Sunday, May 23, 2010

Anatomy of Corruption: Get the Corporates Under RTI Act

The recent Delhi High Court judgment bringing the office of the Chief Justice of the Supreme Court under the purview of Right to Information Act has been widely welcomed as a move in the right direction to ensure transparency in one of the vital pillars of democracy: judiciary. Earlier all public servants were brought under the sweep of the RTI Act. Many ugly shenanigans of public functionaries have been brought to light through this singularly important legislation in the last few years.

It is, of course, a matter of concern that most of the applications under RTI Act are from disgruntled officials aimed at settling personal score with their colleagues. The all-encompassing term public interest has facilitated the surge of such applications. A close examination would suggest that there is absolutely nothing public about them. The issues are so remote and so non-public in character that one blanches how such issues are granted public coloration. But that’s a different issue.

What is of relevance here is the public – the obverse face of corruption. Few seem to ask though of the other face, private or corporate, that makes up the reverse side and makes the coin clink. With the “endism of ‘ism’” taking centrestage (mind not the puny pockets) and the world globalizing under a techni-parasol cover, the conundrum of corruption has become as universal as that of climate change that affects everyone, regardless of where one stays.

The Transparency International’s Report of 2009 showing the Corruption Perceptions Index (CPI) – a measure of domestic, public sector corruption world over – is revealing. The vast majority of the 180 countries included in the 2009 index score below five on a scale from 0 (perceived as highly corrupt) to 10 (perceived as low levels of corruption). India with a score of 3.4 figures in the 84th place, China with a score of 3.6 at 79th, Pakistan with 2.4 at 139th, Russia at 146th with a score of 2.2. Fragile, unstable states scarred by war and ongoing conflict bring up the rear with Somalia at 180th with a score of 1.1, Afghanistan at 179th with 1.3, Myanmar (178th) at 1.4 and Sudan and Iraq (176th) tied at 1.5. These results demonstrate that countries that are perceived as the most corrupt are also those plagued by long-standing conflicts, which have torn apart their governance infrastructure.

“Stemming corruption,” says Huguette Labelle, Chairman of Transparency International (TI), “requires strong oversight by parliaments, a well performing judiciary, independent and properly resourced audit and anti-corruption agencies, vigorous law enforcement, transparency in public budgets, revenue and aid flows, as well as space for independent media and a vibrant civil society. The international community must find efficient ways to help war-torn countries to develop and sustain their own institutions.”

Little wonder the highest scorers in the 2009 CPI are New Zealand at 9.4, Denmark at 9.3, Singapore and Sweden tied at 9.2 and Switzerland at 9.0. These scores unmistakably points towards political stability, institutionalized mechanism for long-established conflict of interest regulations, and efficient functioning public institutions that ensures openness and transparency.

Back to private or corporate face of corruption alluded to earlier. With growing privatization and increasing participation of human and public capital, and scams like Enron and Satyam fresh in everyone’s mind, the necessity of bringing these public listed companies under the RTI’s gaze cannot be overstated. The overall results in the 2009 index are pointers to the fact that opacity and corruption go hand-in-hand – when opacity decreases corruption diminishes; and under full public glare, corruption can hopefully be minimized, if not altogether extirpated. Let the RTI sun act the best disinfectant.

Interestingly, TI conducts an array of global research in its quest to unveil the types and modes of corruption. One is the Global Corruption Barometer – a world wide public opinion survey; and the other, Bribe Payers Index – that measures the likelihood of firms from leading exporting countries to bribe abroad. These throw up interesting facets of corruption that dog us in our everyday official transaction.

Take cartels that are endemic in any procurement process. Cartels are an anachronism in a freewheeling market-driven economy. But they are a reality. Between 1990 and 2005, more than 283 private international cartels were exposed that cost consumers around the world an estimated US $300 billion in overcharges, as documented in a recent TI report.

And not only are they formed, they perpetuate themselves even in oligopolic situations. Worse: such cartel-forming and price increase even happens in a situation of monopsony (when there is only one buyer and many sellers), which, any economist will tell, should be a buyers’ market. Worse still: even when all the cartellers’ entire market-share is courtesy the buyer! But not-so-mysteriously it happens. It’s sure not a mystery wrapped in a riddle inside an enigma; and I don’t have to explain how and with whose ample catholicity!

This is why there is a need to bring all corporates under the RTI’s umbrella. Let’s face it. Every bribe-taker has a bribe-giver. Every man, regardless of his place of work, is a product of the society he lives in. Look, notwithstanding the pious declamations of the army, the collusion of its senior officers in the Sukhna land scam is undoubted. Let’s face it: majority of men (say 90%) are congenital kleptocrats lacking internal moral compasses, while a small minority (say 5%) is congenitally honest. The remainder 5% merrily sway to the atmosphere given them: they stay honest under honest dispensation and turn their coats when the situation so offers.

The bribe-giver, hence, needs to be tracked down. These are the ones who remain untouched and untrammelled by any legislative Acts. It is not enough for their books of accounts to be audited by chartered accountants and supervised by a Board of Directors pampered with perks and goodies. Don’t you forget that retired bureaucrats make every fervent effort to become Directors of companies after retirement! Satyam had one such august number. Only a few days ago, a certain Anil Kumar, former Director of McKinsey, and also one of the founding members of Hyderabad’s prestigious Indian School of Business, admitted to indulging in insider trading and making a fortune!

The answer, though simple, is polemical: bring these public-listed companies under the RTI Act; make their transactions open to public scrutiny. Of course, there’s a need to define “public interest” carefully, because more than in public sector, in the private world there will be more temptation to poach competitors’ “efficiencies” through subterfuge and upset business plans.

Yet the need is indubitable. Much as the public believes that the private sector is pristine and squeaky clean, that’s far from true. It’s as bad as the public sector – full of Caesar’s wife’s paramours; and that Satyams and Enrons are not isolated aberrations, but only symptomatic of a general malaise that will show up its murky entrails once placed under the RTI scanner. Also don’t you forget the other tool: whistle blowing. It’s time to act to make that into an Act too.

No comments:

Post a Comment