Reference no: EM133268821

Section 135 of the India Companies Act of 2013 requires 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 activities. The act has had a major impact in increasing spending on CSR activities in India. Four of the country's top IT service firms-Tata Consultancy Services Ltd., Wipro Ltd, Infosys Ltd., and Tech Mahindra Ltd.-spent about $96 million on CSR activities within India 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.

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? Do you think the United States should pass a law similar to Section 135 of the India Companies Act? Why or why not? If so, should the amount required for CSR spending be higher than two percent of average net profit?