The move by Association for Democratic Reforms (ADR) to bring about reforms in Lok Sabha, in order to ensure that interested members do not influence the deliberations, is indeed desirable. But given the experience in the realm of management of companies, one is bound to feel sceptical.

Company law in India mandates that a director interested in a matter should step out of the boardroom when the agenda turns to the subject, so that he neither participates in the deliberations nor influences its outcome.

He is proscribed from voting in the board meeting as well. More fundamentally, his presence does not count for quorum on a matter in which he is interested. These are salutary principles designed to eschew conflicts of interest.

Curiously though, the company law doesn’t think anything of the same interested director voting in his capacity as a shareholder in a general meeting. In other words, conflict of interest, perceived to be inimical to fairness in board meetings, is considered kosher in the general meetings.

To wit, an interested director cannot participate in a board meeting while discussing the award of a sole selling agency to him, much less vote. But on the same matter, he can participate with full gusto in the general meeting where it is taken up for shareholders’ imprimatur.

NO POLITICAL CHECKS

One does not know what happens behind the closed ornate doors of Cabinet meetings, but intuitively it appears the Cabinet members are not hamstrung by conflict of interest.

The company law requires a company to maintain a register where the director’s direct or indirect interests are supposed to be meticulously recorded. No such nicety however seems to detain our political masters.

At least there seems to be nothing in the Constitution or statute along such lines. Perhaps, upright prime ministers and chief ministers will lead by example and insist on similar standards of propriety from other ministers. But this is purely in the realm of speculation and hearsay.

The point is the ADR’s initiative should in the first instance be directed at the political equivalent of board meetings i.e. cabinet meetings, rather than at Lok Sabha to which it must be extended later, with the top echelons of the government having blazed the trail and set an example. To make the new regime meaningful, adherence to this golden rule must become actionable in an appropriate court of law.

MISUSE OF POSITION

Cynics aver that if the mandate to ‘step out’ has not improved standards of propriety in the corporate environs, it is likely to come a cropper in political life too, where the conscience is even more supple.

In corporate corridors, directors cling together like kinsmen and believe in mutual back-scratching. In the event, the mandate to step out has neither been taken seriously, nor is it perceived as a hindrance to feathering one’s own nests. An interested director sees to it that in his absence, the proposal he is interested in is not scuttled.

To an influential director, a fawning board pays obeisance, whether he is around or not. Much the same can be expected to happen in cabinet meetings and meetings of assemblies.

Regional satraps in a coalition milieu can be counted upon to make their intentions clear. The government of the day dare not rock the boat.

The cynical view, therefore, is that banishment of an interested director from the scene is not, after all, going to end conflict of interest, the root cause of most of scandals in the country.

Both our corporate bigwigs and political satraps are adept at manipulating from behind the scenes, through henchmen or threat of blackmail. Remote control is the instrument with which our political establishment is run, with some of those wielding it taking immense pride in the act.

But this does not mean the ADR proposal should be aborted. The register of interests of directors at least serves the purpose of being available to a vigilant shareholder for inspection.

A similar purpose could be served by the register of members’ interest kept in the temples of our democracy — Lok Sabha and Vidhan Sabhas. The register should be open to public scrutiny either directly or through the RTI law. It would provide rich, luscious grist to the mills of vigilantes like Kejriwal.

While it is true that disclosure is no guarantor of rectitude, its potential to halt the marauders on their tracks cannot be completely discounted, especially if the law makes those pliable ones playing ball, equally liable and accountable.

If a chartered accountant who owns shares of a company can be disqualified from accepting the office of its auditor, a fortiori, our political leaders too must be subjected to the same discipline.

(The author is a New Delhi-based chartered accountant.)

(This article was published on December 25, 2012)
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