Government Ltd: Business-like government or government-like business?

Srinath Sridharan | Updated on October 11, 2020

In an electoral democracy, the elected government is akin to a public limited company, supposedly with unlimited liability. It’s objectives being the Constitution of India, which in this example, would also be the Articles of Association, of how the “company” will be run.

The elected government can be compared to a board of directors or trustees in a corporate set-up. The board can set policies, framework, etc. It also reviews the performance of the management and to reward or punish, on basis the performance. The board is also expected to fairly represent the cause of all shareholders (citizens), including the minority shareholders.

Like a company

For a moment, let us classify ministries as two types: policy-based where it’s primarily setting guiding principles, and ministries as projects-based where it’s executing various functions in a timely manner within budget. You will have few elected representatives, who take up ministerial assignments; in comparison to the corporate board, then these ministerial position holders are like the non-executive independent directors and expected to represent the cause of the minority shareholders (the citizens).

Another way of looking at the personality types of the incumbents is to classify leaders (in both the political sphere and corporate) as “peacetime soldiers” or “wartime soldiers”. This classification determines their ability to face tough situations and to think-on-their-feet and lead-from-the-front by commanding respect.

The expectation in a robust democracy is an active and cerebral opposition, who might differ in political ideology but concur on the topic of national interests. In that spirit, probably some of the opposition party’s elected representatives could act like “Activist investors”, who demand transparency and focussed delivery.

The head of the government (like the Chairman of the Board) has to take care of diversity blend in the cabinet. The pulls and pressures of various stakeholder groups might, at times, dictate ‘affirmative action’, appeasement of certain quarters.’

The bureaucracy is the executive management of the government. It is to execute the objectives of the company’s businesses and to keep the Board informed regularly on its performance and issues. The question of a cohesive team is the ultimate responsibility of the chief executive (‘Secretary’ of a department would be the head of that function and all policies and projects that come under her/his purview). The CEO will have her/his direct reports who have different competence/functional expertise and help achieve the laid-down goals.

However, it is the ultimate responsibility of the Chairman of the board/Head of the government, to be asking the relevant questions to the management and to hold the CEOs accountable for the unified execution of overall company/government targets, without each of the departments having disparate policies that confuse the end-consumers (citizens). In this count, corporate India has fared better than the government; the government clearly has many rules or Acts that are focussed on the same subject but with the interpretation of various rules leaving it open for different outcomes.

It would be better for the unification simplification of various laws and focus on the governance of those laws than just ownership of law under a certain department.

Similar to a corporate having a JV which dictates the board composition and, at times, even the choice of Key Management Personnel (KMP), a coalition government has its due-pressures on the composition of the cabinet. The composition of the members might not be with similar capability/expertise/intent.

Resilient and inclusive

The board is not permanent. It has a specific tenor and goes again to the shareholders for re-election or announces retirement. Whereas, the management can stay until they retire, resign or are dismissed from employment. The electoral population is also the shareholders of this business and can vote to change the Board, as they see confidence or lack of it, in its wisdom and /or performance in the previous term.

Coincidentally, the electoral population and the population that’s still not reached the electoral age, are the market consumers who face the quality aspect of the services delivered by the Company called Government. The big question is who regulates the sector and to whom consumer/citizen grievances can be sent?

Policy design is a process and cannot be based on pushing the process towards “expected or desired” outcome.

The process is supposed to be resilient, fair, all-inclusive and also have the capability to address dissent as well as differences. In this lies the maturity and tact of the key stakeholders, to bring the policy design efficiency to the art of governance — be it in corporate India or the business of the government.

The write ris an independent markets commentator

Published on October 11, 2020

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