CSR = Corporate Sins Redeemed - The Honest Truth By Ajit Dayal
Investing in India - Honest Truth by Ajit Dayal
CSR = Corporate Sins Redeemed A  A  A
18 JUNE 2013

Over the past few months, various arms of the Indian media have carried stories about the wonderful work being done by India's industrialists either through foundations bearing their family names or under the umbrella of their conglomerates and corporations.

The good Samaritans are doing everything from feeding hungry children, educating eager children, training women on new job skills, and providing water to thirsty villages. Many of these initiatives find their way into the Corporate Social Responsibility (CSR) pages of the glossy Annual Reports.

The government, obvious by its absence and total failure over 66 years to do what it was supposed to, is keen to convert these sporadic emotions of giving into a law. The proposed Companies Act will have a provision that forces certain companies to dish out 2% of their annual profits in CSR initiatives. Estimates suggest that there could be a potential Rs 10,000 crore (about 0.15% of GDP) of annual spend from this "compulsory" provision.

While the corporate badhshahs and their begums light all the lamps for the photo-ops that such CSR opportunities present - and while there is, indeed, some good that must be coming out of all this - one needs to step back and ask the question: what is the source of all this charitable money?

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Buying my peace...and some media space for my wife?

The critic in me says that much of this money earned by the givers may not have been legitimate wealth. The source of wealth needs to be questioned. As is being done by PILs, CAG reports, and Supreme Court directed CBI inquiries. This goes back to the question asked by me on two business TV channels for which I am still awaiting a response: Name me 10 business people in this country who have a net worth of Rs 500 crore and have made this through legitimate means.

The cynic in me says that the 2% is a cheap way for the sinners to buy forgiveness. CSR is nothing but a smart way for many corporates - and the families the control them - to buy peace. And win press coverage for their charming spouses for doing some great work.

Consider these instances - all hypothetical with totally arbitrary numbers, but probably close to reality:

  1. Cheap coal for power plants may have made a corporate rich by Rs 1,000 crore. They use the free money to build a temple, build a school, and feed children in schools: Total cost of this could be Rs 50 lakhs, 0.05% of their rigged coal deal;

  2. Oil and gas bonanzas may have made a corporate rich by Rs 20,000 crore. They use the money to build a temple, lay roads in villages, build wells, build schools: Total cost of this could be Rs 2 crore, 0.01% of the benefit handed out by friendly governments;

  3. Cheap land given away as agricultural land and then rezoned into residential development land may have made a corporate rich by Rs 1,000 crore. They use the free money to feed children in schools: Total cost of this could be Rs. 20 lakhs or 0.02% of their landed benefit;

  4. A honcho - as they are lovingly called by the gloating, "please can you advertise with us" media - makes much of his money by selling (or mis-selling) financial products to gullible clients which could result in extra profits to the tune of Rs 100 crore; some of that money finds its way to the "giving" world: maybe Rs 50 lakhs or 0.5% of money earned from a bad business practice.
You can substitute the above for iron ore, CWG contracts, housing scandals like Adarsh, land deals like the ones in Powai, spectrum, dud IPO's, dull mutual funds, or scandalous life insurance products. And change the amounts to whatever you wish.

The point is that many of these companies - and their founders - have been gifted tens of thousands of crore because of their friendship with governments and bureaucrats.

They are not "giving back" anything. They are net stealers from the system because, despite their "giving", they are still "taking" from society.

If they truly wish to give back - they should return all the money they have gamed from the system and put that into CSR programmes. And they don't even need the government to tell them how much they have stolen: they are pretty good at numbers and know the value of their enhanced wealth. The billions of dollars that has been shifted over the decades to a select few would have gone a long way in helping the less fortunate move up the health and dignity ladder.

But, given that we are in a land of milk and honey on a well-laid table of sleaze this "true giving" is not likely to happen.

So the cynic in me says that CSR is likely to be a dribble, an afterthought to win some PR points. Some crumbs to be thrown to the less fortunate - who became "less fortunate" because we stole their minerals, their land, or their savings!

And it is not likely that the NGOs who will be the recipient of their largesse will shun this money. A priest in Mexico (see the documentary "Capitalism: A Love Story" by Michael Moore) refuses to take money from those who he believes to be involved in the drug trade. The priest reasons that those in the drug trade have sinned and destroyed families - they cannot buy peace via a donation to his church. They need to do a lot more to be forgiven.

To buy peace, the sinners have already visited all the shrines. Now they have a new modern "forgive me Oh, Lord" prayer: CSR.

So, the next time you see the CSR report of any honcho-run business ask the question: is this good money doing good work or bad money doing good work for the photo-op? Tell me what you think: please fill complete Table 1 below and email it to me.

Table 1: True CSR or Corporate Sin Redeemed?
Group Good Money or Bad Money? True CSR or Corporate Sin Redeemed?
Birla, Kumar/Aditya    
ITC - tobacco    
Reliance, Anil    
Reliance, Mukesh    
State Bank of India    

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Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt. Ltd and Quantum Asset Management Company Pvt. Ltd. The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site. To write to Ajit, please click here.

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9 Responses to "CSR = Corporate Sins Redeemed"


Jun 20, 2013

Dear Ajit,
I agree to your point that most of the big companies are hand-in-glove causing much of the misery our country is facing, but how does doing 2% redeem of any wrong-doing? Does sharing 2% of their profits make them a Hero? I don't think that in case someone finds out some wrong-doing done by a big corporate company, 2% donation would absolve the guilty corporate of the crime. Please let me know as I couldn't understand it.



Jun 19, 2013

A few days ago,I was on the way to Jamnagar in Gujarat and happened to pass by the Ambanis' home village.I saw the welcome arch bearing the Ambani name and asked the cab driver what they had contributed to the village.He said that other than a small school and a small hospital absolutely NOTHING.He said a few more things which are not exactly comlimentary and I will not mention them here.
So much for the generosity of these honchos.


N Nagaraja rao

Jun 19, 2013

Behind every big fortune there is a crime. In our case it is a rape of mother india by the corporates and the politicians.It is said every dog has his day and these criminals will invite there own doom. "Vinasha kaley vipirithi buddhi"



Jun 19, 2013

Ajit, if this 2% spend is made compulsory by the government then i have absolute belief that they want all, please note "all" the companies to doll out money to the political class as dealings with the govt for coverups which normally companies engage in.
Government is promoting us to be the first in one thing that is Most Corrupt country in the world.
PS: i have not included out country name there as i will be ashamed to to so.



Jun 19, 2013

Hardhitting truth, Mr.Dayal. Business success and ethics rarely move hand-in-hand. This is true probably of business anywhere in the world. Take for example the corporate oil giants such as Shell,Chevron etc-- they try to make up for their indiscriminate looting of the natural resources by CSR ventures-- the point is,they will continue their activities unabated, so maybe these CSR activities is their way of managing the guilt. regds

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Jun 18, 2013

An eye opener

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Jun 18, 2013

An eye opener

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Jun 18, 2013

Truth probably could not have been said more briefly.I really do not know if the SBI makes profit through illegitimate ways.People say Infy exploits their staff, especially new recruits by not paying them adequately for their services.I do not know enough to comment on Wipro.But Sterlite,Reliance,Birlas,Jindals ,Essar etc you listed appear to make bad money and is rich with the wealth they robbed of the poor masses who also own the country's ores,minerals etc.CAG and Aam Aadmi party's findings testify to the loot.You hav not gracefully avoided how it was possible for the corporates without the help of bureaucrats and politicians.Some of them are personally part of the corporates' human element.

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Paul Ponniah

Jun 18, 2013

Your article was simple to the point, to follow it will make one and all exist not in poverty but earn a living by fair means. But the world goes round and round only to find the same old manner of live with exploiting all around.

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