Directors’ duties, CSR and the tragedy of the commons in India: Mutual coercion mutually agreed upon

Abstract

This article argues that humanity is locked into a system culminating in the tragedy of the commons (ToC), and swift action is required to course-correct. Undeniably, companies are the single-largest users of natural resources. To that extent, this article puts forward two interrelated proposals on refining directors’ duties under Section 166 of the Indian Companies Act 2013 and CSR under Section 135 to help avert the ToC. Part I of this article outlines Hardin’s theory of the ToC and examines why corporations fit his definition of the self-interested, rational economic agent. Part II analyses the stakeholder theory embedded in the Indian Companies Act 2013 and highlights its enforcement lacunae. It subsequently proposes a new directorial duty to conduct company business in accordance with principles of sustainable development. Thereafter, Part III proceeds to re-conceptualise the notion of corporate social responsibility (CSR) in Section 135 of the Companies Act 2013 to position CSR as an avenue towards averting the ToC. Part IV concludes. The proposals put forth by this article in Parts II and III do not require paradigm shifts but are consistent with the stakeholder orientation of Indian corporate law, and therefore more easily attainable than most other countries.