Use two attached articles and discuss two of the biggest challenges facing financial managers today. One of the articles should be about the challenge of maintaining ethical financial integrity and the other article should be on, government intervention.

Summarize your findings from the articles in a two- to three-page paper (excluding title and references pages). The paper should be formatted according to APA style. Be sure to properly cite your selected articles using APA style.

INTEGRITY-BASED FINANCIAL LEADERSHIP AND ETHICAL BEHAVIOR: A ... Verschoor, Curtis C Internal Auditing; Nov/Dec 2003; 18, 6; ProQuest Central pg. 44 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Emerging Markets Finance & Trade, 51:377-390, 2015 Copyright Taylor & Francis Group, LLC ISSN: 1540-496X print/1558-0938 online DOI: 10.1080/1540496X.2015.1021600 Effects of Government Involvement in Corporate Social Responsibility: An Analysis of the Indian Companies Act, 2013 Jin Young Shin1, Moosup Jung2, Kyung-il Khoe3, and Myung-Su Chae4 1 Center for North Bay of Bengal Studies, Hankuk University of Foreign Studies, Seoul, South Korea; Department of International Trade, College of Business Administration, Dong-A University, Busan, South Korea; 3Department of International Business and Trade, Baekseok University, Cheonan City, South Korea; 4College of Business Administration, Hankuk University of Foreign Studies, Seoul, South Korea 2 ABSTRACT: In this article, we aim at determining whether government involvement in CSR activity is desirable or counterproductive. We analyze the effects of government involvement in CSR by studying the Indian Companies Act, 2013, and estimating its effects by examining forty-seven top Indian companies coming under this Act on three crucial parameters: level of financial contribution to CSR, operating system of CSR, and the kind of CSR activities undertaken by the companies. Many companies under study already contributed their profits to CSR activities and have operating systems. Most CSR activities of the companies under study are also in compliance with the regulated activities of the new Act. Therefore, government involvement in CSR by regulation is not likely to have much negative effect on companies but can create positive developmental environments for communities. KEY WORDS: corporate social responsibility, effects of government involvement, government involvement in CSR, Indian Companies Act 2013 Since the 1950s, the concept of corporate social responsibility (CSR) has gradually undergone change and corporations operate to the steady involvement of government in regulating CSR activities through public policies and laws. Therefore, the voluntary characteristic of CSR is gradually fading away. Presently, government is involved not only in regulating corporate business vis--vis environment, employee problems, and related issues but also in regulating the ethics of corporate management, charitable activities, and development of local communities. Hence, government role and its effect on CSR is becoming an emerging issue among business people, public officials, and scholars. Thus, the recently enacted Indian Companies Act, 2013, has drawn keen attention in India as well as overseas. On August 9, 2013, the Indian Parliament passed the new Companies Bill, making changes in the way Indian companies operate. It provides enhanced self-regulations, corporate democracy, transparent corporate governance, and provision for mandatory spending of 2 percent of net profit on CSR.1 CSR activities are now administrated under this Act. The new legislation was implemented in April 2014. The Companies Act, 2013, has broken the existing understanding on government policies and regulations of CSR and is representative of the government's aggressive involvement in CSR and the CSR activities. The industry leaders have expressed concern that the new Act represents overregulated government action and may become more problematic and controversial globally. In view of the above, we attempt to analyze the characteristics of the Indian Companies Act, 2013, and estimate the influence of the regulation with special reference to CSR. Address correspondence to Moosup Jung, Department of International Trade, College of Business Administration, Dong-A University, 225, Gudeok-ro, Seo-gu, Busan, 602-760, South Korea. E-mail: jungmoosup@hanmail.net Color versions of one or more of the figures in the article can be found online at www.tandfonline.com/mree. 378 J. Y. SHIN ET AL. Literature Review Changed Concept of CSR The concept of CSR has a pattern of gradual change with times and situations. This changing pattern includes the range and involvement of different actors. In the past, companies had consideration only for consumers, shareholders, and workers but gradually included wider stakeholders such as potential consumers and local communities relating directly or indirectly to the company. Recently, the most inclusive and comprehensive concept of CSR, strategic CSR, has emerged for preventing potential risk factors, which are caused by declining corporate image and compensation costs (Francis and Armstrong 2003; Jimnez 2011; Ok 2004). Traditional CSR activities were deployed in order to avoid legal sanctions, whereas strategic CSR not only pursues active participation in social activity but also has a positive role in the direction of development in social issues (Francis and Armstrong 2003). In the 2000s, the concept of creating shared value (CSV), which is more intensively connected to societies, has emerged. The main theme of CSV is that companies can create economic value by creating social value (Porter and Kramer 2011). CSV emphasizes that companies should be involved in numerous social issues, such as natural resources and water use, health and safety, and working conditions. Perspective of Government Involvement in CSR The changed concept of CSR as seen above has made room for government involvement in CSR activities. However, government involvement in CSR is still a problematic and critical issue among stakeholders and scholars. They have different opinions and perspectives on CSR. Their opinions can be divided into three categories: First, economists argue that the ultimate goal of a company is making profits. The only responsibility of the company is to serve the interests of shareholders by using corporate resources to increase wealth (Clarke 1998). From this perspective, contribution for social activities is the work of government, not companies. From this point of view, the participation and involvement of government in CSR activity is considered to be negative (Lantos 2002). Second, there are those who argue for the necessity of having CSR activities and government intervention for such activities. Freeman (1984) argues that the company as a member of society should have concern for stakeholders' needs and safety. According to him, stakeholders include shareholders, workers, consumers, suppliers, and local and national residents (Freeman 1984). Therefore, companies should fulfill their social responsibilities (Harrison and Freeman 1999), and as such, government can be normatively involved in CSR. The third view is that government involvement in CSR can be cooperative or positive. This view regards the relationship between companies and societies as interdependent. It is argued that the company should identify the problems of the local communities relating to the company and prevent potential problems (Francis and Armstrong 2003). Hence, companies and government need to work collaboratively to be sustainable and to maximize each other's benefits. As can be seen, there are divergent opinions and perspectives on government involvement in CSR. Despite this, the fact is that government involvement has gradually increased (Albreda et al. 2007; Midttun 2005; Moon 2007) and the government has become an important stakeholder, which in turn strengthens its involvement in CSR (Fox et al. 2002). This trend is happening not only in developed countries but also in developing countries. Therefore, it becomes difficult to neglect or ignore the involvement of government in CSR in our discourse. Emerging Trend of Government Involvement in CSR As companies have different reasons and purposes for participation in CSR, so does the government. Porter and Kramer (2002) point out that government involvement in CSR is for enhancing public GOVERNMENT INVOLVEMENT AND CORPORATE SOCIAL RESPONSIBILITY Political exchange Government Social partner 379 Civil Society Social partner Regulatory and policy exchange Commercial Exchange Industry Figure 1. The embedded relational model. Source: Adapted from Midttun (2005). good. Bredgaard (2003) and Zhao et al. (2013) demonstrate a case in which the government entered into a partnership with companies in an attempt to solve employment problem. At times, governments politically support companies in CSR activities to set up standards to attract investment (Ahn 2007). This clearly reveals that governments are now playing an important role in the CSR process. Midttun (2005) suggests the embedded relational governance model for explaining the emerging CSR (Figure 1). The embedded relational model shows three main subjects: industry, civil society, and government. Civil society and industry have a commercial exchange relationship. Industries provide products or services and become employers. Civil societies provide employees and become customers. Government and industry have a regulatory and policy exchange relationship. According to Midttun (2005), the industry is supported by public funding and other forms of partnership in a regulatory and policy exchange. In this relationship, the government can act as a convener or facilitator of CSR (Fox et al. 2002). Following these literature reviews, we examine two aspects of CSR. First is the review of the Indian government concept of CSR. Second is the influence of the Indian Companies Act on CSR. Regulations on CSR by the Indian Companies Act, 2013 In India, there has been a call for CSR legislation for social development and charitable activities since 2000. However, due to strong oppositions from companies, it was put on hold until 2010. It was replaced by a recommendation for companies to participate in community development and charitable activities. In 2011, the Companies Bill, containing CSR provisions, was passed by the Indian House of Representatives (Lok Sabha). On August 9, 2013, this bill was finally passed by the Upper House of the Indian Parliament (Rajya Sabha) and become the Companies Act, 2013. Indian Government Concept of CSR The Indian Companies Act, 2013, affirms that social responsibility is one of the purposes of companies. The Companies Act defines the social purpose of companies, which includes undertaking educational activities, social welfare, charities, and protection of the environment. Thus, the government of India makes social responsibility one of the purposes of companies. The Companies Act, 2013, also imposes a CSR obligation on companies having a certain level of net worth or turnover. This is defined in section 135 (1): \"Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year...\" Further, Section 135 (5) (1) ensures that \"the company 380 J. Y. SHIN ET AL. spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.\" The Companies Act, 2013, thus imposes a CSR obligation on those companies having the above level of assets and profits but exempts small or medium companies from such obligation. Controlling and Operating Mechanism The CSR committee within the company will be governed by the companies and have two or more members of the company and one member as an independent director from outside. The role of the CSR committee is defined in Section 135 of the Act. The main functions of CSR committee are to formulate and recommend to the Board a CSR policy that indicates the activities to be undertaken by the company as specified in Schedule VII of the Act; to recommend the amount of expenditure to be incurred on CSR activities; and to monitor the corporate social responsibility policy of the company from time to time. So, this committee acts in providing information on CSR norms to the companies, planning CSR activities, assisting and approving CSR policies and activities; and monitoring the same. The Companies Act affirms that companies must disclose any information requested by the government. The Companies Act, 2013, sets up a system of internal and external controlling mechanisms of companies for CSR. Regulated CSR Activities The Companies Act, 2013, regulates CSR activities under Section 135 as specified in Schedule VII of the Act. The specified CSR activities by the Act are as follows: In the first category, the fight against hunger and poverty, delivery of relief supplies to underprivileged, and donation activities are included. Providing training activities is included in the second category. Activities contributing to eradication of diseases and improvement of health; combating HIV/AIDS, malaria, and other diseases; and reducing child mortality fall into the third category. The fourth is improving human rights that contribute to gender equality and women's rights. The fifth is protection of the environment, while the sixth pertains to operating social business projects. The seventh includes donation to the Prime Minister Relief Fund and other government funds for charitable purposes. The last two include enhancing employment and contributing to the economic development of local communities by donating to social and economic development projects established by the government. Other activities are expected to be added later. It can be seen that CSR activities, as regulated by the Act, mainly focus on solving social problems for local communities. The main regulations on CSR by the Act can be seen in three aspects: expenditure, constitution of CSR committee, and CSR activities. The effects of the Act on these three aspects are presented in Figure 2. To summarize, the approach adopted on CSR by the Indian government is closer to the concept of CSV than the strict definition of CSR. Their perspective on CSR is also closer to a normative than to a cooperative perspective. Effect of the Companies Act, 2013 on CSR Methodology Currently, around 8,000 companies will fall under the jurisdiction of the Companies Act, 2013 (Dhawan 2013). Due to limitation of data availability and other research constraints, we cannot analyze all 8,000 companies. Hence, forty-seven companies have been chosen as sample studies through two steps. GOVERNMENT INVOLVEMENT AND CORPORATE SOCIAL RESPONSIBILITY 381 The Companies Act, 2013 Contribution Committees CSR Activities Nine categories (poverty, education, Constitution of health, human CSR Committees rights, (two internal environment, social directors and one business, external director) employment, 2 percent of average net profits donation, social development) Criteria of companies for government regulation of CSR (net worth of rupees five hundred crore or more) (turnover of rupees one thousand crore or more) (net profit of rupees five crore or more) Figure 2. CSR operational model of the Companies Act, 2013. First, we examine 100 top Indian companies chosen by Forbes India (Jayashankar et al. 2013) on which they have undertaken research study. CSRidentity.com and Forbes India have investigated how much each company spends on CSR and will have to spend in accordance with the stipulations of the Companies Act, 2013. Drawing on their research data, we have excluded fifty-three companies that do not show CSR expenditure. The data on CSR from the remaining forty-seven companies have, therefore, been used for our study. These selected companies cover diverse sectors such as automobile, banking, electronics and engineering, ITES, metal, oil, real estate, telecommunication, trading, and so on. For analyzing the effect of the Companies Act, 2013, we examine the rate of spending on CSR by these forty-seven companies in comparison with the provisions of the Companies Act, 2013. For finding out the present CSR operating system and activities, we examine the information available on the websites of the respective companies as well as on CSRidentity. com and IndiaCSR.in. Most of the data were collected from the official websites of each company. 382 J. Y. SHIN ET AL. Result Contribution These forty-seven companies have been divided into two groups according to their contributions to CSR. Twelve of the companies already contribute more than 1 percent of their profit after tax (PAT) to CSR activities, the average being 1.73 percent. This is shown in Table 1. Among them, five companies (Hindustan Petroleum Corporation, Jaiprakash Associates, Jindal Steel and Power, JSW Steel, and Tata Steel) contribute more than 2 percent of their PAT to CSR. This first group (Group A) is close to contributing 2 percent of their net profits to CSR. Thirty-five of the companies contribute less than 1 percent of their PAT to CSR. This can be seen in Table 2. Among the thirty-five companies, four presently contribute only rupees (Rs) 1 crore each of their profits to CSR activities. The average contribution of these thirty-five companies to CSR activities comes to be 0.48 percent of their PAT. These thirty-five companies (Group B) are thus far from the requisite contribution mandated by the Companies Act, 2013. Therefore, when the Act is implemented, these Group B companies will suffer a financial burden. Operating System The Companies Act, 2013, requires companies to constitute a CSR Committee and mandates that they have a CSR homepage on their official website. Many of the researched companies already have a mechanism in place for operating CSR activities (Table 3). These are in the form of foundations, management committees, or departments. This kind of operating system controls and manages CSR expenditures and activities. Most of the twelve companies (Group A) have a CSR management system and a homepage exclusively for CSR, except Steel Authority of India (SAIL). Six companies have a general foundation for carrying out diverse CSR activities, while four companies have CSR centers for investment in deemed CSR activities. Reliance Industries, for example, founded Reliance Rural Development Trust (RRDT) and focuses CSR activities in rural areas. Similarly, Hero Motor Corporation has the Integrated Rural Development Center through which CSR activities are deployed in rural areas. Table 1. Top Indian companies on CSR expenditure (more than 1 percent profit after tax), 2012 financial year Company 1 2 3 4 5 6 7 8 9 10 11 12 Revenue Average profit after tax Expenditure on CSR 2 percent of profit after tax GAIL (India) Hero Motor Company Hindustan Petroleum Company Jaiprakash Associates Jindal Steel and Power JSW Steel Larsen and Toubro MMTC Oil India Reliance Industries Steel Authority of India (SAIL) Tata Steel Total 44,861 25,235 195,891 15,351 22,473 36,964 64,960 67,023 17,215 369,571 51,428 135,895 1,046,867 3,891 2,179 1,118 1,296 3,814 1,569 4,818 129 2,988 21,138 5,153 3,995 52,088 54 33 27 47 88 32 70 3 50 288 61 146 899 (86.2%) 78 44 22 28 76 31 96 3 60 423 103 78 1,042 (100%) Source: Dhawan 2013. Units: crore; 1 crore = 10,000,000 rupees. GOVERNMENT INVOLVEMENT AND CORPORATE SOCIAL RESPONSIBILITY 383 Table 2. Top Indian companies on CSR expenditure (less than 1 percent profit after tax), 2012 financial year Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 24 25 26 27 28 29 30 31 32 33 34 35 Revenue Average profit after tax Expenditure on CSR 2 percent of profit after tax Indian Oil Company Bharat Petroleum Company Tata Motors State Bank of India Hindalco Industries Coil India Bharti Airtel NTPC Mahindra and Mahindra Bharat Heavy Electricals Sterlite Industries India Chennai Petrol Company Anani Enterprises ICICI Bank Maruti Suzuki India Infosys HDFC Tata Power Company Grasim Industries Reliance Infrastructure Axim Bank Union Bank of India HCL Technology Bajaj Auto Indian Overseas Bank Motherson Sumi S. Tata Chemicals Power Finance Corporation Siemens Gitanjali Gems Hindustan Zinc Power Grid Company Alok Industries Asian Paints Total 442,459 223,315 170,678 147,197 82,549 79,410 71,506 66,366 63,030 50,654 43,116 45,397 39,418 37,995 40,050 33,734 29,930 26,020 27,899 24,181 21,995 21,172 20,831 20,541 17,987 15,138 14,035 13,075 13,296 12,498 12,061 10,321 10,019 10,872 1,958,745 7,783 1,438 8,437 13,056 3,597 11,759 6,511 9,334 2,948 5,823 6,831 392 1,940 6,366 2,162 7,128 3,608 1,117 3,395 1,229 3,347 1,981 1,778 2,709 943 291 870 2,695 672 349 4,832 2,664 191 929 129,105 83 8 15 71 28 119 33 49 22 37 7 3 14 24 12 26 3 9 16 4 19 6 4 10 5 1 2 13 1 3 8 25 1 1 628 (24.3%) 156 29 169 261 72 235 130 187 59 116 137 8 39 127 42 143 72 22 68 25 67 40 36 54 19 6 17 54 13 7 96 53 4 19 2,582 (100%) Source: Dhawan 2013. Units: crore; 1 crore = 10,000,000 rupees. The situation is similar for Group B companies; that is, companies contributing less than 1 percent of their PAT to CSR. Among the thirty-five companies, twenty-six already have a CSR operation system such as a general foundation, a center, or a CSR department (Table 4). NTPC, for example, has special center for the disabled, while Mahindra and Mahindra has a special center for the developing education sector. Siemens executes CSR through the Smile Foundation. Their CSR department functions as a nodal agency in managing and coordinating with the work of the Foundation. Group B companies have CSR homepages. Thus, the provisions mandating constitution of a CSR committee and having a CSR homepage will not be an added burden on the companies under study. 384 J. Y. SHIN ET AL. Table 3. CSR management system of Indian companies (Group A companies) Company 1 2 3 4 5 6 7 8 9 10 11 12 Homepage General foundation GAIL (India) Hero Motor Company Hindustan Petroleum Company Jaiprakash Associates Jindal Steel and Power JSW Steel Larsen and Toubro MMTC Oil India Reliance Industries Steel Authority of India (SAIL) Tata Steel Total O O O O O O O O O O O 11 Specified center O O O O O O 6 CSR department O O O O O O 4 O 3 Source: Official websites of the respective companies; CSRidentity.com; IndiaCSR.in. CSR Activities The CSR activities undertaken by companies have been categorized according to the Companies Acts, as shown in Table 5. Twelve companies are involved in education, health, and employment activities. These companies support elementary schools or provide scholarships. CSR activities in the health sector include conducting a free health camp and providing primary medicines to poor and rural people. In the employment sector, most companies undertake vocational education rather than providing direct job opportunities. Companies that contribute less than 1 percent of PAT to CSR (Group B companies) are providing CSR activities in areas similar to those of Group A companies. Most companies focus their CSR activities on eradicating poverty, on improving education, health, and employment, and in the socioeconomic development sector (Table 6). CSR activities on social business projects and donating to government funds are insignificant in both groups of companies. Most companies either directly undertake charity work for communities and social groups or they provide financial support to nongovernmental organizations (NGOs). They donate little to government funds until 2012. However, this seems to have changed recently. For example, MMTC, Infosys, and Oil India have donated to the government fund. The latter starts the donation only in 2013. Social business projects are also rarely taken up. When they are, managers attempt to relate the same with the business activities of their respective companies. Besides the regulated category of activities by the Act, the companies also undertake several other CSR activities. They directly or indirectly support women's self-help groups, promote sports and the arts, undertake diverse research on welfare of communities, and so on. Therefore, the prescribed CSR activities to be undertaken by the companies will not have a negative effect on them. The effect of the Companies Act, 2013, on CSR is summarized in Figure 3. Conclusion The concept of CSR has undergone gradual changes since its emergence from being a voluntary undertaking by companies to having the steady involvement of government through public policies and laws. In this context, the Companies Act, 2013, represents the aggressive involvement of government in CSR. GOVERNMENT INVOLVEMENT AND CORPORATE SOCIAL RESPONSIBILITY 385 Table 4. CSR management system of Indian companies (Group B companies) Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 24 25 26 27 28 29 30 31 32 33 34 35 Homepage General foundation Specified center CSR department Indian Oil Company Bharat Petroleum Company Tata Motors State Bank of India Hindalco Industries Coil India Bharti Airtel NTPC Mahindra and Mahindra Bharat Heavy Electricals Sterlite Industries India Chennai Petrol Company Anani Enterprises ICICI Bank Maruti Suzuki India Infosys HDFC Tata Power Company Grasim Industries Reliance Infrastructure Axim Bank UBI HCL Technology Bajaj Auto IOBL Motherson Sumi S. Tata Chemicals Power Finance Corporation Siemens Gitanjali Gems Hindustan Zinc Power Grid Company Alok Industries Asian Paints Total O O O O O O O O O O NA O O O O O O O O O NA O O O O O O O O 28 O O O O O O O NA O O O O O O NA O O O O O NA O O NA O O NA O NA O O O O O 11 9 O 9 Source: Official websites of the respective companies; CSRidentity.com; IndiaCSR.in. In this article, we attempt to understand the effect of the Companies Act, 2013, on forty-seven companies on three crucial parameters of CSR: level of average contribution to CSR activities, operating system of CSR, and the kind of CSR activities undertaken by these companies. We find that government involvement in CSR through the Act will not have much negative effect. According to Midttun (2005), there are three main entities that are involved with and are affected by CSR activities. These are industry, communities, and government. Among them, one subject, the companies, may be negatively affected as a consequence of government involvement. We have seen that the Companies Act, 2013, requires large companies to contribute a certain amount of their expenditure to CSR activities, to constitute a CSR Committee, and specified CSR activities. Among these mandated requirements under the Act, the companies under study already met the requirements except the requirement on requisite expenditure on CSR activities. Therefore, the critical point will be on the mandatory expenditure on CSR activities under the Act. 386 O O O O O O O O 11 O O O Eradicating poverty O O O O O O O O O O O O 12 O O O O O O O O O O O O 12 Education Health O O O O 8 O O O O Human rights O O O 8 O O O O O Environment Source: Official websites of the respective companies; CSRidentity.com; IndiaCSR.in. GAIL Hero HPCL JPKA Jindal Steel JSW Steel Larsen and Toubro MMTC Oil India Reliance Steel Authority of India (SAIL) Tata Steel Total Company Table 5. CSR activities of Indian companies (Group A companies) O 2 O Social business O O O O O O O O O O O O 12 Employment 1 O Donating to government fund O O O O O 9 O O O O 8 O O O O O O O O S&E development Other 387 Indian Oil Company Bharat Petroleum Company Tata Motors State Bank of India Hindalco Industries Coil India Bharti Airtel NTPC Mahindra and Mahindra Bharat Heavy Electricals Sterlite Industries India Chennai Petrol Company Anani Enterprises ICICI Bank Maruti Suzuki India Infosys HDFC Tata Chemicals. Grasim In. Reliance Infra. Axim Bank UBI HCL Technology Bajaj Auto Indian Overseas Bank Motherson Sumi S. Power Finance Corporation Company O O O O O O O O O O O O NA O O O O O O O O O O O O NA O Eradicating poverty O O O O O O O O O O O O NA O O O O O O O O O O O O NA O NA O O O O O O O O O O O O O O O O O O O O O O O NA Education Health O O O O NA O O O O O NA O O O O O O Human rights NA O O O O O O O NA O O O O O O O O O Environment Table 6. CSR activities of Indian companies (Group B companies) NA O O NA O Social business O O O O O O O O NA O O O O O O O O NA O O O O O O Employment NA O NA O Donating to government fund O O O O O O O O NA O O O O O O O O O O O O NA O O O O O O O O O O NA O O O O O O O O O O NA O O O Other (Continued ) S&E development 388 O O O O O O 32 Eradicating poverty O O O O O 31 O O O O 20 O O O 29 Human rights O O Education Health O O O O O O 22 Environment Source: Official websites of the respective companies; CSRidentity.com; IndiaCSR.in. Siemens Gitanjali Gems Hindustan Zinc Power Grid Company Alok Industries Asian Paints Total Company Table 6. CSR activities of Indian companies (Continued) 5 O O Social business O O O O O 28 Employment 2 Donating to government fund O O O O O O 31 S&E development O O O O O 25 Other GOVERNMENT INVOLVEMENT AND CORPORATE SOCIAL RESPONSIBILITY 389 Effect of the Companies Act, 2013 on companies Contribution Committees Activities Group A Group B Group A Group B Group A Group B (more (less than (more (less than (more (less than than 1 1 percent than 1 1 percent than 1 1 percent percent of of PAT) percent of of PAT) percent of of PAT) PAT) thirty-five PAT) thirty-five PAT) thirty-five twelve companies twelve companies twelve companies companies No No companies companies significant Negative No significant significant effect effect effect No No significant significant effect effect Effect on Communities Strong Development Sectors - Eradicating Poverty - Education - Health - Social and Environment development - Human Rights Improving Sectors - Environment - Social business projects - Donating to government fund Figure 3. Effect of government involvement in CSR through the Companies Act, 2013. According to this study, the imposition of a mandatory expenditure may not have a negative effect on Group A companies, which already contribute more than 1 percent of their PAT to CSR activities. However, Group B companies, which contribute less than 1 percent of their PAT to CSR activities, may be burdened financially under the Act even though they already have in place CSR operating systems and undertake CSR activities in accordance with the Act. If Group B companies overcome the financial burden 390 J. Y. SHIN ET AL. of expenditure on CSR, they may be benefited by establishing social partnerships with communities, and enhanced brand image and promoted business sustainability. Under the Act, Indian companies will undertake an expenditure of about Rs 15,000 to Rs 20,000 crores a year on social welfare and socioeconomic development of society (Business Standard 2014). 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