Economy

How Better Corporate Disclosure Norms Can Help India Fight Corruption

There has been considerable debate on how corruption must be reduced in the government. The debate even spawned a movement – which shook the nation and, subsequently, a political party. Several months have passed since then but we still seem unwilling to bell the cat.

Consider the following.

Most organisations in the West do not have specific vigilance departments, whereas most of our government departments cannot so without these. But since the vigilance departments are ineffective, we have anti-corruption bureaus. And despite the proliferation of these, we have a Central Bureau of Investigation to ensure independent investigation. Of course, since experience tells us the CBI is not up to the mark because of political interference, we have the Central Vigilance Commission; now, there is talk of a Lokpal as the panacea for corruption.

Credit: Watchsmart/Flickr CC BY 2.0

Apply, Apply, No Reply. Credit: Watchsmart/Flickr CC BY 2.0

Instead of trying to solve the problem after the corruption horse has bolted – and failing manifestly in this task – can we think of some way to curb rent seeking at one of its major points of origin – the collusion which occurs between big business and government functionaries?

There are basically two kinds of corruption in government offices:

  • Extortion, where bribes are demanded for a legitimate service or as a price to avoid harassment.
  • Collusion, where the giver is eager to pay a bribe so that he can indulge in an illegal act, or enrich himself at the cost of the public. This is usually of very large value and hurts public finances significantly.

It is my belief that demanding greater transparency in all corporate-government dealings can lead to a reduction in the second kind of corruption, which results in huge scams and a great loss to the exchequer.

I will outline how this could be achieved but first I should note that I making an important – but I hope, reasonable – assumption: A small percentage of corporates would collapse if corruption were to be curtailed, since their profits depend on it. Conversely, a comparable number of corporates lose a lot of business opportunities to the former because of their unwillingness to adopt unethical practices.

Most of the corruption of the collusive kind is indulged in by the former. For corporates of the second kind, there is a business need to curtail collusive corruption. Apart from this, there may also be on their part a consideration of ethics and a genuine desire to curb corruption. If even a few such companies decide to take active steps to curtail corruption, and are quite clear that they will not adopt this route of getting unfair or unjust advantage from the government, they can make a difference to the overall national scenario. Taking a proactive role to achieve this goal is in their business interest and could translate to higher profits.

Collusive corruption brings unfair advantages in the form of  lower taxes or unfair relief in paying taxes. Another benefit is getting land or other infrastructure in a manner which amounts to an effective subsidy. One more avenue is to bid competitively for providing services or for public private partnerships (PPPs), and subsequently changing the conditions to affect the public interest adversely.

My proposal is that those corporates wishing to promote honesty should pledge to publicly display all their transactions with the Central and state governments on their websites.

Of course, companies can withhold certain information which may harm their legitimate commercial interests but this is likely to cover a very small proportion of their dealings with government. As part of their policy of disclosure, these companies should also declare the kind of information in government transactions they intend to withhold and state their reasons for this. Many business leaders regret the lack of transparency in our system and bemoan the corruption in government. Here is a chance for them to take the lead and demonstrate their willingness to be transparent and thereby to help transform the way business is done.

It would be very good if a few companies got together and announced their joint commitment to be transparent in their transactions with government. If they have taken a conscious decision to refuse the route of corruption to get undue commercial advantages of any kind, they would lose nothing and certainly gain respect from citizens and peers.

Some companies may well argue that citizens should get this information from the relevant government departments. However, the fact is that these departments usually do not part with information which would reveal favours being done – despite this being a violation of their obligation under the Right to Information Act.

There could be two benefits for companies who publicly announce and practice transparency in all transactions with government:

  • They would be recognised by the public for their commitment to transparency and corporate social responsibility.
  • Over a period of time, if more companies follow suit, it would create pressure on others to accept this level of transparency.

As the law stands, most of this information should be accessible to citizens from government departments using RTI, except that which is exempt. However, when corruption is involved, the information is usually denied and a citizen finds it difficult to battle this unjust denial.

Private action could have the potential of curbing corruption. I am hoping a few enlightened companies will take the lead. Corporates can make an effective contribution to bringing transparency and accountability and reducing corruption. Will some corporate head be willing to take the lead? The same degree of transparency could also be achieved if regulatory agencies – like the Security and Exchange Board of India – make such disclosure norms mandatory for all companies.

Shailesh Gandhi is a former Central Information Commissioner

  • Sujad Syed

    I am a lawyer & I see no hope. India will always be a crony & arbitrary country!

    • Meera Kakarlapudi

      the change should come from all parts of society unlike a mandatory regualtion. It is not possible for human greed to subside but a major section of public atleast educated should accpet to follow such regulations.

  • rbalakrishnan

    The roots for corruption were sown by Nehru, when he gave in to the likes of GD Birla and introduced Industrial Licensing. The industrialists made licensing as the entry barriers, given their ability to grease the wheels of the government. As you say, the rest is history. Dismantling the permission system is an impossibility. We can spend a lot of space writing about it. Cronyism is here to stay.

  • shilpi singh

    something very close to my heart #voiceagainstcorporatecorruption much more murkier than govt organizations..including the so called funded startups…look for story on Food Panda, OYO in Mint

  • Sanjana Ravindran

    Really, can we even think about removing corruption that is wide-spread in corporate. It is a live breeding ground full of corruption with people at influential position (very much similar to our policitians) lobby together to keep talented employees out inorder to get their family and friends inside. The way the HR Heads start their corruption is by lobbying to bring their own family and friends in the company. And poor Operation Heads keep looking helplessly.

    Why do companies ask for full-time MBA for positions where they require 10-12 years of experience? MBA is mostly done when someone wants to change their career, eg. A Software Coder who has done B.E. wants to move to HR then it makes sense that
    he/she does MBA. Why should HR candidates who have years of experience in HR itself and have learnt on job and worked their way up the corporate ladder be overlooked for not having a FULL-TIME MBA? Are these HR heads together trying to lobby with Business Schools to promote full-time MBA? Or are they trying to push children of their friends/relatives and trying to make future safe for their own children? After all they will get their children to do full-time MBA too.

    Technology has made it possible for lectures to be streamed live via satellite and video conferencing, etc. So why is it so difficult for
    these ancient and outdated thinking HR Heads to accept technology. We talk about Disruption in business everywhere, even in medical field. Then why can’t these HR Heads accept that there can be another way of educating oneself. They talk a lot about Change Management. Are they themselves open to change? They move around with the most expensive smart phone. Are they ready to accept that technology can even redefine the way people learn? Do these narcissist deserve to even belong to the HR fraternity? Can these HR Heads first manage their own HR teams properly, leave alone managing the entire human resource of the organization? I know of so many HR members who have seen their HR Heads talking big in Town Halls, etc. but when
    it came to action, they were worse than our politicians. At least our politicians are answerable when questioned by media. But these HR Heads are simply not answerable to anyone. They are technologically outdated, unable to accept Change, unable to allow change to happen. They are up there because they did full-time MBA from IIM/XLRI and other Top 10-15 B-Schools. Leadership cannot be taught. Yes, these institutes can share a lot of knowledge with the students but basic life skills, empathy, leadership,
    fairness is not taught. And this is the reason why they need to call Dalai Lama to teach leadership at IIM. If an individual is bright enough then he/she can continue learning. We have so much resource everywhere. I never went to any coaching class ever in my life but still scored Distinction. Once you learn how to read and write, why can’t the HR Heads accept that self-learning is really
    possible? If they could not learn without help of coaching classes or never felt the inclination or curiosity to explore things without a professor sitting with a stick in hand in a classroom, why do they underestimate so many others who are capable of learning online?

    I keep reading a lot on internet about how MBA is not valued anymore, MBAs are more risk-averse, MBAs cannot be good entrepreneurs, best B-Schools are streaming their lectures online for free, etc. etc. So one thing that comes to my mind is that
    maybe these HR Heads have taken the onus on them to save their breed and help the B-Schools. So while the world talks about capability, disruption, innovation, results, etc. HR Heads keep blabbering ‘Full-time MBA’. This is obviously to save their job as
    well. After all, what to they have in them if the full-time MBA tag is removed? Do they know ground-level reality? No. Can they talk about tangible results in business meetings? No. Can they do anything better than networking? No. Do they understand what their
    role is? No. I think this craze of insisting for a full-time MBA for positions requiring 10+ years of experience is just a way invented by these HR Heads to save their jobs at the cost of many other jobs.

    We have to stop these so called HR heads from using their position to misguide others into believing that no matter how many years of experience or what quality of experience one has, full-time MBA is still required. I have been told that it is a filter used so that they have fewer and good candidates to interview. Really? Can years of experience not be a good enough filter?

    One company does it and then all companies blindly follow them. Till 2-3 years back it was only our Indian companies like TCS, Infosys and Wipro weeding out non-MBAs out of their system. Now even smaller companies have started copying them. Internally
    they all know that experience matters but still the HR heads insist on full-time MBA. They very well know that they will be able to afford a 10-20 lakhs of full-time MBA course for their children and this will make them saleable in the management market. So in short, all the non-MBAs or all those MBAs who studied part-time will be thrown out of job market over a period of time to be replaced by children of these HR heads and their friends/relatives. Is this full-time MBA craze anything less than the quota/reservation system? The only difference is that this is being practiced by the so called sophisticated people
    of the society.

    In US studying while earning is a matter of pride and employers respect their employees for that. But in our country, India only full-time MBAs matter. All those others who could not leave their job to study full-time or did not have rich parents to pay the mind-boggling MBA fees are all useless. If someone studied while earning because he/she had a family dependent on their earnings,
    has to suffer his/her entire life because once upon a time he did a part-time MBA and not a full-time MBA. Unfortunately, copying these Indian companies, even the US MNCs in India have started behaving like them.

    We have to stand up against this reservation system created by these HR heads. They have really no care about Human Resource or Economic Empowerment. They are only lobbying through their LinkedIn group, HR Networking Group, etc to keep hammering that only full-time MBAs are good. I recently attended an interview which was taken by a VP of a fortune 500 company. I was surprised when he told to me at the end of my interview that he did not agree with me that HR can play any role in increasing productivity because it is Ops job. His full-time MBA and so many job-hopping did not even teach him the value HR can bring to business. According to him, HR should not spend time in knowing employees on the floor because it is job of line supervisor. Then what is HR supposed to do Mr. full-time MBA VP? Only keep networking and lobbying to get their children/friends/relatives at higher position in the company while all the other non-MBAs keep slogging to deliver results.

    In one of the previous organization where I worked, the HR head used to promote interns only from the institute where she did her
    MBA. Amazing! Where did fairness, integrity, etc. disappear?

    Another HR head, started weeding out all non-MBAs (irrespective of their performance rating) soon after taking up the position of
    HR head and from where not he started getting new employees who were full-time MBAs. Obviously these newbies could not manage the attrition and retention activities the way the previous experienced employees could. But that did not matter. It would had been interesting if someone did an audit to find out why were these experienced employees with good performance
    but non full time MBAs removed and within a month these new full-time MBAs were brought in. What were the benefits? Was there an increase (even a bit) in the HR scorecard? In fact there was a drastic dip in the overall morale of all other employees. Was this full-time HR head even questioned for his immature decision? Yes, he was moved to another position after 2 years because by then the management realized that this guy was toxic. By then he had ruined careers of many experience HR guys in that system.

    These HR heads need to be stopped from spreading the virus that full-time MBA is the only important thing required irrespective of years and quality of experience.

  • KSR

    Exactly. Where there is a will there is a way. Extortion is smaller than collusion. It is really a joke that taking serious actions on small amounts exchange by hands but not take serious for change million dollars. The oppositions screaming about privatisation and globalization inner mutual understandings. Supreme court,constitution of country may bring amendments to block the loopholes where the collusion will take place. Transparency in understandings between private companies and government must be published in Government websites as well as consumer awareness websites, also in Right to Information. Updates,negotiable instruments all scanned documents must be published in government websites. President and supremecourt judges must support to protect the democracy, otherwise values faded over involvement of private companies in the name of industrialisation.