Introduction
Basically, there are 2 types of financial performance that was used for
measuring financial performance (Aras et al., 2008 and Orlitzky et al., 2003). The first
one is the accounting based financial performance measures. This measurement fo-
cuses on historical firm performance based on financial reporting data. Some measure-
ments include in this group are return on asset (ROA), return on equity (ROE), return
on sales (ROS), earnings per share (EPS). The second measurement takes the market
point of view, such as market share price and return. Aras et al. (2008) states that the
second method gives more independent result than the first method. In order to get
complete relationship, both financial measurement bases are used in this study.
Basically, there are 2 types of financial performance that was used for
measuring financial performance (Aras et al., 2008 and Orlitzky et al., 2003). The first
one is the accounting based financial performance measures. This measurement fo-
cuses on historical firm performance based on financial reporting data. Some measure-
ments include in this group are return on asset (ROA), return on equity (ROE), return
on sales (ROS), earnings per share (EPS). The second measurement takes the market
point of view, such as market share price and return. Aras et al. (2008) states that the
second method gives more independent result than the first method. In order to get
complete relationship, both financial measurement bases are used in this study.
Corporate performance measurement was a process to make a decision whether the
company has showed good performance or not in order to reach company’s goal and
strategy (Lindrawati& Budianto, 2008). Gitman (2011) states that performance meas-
urement was an implementation of corporate responsibility to its shareholder. In rela-
tionship with CSR, some empirical studies focus on corporate financial performance
measurement. Basically, there are 2 types of financial performance that was used for
measuring financial performance (Aras et al., 2008 and Orlitzky et al., 2003). The first
one is the accounting based financial performance measures. This measurement fo-
cuses on historical firm performance based on financial reporting data. Some measure-
ments include in this group are return on asset (ROA), return on equity (ROE), return
on sales (ROS), earnings per share (EPS). The second measurement takes the market
point of view, such as market share price and return. Aras et al. (2008) states that the
second method gives more independent result than the first method. In order to get
complete relationship, both financial measurement bases are used in this study.
Of late, corporate social responsibility (C.S.R.) has been considered a very important factor in
management. In particular, from the viewpoint of shareholder, the issue is whether C.S.R. may
serve to enhance corporate financial performance. In this context, the relationship between
C.S.R. and firm performance has been explored by many authors.
India`s new Companies Act 2013 (Companies Act) has introduced the provision for Corporate
Social Responsibility (CSR). The concept of CSR rests on the ideology of give and take.
Companies take resources in the form of raw materials, human resources etc from the society. By
performing the task of CSR activities, the companies are giving something back to the society.
Ministry of Corporate Affairs has notified Section 135 and Schedule VII of the Companies Act
as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014
(CRS Rules) which has come into effect from 1 April 2014 and certain amendment in May 2016.
Applicability:
Section 135 of the Companies Act 2013 provides the threshold limit for applicability of the CSR
to a Company:
(a) net worth of the company to be Rs 500 crore or more; or
(b) turnover of the company to be Rs 1000 crore or more; or
(c) net profit of the company to be Rs 5 crore or more.
Further as per the CSR Rules, the provisions of CSR are not only applicable to Indian
companies, but also applicable to branch and project offices of a foreign company in India.
Expenditure on CSR does not form part of business expenditure.
CSR Committee and Policy:
Every qualifying company requires spending of at least 2% of its average net profit (Profit
before taxes) for the immediately preceding 3 financial years on CSR activities in India. Further,
the qualifying company will be required to constitute a committee (CSR Committee) of the
Board of Directors (Board) consisting of 3 or more directors. The CSR Committee shall
formulate and recommend to the Board, a policy which shall indicate the activities to be
undertaken (CSR Policy); recommend the amount of expenditure to be incurred on the activities
referred and monitor the CSR Policy of the company. The Board shall take into account the
recommendations made by the CSR Committee and approve the CSR Policy of the company.
Definition of the term CSR: The term CSR has been defined under the CSR Rules which
includes but is not limited to:
• Projects or programs relating to activities specified in the Schedule; or
• Projects or programs relating to activities undertaken by the Board in pursuance of
recommendations of the CSR Committee as per the declared CSR policy subject to the condition
that such policy covers subjects enumerated in the Schedule.
Activities under CSR: The activities (in areas or subject, specified in Schedule VII) that can be
done by the company to achieve its CSR obligations include:
rom 28th March 2020 PM-CARES FUND contribution now qualifies as a CSR expenditure
under the Companies Act, 2013.
ON 23rd March 2020 MCA has recently added that any spending towards curbing COVID-19
spread in India under the list of eligible CSR (Corporate Social Responsibilities) activities. The
activities include the following:
– Promotion of health care,
– Expenses towards preventive health care and sanitation, and
– Disaster management
Corporate performance measurement was a process to make a decision whether the company has
showed good performance or not in order to reach company’s goal and strategy. One study
states that performance measurement was an implementation of corporate responsibility to its
shareholder. In relationship with CSR, some empirical studies focus on corporate financial
performance measurement. Basically, there are 2 types of financial performance that was used
for measuring financial performance.
Accounting based Approach. This measurement focuses on historical firm performance based
on financial reporting data. Some measurements include in this group are return on asset (ROA),
return on equity (ROE), return on sales (ROS), earnings per share (EPS).
Stock market based Approach. This approach is based on market share price and return. It states
that the second method gives more independent result than the first approach. In order to get
complete relationship.