Prof. Sandeep Gopalan

CSR and Law: A Comparative Analysis of US and Indian Case Law

The mandatory CSR spending provision in the Indian Companies Act has brought renewed attention to the debate about the appropriate role for the law in promoting corporate social responsibility. The orthodox view has always been that CSR is a voluntary activity and that legal mandates ought to be avoided. Critics argue that the law should not compel altruistic activity by companies, and that mandates for CSR spending are akin to compelled wealth transfers from shareholders to outsiders. Further, as directors have a responsibility to maximise shareholder profits, CSR activity and spending have the potential to detract from their legal obligations. Therefore, under the orthodox view, the law’s efforts to intervene in the CSR area are not only misguided but also illegitimate.

This paper analyses case law in the US and India from a comparative perspective to determine if the purely shareholder-oriented conception of corporate law is justified. In other words, if corporations have been held to have obligations to other stakeholders, could such cases sustain a justification for legal intervention into the hitherto volition based CSR debate?