Adopting a legal framework for CSR activities

According to a report published in The Financial Express on 29.8.2014, the government has suspended CSR (corporate social responsibility) activities of four state-owned commercial banks (SoCBs). These are Janata Bank Ltd, Agrani Bank Ltd, Rupali Bank Ltd and Bangladesh Development Bank Ltd. The suspension order was issued because these banks were conducting nebulous CSR activities.  
When the CSR activities started increasing, many economists and socially conscious thinkers expressed concern. They suggested that CSR activities should be allowed within a legal framework; and companies should not be allowed to enjoy O.G.L (Open General Licence). This scribe has also written a number of articles suggesting that CSR activities be kept on firm rails.
The phenomenon is not a surprising one, but it might trigger concern among many.  Globally, much stress has  been laid upon  CSR) activities  considering  it to be a major remedy, if not a panacea,  for reducing  the rich-poor divide  which has widened at an alarming  rate due to the unfettered  freedom of the  market economy. Moreover, many countries at the state level also want to use CSR activities as an instrument for alleviating poverty and extending welfare activities   for the less fortunate section of society.
In Bangladesh, CSR activities have gained momentum, particularly in the banking sector, due to the enthusiasm of Dr. Atiur Rahman, governor of Bangladesh Bank. Unfortunately, there is no legal framework in the country, so that CSR activities could be brought under one fold. It cannot be left at the volition of the corporate executives. There will be the danger of fund misuse, as an over-ambitious CEO may feel tempted to utilise the chance of fulfilling his personal ambition through manoeuvring the CSR medium.
Since independence, the state-owned banks have fallen victim to political exploitation. There is no reason to think that there has been any let-up to this exploitation. Funding decorations of VIP roads or gala firework on the occasion of a state event does not fall within the ambit of CSR activities. Financing the arrangement of a golf tournament does not also fall within the purview of CSR activities.
More than a decade has elapsed since CSR became a buzzword in the corporate world of Bangladesh. But the authorities concerned have not thought of the legal aspects. In India, it has been included in the Companies Act of 2013. The schedule of the Act contains the list of CSR activities to be covered:
1) Every company having net worth of 500 million rupee (rupees five hundred crore or more) or turnover of 1.0 billion (Rupees one thousand crore) or more or a net profit of 50 million rupee (Rrpees five crore) or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
2) The Board's report under sub-section (3) of Section 134 shall disclose the composition of the Corporate Social Responsibility Committee.
3) The Corporate Social Responsibility Committee shall,
a) formulate and recommend to the Board a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII:
b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a): and
c) monitor the Corporate Social Responsibility Policy of the company from time to time.
4) The Board of every company referred to in sub-section (1) shall,
a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and
b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.
5)  The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of Corporate Social Responsibility Policy:
Provided that the company shall give preference to the local area and areas around where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount the Board shall, in its report made under clause (o) of sub-section (3) of Section 134, specify the reasons for not spending the amount.
As per schedule (vii) of the Indian Companies Act 1913, the following activities are likely to be covered for CSR activities:
(i) eradicating hunger, poverty and malnutrition; promoting preventive health care and sanitation and making available safe drinking water;
(ii) promoting education, including special education and employment enhancing vocational skills, especially among children, women, the elderly, and  differently labelled and livelihood enhancement projects;
(iii) promoting gender equality, empowering women, setting up homes and  hostels for women and orphans, setting up old-age homes, day care centres   and such other facilities for senior citizens, and measures for reducing  inequalities faced by the socially and economically backward groups;
(iv) ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro forestry, conservation of  natural resources  and maintaining quality of soil, air and water;
(v) protection  of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up  libraries, promotion and development of traditional arts and handicrafts;
(vi) measures for the benefits of armed forces veterans, war widows, and their dependents;
(vii) training to promote rural sports, nationally recognised sports, Paralympics, sports and Olympic sports;
(viii) contribution to the Prime Minister's National Relief Fund or any other fund set up by the central government for socio-economic development  and relief and welfare of the Scheduled Castes, the schedule tribes, other backward classes, minorities and women;
(ix) contributions or funds provided to technology incubators located within  academic institutions which are approved by the central government;
(x) rural development projects.
CSR is not a compulsion for all. The entire process is to be performed in a very transparent way. We may use the model as a guideline but the laws, rules and regulations are to be framed keeping   our situation in view. But something has to be done. The delinquent banks have been detected   because they are under more scrutiny compared to other corporate organisations. The possibility of resorting to delinquency is not ruled out in other companies. So the sooner is the legal framework the better for all.     
In this connection, it may be mentioned that the 'companies law' might be the guardian of the CSR law. But unfortunately,   our 'companies law' is lagging behind in respect of the uniqueness of corporate law. There have been phenomenal changes in the corporate law globally in view of the 'corporate disaster' in the USA in 2001. So the government should immediately frame a CSR law.
rezaulparvaz@live.com