Consider hypothetically that in a country X, companies with net worth, revenue, or net profit above certain established thresholds to spend at least 2 percent of their average net profit of the preceding three years on CSR (Corporate social responsibility) activities. The act has had a major impact in increasing spending on CSR activities in X. Four of the country’s top IT service firms—Digisol Consultancy Services Ltd., Litro Ltd, SystoTech Ltd., and TechniSoli Ltd.—spent about $96 million on CSR activities within X during the first year this rule was in effect. That is 4.7 times the amount they spent on CSR initiatives the previous year, when the rule was not yet in effect. Collectively, these four firms generate over $35 billion in annual revenue.
The companies’ CSR activities include efforts to eradicate hunger, poverty, and disease; promote education, gender equality, and women’s empowerment; reduce child mortality; improve healthcare and sanitation; and provide safe drinking water.
1. Does mandated CSR spending by all organizations within a particular country or market reduce the benefits an individual organization can expect to gain from its CSR programs? 2 marks
2. Do you think that another country Y (assuming that Y is economically stronger than X) should pass a law similar to Section 135 of the X Companies Act? Why or why not? 2 marks
3. If so, should the amount required for CSR spending be higher than two percent of average net profit? 1 mark
