A recent headline in a financial daily “Zuck slams Cook: If you cared, your products would be cheaper”. This statement may sound mean, but can mean that no entrepreneur should play the role of a modern day Robin hood. The entrepreneur should not fleece the customers on one hand and then with the profits contribute to the welfare of the poor and under privileged. They have a duty of care, which is duty to take care of the customers and in turn the community. A corporate makes lots of profit by pricing its products and then it pays back this amount that is generated back to the society in the guise of inclusive growth. This is the story of the modern day Robin hood, the exclusive class.
CSR not inclusive but exclusive
Immediately after the directive from regulators that Corporate Social responsibility (‘CSR”) is a mandatory spend, a businessman was overhead saying, “If the government wants another 2 % of the profits to be spent on CSR we need to increase the pricing of our products”. The regulators seem to have gone overboard in drafting a legislation by forcing every corporate to incur an additional spend of CSR which has lead to the business man to think of an increase in the price for the products and the customer in turn is required to fund the CSR activity.
Take the case of a manufacturing company, where does the company generate money to contribute for CSR activity, it is by selling their product at multiple times the price and making huge profits and then deploy these profits back to the society – payback through CSR. The products can be made available to the lower strata in the society at a price that is affordable rather than fleecing the customers and making money and as a pay back spend the profits back in the society. A better price can make a better consumer and a better consumer can make a better society. This is inclusive growth.
CSR an excessive burden
With all these complications, CSR may not be best suited for a corporate and is for an individual, which can be limited to philanthropy of individual’s wealth. Nowhere in the world CSR is mandatory for a corporate, whereas it is in India. The corporates are not only taxed on their profits but they also carry the extra burden of having to contribute for a cause. The process and procedure is becoming too cumbersome to handle. The risks that get attached to such activity is even more alarming as one wrong contribution can land a corporate into all sorts of problems, there is a politically exposed person (PEP) issue which means every contribution has to screened and the entity to whom the contribution cannot be even remotely connected to any Politian or a political party. The contribution itself may not be a burden whereas overseeing the compliances for CSR is.
Hear the inner voice - Better Salary & Affordable Products
Corporate Social responsibility cannot become a burden on companies, and create too many modern day Robin hood. The companies can take care of its employees by paying better salaries or sell good products at affordable prices. Why do companies accumulate huge cash reserves by not paying good salaries or creating exclusive products for only the exclusive? Instead of generating exorbitant profits and then distributing a small portion back to the society, Employees and Customers who are part of the society can be taken care of. Better salary makes better spending and better spending creates better customers and both make a better society.
CSR in corporate can be better salary to employees and good products at affordable prices to consumers. Let there be inclusive growth in the real sense by the exclusive of the society, there is no need for a Robinhood.
Tags Corporate Law