It was not clear how you have given a rating of 3/5 for L & T and 4/5 for Lupin.

 

  As you know Mormons have a guideline of donating 10% of their income (must be after tax ) for good causes. Other than that I do not know of any others who have any norms. Mahatma Gandhi's norms for people (not of course for the company) is to spend only for the minimum needs and to be the trustee.

  If one follows the reasoning of Gurucharan Das then it should be 0%. He feels that individual shareholders should decide and not the company.

  

  The UN had decided that developed country should spend at least 0.7% helping the developing countries and there are some countries who spend as much as 1%. Perhaps we may adapt this as a yardstick and suggest a norm of companies spending at least 1% for CSR. This is in terms of monetary value. If an employee spends some of his time, we may also put some monetary value and include it.

 

Then comes the question of for what causes should they spend: education, fighting corruption, governance, energy savings, solving water crisis, fighting gender bias, dowry etc, removal of child labour, health, global warming, environmental protection, population control, poverty reduction, etc. If they spend money for these items how can we rate them? A company fighting corruption may deserve higher rating than a company giving outright grant to poor on the principle of teaching fishing is more important giving fish. Thus rating becomes very subjective. Even then one should attempt to rate them by giving different importance each of them and then give a rating like A+, A-, B+, B-, C+, C- etc. + and - to be given on two very important criteria of not giving bribe under any circumstances and holding high ethical standards while dealing with stakeholders. When these two are met we will attach two pluses and when we know that they do not meet them their letter grade will be followed by two negatives and if we do not know much then we will not leave the space blank.

 

What I suggest is to list different items for which a corporation can spend money/efforts (can be quantified in hours), develop a consensus of giving different priorities to them and then weighing them to give a rate of A+, etc.

 

Let me show some items  ( I have given 10 and their total marks add to 100) where they can spend and their priorities and also how we can compute weighing and assign a rating.

 

Item	Priority (A)	Amount spent	%  of Target (B)	Weighing (A*B)
Fighting corruption	If a company is known for not giving bribes then it will get one plus
Holding high ethical values	If a company is known for upholding ethical values then it will get a second plus.
Education	30	1 crore	1*(6.5/20)=.325	9.75
Water	15	0.5 crore	0.5*(6.5/20)=.1625	2.4375
Environmental protection	10	0.2crore	0.2*(6.5/20)=.065	0.65
Reducing poverty	5	0.1 crore	0.1*(6.5/20)=.0325	.1625
Health	10	2.0 crores	2*(6.5/20)=.65	6.5
Gender bias and related issues	10	.2 crore	0.2*(6.5/20)=0.065	0.65
Energy saving and related items	5	0.5 crore	0.5*(6.5/20)=.1625	0.8125
Child labour	5	0.5 crore	0.5*(6.5/20)=.1625	0.8125
Global warming	5	1.0 crore	1.0*(6.5/20)=.325	1.625
Population control	5	0.5 crore	0.5*(6.5/20)=.1625	0.8125
Total weighted score				24.125

 

Company should have spent 20 crores on CSR based on their total after tax income. and has spent 6.5 crores and when we weigh them by their priority they get a total score of 24.125.  If we give a grade of A for any one scoring above 70 as A, above 60 as B, above 50 as C, above 40 as D, above 30 as E and above 20 as F and any one below 20 G. then we can rate this company as F ++ because on both the corruption and ethical standards it is being rated as meeting those subjective criteria.

 

If we ask a larger audience we may come up with some more items for which companies can donate money. Then we can develop through a Delphic technique weight to be given to them. Once we know how much money is spent by the company for each of them we can assign a letter rating. It would be better to limit the number of items to 10 by combining. For example global warming and environmental protection together.

 

Hope the above is of some help. I am attaching an editorial I wrote for CSR issue of Catalyst to show where I am coming on this issue. You might have read it already. I also wrote to Gurucharan outlining my reasons for disagreeing with him.

 

Regards

Bhamy