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.

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.1402363280_5b6de07f20_b

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.

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