CSR as a Government Requirement

“Do you think the government should require companies to have CSR programs?”  This was a question raised in one of our MBA-CSR sessions.  Personally, I don’t think this should be a government requirement.  Corporate Social Responsibility (CSR) programs should be sincerely and voluntarily implemented, rather than being forced to business organizations. 

In 2013, House Bill (HB) 306 was introduced by the former president, Gloria Macapacal Arroyo, as well as her son, Diosdado “Dado” Macapagal Arroyo.   This act is known as “Corporate Social Responsibility Act of 2013”, “an act encouraging corporate social responsibility, providing incentives therefor, and for other purposes”.  Under this bill, companies are encouraged, not required, to voluntarily contribute to sustainable economic development.  Section 43 of Batas Pambansa Blg 68, or the “Corporation Code of the Philippines” was amended as follows: “Stock corporations are prohibited from retaining surplus profits in excess of one hundred (100%) percent of their paid-in capital stock, except: (1) when justified by definite corporate expansion OR CORPORATE SOCIAL RESPONSIBILITY projects and programs approved by the board of directors…”.  Under this bill, the state shall “give national recognition and rewards to all business organizations for outstanding, innovative and world-class CSR-related services, projects and programs;”  spending for these CSR programs are also be entitled to full deductibility from gross income; local government units can provide assistance “necessary for business organizations to perform their CSR;” and that “all business organizations shall submit the list of their CSR activities as part of their annual or regular report to the Securities and Exchange Commission, the Department of Trade and Industry, or the Department of Finance.” 

When I first read about this HB, I was pleased that the government is actually promoting CSR to local organizations.  But on the second thought, I felt that there’s an underlying agenda on this HB, probably because of my bias on the authors of this HB.  As the public knows, our former president faced various plunder and graft cases.  And yet, I find it ironic that they are actually authoring this HB.  CSR, as I have learned in my MBA-CSR class, is how companies contribute to society through good business practice.  But have the authors of this HB done a responsible government practice during their term?  If the plunder and graft cases were true, how confident are we that this HB will be applied by the companies responsibly?  How good is the intention of the authors?  In this HB, companies can already use its CSR projects as a justification for retaining their surplus profits.  Should the companies exceed their surplus profits beyond their paid-in capital stock, and these are not justified, they will be subjected to certain taxes and penalties.  Because of my bias on the authors of this HB, I believe that this will just be used for some forms of concealment and tax avoidance.   

The HB also mentioned (but not limited to) the following activities as forms of CSR activities: “charitable programs and projects, scientific research, youth and sports development, cultural or educational promotion, services to veterans and senior citizens, social welfare, environmental sustainability, health development, disaster relief and assistance, and employee and worker welfare related CSR activities.”  CSR in general, should not be an exclusive project only, and it should form part of the company’s daily operations.  On accounting perspective, I find it hard how to distinguish the costs between CSR and non-CSR programs, particularly for organizations who are already embedding CSR in their core business operations.  Providing a safe workplace and fair compensation to employees are already forms of CSR.  Will our local government consider these as CSR activities as well?  CSR, based on one of the videos that we have watched in class, is how companies earn profits, and not how they spend it.  With this bill, the people will continue to perceive CSR otherwise, and be misled to believe that CSR is how companies spend money (on charitable or philanthropic giving), and not how they responsibly earn their profits.