Talk delivered by Mr. N. Vittal at the IMA Seminar on 13.03.2002, Chennai
I am very grateful to the Indian Medical Association, particularly Dr. Badrinath for
conferring on me the distinction of the Governor of Tamil Nadu, Late Dr. M. Chenna
Reddy Award for Outstanding Service for promoting Good governance. I accept this
distinction conferred on me with very high sense of gratitude and humility. I also consider
that this distinction is a reminder to me that I must continue to work for the cause of
promoting good governance and should not rest on this laurel.
2 Good governance is essential for the progress of any society. When the
government of a state performs its function of administering a country, the function is
called governance. After all, governance is what a government does. But the word
‘governance’ is also being used in the corporate sector especially after the crisis in 1997 of
the South East Asian economies. These days, we have a popular buzzword in management
circles which is ‘corporate governance’. Corporate governance means the moral
framework, the value framework and the ethical framework under which an organisation
takes business decisions. We may therefore call what the Government does as public
governance to distinguish the Governance from Corporate Governance.
3 Good governance is supposed to exist if three objectives are achieved. The first is
there should be equality of law and effective implementation of laws. Secondly, there
should be opportunity for every individual to realise his full human potential and thirdly,
there should be effective productivity and no waste in every sector.
4 Corporate governance became important because in the context of globalisation and
the collapse of the South East Asian tiger economies, it was realised that if there was
corruption and crony capitalism in the financial sector, it will lead to disasters in terms of
complete loss of investments made in companies and capital markets which do not have
corporate governance. Corporate governance essentially consists of three aspects. The
first is transparency in operations. Greater the transparency in operation, less the scope for
corrupt practices or mischief as the risks and the benefits will be clearly understood by all
who are investing in a capital market or an enterprise. The second aspect is accountability.
In a transparent process, everybody knows how a decision is taken and it is easy to identify
those who are guilty and take action against them. The third aspect of good corporate
governance is giving value to the investors in terms of creation of wealth, reasonable
returns and good market capitalisation. When we explore the theme of good governance,
we can examine both public governance and corporate governance. In fact, both are inter
related.
5. Public governance describes the way a country is governed. Every country has a
system of governance operated through a framework of laws. For example, India is a
democracy. According to the Constitution, there are three main pillars of governance.
These are: (i) the legislature which makes the law, (ii) the judiciary which interprets the
law, and (iii) the executive which consists of both the permanent bureaucracy as well as the
elected political executive which implements the law.
6 Public administration is the process by which a country is governed. We can
consider public governance as a result of public administration. Ultimately public
governance depends on the values behind it. This depends on the history and culture of a
country. A quick look at the cultural roots of Indian governance will not be out of place
here.
7 Indian culture has had a head start in understanding the fascinating aspects of
human life. The Vedanta and the Upanishads represent our ancient seers' continuous
search for knowledge guided by logic. They also achieved great leaps forward in
perception because of their mystic powers. We are the fortunate inheritors of a great
tradition, the vedantic tradition, which looks at life in this world and tries to find its
underlying meaning. The quintessence of Vedanta has a dual dimension. The Rig-Veda
lays down the dual purpose of human life. Atmano mokshartham jagat hitayacha. We
look forward for the emancipation of our souls and also the welfare of the world.
8 Another concept which has been cherished through the long history of our cultural
and spiritual existence is the concept of welfare of all human beings. Bahujana sukhaya
bahujana hitayacha - the welfare of the many and the happiness of the many. In fact, this
concept of the happiness of the many has also been transformed into the area of public
administration as the basic principle. Kautilya says in his Arthashastra: "In the happiness
of his subject likes the king's happiness, in their welfare his welfare. He shall not consider
as good only that which pleases him but treat as beneficial to him whatever pleases his
subject".
Praja sukhe sukham rajyaha prajanamcha hitehitam
natma priyam hitam rajnaha prajanam cha hitam piryam.
Arthashastra
9 This ancient wisdom is also reflected in other parts of the country and in literature
in other languages also. 2000 years ago, Tiruvalluvar, in Tamilnadu spelt out in 1330
verses the three purusharthas of existence, dharma, artha and kama. In his chapter on
artha, like Kautilya's Arthashastra, he also dealt with the characteristics of a well-run
administration or shall we say the ethics of good administration. For instance when talking
about the responsibility of a king, Tiruvalluvar says: Murai saithu kapatrum mannavan
makkalkku iraiyentru vaikkapadum. The king who administers justice and protects his
people would be considered as God. The responsibilities of running administration have
also been spelt out by others who have looked into the concept of good administration.
10 If there is one principle that is fundamental to ethics in administration in India, it is
the principle of dharma, the principle of doing the right things, the principle of justice. The
Brihadaranya Upanishad points out the basic principle that the responsibility of the king is
to protect dharma. This is because it is only by protecting dharma all citizens get equal
opportunities and the weak will not be exploited and harassed by the strong.
"Tadetat kshatrasya kshatram yaddharmaha tasmaddharamatparam nasti
atho abliyan baliyamsamanshamsate dharmena yatha ragna evam"
11 Justice M Rama Jois in his Shri Bhau Rao Deoras Lecture Series gave a talk
entitled "Reforming our polity on the basis of Dharma". In this talk he has provided
valuable insights into the concept of Dharma. This is what he says:
From most ancient times, as a part of Dharma, one of the ideals placed before individuals
was that for a higher or greater interest, lower or personal interest should be
subordinated. This idealism is incorporated in a verse in Hitopadesha; It reads "Sub
ordinate the interest of an individual for the sake of the family, of the family to sub-serve
the interest of the village, of the village in the interest of the state, of all wordly interest in
order to attain eternal bliss".
Tyajedekam kulasyarthe gramasyarthe kulam tyajet
gramam janapadasyarthe aatmarthe prithivim tyajet
Mitralabha 150
Replacing the last which is concerned with the other world by the words, "Rashtrarthe
Swartham Tyajet" brings forth the ideas to be followed in the nation's interest.
It is most difficult to define Dharma. Dharma has been explained to be that which helps
the upliftment of living beings. Therefore, that which ensures welfare (of living beings) is
surely Dharma. The learned rishis have declared: that which sustains is Dharma.
Karna Parva Ch 59, Verse 58 eulogises Dharma in the following words:
Dharanat dharma mityahu dharmo dharayate prajaha
Yat syad dharanasamyuktam sa dharma iti nischayaha
Dharma Sustains the society, Dharma maintains social order, Dharma ensures well being
and progress of humanity, Dharma is surely that which fulfils these objectives.
12 The Upanishads say very clearly that there is nothing beyond dharma. The same
concept of dharma is also reflected by Tiruvalluvar. Irai kakkum vayyakam ellam avanai
murai kakkum muttacheyim. The king protects the world and if he acts according to justice
or dharma, then the justice itself will protect him. Dharmo rakshati rakshitaha again
reflects the same principle that if a person rules according to dharma, that dharma itself
will protect him.
13 If we explore the roots of ethics in public administration, we find that we have a
rich tradition. From our literature we find that there is a harmony between the individual
and social goals in our tradition. It is this harmony that provides a meaningful basis for
ethics in public administration. Every individual has to strive to achieve moksha.
Aatmano mokshartham. But at the same his other responsibility is the well being of the
many - Jagat hitayacha. In fact the goal in life for the individual as well as society has
been ultimately distilled in the concept of dharma through thousands of years of our rich
cultural tradition.
14 The Bhagawad Gita is in fact the quintessence of Indian thinking on the spiritual
front. It also is an eminently practical guide for our secular life. The centrality of the
dharma is also emphasised by Lord Krishna in his famous observation in the third chapter
of the Gita. Swadharme nidhanam shreya para dharmo bhayapaha. Each person has his
own dharma and he has to live up to his dharma. It is better to die rather than give up one's
dharma. If everybody practices the concept of dharma, then that in itself brings a sense of
self-discipline. In a society where there is self-discipline, automatically there will be peace
and prosperity. Unfortunately this is an ideal situation and does not exist. There are people
who are bad and we have to punish the bad people if we want to maintain the peace and
prosperity of the society.
15 Manu is very clear on this subject. Everybody has a tendency to enjoy the material
goods in life. It is only the fear of punishment that ensures order. There is hardly an
individual in this world who on his own is pure in his conduct. The King (Sovereign)'s
power to punish and teach the people in the righteous path, and the fear of punishment by
the king yields worldly happiness and enjoyment.
Sarvo dandajitho lokohdurlabho hi suchirjanaha
Dandasya hi bhayat bheeetobhoghayaiva pravartate
Manu VII-22
16 Tiruvalluvar has also described the same concept of punishment beautifully. The
process of the King removing the bad elements from the society, is like the farmer
removing the weeds from the field to protect the crops. Kolayil kodiyarai venduruthal
pain kuzh kalai kathathanodu ther. The concepts of dharma as the foundation for public
administration is obvious.
17 Before we proceed further, it is worthwhile to have a look at the dynamics of ethics
in public administration. This will help us to identify the basic elements that shape the
ethics in public administration. We can then appreciate how while changes may be taking
place in society due to various factors form time to time over centuries the values remain
constant. As values remain constant, the principle of ethics also remain constant. As they
remain constant, we all stand to gain by looking at the classical insights on ethics in public
administration so that we can improve our current practice. In short that is the theme of
this lecture.
18 As a society evolves, it is realised that the behaviour of people have to be
regulated if the society as a whole as to survive. The welfare of a society is the result of cooperation
between its members. No man is an island. The Ten Commandments evolved
because if everybody was indulging in stealing or murdering or coveting his neighbour's
wife, no orderly society is possible. The Ten Commandments reflect the values which a
society cherishes so that they become guidelines for action. The values are the fundamental
principles which are essential for a good orderly society. Practising those values in terms
of code of conducts gets translated into morals or ethics. As the values of society remain
the same, the ethics also in principle remain constant. This is the underlying dynamism of
ethics in public administration.
19 We have seen how values lead to evolution of codes of ethical conduct. In the
context of public administration what will be these values? The first of course is the
concept of dharma or righteous behaviour. When the British came and we inherited the
British system of administration, we became familiar with the concept of the rule of law.
The rule of law is nothing but the rule of dharma. As Brihadaranyaka Upanishad says, the
law is above the king himself. In fact, it is necessary that we realise this and try to shape
our system in such a way that the principle of dharma or law is re-established. In the
Indian context where today we have a democracy, we will be able to establish the rule of
law only if we ensure the law makers do not become law breakers or law breakers do not
become law makers in the first instance.
20 I would like you to consider the following ideas in the context of current practices
which have made our country a highly corrupt country. We are looking at the issue only
from the point of view of how rule of law can be established with the help of right type of
law makers. The law makers in our country are Members of Parliament and Legislature.
They can play a very important role in promoting a corruption free government. Even in
government, while the bureaucratic executive implements the law, it is also supervised by
the political executive in the form of Chief Ministers, Prime Minster and the Cabinet. The
political executive is also responsible to the legislature. The role of the law makers
therefore can be seen from two different angles. The first relates to the enactment of the
law and the second relates to the implementation of the law.
21 The minimum requirement for ensuring that our law makers are able to promote a
corruption free government is that the law makers should not themselves be law breakers.
The Vohra Committee Report had highlighted one negative aspect of our politics namely
the criminalisation of politics. So if we want to start a process by which we will be able to
achieve corruption free government, where the law makers play a very effective role in
achieving this objective, it is necessary that we should first take steps to ensure that the law
breakers and criminals do not become law makers.
22 As CVC my jurisdiction does not cover the judiciary and the legislature.
Nevertheless, as a citizen of the country and as CVC who is concerned with the impact of
criminalisation of politics and corruption in the executive, I have taken up the issue with
the Chief Election Commissioner to see how we can amend the electoral law, particularly
Representation of People's Act, to see that the law breakers do not become law makers. I
have made the following suggestions for consideration:
Ø No political party must be permitted to contest the elections unless it has got the latest
annual accounts duly audited by an auditor as may be prescribed by a notified agency
like the Election Commission, the CAG or the Supreme Court etc.
Ø No political party must be permitted to contest the elections unless it has cleared its
income tax dues and has got the requisite certificate from the income tax authorities.
Ø Complaints regarding corrupt practices during elections can be looked into by the
Election Commission even before the date of polling. The Election Commission has an
excellent communication system to receive complaints of this type and can
immediately take action so that there will be a healthy check and deterrent effect on
corrupt practices during elections. Prevention is always better than cure.
Ø The explanation 1 below Section 77 of the Representation of People Act, which reads
as follows, should be deleted.
Account of election expenses and maximum thereof. - (1) Every candidate at an election
shall, either by himself or by his election agent, keep a separate and correct account of all
expenditure in connection with the election incurred or authorised by him or by his
election agent between [the date on which he has been nominated] and the date of
declaration of the result thereof, both dates inclusive.
Explanation 1. - Notwithstanding any judgment, order or decision of any court to the
contrary, any expenditure incurred or authorized in connection with the election of
candidate by a political party or by any other association or body of persons or by any
individual (other than the candidate or his election agent) shall not be deemed to be, and
shall not ever be deemed to have been, expenditure in connection with the election
incurred or authorised by the candidate or by his election agent for the purposes of this
sub-section :
Provided that nothing contained in this Explanation shall affect -
any judgement, order or decision of the Supreme Court whereby the election of a
candidate to the House of the People or to the Legislative Assembly of a State has been
declared void or set aside before the commencement of the Representation of the People
(Amendment) Ordinance, 1974 (14 of 1974) :
any judgement, order of decision of a High Court whereby the election of any such
candidate has been declared void or set aside before the commencement of the said
Ordinance if no appeal has been preferred to the Supreme Court against such judgement,
order or decision of the High Court before such commencement and the period of
limitation for filing such appeal has expired before such commencement.
Ø A person who has been accused of an offence involving moral turpitude or other
criminal offences should not be permitted to contest the elections. The Election
Commission may identify these offences. In stead of going only by the gravity of the
offence and FIR being filed, the critical test for applying the ban on the candidate
contesting the election should be that the concerned judicial authority like a magistrate
should have examined the FIRs and the data and gone to the stage of framing charge
sheet.
23 If a person who has been charge sheeted in cases involving grave offences and
moral turpitude as identified and notified by the Election Commission, is banned from
fighting the elections, it will ensure that criminals do not enter politics and become
representatives of the people. The responsibility can be cast on the candidate who must be
asked to certify that he has not been charge sheeted or if he has been, give details. He must
also give details of the past punishment awarded to him by the court. We do not know
what action the Election Commission would take. Nevertheless, I think it is necessary to
have a nation-wide debate on this issue so that appropriate action is taken to tackle the
issue of corruption at the political level.
24 One of the reasons for corruption in government is that there are too many
complicated and obsolete laws. The greater the number of laws, greater is the scope for
red tape. Greater the scope of red tape, greater the temptation for corruption. It will be
good if the law makers can have a look at the existing laws in the statute book and see how
many of them can be done away with. In fact when Shri IK Gujral was the Prime Minister,
the Government of India started an exercise and set up the Jain Committee to identify the
administrative laws which were obsolete. If I remember rightly, the committee identified
about 3500 laws of which about 1/3rd could be done away with. So in order to promote a
corruption free government, we should start with a systematic campaign to remove from
the statute book, obsolete laws.
25 In addition to removal of obsolete laws, there is need to introduce a system which
will ensure that no law remains on the statute book forever and thereby become another
source for corruption. We should therefore bring in a concept like the sunset principle as in
the United States. No law remains on the statute book for ever and has a life of say 5 or 10
years at the end of which period, unless it is consciously reviewed and repromulgated, it
will not remain on the statute book. This will automatically ensure that we do not have
laws cluttering the statute book.
26 We find that good governance is supposed to exist if three factors are achieved.
One is there should be equality of law and effective implementation of laws. Secondly,
there should be opportunity for every individual to realise its full human potential and
thirdly, there should be effective productivity and waste of an effort.
27 Zulfikar Ali Bhutto wrote a book called IF I AM ASSASINATED. In that book he
pointed out that India was a united country because of its boisterous democracy. If one
distinction of India is that it is a democracy, it is so because of the active role played by the
press and the media. It is the freedom of the press which is enjoyed in India today that has
kept our democracy vigorous. During the period of the emergency when the press was
muscled, there was a set back. Ultimately the democratic instincts asserted themselves and
today we find that the press is quite vigorous not only in the print but also in the electronic
media. The expose by Tehalka.com on 13th March 2001 which helped to focus attention on
the basic issue of corruption in our system, especially in defence deals is a recent example
of a vigorous innovative and technology savvy media.
28 The basic structure of our state rests on the three pillars of the legislature, executive
and the judiciary. The press is the fourth pillar. It is also called the fourth estate. In the
Indian context of today where we not only have a democracy but a very corrupt
democracy, the freedom of press must be utilised to fight corruption. Tehalka.com and
the other exposes in the media are performing an useful function to highlight the issue of
corruption. There is need for a long-term solution must be found for improving the probity
in public life. This is possible only if we are able to bring greater transparency in public
life. For bringing transparency, we should have a culture which will be promoting
freedom of information.
29 Accountability is necessary for good governance. This is possible through
transparency in operations. Transparency in government is possible if there is freedom of
information and the citizens have access to information. Recently in different parts of the
country like Rajasthan, Maharashtra and elsewhere leaders like Anna Hazare have taken up
the issue of making information available to the public.
30 The government also has been considering for some time the Freedom of
Information Bill. The question is do we have to wait for the Freedom of Information Act to
achieve greater accountability and transparency in administration? In fact, there is no need
for waiting for the Freedom of Information Act. The situation today, as the Tamil proverb
says, is like having butter in hand and looking for ghee. In our system there are sufficient
opportunities already available to make the administration more accountable by providing
greater access to information.
31 The Central Vigilance Commission is going to be made into a statutory authority
based on the Supreme Court judgement in the Vineet Narain Case popularly known as
Hawala Case. The CVC Bill is also before the Parliament. Even before the bill is passed,
because of Para 56 of the Supreme Court judgement, the judgement itself has the force of
law under Article 141 of the Constitution.
32 One of the powers given to the CVC even under the Department of Personnel's
notification of 4.4.99 under which the CVC is functioning now is exercising the
superintendence over the vigilance administration of government of India organisations.
The power of superintendence means that CVC can give directives, which are expected to
be complied with by the organisations within the purview of the CVC.
33 If in any organisation there are practices which lead to corruption due to lack of
transparency by denying access to public of information, the CVC can issue a directive. In
fact on 18.11.98 the CVC has issued a directive as follows.
One major source of corruption arises because of lack of transparency. There is a scope
for patronage and corruption especially in matters relating to tenders, cases where
exercise of discretion relating to out of turn conferment of facilities/ privileges etc. Each
Organisation may identify such items which provide scope for corruption and where
greater transparency would be useful. There is a necessity to maintain secrecy in matters
where discretion has to be exercised. But once the discretion has been exercised or as in
matters of tenders, once the tender has been finalised, there is no need for the secrecy. A
practice, therefore, must be adopted with immediate effect by all organisations within the
purview of the CVC that they will publish on the notice board and in the organisation’s
regular publication the details of all such cases regarding tenders or out of turn allotments
or discretion exercised in favour of an employee/party. The very process of publication of
this information will provide an automatic check for corruption induced decisions or
undue favours which go against the principles of healthy vigilance administration.
34 A fourth option is available through the judiciary. If there are blatant cases where
access to information leads to corrupt practices, the courts can issue order and bring in
greater transparency in the system. The problem is that it may take a long time before the
courts dispose off the case, but that option is still available. Finally, being a democracy, we
have parliament and legislative assemblies where questions can be asked. Government is
bound to provide information based on codes of parliamentary practice. Mao Tse Tung
said that a banquet could be eaten only mouthful by mouthful. It is only necessary that
enlightened citizens realise this principle and then start nibbling at the opportunities that
already exist in our system to bring in greater transparency and accountability in
administration. The watchword must be: Act, do not wait for the Act.
35 The second role of the press is that they must be able to use the latest technology to
expose the facts which otherwise would not come to light. The use of spy cameras by
Tehalka.com group was one example of use of technology. In addition, Internet can be
useful as a source of information and also spreading information. The modern technology,
especially in the age of information, should be fully exploited if in a country like India the
media has to become even more effective.
36 Along with the need for bringing transparency and using of technology is also a
question of sense of responsibility. The freedom of the press can also be misused to
become an instrument of blackmail or yellow journalism. There could also be hidden
agendas and the individual agendas may be pursued using the media. But in a democracy
like United States, there are organisations which have single point agendas and they may
use the media for this purpose. Perhaps this is true of any democracy. The sense of
responsibility to improve the well being of the people will go a long way to improve
credibility. Government have declared the year as the year of e-governance. Egovernance
means using information technology widely in government systems would
result in hopefully better transparency and better service to the citizen. The press must be
able to use initiatives like e-governance of the government to see how even greater
transparency and responsibility can be brought into the system. E-governance is also
called SMART government (Small, Moral, Accountable, Responsive and Transparent
government). The press can also act in a smart manner to ensure that the real object of
SMART governance is achieved.
37 The issue of corporate governance has become increasingly important especially in
the context of globalisation. Globalisation involves the movement of four elements of the
economy across national border. These are:
i. physical capital in terms of plant and machinery
ii. financial capital in terms of money invested in emerging market
iii. technology, and
iv. labour
38 This investment of financial capital in emerging markets calls for the ethical
dimension apart from the purely efficiency dimension in enterprises. Investors globally
want to be sure that the enterprise in which they are investing are not only run competently
but are also run ethically. Hence, the focus on corporate governance. At this stage, it will
be worthwhile to have a look at what the Kenneth Blanchard and Norman Vincent Peale
say in their book, THE POWER OF ETHICAL MANAGEMENT about the concept of
ethics in the business context. The authors have articulated what has been called the three
way ethical check. The ethical check questions are as follows:
Ø Is it legal? Will it be violating either civil or company policy?
Ø Is it balanced? Is it fair to all concerned in the short term as well as in long term? Does it
promote win-win relationship?
Ø How will it make me feel about myself? Will it make me proud? Would I feel good if
my decision was published in the newspaper? Would I feel good if my family knew
about it?
39. These ethical check questions provide a good reference point to decide on ethical
issues, which arise in the contemporary Indian management. The authors have also provided
the following five principles of ethical power for organisations.
Ø Purpose: The mission of our organisation is communicated from the top. Our
organisation is guided by the values, hopes and a vision that helps us to determine what
is acceptable and unacceptable behaviour.
Ø Pride: We feel proud of ourselves and of our organisation. We know that when we feel
this way, we can resist temptations to behave unethically.
Ø Patience: We believe that holding to our ethical values will lead us to success in the long
term. This involves maintaining a balance between obtaining results and caring how we
achieve these results.
Ø Persistence: We have commitment to live by ethical principles. We are committed to
our commitment. We make sure our actions are consistent with our purpose.
Ø Perspective: Our managers and employees take time to pause and reflect, take stock of
where we are, evaluate where we are going and determine how we are going to get there.
40. I think the experience of excellent companies and visionary companies shows that in
the ultimate analysis values do matter, ethics does matter. In their book, "In Search Of
Excellence" by Peters and Waterman, the authors pointed out how one of the characteristics
of excellent companies was "hands on value driven". While the managements are hands on
and decide on day to day matters, they have also not forgotten their values. Similarly in their
book, "Built To Last", Jeremy Porrass and James Collins pointed out that ultimately the
visionary companies, the companies which lasted much longer 50 to 100 years compared to
the normal lifetime of 15-20 years of the standard companies, one main characteristic was
their core values which irretrievably linked with their company practices and procedures. In
other words, the long term basis for success appears to be internalisation of ethical values
and ensuring that these are woven irretrievably into the company policies and practices.
41. We may now examine the nexus between public governance and corporate
governance. Corporate governance depends upon two factors namely, the attitude and the
values cherished by the management of the business enterprise and the external
environment in which the business operates. The external environment in which the
business operates would include the legislation relating to the functioning of business
enterprises, covering the entire spectrum from registration of companies, their structure,
and settlement of disputes, laws relating to the capital market and punishment for bad
practices like insider trading and so on.
42. Public governance on the other hand is broadly connected with the running of the
government of a country and ensuring that the rule of law prevails. There has to be
fairness and transparency in the system of justice. If the public governance is not
conducted on healthy lines and if there is corruption, then there is no fairness. Corruption,
as the World Bank defines, is the use of public office for private gain. If the public
servants are going to exploit their position for private gain then the quality of public
governance suffers. If the quality of public governance suffers, corporate governance then
becomes more difficult. It can definitely be said that while the management of an
enterprise can still be ethical and try to maintain its internal corporate governance. If the
environment in which it operates is not clean then it may not be successful or even if
successful, it will find it very difficult to operate.
43. The issue of corporate governance has its own dynamism. This will be obvious
from the fact that, thanks to globalisation there are many multinational companies that
have their own internal sense of values. One of the most vocal and articulate leaders in
business has been Jack Welch. This is what Jack Welch says about integrity.
“Excellence and competitiveness are totally compatible with honesty and integrity. The A
student, the four-minute miler, the high-jump record holder – all strong winners – can
achieve those results without resorting to cheating. People who cheat are simply weak”.
“A professor gave a hypothetical case to his business school students. He said, ‘If you
were running a business for a larger company and were about to book a $50 million order,
but to do so, you had to deposit $1 million in a Swiss bank account to an agent, would you
do it? Approximately 40 per cent to 50 per cent said they would. I was shocked!
Shocked! I told the students someone was teaching them the wrong things. This was not
one of those cases where you had to interpret the law; this was a simple bribery case”.
“In the end, your integrity is all you’ve got”.
44. In India, there have been excellent business leaders like Shri Narayana Murthy of
Infosys and Shri Ajim Premji of Wipro who have built world-class enterprises. Both these
business leaders are also placing a very high value on the principles of business ethics.
What Shri Narayana Murthy said in a talk to the Students at Wharton School of Business is
worth noting.
“The Infosys value system can be captured in one line – the softest pillow is a clear
conscience. A company’s value system is the guiding light in its hours of darkness. It
builds confidence, peace of mind, and enhances enthusiasm during tough times. The
importance you attach to your value system is reflected in the cost you are willing to incur
for your belies and convictions. At Infosys, we have stood firm whenever our value system
was tested. We knew that talking short cuts that compromise our values would be
detrimental. One of my strongest beliefs is that corporations have an important duty to contribute to
society. No corporation can sustain its progress unless it makes a difference to its
context”.
45. It is therefore obvious that even if public governance is not up to the mark in a
country, managements of the business enterprise can try to maintain the best corporate
governance and stick to certain values in their own system. In fact, companies that observe
good corporate governance or maintain values seem to be doing better in the business area
also.
46. Public governance can also bring in greater discipline for better corporate
governance by nurturing the appropriate external environment in which an enterprise
operates. Right now in India we have the Stock Exchange Board of India (SEBI), to
regulate the stock exchanges. We also have the Companies’ Act for governing the
operations of business enterprises. Based on the experience gained, the rules and
regulations relating to business are being constantly revised. In this year, there have been a
series of scams relating to the stock exchange and a Joint Parliamentary Committee is
going into this. Based on the past experience, corrections have to be made. In the stock
exchanges of United States in the 80s and 90s, there were series of scams like insider’s
trading, junk bond schemes and savings and loan scandals. Corrective measures have been
taken to build systems to ensure that malpractices do not flourish in the capital market and
the business world. The role of the public governance therefore as the watchdog of
corporate governance and as the agency primarily responsible for laying down the rules of
the game is therefore obvious.
47. The increasing globalisation and removal of trade barriers, thanks to agencies like
WTO, is also adding one more dimension to better corporate governance through
introduction of uniform standards. For instance, in India we are examining the issue of
GAAP – Adoption of Globally Accepted Accounting Practices. Perhaps acceptance of
such standards will bring in, in course of time, a uniform set of practices for corporate
governance.
48. The thrust for greater uniform standards has got a boost, thanks to the increasing
use of information technology. The internet and increasing use of information technology
are opening new horizons for business. Simultaneously, the potential for cyber crimes
which can be committed internationally, is also being realised. To tackle cyber crimes, it
becomes necessary to have international standards and international cooperation. This is
also going to contribute significantly to evolution of systems and procedures, principles
and regulation to see that healthy corporate governance practices prevail. One can hope
that this, in turn, will have an impact on the public governance in different countries and
this may happen to be a healthy impact.
49. Development of organisations like the WTO is also another step that is trying to
bring in a set of uniform standards and approaches so far as treatment of the behaviour of
business enterprises is concerned. To the extent, common standards evolve, either due to
the operational needs, dictating adoption of uniform standards or the necessity for fighting
common enemies like cyber crime promoting cooperation or the legal commitment entered
into internationally by members of the organisation, WTO, all point to a state where the
public governance and the corporate governance are becoming increasingly inter-related.
To the extent a country is more globally and closely linked with the global economy, this
inter-connection also becomes stronger.
50. The judicial system has an important role to play ultimately in ensuring better
public governance and corporate governance. There may be so many regulations, rules
and procedures but ultimately when disputes arise, they have to be settled in a court of law.
There could be, of course, alternative dispute resolution mechanism like arbitration but in
countries like India it is the judiciary that has to step in and ensure that healthy practices
prevail. The Information Technology Act, 2000 of India has the following interesting
position regarding its jurisdiction.
75. Act to apply for offence or contravention committed outside India
(1) Subject to the provisions of sub-section (2), the provisions of this Act shall apply
also to any offence or contravention committed outside India by any person
irrespective of his nationality
.
(2) For the purposes of sub-section (1), this Act shall apply to an offence or
contravention committed outside India by any person if the act or conduct
constituting the offence or contravention involves a computer, computer system or
computer network located in India.
51. We have already seen how the basic framework of the Constitution in India
depends on the three main pillars namely, judiciary, executive and the legislature. The
basic structure of the Constitution is not to be tampered with. One of the areas in which
the judiciary has been very active is in pointing out whether in terms of any legislation that
is passed or practices, principles and laws enacted to test whether they are in tune with the
basic structure of the constitution. This is an important provision and to that extent the
judiciary is clean and effective. It can be a guarantee for better public governance and
better corporate governance.
52. Ultimately, both better public governance and corporate governance are an exercise
in continuous learning. We learn from experience and try to avoid the mistakes. But when
it comes to new types of crimes or new types of frauds, it is better to remember what Oscar
Wilde said: “The thief is an artist and the policeman is only a critic”. It does not mean that
we should stop devising systems which will be as effective as possible in ensuring that the
better governance prevails. Ultimately, there are two elements for better governance. First
is the individual values of the people who are in running the enterprise and the second is
the external framework of rules, regulations, organisations and systems. Perhaps a
continuous effort at sensitising the people about the need for good corporate governance is
required because, however, good may be the operational systems and procedures, if the
people who are operating systems do not have the right values, we will not succeed.
53 Perhaps the best technique to learn is to act on the advice of the Taitreya
Upanishad. Let us come together, let us enjoy together, let our strengths come together, let
us move from darkness to light, let us avoid the poison of misunderstanding or hatred, that
way lies progress. Sahana vavatu sahanau bhunaktu sahaviryam karavavahai tejasvinam
vaditamastu madvid visha vahai om shanti shanti shantihi.
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