The Hindu Business Line : Private sector smugness

OFF and on, observers of the Indian corporate scene come up with disturbing comments on the cursory nature of checks and controls exercised over private sector firms. Apparently, for all the talk of subjecting private firms to a code of corporate governance and despite the existence of regulatory authorities such as the Securities and Exchanges Board of India (SEBI), India's private sector seems to have failed the cardinal test of public accountability if the report of a Frauds and Misconduct diagnostic survey conducted by KPMG in 2003 is any guide.

Here is the published gist of disclosures of that survey: Indian companies are ill prepared to handle frauds and corporate espionage. As many as 58 per cent of the 196 respondent companies had no policy to counter corporate espionage. Around half of the respondent companies did not have in place a conflict of interest policy.

The survey also brought out that Indian companies did not have adequate screening procedures to bar fraudsters from joining. The ugly findings represent an area of darkness where it is imperative for India to make good the deficiencies, especially because there is no tradition here of citizens boldly taking up cudgels against harassment and callousness.

India's private sector is badly slipping in customer service also. Its advertisements are couched in nectar-like language, but its actual dealings leave a lot of sourness. Already, customer dissatisfaction is growing with some private companies which have taken over erstwhile public sector undertakings.

Business tycoons, instead of cribbing over slow pace of divestment and privatisation, and faulting Government over this or that, should first do a lot of inspection and put their houses in order.

Poor or fraudulent management lead not only to the misuse of resources but also jeopardise the interests of stakeholders. It is by now a well-understood maxim that free market should not be allowed to degenerate into a free-for-all market.

It is in this context that the role of the Government as a moderator, umpire and regulator becomes important. That is why constant vigilance against human greed getting the better of public weal is necessary. India cannot simply afford a scandal of the nature of an Enron, Tyco or Worldcom exploding in its face in the future.

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