Indian Finance Minister Pranab Mukherjee said he prefers companies to voluntarily adopt good governance and corporate social responsibility (CSR) practices, rather than be legally compelled to do so. Such voluntary contributions should be recognised and rewarded.

Highlighting the responsibility of companies to participate in India’s great infrastructure development story, Mukherjee wanted them to ensure progress in health and education to make growth inclusive.

“The key to that is corporate governance. We need to introspect and understand that better governance standards cannot be imposed by the law or by courts”, the minister said, adding that unless Indian companies were willing partners in inclusive growth, corporate governance could not happen.

Mukherjee said the post of independent director on a company’s board should not be seen as an ornamental post or a superannuation park. He distinguished between ethical party transactions and the ones that jeopardised minority shareholders’ interest for the private ones of the promoter.

The minister’s views come at a time when the parliamentary panel that examined the draft Companies Bill suggested introduction of a mandatory CSR levy of two per cent of net profit, under the proposed law.

CSR, he said, was more than just an allocation of funds. “When a pharmaceutical company invents, produces and sells life-saving medicines at reasonable cost, that itself becomes CSR. But if the company tries to maximise the cost of medicines sold to the people, it exists just for itself,” Mukherjee said.