The Hindu Business Line : Crime and punishment

Never before has the country had to confront such a succession of crises in so short a time. Just six weeks after the worst terrorist attack comes the biggest fraud in India’s corporate history. Like the attacks on Mumbai, the Satyam swindle, is unique, not just in its magnitude but in the shock waves it sends across the country. If the terror attacks revealed the nation’s vulnerability to exogenous forces, the Satyam chairman’s self-confessed scam reveal s the fragile foundation of corporate ethics on which India’s external reputation has been so assiduously built for almost a decade. The Mumbai carnage drew the world’s sympathy even as India’s self-restraint in dealings with its troublesome neighbour elicited praise. As the full magnitude of the lies perpetrated over the years surfaces, the Satyam fraud will cause as much revulsion worldwide as it has internally. For the policymaker, much more is at stake; that revulsion will morph into a collapse of faith in India’s trustworthiness. Whether or not the Satyam case is an isolated one, as some business leaders think, is beside the point. At stake is the reputation of the entire business community in the eyes of the global and domestic investor. Equally at stake is the capacity of the policymaker to punish the guilty.

To their credit, the Ministry of Corporate Affairs and the regulators plan joint action; over the years, India has created enough laws to unearth and book white collar crime of various hues. But history shows a poor record of the perpetrators being given their just desserts as cases drag on for years till they fade from public memory, leaving a permanent scar on the country’s reputation for governance. More than the unlawful action, it is this dismal mismatch between crime and punishment that allows the greed of a few to flourish at the expense of the many. It is this reputation that will damage all the efforts the Government has made to revive the dispirited economy.

In anticipation of more frauds, banks will batten their hatches and turn even more cautious in lending. More than terrorist attacks it is the incapacitated response to corporate misrule that will deter investors and capital from our shores as it will turn away customers from our services and products in the global marketplace. The Satyam scandal is not just about greed and corporate governance, less compliant and complacent directors and more critical auditors but about quicker and more punitive indictments under existing laws. Those alone will anchor the world’s faith in us.

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