Times of India reported that the passage of the Companies Bill in Lok Sabha recently has paved the way for a significant overhaul of the legislation overseeing firms. In an interview Corporate Affairs minister Sachin Pilot outlines the need for making CSR spending mandatory for certain class of companies, the role of auditors and the need to distinguish between lobbying and advocacy. Excerpts:
The issue of lobbying has attracted lot of attention in India in recent days. How do you plan to tackle the issue?
We got to be distinguishing between what is advocacy, what is projecting what you believe is the best policy making, inputs and ideas and suggestions. There has to be a clear-cut line between what is legal and what is not legal. I think it would be best if the ambiguity is cleared.
Many countries have clear regulations, laws on what is acceptable and what is not acceptable. In India there is ambiguity and I think we must put our heads together and figure out whether we should be able to categorically define the activities. I think it is probably wrong to equate lobbying with bribery straightway. I think that kind of negative connotation is there because there are no clear cut rules and regulations as to what is lobbying. That clarity needs to brought in rather quickly.
Is your ministry taking the lead on the issue?
I don’t think it is my ministry alone. It has to be done at the political level, at the governmental level and we must also start discussing with corporates.
How confident are you that companies will stick to the CSR guidelines?
It’s not that companies have not been doing CSR previously. The idea was to give it a structure, a shape, regularize it in a way that it becomes formatted. And, we are following a principle of self reporting. I am very confident because the private sector, the corporates — they themselves want to build bridges with the community. I also think it help them enhance their brand value and their presence in a very positive fashion. I am very confident that they want to come over and do it as long as there is absorptive capacity in the area to get the CSR done.
What about demand for tax breaks for CSR activity?
There was demand from some corporates that the money they spend on CSR, they should be able either expense it or get some sort of advantage of doing that. I think that is firmly in the domain of the finance ministry and we will be happy to have a discussion with the finance ministry on this. So far, as the implementation and execution of this is concerned we have urged the corporates to be project driven.
How are you going to enforce the rules on auditors as laid down in the bill?
I think we got to as a country and the corporate sector learn lessons from what has gone wrong in the past. I believe that the new bill, with the constitution of the National Financial Reporting Authority (NFRA), will make it possible to have a thorough look. The quality of audit and the fact that if there is any wrongdoing or non-compliance, action must be taken immediately.
That is what the NFRA will be doing. It will be a quasi-judicial body. It will be able to suspend auditors, it will take action against partners and auditors, who are found to have indulged in any foul play. Quality of audit, restriction on the number of years a company can be audited by same auditor, audit committee on board are some of the safeguards. Online filing has brought transparency. NFRA will be an overarching body.
(Sourced from Times of India, 27 December 2012)