passage to a corruption-free india

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  • 8/17/2019 PASSAGE TO A CORRUPTION-FREE INDIA

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    APRILMAY  THE JOURNALwww.cii.co.uk

    CORRUPTION & CRIME  INDIA

    APRILMAY  THE JOURNALwww.cii.co.uk

    CORRUPTION & CRIME

     Corruption is perhaps as

    old as human civilisation,

    and omnipresent. The lure

    of emerging markets for

    globalising forces poses

    new risks for them relating

    to bribery, grease payments, extortion and

    employee fraud. Covering or excluding

    corruption or crime is no solution. Thisarticle is an attempt to share insights from

    some exceptional thought leaders on corrupt

    practices in India.

    “Despite being universally disapproved

    of, corruption is nevertheless universally

    practiced. Notwithstanding this paradox,

    there is very little literature that actually tries

    to answer it.” So says Dr V Raghunathan,

    an eminent thought leader and expert in

    behavioural finance, who provides a good

    starting for a better understanding of

    managing corruption and risks in India.

    What is corruption?For our purposes, Dr Raghunathan interprets

    corruption as the misuse of public office for

    private gains.

    It would appear, adds Dr Raghunathan,

    when most people denounce corruption,

    they do so as thos e at the ‘receiving end’of corruption – paradoxically, the one called

    upon to pay bribes. Corruption thereby

    becomes repulsive for two reasons: both

    morally and economically. As long as the

    person is being forced to cough up the

    bribe to have his legitimate entitlements

    granted and is not paying it to receive undue

    favours, it may be difficult in practical terms

    to find fault with an average bribe-giver’s

    point of view.

    He then goes on to say that it may be

    reasonable to expect the number of bribe-

    givers to be much greater than the number

    of bribe-takers. As the one in power, he or

    she often is, or is regarded as, the cause of

    corruption. Let us assume that the ratio of

    bribe-givers to bribe-takers is 10: 1. When you

    poll the population in general, a large majority

    of them – nearly 90% being bribe-givers –

    may disapprove of corruption because of themoral and financial costs it inflicts upon them.

    Thus, it takes a mere 10% of the population

    to act corrupt for the entire 100% to be

    regarded as practising corruption, thus

    creating the impression of corruption being

    universally practised. How does one negate

    this paradox and work towards making

    corruption less universal? This remains his key

    question.   I   M   A   G   E   :     A     L     A     M     Y

    Shades of corruptionCorruption and fraud, according to Ravi

    Venkatesan in his HBR paper Confronting

    Corruption, falls into four categories: bribes,

    speed money, extortion and employee fraud.

    They are defined thus:

    Bribes: Multinational companies are

    prohibited from off ering anything of value

    to a government official, political party or

    party official with the intent to influence that

    person or to secure an improper advantage in

    obtaining or retaining business;

    Speed money, or ‘grease payments’: Speedmoney is a payment for doing something he or

    she should do, faster;

    Extortion: Extortionists are usually solo

    rogue actors without institutional backing – it is

    often possible to call their bluff ;

    Employee fraud: Increasingly, the biggest

    corruption threat facing a company is the risk

    their own employees may be on the take. Greed

    is also driving more management fraud.

    The most corrupt professionsThe magazine India Today recently conducted

    a poll on the most corrupt professions. As

    expected, politicians topped the list, followed

    by police and the lower judiciary. A surprise

    revelation surfaced when journalists made an

    unexpected appearance in the most corrupt list.

    The Transparency Global Corruption

    Barometerreveals that 41% of Indians believe

    the media is “complicit in corruption”. In fact,

    consensus exists in the profession on the need

    to urgently tackle the issue, according to the

    late editor Vinod Mehta in his bookEditor Unplugged.

    What reinforces corruptbehaviour?What can possibly inhibit the conversion of

    corrupt thought into action? Clearly the fear

    of observation or detection, and the fear of

    consequences, believes Dr Raghunathan.

    So while an act of corruption may be driven

    by greed, it can be inhibited by the fear of

    detection and punishment.

    The fact is that a society is as corrupt

    as the system allows it to be. The weak

    administrative and political institutions of

    emerging democracies perhaps off er an

    appropriate environment for corruption to

    prosper. This probably explains why in many

    developed societies, where the probability of

    being caught while indulging in corruption is

    higher and the consequences of being caught

    are severe, the instances of corruption are

    fewer.At one extreme, in India, it would seem that

    we are beginning to take corruption in our

    stride. We no longer squirm at being ranked

    among the most corrupt countries in the world.

    We have come to accept corruption as our

    national character and hence we do not view it

    as a serious and alarming social malaise, as is

    evident from the popular support enjoyed by

    some of our scamsters in public life.

    PASSAGE TO ACORRUPTION-FREE INDIA

     As the world’s secondmost populous countryopens up to ever moreWestern business, theneed to overcome its

    historical problems withcorruption becomesmore pressing by theday. Praveen Gupta shares some scholarlythoughts on the issue...

    Thailand, China, Korea, India and Pakis

    have high power distance, since these

    countries are probably more autocratic

    feudalistic or paternalistic.

    In short, explains Dr Raghunathan, a

    country like India will have to reduce it

    power distance index enormously if it

    hopes to make the society less corrupt

    The authority to demand one’s entitlemfearlessly and face a public official will

    snowball in society only if the power d

    index is brought down. One can readily

    the relationship the power distance ind

    must have with literacy, education and

    economic wellbeing.

    So one hopes that as the country’s p

    capita income improves and the literac

    level goes up and we put various syste

    checks and balances in place for great

    transparency, we should be able to con

    corruption and a day might come when

    could say corruption is widely condem

    and, quite rightly, not so widely practi

    Tough roadBe prepared to tough it out, reminds

    Mr Venkatesan in his HBR paper. He be

    success is perfectly possible in emergi

    markets without making compromisesthere are real consequences and real c

    for those who uphold ethical behaviou

    especially in the short term.

    Global leaders should publicly suppo

    bribery laws, speaking out against corru

    practices in their industry and explicitly

    acknowledging any loss of business that

    results from ethical principles. Chief ex

    must ensure that every employee in eve

    part of the world is utterly clear about w

    conduct is acceptable and what is not.

    The thought leaders quoted here are

    an epitome of courage in accepting an

    articulating the state of corruption. Th

    is also a recurring push on this front fr

    the country’s expanding and assertive

    middle-class. Thanks to activism in sec

    of media coupled with the country’s ap

    court (Supreme Court), the dissatisfac

    channelling into a slow and steady cleaThat should only bring cheer to unde

    in fiduciary, professional and personal

    liabilities, concerned about reputation

    cost of doing business in India as it ope

    for more global action.

    Praveen Gupta, FCII, Chartered Insurer is

    managing director and chief executive o

    Raheja QBE General Insurance Co.

    An insider’s accountVinod Rai, India’s 11th comptroller and auditor

    general (CAG), and a symbol of the country’s

    anti-corruption movement, throws light on

    his time as the CAG in his book, Not Just An

     Accountant . It focuses on the many pitfalls

    – ethical, political and economic – India

    must avoid if it is to emerge a stronger, more

    prosperous nation.In this narrative, rich in anecdote and

    inside information, Mr Rai speaks of the major

    scams that shook the country in the new

    millennium. Among the case studies – chosen

    for the diversity of failures they highlight – are

    the procedural irregularities in the issuance

    of licenses for the second-generation (2G)

    spectrum; the XIX Commonwealth Games;

    the enormous losses the country was forced

    to endure in the allocation of coal blocks to

    agencies incapable of efficiently exploiting

    our national resources; the wilful flouting

    of procedures and the clear evidence of

    crony capitalism in the exploration of India’s

    hydrocarbon resources; and the tragic tale of

    civil aviation in India.

    Mr Rai endeavours to keep future

    generations apprised of the pitfalls to be

    avoided in the mission for nation-building.

    The pain they have experienced should inspirein them the strength for greater success. Each

    challenge must spur greater response. Each

    failure should provide a greater stimulus for

    success. And more importantly, it is vital to

    recognise that success will not be handed on

    a platter; one will have to go out in the sun

    and toil for it.

    Reducing the ‘power distanceindex’Dr Raghunathan quotes Malcolm Gladwell

    from his book Outliers, where he alludes to

    Gerard Hendrik Hofstede’s ‘power distance

    index’ as a framework for assessing cultures.

    It measures “the extent to which the less

    powerful members of organisations and

    institutions (like in a family or a business)

    accept and expect that power is distributed

    unequally”. The higher the acceptance and

    expectation of power inequality, the higherthe ‘power distance’.

    Using this framework, it is seen that

    countries like Austria, Australia, Israel, New

    Zealand, Switzerland, the UK and several

    Scandinavian countries represent low

    power distance since these societies expect

    and accept power relations that are more

    consultative or democratic. On the other

    hand, countries like Malaysia, Indonesia,