Corporate India's latest obsession is corporate social responsibility.

Talk to any company, you will hear of many stories of how it has helped victims of a natural calamity, undertaken poverty alleviation programmes in select villages and even assisted the government in improving civic amenities.

This is the new age of corporate social responsibility. A company wants to be rated as much by its contribution to society as by its improvement in the bottomline.

Two-three years ago, companies were in a different mood.

That was also a different era. Companies were optimistic of business prospects. Life began and ended with increasing shareholder value.

Each company was in competition with the other to earn more profit. Yes, governance, rules and accountability were important. Even corporate social responsibility as a concept was not alien.

But for most companies, this was not an issue that dominated the top management's mind space.

Today, business seems to be worried about trust, values and social responsibility.

The main agenda at the recently concluded annual meeting of the World Economic Forum was all about rebuilding trust.

Top CEOs of the world's best companies debated how companies should not just remain content with following rules of business. They need to follow principles. Enron followed the rules, but not the principles.

So, rules are important for the corporations of tomorrow, but more important is principled behaviour.

Similarly, accountability was considered very important.

But most business leaders today feel that companies must move from accountability to transparency. It is argued that a company's financial performance should not be the sole criterion of its success.

Shareholders are important. But more important are other stake holders -- its customers, the employees and the communities in which they operate.

Hence, the importance of corporate social responsibility.

The world's business leaders may today discuss the importance of corporate social responsibility.

The British government may have even created a department of corporate social responsibility. But in India, corporate social responsibility is not something that has happened just now.

India's much-maligned public sector has been on the forefront of what experts today describe as corporate social responsibility.

Take any public sector unit in the heavy engineering industry, you will find that it not only sets up a township around the plant, it also establishes a school, a hospital and several other civic facilities for its employees and those that live in that area.

Even a private sector giant like Tata Steel had set up a township in Jamshedpur much before today's global managers began crying hoarse over the need for corporate social responsibility.

The problem with corporate social responsibility began when the Indian government expected the private sector too to play a role similar to that of the public sector companies.

There were not too many enlightened private sector companies that came forward in response to the government plea.

The government did not give up its efforts. It introduced fiscal incentives to encourage private sector companies to undertake rural development programmes.

It introduced a clause in the industrial policy that companies that wish to set up industries in backward areas would receive special benefits.

And last year, the government offered tax incentives to those companies which set up water purification projects.

Unfortunately, none of these fiscal incentives could encourage the private sector to take up projects in large numbers.

Finance Minister Jaswant Singh did not mince words when he told a gathering of international business leaders recently that in his experience, capital had no sentiments and it always sought multiplication and growth.

Without being a trained economist, the finance minister understood the real problem with the concept of corporate social responsibility.

Corporates must be judged by how they create wealth. You might put in place rules and regulations to ensure that wealth creation takes place openly and responsibly. But why expect the corporates to be judged by what charities they offer to different stakeholders in society?

Also, making corporate social responsibility a yardstick for how well a company has performed may well be construed as an indirect admission that profit and growth are not honourable objectives.

Worse, any excessive emphasis on corporate social responsibility might encourage the government offload some of its responsibilities to be performed by the corporate sector.

For instance, why should a police department in any state be supplied with vehicles by a company?

And why should the state not take up itself the responsibility of providing computers in all schools owned and run by it?

There are clear dangers if corporate social responsibility is allowed to take over the role of the state. The state can partner with the private sector to improve public services. But there has to be clear and transparent rules that should govern such initiatives.

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