By any moral standard, corporate social awareness used to be a noble thing to endorse, until a bunch of politicians messed with it and turned it into a fungible concept labeled as Corporate Social Responsibility (CSR) through a self-styled process of legislation.
As this newspaper reported (The Jakarta Post, July 25), Indonesia is the only nation in the world to have legislated CSR, through the promulgation of its new law on limited liability companies (UU Perseroan Terbatas, 2007). Article 74 of this law explicitly obligates companies dealing with natural resources to adhere to certain social and environmental responsibilities. What this entails is not yet clear -- the law itself does not bother to define it.
The law has been passed despite all the charges, levies, taxes and other requirements that businesses have had to bear. All registered companies already have to comply with central and regional regulations, ranging from operational permits to safety standards, from taxes to revenue sharing clauses, environmental considerations, et cetera.
The arguments of representatives of the business community have been dismissed by legislators as either inadequate or irrelevant. In the meantime, it is becoming clear that some key state players are on their way to mull over the best ways to exploit it as a financing source for "something bigger than poverty reduction".
One cannot help but wonder why this tragedy happened and where it will lead us. Several parliamentarians believed the business community had paid no heed to existing requirements. Rather than overhaul existing laws or empower relevant agencies, they decided to create this law that obligates charity. Still, in the eyes of many their ultimate end seems good and moral. The law will lead to more disadvantaged people being helped and more social issues being solved. However, as this article will contend, in many ways the opposite seems true.
First of all, it is hard to argue against any ethical proposition in the absence of a positive ethical system. This article tries to evaluate the logical assumptions behind the legislation and analyze some logical consequences from an economic point of view. The writer believes that even an ethical proposition should be based on sound logic.
Now, by altering social charity from being a voluntary act of grace to an act coerced by the state, politicians have paved the way for all of us to live under a regime of compulsory charity. By enforcing charity in a way far from being charitable, they will kill charitable desires completely. If the state already "arranges" it, there will be no point giving more.
Passing legislation for generous projects of justice aimed at poverty reduction means legally exalting the poor or the deserving poor as a privileged class. The poor will thus be equipped with an enforceable claim to the fruits of labor of other classes.
Justice is a difficult word to define, but most of us believe that Indonesia should be a just state. It follows from this that if achieving justice is used to justify favoring a certain group, it should be done in a way that imparts no injustice to others. We cannot establish social justice by resorting to social injustice. Also, helping a poor person by using someone's means against his or her will cannot be called generosity. As an extreme example, it is like affluent people being penalized and enslaved while the poor are put on a pedestal.
From the onset, the whole issue brings to light a dearth of understanding on how the economy works and the nature of business and entrepreneurship within it. As such, it is worth emphasizing here that if we truly want to alleviate poverty, the only sustainable way to do so is through production. If the nation wants to alleviate poverty, the first thing it must do is increase production, not reduce it. This simple law has been discovered through hundreds of years of economic evolution as a science. It is so apodictic a law that no man on this planet can ever alter it.
Moreover, it is precisely businesspeople who personify the real engine for economic growth. They are the only truly economically productive agent within the economic system. No doubt some of them are extremely successful, but that should be seen as their reward and should not spur anyone's envy. Some successful businesspeople are often parodied as the "king" or "queen", such as in "King of Burger", "Ratu Dangdut" and "Raja Voucher".
Laugh as we may at this, we should not let its essence slip. Contrary to popular belief, and unlike real kings of the past who won territories by force and imperialism, the ingredient for success in business is service excellence.
Every business only survives by serving its customers. In a real world that knows no free lunch, businesses must remain profitable if they want to stay in the market. And the market is more than ready to kick out every business entity that is not up to the test.
Thus, when put into application, the law will certainly increase the level of compliance (read: cost) that local businesses have to cope with before they can even start thinking about head-to-head competition. That the law only affects those in the mining sector at the moment will only slightly slow down the process. Eventually, this approach and treatment will only discourage people from producing while draining our savings to subsidize the formation of the favored caste.
Unless something is done to rectify this absurdity, we can envision a country whose citizens have to contend with costly products produced by companies with high overheads. We can only start to imagine the fate of a nation whose entrepreneurs, deprived of competitiveness, lose out on the global stage.
There will be a major and lasting decline, not in terms of poverty, but in terms of our living standard.
(First published under the title of State's firm hand could crush spirit of charity in the Jakarta Post, August 30, 2007.)
As this newspaper reported (The Jakarta Post, July 25), Indonesia is the only nation in the world to have legislated CSR, through the promulgation of its new law on limited liability companies (UU Perseroan Terbatas, 2007). Article 74 of this law explicitly obligates companies dealing with natural resources to adhere to certain social and environmental responsibilities. What this entails is not yet clear -- the law itself does not bother to define it.
The law has been passed despite all the charges, levies, taxes and other requirements that businesses have had to bear. All registered companies already have to comply with central and regional regulations, ranging from operational permits to safety standards, from taxes to revenue sharing clauses, environmental considerations, et cetera.
The arguments of representatives of the business community have been dismissed by legislators as either inadequate or irrelevant. In the meantime, it is becoming clear that some key state players are on their way to mull over the best ways to exploit it as a financing source for "something bigger than poverty reduction".
One cannot help but wonder why this tragedy happened and where it will lead us. Several parliamentarians believed the business community had paid no heed to existing requirements. Rather than overhaul existing laws or empower relevant agencies, they decided to create this law that obligates charity. Still, in the eyes of many their ultimate end seems good and moral. The law will lead to more disadvantaged people being helped and more social issues being solved. However, as this article will contend, in many ways the opposite seems true.
First of all, it is hard to argue against any ethical proposition in the absence of a positive ethical system. This article tries to evaluate the logical assumptions behind the legislation and analyze some logical consequences from an economic point of view. The writer believes that even an ethical proposition should be based on sound logic.
Now, by altering social charity from being a voluntary act of grace to an act coerced by the state, politicians have paved the way for all of us to live under a regime of compulsory charity. By enforcing charity in a way far from being charitable, they will kill charitable desires completely. If the state already "arranges" it, there will be no point giving more.
Passing legislation for generous projects of justice aimed at poverty reduction means legally exalting the poor or the deserving poor as a privileged class. The poor will thus be equipped with an enforceable claim to the fruits of labor of other classes.
Justice is a difficult word to define, but most of us believe that Indonesia should be a just state. It follows from this that if achieving justice is used to justify favoring a certain group, it should be done in a way that imparts no injustice to others. We cannot establish social justice by resorting to social injustice. Also, helping a poor person by using someone's means against his or her will cannot be called generosity. As an extreme example, it is like affluent people being penalized and enslaved while the poor are put on a pedestal.
From the onset, the whole issue brings to light a dearth of understanding on how the economy works and the nature of business and entrepreneurship within it. As such, it is worth emphasizing here that if we truly want to alleviate poverty, the only sustainable way to do so is through production. If the nation wants to alleviate poverty, the first thing it must do is increase production, not reduce it. This simple law has been discovered through hundreds of years of economic evolution as a science. It is so apodictic a law that no man on this planet can ever alter it.
Moreover, it is precisely businesspeople who personify the real engine for economic growth. They are the only truly economically productive agent within the economic system. No doubt some of them are extremely successful, but that should be seen as their reward and should not spur anyone's envy. Some successful businesspeople are often parodied as the "king" or "queen", such as in "King of Burger", "Ratu Dangdut" and "Raja Voucher".
Laugh as we may at this, we should not let its essence slip. Contrary to popular belief, and unlike real kings of the past who won territories by force and imperialism, the ingredient for success in business is service excellence.
Every business only survives by serving its customers. In a real world that knows no free lunch, businesses must remain profitable if they want to stay in the market. And the market is more than ready to kick out every business entity that is not up to the test.
Thus, when put into application, the law will certainly increase the level of compliance (read: cost) that local businesses have to cope with before they can even start thinking about head-to-head competition. That the law only affects those in the mining sector at the moment will only slightly slow down the process. Eventually, this approach and treatment will only discourage people from producing while draining our savings to subsidize the formation of the favored caste.
Unless something is done to rectify this absurdity, we can envision a country whose citizens have to contend with costly products produced by companies with high overheads. We can only start to imagine the fate of a nation whose entrepreneurs, deprived of competitiveness, lose out on the global stage.
There will be a major and lasting decline, not in terms of poverty, but in terms of our living standard.
(First published under the title of State's firm hand could crush spirit of charity in the Jakarta Post, August 30, 2007.)
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