CORPORATE GOVERNANCE - THE POLITICS OF KOWTOWING WITH POLITICIANS
By Ruma Dubey
DLF is a big loser on the bourses today and it is thanks to Kejriwal. To think that the allegations of one man, without any evidence to backup, can push the company and the markets to the wall? That’s the power of raising a voice against corruption. DLF has denied all allegations, which is predictable; no one is going to come on board and admit to any wrongdoings. As usual, its independent directors are clueless. More importantly, the market will be worried about it today and the next day, when moods swing to the other side, it will push this entire issue behind, irrespective of whether or not it gets proven otherwise and move on, with many traders getting lured by the current fall. Such is the nature of the market. And people? Well, we all shrugged our shoulders, raised our eyebrows and that’s it! We all know that trading of favours with politicians is an unwritten rule to conduct business in India; or else companies will simply not be allowed to function smoothly.
DFLF is a corporate governance issue of this week and prior to that, we had Naveen Jindal resigning as MD from Jindal Steel and Power. And there was Manoj Jayaswal, Chairman of Abhijeet Power, which had filed for an IPO and now after Jayaswal being named in the Coalgate scam, had to withdraw the IPO. In a way, the Coalgate scam has exposed the ugly underbelly of India Inc, as though the telecom scam was not exposure enough.
Prior to this, we had the “YSR” or “Jagan Reddy” brand of companies facing ire - Ramky Infra, Aurobindo Pharma, India Cement and Nava Bharat Ventures. These companies were under CBI scanner for issues relating to transactions of corporates with which Mr Reddy and his firms, and the investments they had made to secure land to set up special economic zones, etc. And how can one forget the largesse’s enjoyed by the Satyam group from political parties.
Yes, if one has to survive in the corporate world, it is probably essential to kowtow with politicians. But how much and how far is the big question. Every industrialist has to knock on the doors of the politician but whether that knocking leads to money exchange and underhand dealings is what worries the most. Right from Ratan Tata to Mukesh Ambani, all need to kowtow. It would be naïve to think that it does not happen.
What has also come forth is that companies, which require the least amount of licenses, like IT and other similar service oriented companies have the lowest or no political give and take; simply because dependency to get clearances is negligible. While those in the energy sector, coal, realty, SEZs and all those which require maximum Govt nods and use natural resources, do the maximum kow-towing with politicians. To question whether politicians can unscrupulously rape the country and its resources is stupid; of course they exploit to the hilt, or else why have they become politicians in the first place? To serve the nation and its people? That’s pure hogwash!
Yes, today, the image of a honest, good to earth, social responsible industrialist has taken a beating. If he was the untainted hero a few years ago, we have no heroes today. Industrialists say that it is impossible to function without having a nexus with the politicians as closeness to the politician is like a ‘master key’ which opens all doors. But the price to get hands on this ‘master key’ is credibility and honesty and the greed of politicians has become so intense that if industrialists do not compromise, they and their company will simply never get off from the ground. Greasing palms and trading favours is not right but the leaders have created an environment wherein without this, nothing will move.
Corruption is far and deep rooted in India and like scum rising up, intermittently, we will see such scams and cleansings happening. But whether anyone implciated will ever get legal imprisonments is highly doubtful; Ramalinga Raju and Kalmadi are both out; need we say more?
The only good news is that thanks to these major corporate governance issues, independent research outfits, FIIs and minority shareholders have become more vigilant. The recent reports by Veritas, and Espirito Santo Securities say things which others are scared to put out openly. Emergence of proxy advisory firms like IIAS, InGovern and SES give investors a true and independent opinion on corporate governance.
Some good always comes from a lot of bad. Lets see, how much more bad comes out to bring out some more good.