Dr Indrajit Dube - Statutory Corporate Social Responsibility - Outcome of Decolonized Corporate Law - 4 February
Decolonisation of Company Law in India accelerated with economic transition. The present Company Act 2013 has been de-rooted largely from its colonial origin. Post Colonial Company Law 1956 [CA 2015] was largely a replica of British Law, which sustained for 56 years with 24 amendments. With the shift in country’s economic model in 1991, CA 1956 was felt to be inadequate to address the growing local needs.
Colonial Company Law Philosophy was based on Shareholder Primacy. But Government of Independent India emphasised on role of companies in societal building. So, India witnessed massive nationalisation of companies with the objective that they will contribute to the economic and social growth in postcolonial period. In this process, the Government became the largest shareholder. This model was short-lived even though it proved to be successful to a certain extent.
This model was also somewhat counter-productive. It contributed to inefficacy in Model of Public Sector Undertaking, slow growth in economy, heavy balance of payment deficit and sinking balance in foreign currency. This led the Government of India to adopt a New Economic Policy.
The model of corporate business, India wanted to develop was largely based on Gandhi’s concept of trusteeship. This demanded that they manage the assets in the best possible way, take part of the profits to sustain themselves and dedicate the remaining profits for the upliftment of society. To that extent, the Corporate philosophy forwarded by CA 1956 was not in synchrony with the Gandhian philosophy of trusteeship.
Many commentators have opined that there is difference between India and Bharat. There are large underprivileged sections in India, even though a number of millionaires and billionaires feature in the Forbes list of richest people in the world.
India thought, through the development of corporate economy, it could contemporaneously uplift its social Institutions. And in doing that, corporate need to participate significantly in the process. So, after a long debate within and outside Parliament, Indian adopted Statutory Corporate Social Responsibility (CSR), where a particular class of companies needs to spend two percent of their profit in CSR of their choice.
India made a remarkable departure in its corporate philosophy from shareholder primacy to stakeholder primacy.