In 2020, the House of Representatives passed House Bill 6137, otherwise known as an “Act encouraging corporate social responsibility, providing incentives therefor.” A similar bill is also pending in the Senate.

Under this bill, corporate social responsibility (“CSR”) remains to be voluntary, as it has always been, but corporations who engage in CSR will be given the right to retain surplus profits if the same would be used for CSR purposes. This is an amendment to Sec. 43 of the Corporation Code where stock corporations are prohibited to retain earnings in line with their responsibility to declare dividends.

Although we understand the intention of the bill is to encourage more companies to engage in CSR, a law on CSR is unnecessary. As it is, there are already perks given to corporations for doing CSR. Donations which qualify as CSR are considered tax deductible.

By the very nature of CSR, which is voluntary, corporations should not be given additional incentives. The provision allowing them to retain surplus earnings, instead of declaring dividends, and opens the gates for abuse where the rights of stockholders might be affected.

During this time of pandemic, CSR is most welcome. However, this voluntary aid from the private sector, while acknowledged, should not come with a corresponding duty from the government to provide incentives.