CSR: MYTH OR REALITY
Oct 10 - 16, 2011
Like an individual, a corporate entity also has some social responsibilities. It is observed that the corporations often do not meet the minimum humanitarian and environmental standards in developing economies. In a society where the employers are not ready to pay employees minimum salary fixed by the government and perks to commensurate with the rate of inflation, one cannot expect something additional from the commercial ventures.
This mindset is common around the world but the stringent laws and governments taking care of education and healthcare set the minimum standards for the private sector.
The situation in Pakistan is disappointing mainly because adequate laws do not exist and even if the laws are there, the implementation is very poor. It is expected that private/public limited companies realize their responsibility but it is only a perception and reality is often different.
To begin with, the sponsors have the biggest responsibility to protect the rights of minority shareholders. However, this does not seem to be the case as almost one-third of the total listed companies have been placed on defaulters' counter and trading in dozens of companies remains suspended for months or years.
Out of the various reasons for placement of these companies on defaulters' counter, the most common are not releasing timely periodical reports, not holding annual general meeting and above all not paying dividends to the shareholders.
Strangely, the apex regulators have not been able to improve the conduct of the directors of these companies.
The second largest stakeholders in listed companies are financial institutions, carrying the load of billions of rupees of non-performing loans. Initially, financial institutions make provisions according to the prudential regulations, which reduce their income and ultimately most of these loans have to be written off.
This adversely affects the depositors as well as the shareholders of the financial institutions. Entities like NDFC, IDBP, and ICP virtually became bankrupt. Since all these entities belonged to public sector, they have caused enormous loss to the national exchequer. It is estimated that last year more than Rs300 billion was eaten up by the state owned enterprises, almost one fifth of total revenue collected.
Some of the state owned enterprises pay huge dividends among the shareholders but it is at the cost of consumers of the products sold by these entities. Exploration and production companies, oil marketing companies and gas marketing companies pay huge dividends but the real beneficiary is the government of Pakistan, which has the largest stake in these entities.
The real losers are consumers of petroleum products and gas. The prices are kept exorbitantly high to facilitate the government to collect colossal corporate tax and dividend. In fact, the regulatory authorities have also failed in protecting the interest of consumers as they allow hike in price/tariffs only to enable the government to collect dividend and maximum tax and non-tax revenue.
At closer look at the prevailing energy crisis shows that the primary reason for the dismal prevailing situation is blatant theft of electricity, hovering around 40 per cent of the total electricity made available to the distribution companies.
This has plagued the entire energy chain, from distribution to generation companies and from oil and gas marketing companies to refineries and exploration and production companies.
Electricity outages up to 16 hours a day are affecting industrial and commercial activities as well as lives of the masses and social fabric of the society. One per cent pilferage of electricity costs KESC about Rs1.5 billion per month or Rs18 billion per annum. As a result of delay in receiving payment the entities are forced to borrow and pay colossal financial charges which on the one hand add to the expenses of electric utilities and on the other hand leaves little amount to be lent to the private sector.
Business entities spend considerably good amount on some of the activities which they club under corporate social responsibility. These include promotion of sports, donations for calamity affected people, conservation of environment, education and healthcare.
It is often said that multinational companies spend more on public welfare but it is only because of the laws of the countries in which these companies have been incorporated. According to these laws companies involved in oil and gas exploration, units emitting toxic gases and effluent, chemical and power plants, refineries and even tobacco companies are required to spend specific percentage of their profit for the conservation of environment.
Union Carbide catastrophe of India still haunts people. All the affected people have not received the compensation and little has been done for the rehabilitation of the people who had gone through the trauma. Though no incident of such a magnitude has ever occurred in Pakistan, collectively industrial establishments are creating all sorts of pollution.
Burning of furnace oil containing high percentage of sulfur, sale of motor gasoline containing lead, discharge of effluents without any treatment into sea, burning of all sorts of garbage containing plastic bags and solid waste from hospitals and emissions from cement plants and sugar mills are some of the most obvious violations of the laws of the country.
However, there are few corporations, which have greater realization of the obligations towards their employees, people of the area where their facilities are located and the society in general.
Some of the charitable foundations are involved in education and healthcare. It is on record that some of the business groups of Pakistan have created foundations to undertake many of the activities aimed at improving lives of the people.
In Karachi Kidney Centre and Tabba Hospital are two outstanding institutions. Added to these are activities of Aga Khan Foundation in education and healthcare and even housing. However, a lot remains to be done as the government spends around five per cent of its budget outlays on education and healthcare.