corporate curruption in inda and US

                              

This blog is especially written in response to the article by josh Goodman in wall street journal, his article on ‘what India can learn from the US battle on bribery’ is an excellent piece, but certain refinement is surely needed in Indian context.

He points out quite rightly that it was not only the enactment of Foreign corrupt practices act 1977 in US that reduced corruption, but other factors that accelerated the process were exposing high profile cases and penalising them like Daimler, Siemens (jointly paid penalty of $ 2 billion) which could became model for other corporate to deter them from being involved in the corrupt practices, creating stakeholders in non corrupt practices and political will. There is no doubt that these measures are very important, but what is more important in India, looking at the recent spate of scandals, is little different.

The one common thread that runs across all the major scandals is the lack of automated transparency, which simply means transparency of a kind which is deeply embedded in the process itself. Let me explain it, technically the most democratic form of corporate are joint stock listed companies, the value of a company depends upon the information it reveals in the market, shares prices move as per the prospects of profit, not only that, people are wise enough to gauge the impact of even a political event on the prospects of a company, so movement of resources are ideal, but that never happens in any country, in any company. Why ? because information  are either suppressed are calculated wrong information is circulated to misdirected the choices of investors, this is exactly what happened in Satyam, Worldcom, Xerox, Enron cases where wrong accounting data were provided to the market.

In corruption cases like 2G, antrix- devas deal the major problem was again the same where, contracts or allotment of scarce resources were made through a clandestine deal, only came in the public notice when damage was already done.

So what is needed most, is the reform which embed the transparency automatically, every information that is provided by the corporate must be verified, corporate governance and especially, corporate accounting and auditing need to be strengthened , today ICAI hardly makes any news  about auditing and accounting in Indian corporate except conducting CA and CS exams, this is the high time when 2^nd generation reform is adopted,  listing of public corporate  is achieved, SEBI the market regulator is given more teeth in corporate governance, the overlapping issues between SBI,RBI, ministry of corporate affairs need to be resolved. The more the economy will be open, liberalised and market friendly, the more open information in the market will prevail. The right to information act with some exception need to be applied on the corporate as well.

India is in the nascent stage of corporate governance whose problem of corruption is anatomically different from the corruption prevailed in the US corporates which has a fairly strong corporate culture, the company like galleon and person like Rajat gupta are caught and charged, while in india, we have not heard any galleon or rajat, gupta barring few mysterious arrests like harshad Mehta and ketan parikh.

The political will follows the trend, not the vice versa, political will need to be made a process not an individual effort, to make it a process , it is important to have a strong and vibrant corporate governance, where every possible information is revealed. The major challenge is to sustain the political will not its sporadic application.( the best example is the Nitish government in bihar, who have made development as an issue, so no matter who follows him , he will always be judged on developmental parameters, so successor will be process bound to undertake development.)