Why mandating CSR may not be a good idea
Corporations could ‘pretend’ to participate in SL1M just to qualify for the contract, but they may not be the most eligible or cost effective to deserve the honour.
By TK Chua
It is a noble idea to insist on corporate social responsibility (CSR) from corporations that have benefited from Malaysia’s growth and prosperity.
I am referring to Prime Minister Najib Razak’s warning to corporations for refusing to take part in the 1Malaysia Training Scheme (SL1M), a training programme aimed at enhancing the marketability of unemployed young graduates through skills, knowledge and working experience enrichment.
Najib said other than government-linked companies, public-listed companies should also participate in the scheme, or prepare to face the consequences.
“I will instruct the Treasury to make this a precondition for them to secure large government contracts. So, if they do not participate, their opportunity to secure government contracts will also be slim,” Najib was quoted as saying by Bernama.
I believe it is a good programme that should be supported if the scheme is carried out thoughtfully and prudently.
Rightly, all corporations should perform CSR, not just those which are benefiting from government contracts. After all, all corporations are a product of Malaysia’s environment.
However, I would prefer that CSR be voluntary action borne out of concern for the wellbeing of the country as a whole. I would prefer a win-win solution with corporations seeing the cost as well as benefits of their own actions.
Withholding government contracts to corporations not participating in SL1M could be an effective means to assert cooperation and impose compliance. But it is defective in several aspects.
First, not all corporations are involved in government contracts. Hence the directive is only effective on corporations depending on government contracts, but not others.
Second, corporations not participating in SL1M could be involved in other CSR projects. By insisting on SL1M, the government could inadvertently deny funding for other CSR projects.
Third, by mandating corporations to participate in SL1M, CSR will become an “obligation”, not a “voluntary action”.
When it is a voluntary action, corporations do it based on profits and free will. An obligation, on the other hand, is non-discretionary. Corporations must do it based on cost and budget.
There is a danger in the Treasury insisting on SL1M when awarding government contracts. Corporations could “pretend” to participate in SL1M just to qualify for the contract, but they may not be the most eligible or cost effective to deserve the honour. I hope the Treasury will not be distracted by SL1M that may cause many sub-optimal contracts.
TK Chua is an FMT reader.
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