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Home > Business > Columnists > Guest Column > Kanika Datta

Spending, not wisely but too well


September 11, 2003

Does India need better government schools or better corporate governance in its companies? Obviously, the two issues can't be compared. But when it comes to allocating government funds, which should be given priority?

Assuming that only the insane would choose the latter, it is hard to understand the Cabinet's approval last week for the government to spend Rs 10 crore (Rs 100 million) on a National Foundation for Corporate Governance. Confederation of Indian Industry and the institutes of company secretaries and chartered accountants will chip in another Rs 5 crore (Rs 50 million), all told, towards the trust.

What will this trust do? Apparently it will provide "financial and other assistance" for the promotion of good corporate governance. Since good corporate governance is largely about overhauling company boards, improving business practices and generally not gypping the stakeholders, it is difficult to see why any corporation should be in need of funds to do all of this.

It is harder to understand how a publicly-funded trust can improve India Inc's corporate governance record. This trust will be chaired by the finance minister and have a three-tier management structure -- the governing council headed by the minister in charge of the department of company affairs, a board of trustees and an executive directorate. It will apparently provide consultancy services apart from technical and managerial support to beneficiaries of the trust.

What "technical services"or "managerial support" does a company need to, say, get the promoter's cronies off a company's board or remove the window-dressing on its balance sheet? If companies want such advice, surely they can pay a consultant.

Indeed, CII has a fairly comprehensive draft for a corporate governance code that was drawn up by a committee headed by Kumar Mangalam Birla some years ago, elements of which found their way into the recently introduced Companies Bill?

In any case, corporate governance is a well meaning if muzzy ideal that is generally dictated by the prevailing business climate. It is usually relegated to the backburner when times are good and everybody is making money on the stockmarkets.

As Enron and Worldcom proved so eloquently, it is only when the scandals start emerging from the woodwork in the form of accounting shenanigans and ethical breaches that people sit up and start asking hard questions about corporate governance.

Given this flip-flop in the public discourse, surely it is the role of the watchdog agencies -- like Sebi, ICAI and so on -- to keep tabs on whether companies are acting ethically. Surely a drastic reform of the judicial system so that justice is dispensed more speedily to, say, aggrieved employees, shareholders and so on would go a longer way in encouraging companies to improve their governance record (our consumer courts have set a reasonably honourable record here)?

No doubt, Rs 10 crore (Rs 100 million) seems like pennies in the government's expenditure budget. My case, though, is not that the government should not spend but that, it has its priorities wrong somewhere.

This was forcibly if unwittingly brought home several days later at the National Award for Teachers. HRD Minister Murli Manohar Joshi delivered himself of a singularly soporific speech where he said the destiny of 20 crore children was in the hands of teachers and how the government had created 500,000 teaching posts in the past one and a half years.

It is not known if he read the comments of some of the 280-odd recipients of the award -- most of whom taught in rural and district government schools -- that were published in the newspapers later.

Most of them simply wanted pucca buildings, stationery, uniforms or sports gear -- in other words the very basic of infrastructure -- for their students. One science teacher wanted a prism to conduct better experiments. A teacher from the North East said his school needed more teachers -- it had just eight teachers for 500 students.

Rupees 10 crore would easily buy all of this and more; it could just as easily bring much-needed succour to public health service; it is uncertain how far it would make India Inc a model of corporate governance.

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