly,
multinational and domestic enterprises are subject to the same expectations in respect oI their
conduct wherever the Guidelines are relevant to both. Likewise, while SMEs may not have the
same capacities as larger enterprises, they are invited to observe the Guidelines 'to the Iullest
extent possible. The Guidelines are Ireely available to all user organizations8. Since the
Guidelines do not require users to publicize their use, the actual number oI users is not known.
Nonetheless, surveys among large enterprises indicate that a signiIicant proportion reIer to the
Guidelines in their CSR policies.
The OECD Investment Committee,
49
in consultation with BIAC and TUAC, is responsible Ior
oversight oI the Guidelines. Adhering governments are individually responsible Ior promoting
use oI the Guidelines, and Ior processing any 'speciIic instances, through their NCPs. They
meet annually at the OECD and report to the Investment Committee, which conducts a 'peer
review oI implementation.
50

The Guidelines were expressly designed to strengthen the existing international normative
Iramework. Among other norms, they reIerence the Universal Declaration oI Human Rights, the
ILO Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on
Environment and Development and Agenda 21, and the Copenhagen Declaration Ior Social
Development. The Guidelines can readily be used in conjunction with other instruments9.
Explanatory materials have been developed to outline their relationship with the UN Global
Compact, the Principles Ior Responsible Investment, and with the GRI Guidelines.

UA Clobal Compact:-
UN Secretary-General, one oI the principal organs oI the United Nations, with support Irom UN
agencies, governments, and representatives oI business, labour and other civil society bodies. It
accepts new adherents on an ongoing basis Irom all major categories oI societal actors. The UN
Global Compact has been recognized on a number oI occasions by the UN General Assembly, as

48
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CLCu LnvlronmenL and Lhe CLCu Culdellnes for MulLlnaLlonal LnLerprlses CorporaLe 1ools and Approaches
CLCu 2003
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CLCu ChapLer 7 ollcles for romoLlng 8esponslble 8uslness ConducL ln ollcy lramework for lnvesLmenL
2006
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well as by all Heads oI States and Governments in the UN World Summit Outcome document
(2005) and the G8.
The UN Global Compact has two broad goals. These are to mainstream ten core principles
relating to human rights, labour standards, the environment, and anti-corruption in business
activities around the world; and to catalyse actions in support oI broader UN goals, such as the
Millennium Development Goals (MDGs). A voluntary initiative, it is not a code oI conduct. It
oIIers 'a policy Iramework Ior organizing and developing corporate sustainability strategies
while oIIering a platIorm based on universal principles to encourage innovative initiatives
and partnerships with civil society, governments and other stakeholders. The UN Global
Compact invites companies to embrace, support and enact, within their sphere oI inIluence, the
Iollowing ten principles10
51
:

uman Rights.
Principle 1: Businesses should support and respect the protection oI internationally proclaimed
human rights; and
Principle 2: make sure that they are not complicit in human rights abuses.

Labour Standards.
Principle 3: Businesses should uphold the Ireedom oI association and the eIIective recognition oI
the right to collective bargaining;
Principle 4: the elimination oI all Iorms oI Iorced and compulsory labour;
Principle 5: the eIIective abolition oI child labour; and
Principle 6: the elimination oI discrimination in respect oI employment and occupation.

Environment.
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diIIusion oI environmentally Iriendly technologies.

Anti-Corruption.
Principle 10: Businesses should work against corruption in all its Iorms, including extortion and
bribery.
The UN Global Compact is directed primarily to the business sector, but is a multi-stakeholder
initiative and engages all kinds oI societal actors, including public agencies, labour and civil
society organizations. Companies participating in the Compact initiate their involvement by
expressing their support in writing at CEO level. Among other things, each participant commits
to integrate the principles into organizational strategy, culture and operations; to publicly
advocate the UN Global Compact and its principles; and to publish annually a 'communication
on progress, a description oI the ways in which it is supporting the Global Compact and its ten
principles. Since its launch in July 2000, the initiative has grown to over 5, 000 participants,

31
The list includes human rights; workplace and employee aspects (including occupational health and saIety); unIair
business practices including bribery, corruption and anti-competitive practices; organizational governance;
environmental aspects; marketplace and consumer aspects; community aspects; and social development aspects.
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including over 3,600 businesses in 120 countries around the world. It is widely regarded as the
world's largest global corporate citizenship initiative.
52

The Compact has a 'multi-centric governance Iramework. This includes a triennial Leaders
Summit, annual local networks Iorum, the Global Compact OIIice and a UN Inter-Agency Team,
as well as a 20 person global Board comprising representation Irom business, civil society,
labour and the UN Iamily. The Compact`s principles are derived Irom the Universal Declaration
oI Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work; the Rio
Declaration on Environment and Development, and the UN Convention against Corruption. The
Global Compact has developed guidance materials that help users understand its relationship
with the OECD MNE Guidelines, and with the GRI Guidelines. The Compact endorses but does
not require the use oI the GRI Guidelines in making 'communications on progress.

1he Universal Declaration of Human Rights:- The Universal Declaration oI Human
Rights states that 'every individual and organ oI society has the responsibility to strive 'to
promote respect Ior these rights and Ireedoms and 'by progressive measures, national and
international, to secure their universal and eIIective recognition and observance11. As
important 'organs oI society, businesses have a responsibility to promote worldwide respect Ior
human rights.
53
The ILO Conventions establish norms covering all aspects oI working conditions
and industrial relations. Some oI the most important cover12 core labour standards (i.e. basic
human rights in the workplace). These include the right to Ireedom oI association, the right to
organize and to collective bargaining, and Ireedom Irom Iorced labour. ILO conventions are
binding on all countries that have ratiIied them.
54


.3..1 The LO Tripartite Declaration of !rinciples Concerning Multinational Enterprises and
Social !olicy.
It is a global instrument designed to provide guidance to government, employer and worker
organizations in areas oI employment, training, conditions oI work and industrial relations. All
core labour standards are covered. Although it is a non-binding instrument, its implementation is
nevertheless the object oI regular reviews.

.3..2 The LO Declaration on Fundamental !rinciples and Rights at Work.
It is based on the core labour standards outline in the ILO Conventions. The Declaration is not
binding but applies to all ILO member states. As part oI a strategy to help countries to have well-
Iunctioning labour markets, it provides Ior a mechanism Ior annual review oI the eIIorts made by
member states that have not yet ratiIied the core labour standards. The Declaration also

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unlLed naLlons 8uslness and Puman 8lghLs Mapplng lnLernaLlonal SLandards of 8esponslblllLy and
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reinIorces the application oI core labour standards in private voluntary instruments.
55
The 1992
Rio Declaration sets out 27 principles deIining the rights and responsibilities oI states in relation
to human development and well-being. The Agenda 21 agreement provides guidance Ior
governments, business and individuals on how to contribute to eIIorts to make development
socially, economically and environmentally sustainable. Its Chapter 30 recognizes the value oI
promoting 'responsible entrepreneurship.

.3..3 The Millennium Development Goals.
It identiIies a series oI government-agreed targets and timetables in relation to issues such as
poverty reduction, improvement oI child health care and education, and the promotion oI gender
equality.

.3.. The Johannesburg Declaration on Sustainable Development (2002).
It says that the private sector has 'a duty to contribute to the evolution oI equitable and
sustainable communities and societies, and that 'there is a need Ior private sector corporations
to enIorce corporate accountability. Its Plan oI Implementation notes the need to 'enhance
corporate environmental and social responsibility and accountability. The UN Framework
Convention on Climate Change and Convention on Biodiversity were also signed by a majority
oI governments.

.3..5 The 2005 World Summit Outcome.
It reiterated the importance oI Iull respect Ior existing labour, human rights and environmental
commitments and encouraged 'responsible business practices, such as those promoted by the
Global Compact.

.3..6 UN Convention against Corruption (2003).
It ratiIies countries undertook to criminalize an array oI corrupt practices; develop national
institutions to prevent corrupt practices and to prosecute oIIenders; co-operate with other
governments to recover stolen assets; and help each other to Iight corruption.

4.4 CSR THE INDIAN SCENARIO:

In an economically globalized world, corporations are subject to global expectations, and a
globally accepted and broad concept like sustainable development Iits well with the economic,
social and environmental responsibilities oI global corporations. Accordingly, the triple bottom
line approach to CSR suggests that a business organization must strive to balance these three
areas oI responsibility. Because oI its alignment with the concept oI sustainable development,
this approach is widely applied around the world. Associating CSR with sustainable
development has become so common that CSR reporting is oIten called sustainability reporting.
In India, till very recently, the Iocus was on charity, which is not really CSR. Sustainable CSR
programmes mean a cohesive mix oI economic, legal, ethical and philanthropic tenets.
56
In

33
lor CS8 racLlces ln lndla see wwwkarmayogorg/csr LasL vlslLed 22nd uecember 2008
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lor CS8 racLlces ln lndla see wwwkarmayogorg/csr LasL vlslLed 22nd uecember 2008
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today's changed business scenario, there is an increased Iocus on giving back to society and
creating a model which works long term and is sustainable and it is imperative that the best
practices Ior inclusive growth are shared with the stakeholders. Recent rash oI scandals involving
major corporate giants throughout the world have brought to the attention oI public and academia
the need to analyze these issues.

4.5 CORPORATE SCANDALS: SATYAM STORY-

Satyam was recognized Ior its work with the Byrraju Foundation, Iounded by Ramalinga Raju,
Chairman oI Satyam Computers. Byrraju Foundation builds progressive, selI-reliant rural
communities in India through a holistic, transIormational approach. The Ioundation provides a
broad range oI services to villagers, including Healthcare, Education, Literacy, Water,
Environment, Sanitation, Livelihoods, and Disability Rehabilitation. Satyam was speciIically
honored Ior its participation in The Byrraju Foundation`s program to provide remote
electrocardiograms (EKGs) checkups to villagers all over Andhra Pradesh. So Iar, the Byrraju
Foundation`s work has impacted more than 3 million people in 199 villages in six districts oI
Andhra Pradesh, a state oI 80 million people in Southern India. It will expand into other states
shortly. A spokesperson Ior UKTI said "This is the Iirst year that we instituted a Corporate
Social Responsibility Award which was awarded to Satyam Computers Ior the work oI its
Ioundations in rural India and the establishment oI the Emergency Management Research
Institute (Popularly known as 108 services)which draws on Satyam's technology to improve the
responsiveness oI India's emergency services. We believe that Corporate Social Responsibility is
about giving back to the community and promoting inclusive values in corporate organizations
and that Satyam Computers has demonstrated this in Iull measure.
57

II we look at the present situation its chairman Rama Linga Raju is in the jail Ior misleading
stake holders and government Ior wrong accounting practices , the Bairaju Foundation is about
to close. This is the situation in India regarding CSR. In order to tackle this case the Indian
government should learn lessons Irom the western governments who were successIul in timely
punishing the oIIenders.


Labor Law Problems:
labor law violations as a major problem in India's garment industry: "Workers are not being paid
even statutory wages, as payment is linked to reaching unreasonably high production targets--
simply put, unpaid overtime. In short, the global outsourcing world has a long way to go merely
to attain legal compliance.
When subcontractors--even those that are subject to monitoring--still routinely violate local labor
law, CSR programs and their advocates may be muddying the waters. The advocacy community
presents wage demands--e.g. the demand that subcontractors pay a 'living wage--which is


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asprational. But urging multinationals to pay higher wages assumes that legal wages are already
being paid.
58

Let's look at this situation in a real context. With its marketing strategy built on rhetoric oI
'social justice, The Timberland Company is a multinational that plays actively in the CSR Iield.
The company's recently released 2004 CSR report includes a breakdown oI Iactory violations by
category that closely mirrors the FLA breakdown, with "compensation (i.e., minimum wage)
the second highest category oI violations (12). By deIinition, violations oI this part oI
Timberland's code oI conduct constitute primarily violations oI law. Timberland's CSR report
claims the company is stepping up its program "Irom compliance to enablement. II companies
merely ensured that their suppliers obeyed the law that could bring economic restitution to
millions oI workers whose pay is purposely miscalculated.

Human Rights Issues:
However, a legal linkage does exist through standard manuIacturing contracts, which contain
compliance clauses, and a recent case suggests that such contract language can have teeth. In
Doe vs. Unocal, Burmese workers who suIIered human rights abuses on a pipeline project
brought suit against Unocal, which was a partner in the project. Commenting on the Iindings, the
Chapman Law Review noted, 'Iuture plaintiIIs seem on Iirm ground Ior pursuing corporations in
Iederal court.Ior their human rights abuses abroad. Such plaintiIIs may have even greater
success pursuing comparable state claims based on state constitutional and statutory provisions
Iorbidding Iorced labor, unIair competition, and unjust enrichment.
The Unocal case "shows that corporations have both direct and indirect human rights
responsibilities," says Susan Aaronson, director oI globalization studies at the Kenyan Institute, a
Washington think tank. Today, human rights cases usually stem Irom extreme physical abuses,
but society's concept oI what constitutes "abuses will likely continue to expand. II labor laws
are consistently broken with the knowledge oI business partners, this could conceivably be
considered "unjust enrichment. Apart Irom the above situations the Iollowing examples are
worth reading regarding MNC attitude towards Indian people.
Example No. 1 - Bhopal Gas Disaster
In the year1984 chemical gas leaked Irom the Union Carbide plant in Bhopal, India. ReIerred as
the worst industrial disaster in human history, on the horriIic night oI December 2nd and 3rd,
more than 40 tons oI the deadly gas methyl iso cyan ate escaped Irom the pesticide Iactory.
Approximately halI a million people were exposed to the gas and 20,000 have died to date as a
result oI their exposure. More than 120,000 people continue to suIIer Irom severe health ailments
related to the accident and contamination. In 2001, the US-based gigantic Dow Chemical
purchased Union Carbide, thereby acquiring its assets and liabilities. However it has been
steadIastly reIusing to clean up the site, provide saIe drinking water or compensate the victims,
or even disclose the composition oI the gas leak, Dow, like UCIL earlier, claims that it has no
liability oI the past. The Dow Chemical Company, with annual sales oI $28 billion, says in its
web site: it is 'committed to the principles oI Sustainable Development and its approximately
50,000 employees seek to balance economic, environmental and social responsibilities.

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Example No. 2 In the year 2001 the Unilever Company has dumped 300 metric tons oI mercury
at Kodaikan allocated at South India. As a contrast to the above activity the Unilever website
states, 'We are committed to conducting our operations with integrity and with respect Ior the
interests oI our stakeholders...We are also committed to making continuous improvements in
the management oI our environmental impacts and to working towards our longer term goal oI
developing a sustainable business.
In order to tackle above situations a new initiative has taken by Government oI India, that is
CREP, or 'The Corporate Responsibility Ior Environmental Protection initiated by the Indian
government recently this year in 2003, is a case in point. A guideline Ior a set oI non-mandatory
norms Ior 17 polluting industrial sectors has been set but there is no real pressure Ior
implementation or internalization. An ethical being which claims to respect the earth cannot have
discontinuities in its practices. Ethical practices have to place in an integrity Iramework, and that
implies at the very least a lack oI multiple ways oI being.` This can be no diIIerent Ior
individuals as Ior companies. Contrast to the above news the Unilever website states 'All
Unilever companies must comply with local laws and adopt the same standards Ior occupational
health and saIety, consumer saIety and environmental care.

















CHAPTER 5: COMPANIES BILL, 2009


5.1 RECOMMENDATIONS OF THE REPORT OF THE REPORT OF THE STANDING
COMMITTEE ON FINANCE, ON THE COMPANIES BILL, 2009:
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The 21st Report oI the Standing Committee on Finance, on the Companies Bill, 2009, presented
in FiIteenth Lok Sabha session on 31st August, 2010 had much to oIIer. Chaired by Sri
Yashwant Sinha the Committee gave several recommendations on the Bill with its 28 Chapters
and 426 Clauses in light oI the suggestions, memorandums received by various regulatory bodies
and institutions like SEBI, RBI, ICAI, ICSI, ICWAI, FICCI and so on.
59

The Bill seeks to codiIy a new law to regulate companies and other corporate entities in the
country and repeal the existing Companies Act, 1956. The need Ior the change was Ielt in the
light oI the changes in the economic scenario both domestically and internationally in the past
couple oI decades. The tone oI the Bill and the Iocus oI the Committee was to bring about such
changes that would be in consonance with the national and international economic changes and
to remove the redundant provisions making the act more compact, easing out the procedural
requirements and regrouping the scattered provisions; yet remaining stringent on grounds oI
good corporate governance and protection oI the interest oI the investors and public at large.
Few oI the recommendations oI the standing committee` reports are:
60

1. The voluntary Corporate Governance Guidelines 2009, issued by the Ministry oI Corporate AIIairs
should be made mandatory Ior the listed companies and to be appropriately included in the Bill
keeping it voluntary Ior unlisted companies.
2. The recommendations oI the two Joint Parliamentary Committee reports that were incorporated in
the Companies (Amendment) Act, 2000 also Iind place in the Companies Bill, 2009. This means
that the penalties with regard to inter-corporate loans and investments would increase, Ministry
to Irame necessary rules Ior inter corporate loans and investments, serious oIIences would be
non-compoundable and to be adjudicated by Special Courts. Central Government can order
investigation against a company directly without the inquiry and the report oI the Registrar u/s
234 as is required, Special provision Ior Ireezing oI assets oI a company under investigation,
Audit Committee to be mandatory, statutory Iillings become more stringent.
3. The Committee recommends that IFRS convergence to Iind place appropriately in the Bill to
harmonize the accounting standards.
4. Investor Education and Protection Fund is to be administered by a statutory body and the
Committee recommends that the Iund should be utilized Ior providing immediate relieI to the
small investors, who have suIIered losses due to corporate deIaults. Recognised Investors
Associations should also be empowered to Iile class action suits and also complaints to Central
Government/Tribunal on behalI oI a prescribed number oI shareholders. The procedure

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prescribed Ior immediate relieI / compensation to small investors should also be made simpler
and quicker. IEPF to reIund the dividend claims oI the investors even aIter 7 years. This claim
does not get extinguished however company`s obligation to transIer to IEPF remains.
5. Concept oI Independent Directors came under scanner aIter the Satyam scam and aIter a lot oI
deliberation the Committee recommended that as the institution oI Independent Directors is
critical instrument Ior ensuring good corporate governance the appointment oI Independent
Directors should be done with utmost care and that the government should lay down rules Ior the
appointment, qualiIication, extent oI independence, role, responsibilities and liabilities. The
Ministry is also contemplating on keeping the appointment oI Independent Directors should be
independent oI the management oI the Company.
6. As the Bill, sought to reduce the jurisdiction oI SEBI, the Committee considered the view that the
designated jurisdiction oI the regulators like SEBI, RBI should be articulately appropriated in the
Bill and the Ministry is to ensure that there is no conIlict or overlap oI jurisdiction in the
governing statutes and the rules Iramed there under. The Bill should be articulate and explicit
about the overriding eIIect the special statues whenever there is conIlict with the provisions oI
the Bill and in respect oI the matters where the Special Act is silent, the provisions oI the Bill to
be applicable.
7. National Advisory Committee on Accounting Standards (NACAS) role to be expanded in the
Companies Bill, 2009 and to make recommendations to the Central Government Ior both
accounting and auditing standards. The Committee recommends suIIicient mandate to be given
to oversee the accounting and the auditing standards and to review the quality oI the audits
undertaken.
8. The instrument oI public deposits as a source oI capital Ior companies should not be discouraged
in law, while deterrent provisions should be brought against deIaulting companies.
9. To bring Corporate Social Responsibility (CSR) in the statute itselI, the Committee Ieel that
separate disclosures required to be made by Companies in their Annual Report by way oI CSR
statement indicating the company policy as well as the speciIic steps taken there under will be a
suIIicient check on non-compliance.
10. In the light oI availability oI postal and electronic ballot, the Committee suggests that the existing
concept oI proxies may be done away with and there should be a requirement Ior higher quorum
Ior meetings than Iive members personally present to a reasonable percentage.

Other recommendations are.

O Key Managerial Personnel to include Whole Time Directors even iI the company has a
Managing director or manager.
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O Promoters to Iorm a part oI oIIicers in deIault and persons advising the board in
ProIessional capacity to be excluded.
O The amount capitalized on issue oI bonus shares and shares against consideration other than cash
and other arrangements to also Iorm a part oI paid up capital under the deIinition.

O As the Companies Bill proposes Ior introduction oI small companies and One Person Companies
the capitalization threshold limit to be higher than existing Ior private and public companies.

O Director and Key Managerial Personnel to be included in the deIinition oI related party.`

O With the view to prevention oI diversion oI Iunds and to keep the rules Ior inter corporate
investments stringent, it is being proposed that the deIinition oI subsidiary company to include
subsidiary company to be company in which the holding company holds voting power through
two or more subsidiary companies and also provide Ior circumstances wherein a company shall
be deemed to control the composition oI the Board oI Directors oI another company

O To ensure greater accountability, the Committee recommends that the compliance certiIicate to
be given both by the proIessional as well as by Director/Manager/Secretary oI the Company.

O Process oI conversion oI company Irom one Iorm to the other to be made easier.

O Statutory Iilings become stringent with regard to annual returns, directors changes,
Registered oIIice address change etc.

O Disclosures in the prospectus at the time oI public issue is provided Ior in the Bill

O Statutory Auditors: Auditing standards to be notiIied in the Bill. Auditors report on the Internal
Iinancial controls oI listed companies, Non compliance by auditor may result in Civil and
Criminal liability, Compliance with AS made mandatory.

O Directors: Appointment oI Independent Director to remain independent oI the company`s
management, Insider Trading a criminal oIIence, Restrictions on non cash transactions involving
Directors, Non executive director Iinds deIinition in the Bill, Bill explicitly to mention the duties
oI the Directors.

O Incorporating a company would be made easier, insider trading would be a criminal oIIence,
transition oI companies Irom one Iorm to another, new one person company with simpler
compliance regime.
In the light oI the recommendations oI the Committee, we are yet to see how the
recommendations are reviewed by the Ministry.

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5.2 PANEL VIEWS ON COMPANIES BILL, 2009: A GOOD AUGURY:

It is with a sigh oI relieI that one would Iinish reading the Parliamentary Committee's Report on
the Companies Bill, 2009. II the committee's reasonable recommendations are implemented, the
new legislation should be quite sustainable. An attempt has been made here to present the main
thrust oI the report.
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The Union Ministry oI Corporate AIIairs has agreed with the committee to reduce the excessive
role and scope Ior delegated legislation in the Companies Bill, 2009, and thus have indicated 25
clauses where rule-making provisions will not be included. While this is a good development,
with the words as may be prescribed' appearing about 235 times in the Bill, it is important that
legislative policy, rule-making provisions and executive action are properly balanced to address
the need Ior quick adaptability in a Iast changing global environment without the ubiquitous
messiness oI government rule-making. Hence, this may be reviewed.
Corporate governance
The panel has recommended rotation oI statutory auditors and compulsory appointment oI
internal auditors Ior certain class oI companies.
Independent directors will also have to retire on completion oI six years. An independent director
should not have any pecuniary relationship with the company; his relative may have some
pecuniary relationship with the company. This is Iine except that pecuniary relationship should
also be not there Ior the relative oI an independent director iI independence oI independent
directors is to be expected and ensured. The committee has recommended that the directors'
report should also contain a statement regarding risk management policy, corporate social
responsibility (CSR) policy, and appraisal oI board perIormance. The maximum number oI listed
companies a person can be appointed as a director should not be more than Iive.
In addition to the audit committee, in the case oI a listed company and other class oI companies,
the constitution oI a nomination and remuneration committee has been recommended.
On the recommendation oI the committee, the Ministry has agreed to insert a provision giving
some immunity Irom civil or criminal action to independent directors in certain cases.
The provision needs to be legally reinIorced so as to give a real comIort to independent directors.
Further, this new provision should also say that no arrest warrant should be issued against an
independent director without the written authorization oI a judge not below the rank oI a district
judge who should give to the independent director an opportunity oI being heard beIore issuing
such authorization.
A company, with not less than a net worth oI Rs.500 crore or a turnover oI Rs.1,000 crore or a
net proIit oI Rs.5 crore a year, should at least contribute 2 per cent oI its average net proIit in the
last three years towards CSR initiatives. While the intention oI the government is laudable, this
mandatory provision may be counterproductive, robbing CSR oI its legitimacy.
Corporate delinquency
The committee has recommended that the Serious Fraud OIIice should have statutory
recognition. Whistle-blowing mechanism is also sought to be given statutory recognition. Apart
Irom this, various other measures have been suggested to strengthen investigative measures Ior

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corporate Irauds, which are welcome. The Ministry, to prevent the abuse oI diversion oI Iunds
through too many step-down subsidiaries, has agreed to limit statutorily the number oI
subsidiaries at the level oI Iirst line oI subsidiaries. This is welcome except that operating
subsidiaries should be exempt. The committee has also recommended that the remuneration paid
to key managerial personnel should be recovered in the event oI established Iraud or Iudging oI
proIits by the company.
The committee has recommended annual inspection by the Registrar oI Companies (ROC). All
these years, ROC inspection has proved to be ineIIective. This exercise would be meaningIul
only iI acknowledged experts are also involved in the inspection, under the direct charge oI the
Joint Secretary in the Ministry oI Corporate AIIairs.

























CHAPTER 6: CORPORATE SOCIAL RESPONSIBILITY IN LIGHT
OF COMPANIES BILL, 2009
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It has reported that Corporate social responsibility (CSR) activities oI companies may be
subjected to a more rigorous decision making process soon. To prevent ad hocism in CSR
activities, oIten seen by critics as a means to pare down their tax payoIIs, the government may
make it mandatory Ior Iirms to secure shareholder`s approval beIore committing Iunds and plans
Ior corporate philanthropy.
"The boards oI companies would not be able to take any unilateral decision on CSR, there must
be wider participation on the issue to ensure transparency and accountability," a senior
government oIIicial told.
The government was earlier toying with the idea oI mandating companies to spend 2 oI their
net proIit on CSR. In addition, it will help the private sector picking up a larger tab oI India`s
massive resource requirements to Iund its soIt inIrastructure needs such as education and
healthcare services. The government is examining whether the shareholders` approval Ior CSR
can be incorporated in the new Companies Bill that it plans to legislate in Parliament`s monsoon
session.
For several companies such as Bharti Airtel, Hindustan Unilever Ltd, State Bank oI India and
ITC Group CSR programmes are part oI their business models.
The draIt Ior Companies Bill is likely to be sent Ior cabinet approval in June. 'All critical issues
have been ironed out with the industry, Murli Deora, minister corporate aIIairs told.
Corporate aIIairs minister Murli Deora has echoed industrialist Ratan Tata's concerns regarding
companies' social responsibilities and said that they must mandatorily spend at least 2 oI their
net proIits in the welIare oI the society where they thrive.
Deora said, he had circulated the draIt company Bill to ministries on Saturday Ior their
comments, and based on their Ieedback, he would make it mandatory Ior companies to spend 2
oI their net proIits in corporate social responsibility (CSR).
"It is quite surprising that they (companies) do not spend even halI a per cent oI their proIit in
social welIare, but they Iorget that a prosperous society is a must Ior their own survival," Deora
said.
On Saturday, he also aIIirmed his views on CSR at Mumbai Congress party meeting held to
mark the 20th death anniversary oI Rajiv Gandhi. "Rajiv Gandhi wanted companies to help in
bridging the wide gas between the rich and the poor and the party also wants companies to take
their social responsibilities, seriously, "he said.
Deora said that his proposal oI making CSR mandatory was resisted by many companies during
his recent nation-wide public interactions beIore Iinalizing the draIt oI the new company law.






CHAPTER 7: CONCLUSION AND SUGGESTION
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Corporate Social Responsibility is not a Iad or a passing trend, it is a business imperative that
many Indian companies are either beginning to think about or are engaging with in one way or
another. While some oI these initiatives may be labeled as corporate citizenship by some
organizations, there basic message and purpose is the same. A successIully implemented CSR
strategy calls Ior aligning these initiatives with business objectives and corporate values thereby
intergrating corporate responsibility across the business Iunctions and enhancing business
reputation. The challenge Ior us is to apply Iundamental business principles to make CSR
sharper, smarter, and Iocused on what really matters. This can be done by:
Focusing on priorities
Allocating Iinance Ior treating CSR as an investment Irom which returns are expected
Optimizing available resources by ensuring that eIIorts are not duplicated and existing services
are strengthened and supplemented
Monitoring activities and liaising closely with implementation partners such as NGOs to ensure
that initiatives really the desired outcomes
Reporting perIormance in an open and transparent way so that all can celebrate progress and
identiIy areas Ior Iurther action.
In India, till very recently, the Iocus was on charity, which is not really CSR. Sustainable CSR
programmes mean a cohesive mix oI economic, legal, ethical and philanthropic tenets. In today's
changed business scenario, there is an increased Iocus on giving back to society and creating a
model which works long term and is sustainable and it is imperative that the best practices Ior
inclusive growth are shared with the stakeholders. Getting multinationals to comply with local
laws is not an easy task. Many countries, north and south, do not direct suIIicient resources to
enIorcement. Management practices that evade regulations persist. Furthermore, labor laws can
indeed be diIIicult to interpret. But suppliers, companies, and countries can't point to these
diIIiculties to elude legal accountability. Legal compliance will be hard to achieve, whether
within the CSR rubric or not, but extracting legal compliance Irom CSR has the advantage oI
bringing to light a range oI workplace and wage issues that companies are required by law to
attend to. Finally the author oI this paper hopes that the companies` attitude towards CSR is
more on transIormation rather than giving inIormation in web sites.






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SUGGESTIONS

1. Provide greater incentive Ior companies to Iocus on Iirst keeping the law. Corporate
leaders and their general counsels would give compliance issues a higher priority iI they
recognized the risk oI increased scrutiny on the legal angle oI their global operations. In
Timberland's case, its sole perIormance indicator Ior monitoring is "percentage oI
Iactories assessed. II the company were mandated to report legal compliance, this would
be a much stronger indicator oI actual working conditions.
2. Give greater accuracy to CSR ratings. Company CSR assessment questionnaires
Irequently put more emphasis on inspirational issues. While legal compliance is also
included, it is not meaningIully probed. The socially responsible investment community
would do well to separate out legal requirements and Iorm one assessment on these, and
then evaluate a company on "beyond compliance issues.
3. Support company compliance staII, which must oIten make unpopular requests. In the
experience oI many staII, it seems as iI upper management must be persuaded to support
not only CSR goals, but regulatory recommendations as well, e.g., Iactory reimbursement
oI workers who were not paid legally.
4. Increase the number oI companies engaged in these issues. II companies regard Iactory
monitoring as a potential legal liability, they are more likely to attend to it whether or not
they have a penchant Ior CSR

















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BIBLIOGRAPHY

- Corporations and Markets Advisory Committee, The Social Responsibilities oI
Corporations, December, 2006

- May, Steve; Cheney, George; Roper, Juliet; The debate over corporate social
responsibility, OxIord University Press, 2007

- Williams, Cynthia A.; Ruth V. Aguilera (2008). "Corporate Social Responsibility in a
Comparative Perspective". in Crane, A., et al. The OxIord Handbook oI Corporate
Social Responsibility. OxIord: OxIord University Press.

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