The new Companies Bill 2011, section 135 on Corporate Social Responsibility (CSR), has raised a lot of debate about the merits of holding companies responsible for social responsibility. Some have stoically refuted that companies are any way liable for social responsibility as their objective is to earn profits. According to this view, earning profits and social responsibility are not complimentary goals. Another view presented, to which I subscribe, is that companies owe it to the society and must meet social responsibilities. Profitability and social responsibility are not divergent goals and are mutually beneficial.
Hence, I thought of sharing His Holiness The Dalai Lama’s ideas on social responsibility expressed in his book “My Spiritual Autobiography”. He epitomizes a socially responsible life. While the act is the dry subject, below are some deeper philosophical musings on social responsibility. Read on, and tell me, do you agree with it?
Section 135, Companies Bill 2011
The section stipulates that select Indian companies form a Corporate Social Responsibility (CSR) Committee with three or more directors of which one must be independent. The Committee will report to the board, formulate a CSR policy and recommend expenditure. The board is expected to approve the policy, make it available on the company website and ensure that at least 2% of average net profits of preceding three years is spent on CSR activities. If the CSR budget is not spent in a particular year, the same shall be disclosed with reasons for not doing so in the annual report. The section is applicable to companies that meet either of the following three criteria. That is, have a:
- net worth of Rs 500 crore or more or
- turnover of Rs 1000 crore or more or
- net profit of Rs 5 crore or more.
The big question is – should companies be asked to spend 2% of average net profits on CSR? Let me share the financial logic and the spiritual reasoning for doing so.
The Spiritual Reason
In the modern world we believe spirituality has no place in business. This is more of a western concept rather than an Indian one. In India, even a small shopkeeper will have a photograph of their god and start work after offering prayers. In my view, spirituality promotes ethical thinking and behavior. Organizations are in dire need of building an ethical culture. In the present world organization behavior and culture impacts society, hence one cannot dissociate the two. I am impressed with Dalai Lama’s story in his book. He said :-
“I remember an Indian politician who invited me to discuss this point with him. He said to me, with sincere humility, “Oh, but we’re politicians, not monks!” To which I replied: “Politicians need religion even more than a hermit in retreat. If a hermit acts inspired by bad motivation, he’ll harm only himself. But if a politician, who can directly influence an entire society, acts with bad motivation, a large number of people will experience the negative consequences.”
He has then further described spirituality as :
“Spirituality, in my view, consists of transforming the mind. The best way to transform it is to get used to thinking in a more altruistic way. So ethics is the basis for a secular spirituality for everyone, one that is not limited to a group of believers in one religion or another.“
The same logic applies to business also. A CEO’s decisions impacts thousands of employees, customers, suppliers, shareholders and the public. Can we afford a CEO not to be spiritually aware? Wouldn’t promoting secular ethics help organizations build an ethical culture? Studies indicate that major frauds in organizations – Enron, Satyam, Olympus – occurred when senior management stopped differentiating between right and wrong business practices and was governed by greed.
The Social Reason
Backbiting, backstabbing and bitching are thought of as normal in corporate world. Employees show surprise when a fellow colleague shows compassion, consideration and empathy. Fear, insecurity, ruthlessness and competitiveness have led to deterioration in human values and humanity . The paradox is that with these value systems and emotions prevailing in organizations, we want to create winning teams. A near impossibility, and then we wonder on reasons of failure.
The problem arises because of the thinking that emotions have no place in business. How is it possible to segregate emotions during business hours when we base 70-80% of decisions on emotions? Should one view it that good emotions have no place in business, only negative emotions are allowed? Dalai Lama hit the nail on the head and identified the core problem in the following words:
“Unfortunately, love and compassion have been excluded from too many areas of social interaction, for too long a time.”
He further identified the impact of positive emotions on a human being. He aptly points out:
“A mind dedicated to compassion is like an overflowing reservoir: it is a constant source of energy, determination, and goodness. You could compare compassion to a seed. If you cultivate it, it makes an abundance of other excellent qualities blossom, such as forgiveness, tolerance, inner strength, and confidence, allowing us to conquer fear and anxiety. The compassionate mind is like an elixir: it has the strength to turn adverse situations into beneficial circumstances.”
Studies show that corporate philanthropy programs not only attract talent but retain employees. Employees at all level appreciate organizations that have a humane culture and are dedicated to the welfare of society. Although managements believe that numbers and targets drive achievement of profits, CSR activities contribute to the bottom line by improving ethics, culture, commitment and engagement levels within the organization.
Secondly, companies are linking CSR activities with their brands. Results show that customers view organizations better and are more loyal to products when they consider the company socially responsible.
Lastly, India really lags behind in charity. As per the Worlds Giving Index 2011, India ranks 91st among 153 countries assessed. India was ranked as the most uncharitable nation in South Asia, Pakistan, Bangladesh, Sri Lanka etc. all rank better than India. With India’s poverty levels and discrepancy in incomes, this status is really sad.
The Financial Reason
Presently in Indian media there is a debate going on The National Food Security Bill ( NFSB). The objective of the bill is to eradicate hunger and malnutrition in the country. For 2011-12 financial year the food subsidy budget is Rs 60,572 crore. The NFSB plans to provide subsidized food grains to 64% of the population with a budget of approximately Rs 95,000 crore. The debate is that should government be providing such a large subsidy to the poor?
Professor Bardhan rightly pointed out in Economic Times interview saying “About 9 % of GDP is being given to the relatively rich in the form of subsidies, why should the government then mind giving 1-2% of GDP to the poor.” Indian organizations receive benefit in the form of direct tax, excise duty and sales tax subsidies for building the industrial sector and exports. Should these be withdrawn to give the whole amount to the poor? Asking organizations to invest 2% of their average net profits in society seems a small price, when public money is being used to subsidize business. Of course some naysayers are saying that government is being financially irresponsible by giving this huge subsidy. Question remains, do they hold the same view on subsidies given to business sector?
This gets me back to Dalai Lama’s thinking - “Everyone must assume his own share of universal responsibility.” Unless the corporate sector gets committed to fulfilling social responsibilities, the country will deteriorate. Besides economic power, the society needs a lot more to flourish and be healthy.
I found Dali Lama’s description of his morning rituals enchanting. He narrates – “As a practicing Buddhist monk, as soon as I wake up I pay homage to the Buddha, and I try to prepare my mind to be more altruistic, more compassionate, during the day to come so that I can be of benefit of beings. Then I do physical exercise – I walk on a treadmill.” World’s most influential and renowned monk happily adopts modern day gadgets into his daily life. He talks of ethics of genetic engineering, global warming, environment risks etc. with complete ease and knowledge. However, we the management experts, the technical geniuses, the advocates of change hesitate to incorporate spirituality, compassion and social responsibility in business. Ironical isn’t it. Can we leave our hearts at home when we come to work?
I want to share the prayer Dalai Lama read on receiving the Nobel Peace Prize. He wishes that this prayer is on his lips when he dies. Very few people in the world can have this level of generosity of spirit, but maybe in 2012 we can think of new beginnings.
May I be the protector of the abandoned,
The guide for those who wander the path,
And for those who yearn for the other shore,
May I be the vessel, the ferry, the bridge;
May I be an island for those who need an island,
The lamp for those who need a lamp,
The bed for those who need a bed;
May I be the wish-fulling gem, the vase
With great treasure, a powerful mantra, the healing plant,
The wish granting tree, the cow of abundance.
As long as space remains,
As long as beings remain,
May I too remain
To relieve the sufferings of the world.
Indian saint Shantideva’s prayer read by Dalai Lama on accepting Nobel Peace Prize in 1989.
- My Spiritual Autobiography by His Holiness The Dalai Lama
- New Companies Bill – Ministry of Corporate Affairs
- India should cut wasteful expenditure on subsidies: US prof Pranab Bardhan