Private sector should not be like a rein-less horse and the Companies Act, 2013, will make corporates more accountable and more responsible to the society, according to Bhaskar Chatterjee, Director-General and CEO of the Indian Institute of Corporate Affairs (IICA) under the Ministry of Corporate Affairs.

He was speaking here on Tuesday at a workshop on ‘Companies Act, 2013: A new vista for corporate responsibility’ organised by the institute.

Satyam scandal

He said that in the aftermath of Satyam scandal the searchlight had been turned on the responsibility of the private sector and the need for having good corporate governance.

“In fact, the whole economic downturn in the West can be blamed on the malpractices and skullduggery indulged in by the corporate giants there and not on the inefficiency or corruption of the governments. The naked greed and ambition of the corporates in the West is seen to be believed. They think they are above the law and regulation. It is that kind of attitude which triggered the economic crisis in the US and Europe,’’ he said.

Keeping in view these factors, Chatterjee said that the Companies Act, 2013 was enacted to regulate the corporates, but at the same time without impinging on their freedom to grow. “The act sets a new agenda, a new path. It paves the way for good corporate governance and protection of the interests of the shareholders and stakeholders,’’ he said.

Corporate social responsibility

He also spoke at length about corporate social responsibility (CSR) and how it was made mandatory for the corporates to spend two per cent of the average net profit of the past three years on CSR.

Companies would have to lay down the CSR policy and also appoint a CSR board within the company to monitor the activities.

“CSR can no longer be viewed as merely a charitable activity. The companies — public or private — should have to report to the Government on how and where they are spending the CSR funds. At a later stage, we may even have CSR rating for the companies,’’ he said.

Earlier, E.A.S Sarma, a former bureaucrat, launched a scathing attack on the Companies Act, 2013, and remarked that certain sections relating to CSR almost read like the manifesto of some political parties.

He said the Act was disappointing in many respects and it should have been prepared with greater care to rein in the corporates.

He said the corporates in India were getting away with murder and even the public sector companies were no exception. There was no check on the shell companies being floated by corporates for various malpractices.

D.V Subba Rao, former Chairman of the Bar Council of India, remarked that corporates should not be allowed to deal with other people’s monies as they please and there should be strict regulation and enforcement to keep them in check.

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