What happens when firms have to stump up for good causes

KITEX GARMENTSCSRCSRNGO is one of the largest private companies in Kerala, a communist-led state in southern India. Its embrace of corporate social responsibility () is enthusiastic. In the fiscal year ending in March 2020 it allocated 5.3% of its average profit over the past three years to public roads, schools, housing and safe drinking water. That makes it a poster-child for an Indian law passed in 2013, in the aftermath of a corporate fraud scandal, that requires Indian companies to divert at least 2% of annual profits to projects.Arguments leading up to the law’s approval pitted s and populist politicians, who supported it, against India Inc, which said it merely created a new tax. Several big corporate contributors argued that philanthropy would be damaged by government involvement. A new study by Shivaram Rajgopal of Columbia Business School and Prasanna Tantri of the Indian School of Business suggests that last group has a point.