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Governance of Mandated Corporate Social Responsibility: Evidence from Indian Government-owned Firms

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Abstract

This study provides evidence on the governance of CSR policies and activities by Indian central government-owned companies [i.e. Central Public Sector Enterprises (CPSEs)] within a unique mandatory regulatory setting. We utilise the multi-level ‘Logic of governance’ conceptual framework (Lynn et al. Improving governance: A new logic for empirical research, 2001; Lynn and Robichau, J Publ Policy 33:201–228, 2013) and draw upon interview data collected from 25 senior managers in 21 CPSEs to assess the dynamics of CSR implementation within CPSEs. Our findings indicate most managers believe that a mandatory policy has enhanced the accountability and commitment of governing boards and senior management to CSR. However, CSR policy implementation within Indian CPSEs is still nascent, fraught with bureaucratic hurdles, insufficient human and knowledge resources, limited stakeholder analysis and over-emphasis on CSR budget utilisation as an outcome. Several key areas for improvements include the need for better translation of national CSR policy goals to firm-level strategies, more formal assessment of stakeholder needs, clearer communication lines with external service providers, such as NGOs and local government agencies, and the better evaluation of CSR outcomes (i.e. the social impact of CSR activities). The findings of this study have implications for both theory and policy development.

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Notes

  1. In 2007, Indonesia passed Article 74, Law 40 of the Limited Liability Corporation Law that requires companies limited by liability to undertake CSR (Waagstein 2011), and in 2011, the Philippines Congress (Lower House) passed the HB4575 Bill, which sought to institutionalise CSR (Congress 2013). However, neither country specified the amount to be spent on CSR.

  2. The DPE sets policy guidelines on performance improvement and evaluation, financial accounting, personnel management and such areas, as well as annually collecting, evaluating and maintaining information on their performance.

  3. The revised 2013 CSR guidelines (DPE 2013) mandate the CSR budget of CPSEs earning less than 100 crore rupees profits to be 3–5 % of net profit; those earning 100–500 crore rupees must spend 2–3 % and firms with earnings of 500 crore rupees and above, must spend 1–2 % of their net profits. Unspent CSR budgets must be carried forward into a sustainability fund.

  4. The Act mandated that effective from 1 April 2014, an Indian company having a net worth of at least 500 crore rupees (~US$835 million), a minimum turnover of 1000 crore rupees (~US$1670 million) or a net profit of at least 5 crore rupees (~US$8.35 million) spend on average 2 % of its net profits on CSR activities (1 crore INR equals 10 million (10, 000, 000) INR).

  5. Ghandi is well known for leading India to independence and seeking more ethics-based economic management.

  6. COPU is a parliamentary committee instituted in 1964 that exercises financial control over public sector companies, examines their reports and accounts, and determines the commercial efficiency with the aim of identifying overall defects in the systems and procedures of public sector enterprises.

  7. The Government of India categories all CPSEs in India into different groups, namely Miniratna, Navratna and Maharatna, based on parameters like turnover, profits and claim for government financial support. The category of CPSE determines its financial and operational autonomy, which increases from the Miniratna to the Maharatna category. Higher status CPSEs need to demonstrate higher CSR performance.

Abbreviations

COPU:

Committee on public undertakings

CPSE:

Central Public Sector Enterprises

CSR:

Corporate social responsibility

DPE:

Department of public enterprises

GDP:

Gross domestic product

LOG:

Logic of governance

MOU:

Memorandum of understanding

NGO:

Non-government organisation

NVG:

National voluntary guidelines

PBT:

Profit before tax

PSE:

Public sector enterprises

PSU:

Public sector undertakings

TISS:

Tata Institute of Social Sciences

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Authors and Affiliations

  1. College of Business, School of Accounting, RMIT University, Melbourne Campus, Melbourne, Australia

    Nava Subramaniam

  2. School of Business & Law, Higher Education Division, Central Queensland University, Melbourne Campus, Melbourne, Australia

    Monika Kansal

  3. School of Business, Amrita School of Business, Amrita Vishwa Vidyapeetham, Amritapuri, Bengaluru, India

    Shekar Babu

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  1. Nava Subramaniam
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Correspondence to Monika Kansal.

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Table 2 The questionnaire framework
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Subramaniam, N., Kansal, M. & Babu, S. Governance of Mandated Corporate Social Responsibility: Evidence from Indian Government-owned Firms. J Bus Ethics 143, 543–563 (2017). https://doi.org/10.1007/s10551-015-2804-0

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