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PROS & CONS OF CORPORATE SOCIAL

RESPONSIBILITY
Dr.B.NARAYANAN
R.Revathy
Abstract

Corporate social responsibility (CSR) refers to a method of running a


company that seeks to address not only profitability, but also the
environmental and social consequences of the business. While most
corporate social responsibility concerns are directed at very large
businesses, even small- and medium-sized businesses that employ a large
number of local residents or participate in environmentally problematic
industries can face pressure to adopt corporate social responsibility.
Corporate social responsibility concerns both the public and the business
community. The current global financial crisis has ignited public concerns
with corporate social responsibility. Wall Streets greed, executive overpay,
the moral hazard of financial derivations, and excessive risk-taking have
been publicly questioned and condemned. Attention has also focused on
deciphering how different companies and different countries understand
corporate social responsibility.

The
concept
of
"corporate
social
responsibility" has become pervasive
enough that it has earned its own
acronym in business circles: CSR. The
term means that a corporation should be
accountable to a community, as well as to
shareholders,
for
its
actions
and
operations. When a corporation adopts a
CSR policy, it aims to demonstrate a goal
of upholding ethical values, as well as
respecting people, communities and the
environment.

PROFITABILITY AND VALUE


A CSR policy improves company profitability and
value. The introduction of energy efficiencies
and waste recycling cuts operational costs and
benefits the
environment. CSR also increases company
accountability and its transparency with
investment
analysts
and
the
media,
shareholders and local communities. This in turn
enhances its reputation among investors such
as mutual funds that integrate CSR into their
stock selection. The result is a virtuous circle
where the company's stock value increases and
its access to investment capital is eased.

WEIGHING PROS AND CONS OF CSR


In choosing to embrace corporate social responsibility,
numerous factors should be weighed, including:
Companies have limited resources, and shareholders
must still be considered even as other stakeholders
are being satisfied. Growing more socially responsible
at the cost of profitability can spell trouble for a
business.
Companies must not let CSR efforts distract from their
underlying mission. The goal is to find social issues
that support and align with the companys interests
and purpose, whether its a neighbourhood restaurant
choosing locally produced agriculture or a global
clothing manufacturer promoting workplace safety
regulations in the developing world.

Pros,
Cons
and
scope
for
improvement ofCorporate Social
ResponsibilityCSR clause- As per the
Companies Act, 2012
The recently passed Companies Bill,
2012
has
a
separate
clause
onCSRwhich makes it mandatory for
certain specific companies to spend
2% of the average net profit made in
preceding
3
financial
years
onCorporate Social Responsibility.
The 2%CSRprovision will have ripple

FOLLOWING ARE ITS


PROS
:
Mahatma Gandhi once
said, Industry
should consider
themselves as trustee and servants of the poor. CSR, as
a concept, upholds Gandhijis views. (Pro-Gandhian)
CSRis very popular in countries like Japan, South Korea
and growing economies like Brazil where companies are
actively involved in various activities to demonstrate
themselves as socially responsible corporate citizens.
(Widely accepted)
Indiabecame the first country to makeCSRmandatory,
which would help shaping communities and improving
the national economy. (India- first country)
Huge scope for the corporate sector to contribute to
employment, health, education and poverty.

Enhances the possibility of cooperation between business,


society and government. (Cooperation)
Enhances the competitiveness of the company, while
simultaneously advancing economic and social well-being
in the communities, thereby increasing the long term
sustainability of the company. (Competitiveness)
If a company does not conduct its ownCSRit can give the
required amount to the governments socio-economic
welfare programs such as Prime Ministers National Relief
Fund. (Diversion of funds)
With the 2%CSRprovision there will be an immediate
doubling of social program money inIndiai.e. additional $5
billion poured into social welfare sector. (More money)
Via 2%CSRthere will be more human capital developed
(education, healthcare, training, etc) in the economy which
will have long term ripple effect on Indian economy to
accelerate production of goods and services.(Human
capital)

FOLLOWING ARE ITS CONS:


No other country in the world has
madeCSRmandatory.
MandatoryCSRincreases the inefficiency
which can be equivalent to government
taxing its investors which deprives them of
mobilizing the economy. (Inefficiency)
Might
create
reluctance
within
the
international business community about
investing inIndia. (Reluctance)
One of the basic aspects of corporate
commerce this clause tends to ignore is the
interests of the shareholders of a company.
The shareholders have invested their money

There is already a series of cascading taxes charged


on companies, in addition to the expenditure incurred
on buying materials from suppliers, employee
benefits and so on, hence an extra mandatory
expenditure would become burdensome. (Cascading
taxes)
Also the percentage of expenditure fixed i.e. 2% is
high; ideally it should have been around 1% of profit
after tax. (High percentage)
Any company operating in a market is bound to have
constant interactions with the society around it. It
might be with the people it employs, lenders who
lend it, exchequer which collects taxes. Therefore, if a
company is fair in its dealings there is hardly any
need for imposingCSRon it. (Socio-economic
interactions)

CONCLUSION
Corporate social responsibility provides a crucial
element in a corporations image and livelihood.
Globalization is a reality. Globalization includes
economic, political, social and cultural changes. The
financial crisis emphasized the inter-relationships of
countries cultivated through the globalized economy. It
was essential in order to ensure global economic
survival. Society, as a whole, is interconnected. The
business model focuses on social obligations and
moral duties that businesses have to society.
We realize that corporate social responsibility varies
widely from company to company and country to
country. There are still many industries and countries
that are underdeveloped in this area. Corporate social
responsibility
has
been
linked
to
economic
development.