The Evolution Of CSR In India: Examining The Agency Problem Through The Lens Of Corporate Regulation Theories
- IJLLR Journal
- Jan 31
- 1 min read
Chirag Agarwal, OP Jindal Global University
ABSTRACT
Corporate Social Responsibility (CSR) in India has undergone a significant transformation in India, starting from the voluntary guidelines on Corporate Social Responsibility in 2009 to the Mandatory Provision of CSR under Section 135 of the Companies Act, 2013 effective since 2014. This paper explores the evolution of CSR practices in India and critically examines whether the mandated CSR activities lead to an Agency problem, where the interests of corporate managers diverge from those of shareholders. By employing various theories of corporate regulation, including contractual theories, communitarian theories, and concession theory, the research delves into the complex interplay between corporate governance, regulatory frameworks, and social responsibilities.
Contractual theories, which emphasise voluntary agreements between stakeholders, are juxtaposed with communitarian theories that advocate for a broader societal role for corporations. Concession theory, which views corporations as entities created and regulated by the state, further enriches the discussion by highlighting the regulatory implications of CSR mandates. The analysis reveals that while CSR initiatives in India have fostered greater corporate accountability and societal benefits, they may also exacerbate the Agency problem by diverting resources and attention away from shareholder value maximisation.
This paper contributes to the ongoing debate on the effectiveness of CSR as a tool for sustainable development and the potential conflicts it may create within corporate governance structures. The findings suggest a need for a balanced approach that aligns corporate social objectives with shareholder interests, ensuring that CSR efforts are both impactful and strategically integrated into business operations.
Keywords: Corporate Social Responsibility, Companies Act 2013, Agency Problems, Shareholder, Manager, Contractual theories, Communitarian theories, Concession theory
