Indian Critics of Corporate Responsibility Law Fear Government Control

A new corporate responsibility law in India that requires foreign and domestic companies with in-country profits of $78 million or more annually to spend at least 2 percent of their earnings on community development projects has rattled many in the country's corporate sector, the Washington Post reports.

Failure to comply with the law — or to give a valid reason for noncompliance — could result in fines or imprisonment for top executives. According to the Post, the government believes the law will generate much-needed assistance for the poor and, as inequality in the country widens, will mitigate the growing resentment toward increasingly wealthy corporations and Indian entrepreneurs. "In the last few years, there has been a perception of [a] growing trust deficit between rural communities and large companies that make billions of dollars," Sachin Pilot, India's minister for corporate affairs, told the Post. "If the company invests in corporate social responsibility, it will go a long way in reducing acrimony and strife between the two."

Indians have long donated money to temples and given food to the poor, while more recently homegrown tech firms have set up programs to promote digital literacy in rural villages and have encouraged volunteerism among their employees. Nevertheless, India ranked 133 out of 160 countries in the World Giving Index last year, in part because wealthy Indians prefer to pass their fortunes on to their children — and because many fear their charitable gifts could be misused by unscrupulous charities.

Under the new law, the boards of companies operating in the country will be required to scrutinize their charitable efforts and post information about them on their Web sites. While detailed implementation rules are being finalized, a number of people told the Post it is unclear what types of programs will be subject to the law and how compliance will be verified. "Anything that is made mandatory can be misused," said Anu Aga, director of Thermax, an engineering company that funds educational nonprofits. "If your heart is not in it and you are forced to do it, then it is easy to find wonderful ways to dodge."