Prof. Afra Afsharipour

Corporate Social Responsibility and the Corporate Board: Assessing the Indian Experiment

Corporate social responsibility (CSR) has received significant attention from businesses, civil society and governments around the globe. Perhaps nowhere is this focus more pronounced than in India. In line with global trends, there has been a robust debate in India over CSR practices. Furthermore, over the past decade, Indian corporate law has slowly moved from a shareholder centric model to a more stakeholder oriented model, culminating in the passage of the Companies Act, 2013. A central feature of the 2013 Act is the requirement for companies to spend and report on CSR activities.

India appears to be the first nation to require CSR considerations as part of a company’s corporate governance and the first nation to move toward mandatory CSR spending across the board for all publicly listed companies. Under India’s approach, the focal point of any company’s approach to and implementation of CSR is the board of directors. CSR in India is a board function that cannot be separated from a company’s corporate governance. For example, the board of director’s CSR committee must frame the company’s CSR policy and the amount that the company must spend on CSR activities. Upon approval by the board, the CSR policy must be disclosed in the board’s annual report. Moreover, the board must ensure that the mandatory amount for CSR is spent on the activities outlined in the policy.

This paper will identify the justifications for India’s corporate governance oriented CSR approach. It places the board’s CSR role within the larger framework of board reforms in India. It then analyzes whether some of the challenges that India has already faced with respect to board reforms may also infect the move toward mandatory CSR. The paper will close with discussing several proposals to improve the role of the board in implementing the CSR mandate.