Sachar Committee Report

06/05/2021 1 By indiafreenotes

The Committee (1978), inter alia, looked into the social responsibilities of companies. Every company apart from being able to justify itself on the test of economic viability will have to pass the test of a socially responsible entity.

In this context, it will be judged by various tests dependent upon the circumstances in each company and in each area.

Thus, a chemical company which may declare very high dividend may yet be responsible for polluting the water and air and would have to be named as a socially irresponsible company.

Similarly, the waste discharge from the factories resulting in loss of fish and thereby depriving a large number of fishermen of their livelihood and also posing a risk to those eating fish would certainly be ranked as an irresponsible act. No company in these days can disown its social responsibility.

For securing responsible behaviour, the committee was in favour of “openness in corporate affairs” i.e. adequate disclosure of information for the benefit of shareholders, creditors, workers and the community.

It suggested that social costs-benefit analysis, which was one of the prime considerations for investment decisions in the public sector, ought to be taken into account in the matter of investments in the private sector.

The accountability of the public sector to the people through Parliament must find its parallel in the private sector in the form of social accountability, at least to the extent of informing the public about the extent and the manner in which it has or has not been able to discharge its social obligations in the course of its own economic operations.

It is in this sense that social responsibility of business, as far as the private sector is concerned, is but social accountability and is a mere extension of the principle of public disclosure to which the corporations must be subject.

Other relevant suggestions of the Committee are as follows:

  1. The test for judging a company’s consciousness towards the interests of the public may include: the interest it makes in the area of its operation, the welfare of its employees, the spread of adult literacy and so on.
  2. It should be obligatory on a company to give a social report every year showing to what extent it has been able to meet its social obligations.
  3. While quantifying the contribution that a company claims to have made towards social obligations, the social report should specify that no part of the benefits from contribution made by the company have gone either to the directors or their relatives or to any association in which the directors and their relatives have any personal interest.
  4. The Companies Act should be suitably amended requiring every company to give along with the director’s report a social report, which will indicate and quantify, the various activities relating to social responsibilities carried out by a company in the previous year.
  5. A majority of the population of the country lives in rural areas and its well-being is essential. A company which consciously and with deliberate choice establishes its business in such areas will certainly be held to have played a more socially responsible role even though in terms of its returns on investment it is less profitable than other companies.
  6. Social responsiveness may also be judged from the policy of employment followed by a company so far as the socially handicapped and the weaker sections of the community are concerned.

In 1980 there was a significant development in that the TISCO invited a team of eminent persons to undertake a “social audit” of their organisation and published the findings in the form of a report