English: Reading Comprehension Set 51

Directions:(1-10)Read the following passage carefully and answer the questions given below them. Certain words/phrases have been printed in bold to help you locate them while answering some of the questions.

The Indian Companies Act (2013) mandates that Indian corporates, public and private, must allocate at least 2 per cent of their net profits for CSR (Corporate Social Responsibility). The Act defines broadly the social framework within which companies should spend their CSR funds but beyond that, companies have the freedom to identify the projects and determine the modalities of implementation. The Act was gazetted in 2014 and since then, according to the Ministry of Corporate Affairs (MCA), companies have spent Rs 5,922 crore, Rs 7,549 crore and Rs 8,446 crore in 2014, 2015 and 2016 respectively on eligible CSR activities. This is not an insignificant amount but the question does arise: Is the current individualistic model with every company doing its own thing, the optimal model for the utilization of these statutorily sequestered funds?

There are three reasons for asking this question.

One, corporates have limited experience and expertise in addressing the complexities of social development. That is not their business and whilst they may be genuinely committed to social upliftment, this is not an activity they are trained to lead or manage. They do hire resources to bridge the lacuna but there are many entities with a deeper understanding of social issues and better placed to deploy CSR funds.

Second, the MCA data shows that the bulk of the CSR money (almost 75 per cent) is allocated to just three sectors — education, health (including sanitation and water) and rural poverty. This is, of course, not surprising. These are the most pressing issues facing the country. But this focus raises questions. Is there duplication of effort? Are there inter se synergies to be garnered through cooperation?

Third, the MCA data also reveals a skew in the distribution of the CSR funds. Almost 40 per cent of the money goes to just a few relatively well-developed states — Maharashtra, Gujarat, Karnataka, Tamil Nadu, Andhra Pradesh and Telangana. This is again not surprising given that India’s most profitable companies (Reliance, Infosys, Wipro, ITC, IOC, HDFC) invest preponderantly in these states and Section 135(5) of the Act encourages companies to “give preference to the local area and areas around it where it operates, for spending the amount earmarked for CSR activities.” The current model, in short, aggravates rather than alleviates existing regional and social disparities.

CSR has been a controversial subject. People like the Nobel Prize winning economist, Milton Friedman, held that business had a singular responsibility to their shareholders and that “the business of business was business”. The Economist magazine had declared CSR to be a “fad” when the concept was first introduced into the corporate vocabulary. Corporates have indeed, for long, regarded CSR as little more than a business necessity. A “price” to be paid to hold onto their operating license; a peg on which to claim they run a “principled” business; an integral part of their public relations exercise. They did not spend money on social projects because of an underlying social commitment or moral suasion.

This attitude has, in my view, undergone a subtle but definitive shift in recent years. I believe an increasing number of Indian companies, especially large-cap professionally managed companies have woven social responsibility into the fabric of their corporate values. Their leaders have distanced themselves from the Friedmanite dictum. They, of course, hold themselves responsible for their “business” but not to create value just for the benefit of “business”. They acknowledge a responsibility towards stakeholders that falls outside the boundaries defined by the shareholder community.

I am sure I will be accused of looking at corporates through rose-tinted lenses. I will be told that the juxtaposition of profits and principles is inherently contradictory — a la jumbo shrimps. This criticism may have substance but it does not negate, at least in my view, the reality of increasing corporate involvement in social issues.

It is this positive trend that encourages me to offer a different model for CSR expenditure. I suggest that corporates pool their CSR funds into a common “CSR trust” and allow an autonomous body to manage and disburse the funds. This body should be a confederation of corporates, NGOs, domain experts and government. Its role should be to define the CSR agenda, identify the CSR projects, select the local partners, allocate the resources and oversee implementation. I believe such a collaborative model would be an improvement on the present individualistic approach for the following reasons.

One, it would enable the pooling of knowledge and experience, the sharing of best practice and the leveraging of scale economies. Two, It would provide a forum for learning from the grassroots experience of NGOs and the local community. Three, it would facilitate back-office synergies and reduce duplication of efforts (as mentioned, CSR money is concentrated on just three sectors). Four, it would allow for a more equitable geographic distribution of funds. And finally, it would provide a platform for the delivery of holistic solutions developed by leveraging the financial and non-financial assets of corporates and by creating development “joint ventures” between companies with complementary assets and skills. Thus , for example, a JV between Reliance JIO, TCS, Unilever and Larsen and Toubro could bring to a CSR project on education not just the hardware of a school building , tables and chairs but also Internet connectivity by Jio, IT by Wipro, marketing skills by Unilever, vocational training by Larsen and internship by all. And thereby generate sustainable income generating opportunities.

The government is responsible for social development. Corporates cannot replace them in this role. But governments need help. Corporates can make a meaningful contribution especially if there is a platform that allows them to offer the totality of their skills, technology and resources. The above model for CSR provides such a platform. The corporates will no doubt initially resist the dilution of control over this discretionary fund. But this resistance might weaken if they are assured that a collaborative model will generate a greater bang for their social buck. The Niti Aayog should convene a meeting of the custodians of the “CSR trust” and ascertain the corporate response.

  1. What makes the author doubt if the current model of companies is ideal for the utilization of the funds allotted for Corporate Social Responsibility?
    Managing social upliftment is not an expertise of the corporate
    Focus on only few specific sectors while providing funds raises doubts on the intentions of the corporates
    Uneven state wise distribution of funds
    All of these
    None of these
    Option D
    “That is not their business and whilst they may be genuinely committed to social upliftment, this is not an activity they are trained to lead or manage.”
    “the MCA data shows that the bulk of the CSR money (almost 75 per cent) is allocated to just three sectors”
    “the MCA data also reveals a skew in the distribution of the CSR funds. Almost 40 per cent of the money goes to just a few relatively well-developed states”

     

  2. What is ‘Friedmanite dictum’?
    A “price” to be paid to hold onto their operating license
    the business of business was business
    CSR is a fad
    corporates are looked through rose-tinted lenses
    large-cap companies have inculcated social responsibility
    Option B
    “Milton Friedman, held that business had a singular responsibility to their shareholders and that “the business of business was business”.”

     

  3. How according to the passage was the CSR regarded as by corporates earlier for long?
    It helped them to claim that they run an ethical business
    The corporates considered it to be their responsibility to serve the needy
    It was a way to increase the share value of the corporates
    It was a way to lure small businesses
    Both A and D
    Option A
    “Corporates have indeed, for long, regarded CSR as little more than a business necessity. A “price” to be paid to hold onto their operating license; a peg on which to claim they run a “principled” business; an integral part of their public relations exercise. They did not spend money on social projects because of an underlying social commitment or moral suasion.”

     

  4. Choose the word from the given options which has the meaning most opposite to the word given below as used in the passage.

    Preponderantly

    scarily
    dangerously
    fractionally
    largely
    significantly
    Option C
    Preponderantly means largely. Opposite is fractionally

     

  5. What is the author’s stand regarding the corporate’s attitude towards social responsibility?
    The corporates now a days consider social responsibility as a part of maintaining their public relations
    The corporates have now become more self-centered and business oriented
    More emphasis is being laid on extracting business from social responsibility
    Corporates are now aiming beyond creating value just for the business
    They are wearing masks of running ethical businesses and camouflaging it by involving themselves in social work
    Option D
    “I believe an increasing number of Indian companies, especially large-cap professionally managed companies have woven social responsibility into the fabric of their corporate values. Their leaders have distanced themselves from the Friedmanite dictum. They, of course, hold themselves responsible for their “business” but not to create value just for the benefit of “business”. They acknowledge a responsibility towards stakeholders that falls outside the boundaries defined by the shareholder community.”

     

  6. What is the relation between the government and the corporates in social development?
    Government seeks suggestion from corporates
    The government plans and corporates implement those plans
    The government needs help from corporates in bringing social development
    Corporates pool their CSR funds into a common account and then transfer it to the government for social responsibility
    Both A and B
    Option C
    “The government is responsible for social development. Corporates cannot replace them in this role. But governments need help. Corporates can make a meaningful contribution….”

     

  7. What is the benefit of pooling CSR funds into a common CSR trust?
    It will engage NGOs
    It will help to identify the CSR projects
    It will help to share the best practices
    Both A and B
    All of the above
    Option C
    “One, it would enable the pooling of knowledge and experience, the sharing of best practice and the leveraging of scale economies”

     

  8. Choose the word from the given options which has the meaning most similar to the word given below as used in the passage.

    Sequestered

    revealed
    restored
    confiscated
    categorized
    lineated
    Option C
    Sequestered means confiscated.

     

  9. Choose the word from the given options which has the meaning most similar to the word given below as used in the passage.

    Lacuna

    large
    general
    inflated
    gap
    double
    Option D
    Lacuna means gap.

     

  10. Choose the word from the given options which has the meaning most opposite to the word given below as used in the passage.

    Synergies

    checks
    friction
    beliefs
    expansion
    removal
    Option B
    Synergies means collaborations. Opposite is friction.

     

 

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