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Shareholder approval key for CSR activities

business Updated: May 25, 2011 02:29 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times
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Corporate social responsibility (CSR) activities of companies may be subjected to a more rigorous decision making process soon. To prevent ad hocism in CSR activities, often seen by critics as a means to pare down their tax payoffs, the government may make it mandatory for firms to secure shareholders’ approval before committing funds and plans for corporate philanthropy.

“The boards of 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 official told Hindustan Times.

The government was earlier toying with the idea of mandating companies to spend 2% of their net profit on CSR. In addition, it will help the private sector picking up a larger tab of India’s massive resource requirements to fund its soft infrastructure needs such as education and healthcare services. The government is examining whether the shareholders’ approval for 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 of India and ITC Group CSR programmes are part of their business models.

The draft for Companies Bill is likely to be sent for cabinet approval in June. “All critical issues have been ironed out with the industry,” Murli Deora, minister corporate affairs told Hindustan Times.