Shrutika Kohli
A systematic process which enables an organization to operate in a manner that meets with the business, legal and ethical expectations. It is a internal system encompassing policies, processes and people which serves the needs of all stakeholders by structuring, operating, directing and controlling management activities with good business objectives and integrity. Corporate Governance can be achieved by following corporate social responsibility.
One of the major amendments in Companies Bill 2012 is that specified companies will have to necessarily spend 2% of their average net profits made in the immediately preceding three financial years towards Corporate Social Responsibility.
This is mandatory for the companies having net worth of Rs 500 crore or more or turnover of Rs 1000 crore or more or a net profit of Rs 5 crore or more during a financial year.
While moving the bill the Union Minister of State for Corporate Affairs- Shri Sachin Pilot said that “Private companies while their growth also have responsibility towards society besides equitable and sustainable growth of the country”.
Recently in an economic times interview, Rakesh Jhunjhunwala (owner of the stock brokerage enterprises) said that stocks of companies which follow good corporate governance should be followed.
Various companies following undertaking CSR programs include Bharat Petroleum, Birla Group, Hindustan Unilever, Indian Oil, ITC and Tata Group through donations and charity events.
The essence of CSR comprises of philanthropic responsibility, corporate responsibility, ethical responsibility, and environmental responsibility, legal and economic responsibility.
OBJECTIVES OF CORPORATE GOVERNANCE:
COMPONENTS OF CORPORATE SOCIAL GOVERNANCE:
- Composition of Board.
- Attendance of directors at Board meetings, committee meetings and general meetings.
- Board functioning and procedures.
- Responsibility and Accountability of directors.
- Composition of audit committee of Board.
- Shareholders and Investors Grievances Committee.
- Prevention of insider trading.
- Corporate philosophy.
BENEFITS OF CORPORATE GOVERNANCE
HOW TO PROMOTE CORPORATE SOCIAL RESPONSIBILITY:
1. ACTIVITIES WHICH LEAD TO SAFETY, HEALTH AND ENVIRONMENT:
These include activities like giving disaster management training, clean drinking water, health and medical care, water harvesting, fully complying with environment standards.
2. COMMUNITY DEVELOPMENT ACTIVITIES:
These include activities like setting up hospitals, giving donations and charities, taking up AIDS awareness campaign, alcohol de-addiction centres, contribution towards national calamities, rural healthcare, women development, contribution towards scholarships to students of weaker sections.
3. TOWARDS INVESTORS:
Providing investors guide, annual shareholder satisfaction survey and annual reports.
4. TOWARDS EMPLOYEES:
Eliminate discrimination of employees, abolition of child labour etc.
CONCLUSION:
CSR considers the impact of actions of the organisation on the full range of stakeholders.CSR helps in good Corporate Governance It requires organisation to be accountable for its acts. Thus it puts emphasis on actions and activities of organisation.
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Shrutika Kohli
B.COM (H), MBA (Finance), CA final student
e-mail-kohlishrutika12@gmail.com
Even if CSR is not followed, still Corporate Governance can be effectively implemented in an organization. CSR is not the root cause of Corporate Governance. In simple terms, while Corporate Governance is a ” ethical character of an organization, which reflects in its transparent policies, processes and behavior with all its stake-holders, i.e., whoever comes into contact with the organization, Corporate Social Responsibility is one of its obligations to the Society in which it operates and thrives. CSR can be tangible while Corporate Governance can be experienced/observed.