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An act, acid rain and corporate governance

Trust Altamas Kabir, the former Chief Justice of India, to draw a logical correlation between acid rain and corporate governance.

“Corporate governance has many facets. It’s not just the question of running a company properly, or well, or for profits, following transparency, rules (and) whatever. It’s also about a certain social conscience,” Kabir said at the IDBI presents BCC&i Think, in association with The Telegraph, at the Palladian Lounge last Tuesday.

To illustrate his point he said rapid industrialisation in parts of north Europe, where natural resources were being used beyond what is required, possibly because of the lack of corporate governance, had led to acid rain in parts of North America.

He highlighted a crucial difference between the companies act of 1956 and the one amended last year, where corporate social responsibility has been turned into a “statutory obligation”.

“What was voluntary before is today a statutory obligation. This is the social consciousness, which the administration feels all corporates should have. The persons who would be required to take up corporate social responsibilities it was kept with companies which had a net worth of over Rs 500 crore or an annual turnover of Rs 1,000 crore or those who made a profit in any given year of Rs 5 crore and above. This was a responsibility placed on the corporate or the company to achieve certain social objects,” he explained.

Kabir said Schedule VII of the act has features social in character, such as eradication of hunger and poverty, making provisions for people to have certain amount of vocational training and ensuring a clean environment.

Then came his acid rain metaphor vis-à-vis the lack of corporate social responsibility.

“One of the things which was part of corporate social responsibility was to promote sustainable development, sustainable growth something which is entirely linked with the corporate world,” Kabir said.

After the acid rain alchemy, he drew a connection between the corporate world and hole in the ozone layer and the emission of greenhouse gases.

Kabir said conservation summits in Johannesburg, Rio and other places have been trying to convince the corporate world to “use natural resources in a manner which would not only sustain its own growth but leave something for the future”.

He stressed the need for renewable energy, hydel and wind power or “things that can always be regenerated”. “These are some of the things introduced by the new act with a responsibility directly placed on corporates.”

Kabir concluded his lecture with a point on safety of women in workplaces as part of corporate responsibility.

Companies should “ensure women employees were not intimidated… This is one aspect, which people sometimes forget while discussing corporate governance and I feel this is something which needs to be stressed every time there is a talk about corporate governance”.