The Key to Successful Corporate Social Responsibility in India

Corporate social responsibility is a topic of keen discourse around the world and India is no exception. However, it appears to us that prevalent CSR practices – the organization of blood donation camps, to cite just one example -- are symptomatic of a failure of corporate governance.

It is a sign of bad corporate governance when managers donate to causes that their companies are in no way better positioned to address than individuals are.

As trustees of corporate assets, are managers not exceeding their brief when they divert resources in this fashion and pursue personal passions with corporate resources?

Would it not be better to distribute profits among the shareholders and employees and leave it to their discretion, as individuals, to contribute to the causes that they deem fit?

Again, CSR is sometimes treated as being no different from image building. But such an approach is short-sighted and therefore not good corporate governance.

"Hypocritical window-dressing" – to use the famous phrase coined by Milton Friedman -- of this kind is soon found out and has not been shown to be very effective for image building.

But when the "CSR strategy" of a company gets merged with its competitive strategy so as to become indistinguishable from it, it is a sign of good corporate governance taking shape. There is no more a need for CSR as a stand-alone activity.

source: http://online.wsj.com/article/SB124019930116534151.html