The Home Minister recently asked the Bangladesh Bank Governor to monitor movement of CSR (Corporate Social Responsibility) fund so that it does not reach terrorists or is not laundered abroad to finance anti-state activities. Obviously, his statement is to be taken seriously because the country is under threat of terrorism. A number of incidents have occurred giving worrying signals.
CSR is no more a buzzword in Bangladesh; its activities have been ever on the increase. It is not a new concept and it gained momentum recently not only in Bangladesh but also around the globe. After the fall of the Soviet Union, market economy has been enjoying unimpeded journey. China, otherwise a communist country, is now an ardent follower of market economy.
Alongside the rapid progress of free market economy, the rich-poor divide across the world has been widening. This has been a major concern both for economists and world leaders. A corporate entity's responsibility cannot be confined to its shareholders only. It has duties to discharge towards its employees, the society, the environment and finally the nation as a whole. Ford, the pioneer of motor car industry of the world, used to pay highest wages to its workers for their comfortable livelihood. In India, TATA has in most cases built townships around its manufacturing hubs for accommodation, health care and education of its workers.
Since it is believed that CSR activities can reduce the rich-poor gap and also help improve the environment, governments have been involved in guiding and monitoring CSR activities in many countries, particularly in the developing ones. What is CSR fund? The fund is taken out of the profit of a company. The question of CSR activities by a losing concern cannot arise. The Board of Directors will earmark a portion of the profit for CSR activities. The amount along with a list of projects shall have to be published in the Annual Report of the company and placed in the annual general meeting (AGM). The fund is the shareholders' money and they must get proper information. The CEO cannot enjoy absolute authority in handling CSR fund as there will be a possibility of misuse of the fund which might ultimately reach the terrorists.
Moreover, there are chances of utilising the fund in ceremonies displaying extravaganza. The company is to ensure that the fund is utilised for activities like poverty alleviation, mass education, health, games and sports for children, protection of environment and welfare of its employees. CEOs sometimes use the fund for ulterior motives. Proper utilisation of the fund can only be ensured through proper laws. The shareholders can establish their rights if the law is available in raising their demands. Otherwise, their voices raised in the AGM will be lost with the ending of the meeting. The Bangladesh Securities and Exchange Commission, the regulatory authority of the capital market, will also be able to take action if the company law contains such a provision.
Some people have suggested for guidelines instead of a law. That would be totally ineffective. Corporate mandarins will cunningly misinterpret the guidelines for fulfilling their personal ends. It has been mentioned earlier a number of times that India has enacted laws for proper use of CSR fund both inclusively and exclusively. There is nothing wrong if we borrow the relevant part of the legislation from the Indian Companies Act, 1993.
There are plenty of areas where the CSR fund can be utilised in a meaningful manner. It must not be used for activities such as cosmetic decoration of the VIP roads, gala opening ceremony of a state function or any other organisation. Once it is specified in the company law, the government will also be able to properly monitor the expenditure.
A few years back, Finance Minister AMA Muhith expressed his frustration over inadequate disclosure of corporate accounts. He took the initiative for preparing the Financial Reporting Act obviously to ensure transparent account of the publicly traded companies. The Act was passed but the Financial Reporting Council is yet to be set up. This should be constituted without any further delay. With this, we also hope that necessary law regarding the monitoring of CSR fund will be passed in the coming budget session of Parliament. It will be unwise to leave CSR activities at the whims and caprices of the corporate mandarins masquerading under the so-called guidelines.