Corporate Governance and Political governance deficit-the similarities

In 2010/2011, several scams rocked the Indian political scenario right from the mother of them all(2G spectrum allocation, Karnataka mining licenses, Adarsh housing society etc). Chief Ministers were dismissed, inquiry commissions set up and heads rolled. The media gleefully credited their reporting and publicity as a deterrent factor. All that was to change when the spurt of corporate scams errupted. Just recouping from the FY09 Satyam scam, multiple scams were exposed right from the mining licenses(Jharkhand, Karnataka), land acquisition(for SEZ, projects), Radia tapes, bribery, cases etc. While some CEOs were arrested/dismissed(Gautam Doshi, Everonn CEO, Money Matters, LIC Housing Finance), industry forums were quick to pass them off as rotten apples. But on deeper reflection, one should not have been surprised for these scams. After all, the inconvinient truth is that corporate governance reflects the society it resides in. And the common reasons are

• No separation of powers:-Like how most political parties are one man shows, so are most companies. The CEO-Chairman position is not separated.
• First past the post:-Like how 30% voting share is often enough to win seats, the same is true for companies as well. As there is no proportional representation, the shareholders with even 30% voting power can often control the Board easily.
• Redistribution focus over governance:-Few Indians would genuinely expect their MP/MLA to debate larger issues in the assembly/parliament, at the cost of giving attention to local issues. Similarly, investors do not expect their directors to show exquisite coalition dharma viz corporate governance; but instead expect share price maximization
• Opaque funding/controls:-like how political parties benefit from anonymous contributions and exempt income, often without tax returns scrutiny; company promoters benefit from related party transactions that enable major siphoning out of funds. 

However, there are major exceptions also

•   Contest ability is much more in politics than in companies, where hostile takovers are quite rare. Companies can be defeated at the market place, but rarely are corporate power battles(especially takeover bids) fought in public.
• Coalition dharma is much more relevant in companies than at the assemble level in politics. While the company must juggle the interests of workers, investors, employees, government(at the bare minimum!!), the politician is often content with jugging the interests of his voters(or atleast appearing to do so).

This analogy is so relevant that next time we blame the Government for anything, it is better to take a hard look at our corporates, to see whether we are committing the same sins or not. 

Why politicans should make good managers

Those who have studied organization structure(right from Robbins onwards) agree on the pivotal role of organizational politics. To rise to the top level, besides competence and luck, one does need a very good ability to navigate organization politics. In both India & USA, several politicians have strong business interests/affiliations, which often predate their entry in politics. Indian examples are the Reddy brothers of Karnataka, Maharashtra sugar barons, Dhanbad coal mafia, Goa ministers, Jindals etc, while USA examples would cover a large chunk of the House of Republicans. So why does this happen? Below are some ideas

• Sociologists hold that where people need to divide limited resources among themselves, they start politicking to maximize their share. Whether the arguments be rational('economics'), spiritual('religion'), social('democracy') or by force('muscle power')-politics is the common strain. This limited resources fight is true for organizations as well. 
• The trend in India is to build a coalition of friends(and a few enemies) to keep out the common foe. These coalitions navigate several minefields, but are the way ahead in India atleast. Even in organizations, the manager needs to coordinate various functions, and have them work in harmony, or atleast work on the coalition model of acting on common minimum program(organization goals). Even outside the organization, the tendency to form alliances is now growing beyond the technological world, and entering areas like auto(Renault-Nissan) and pharma.
• By playing the divisive politics card of caste/region/creed etc, politicians instinctively know how to divide and rule. This skill would serve them well in organizations, where under the pretext of 'segregation of duties/maker checker concept', different sub units are designed to check and neutralize each other's over reach.

We do not need an Indian Lee Kuan Yew-not even Anna Hazare

As people well acquainted with Singapore would know, its first prime minister Lee Kuan Yew is credited with transforming the marshy swampland into the world's best island state-a centre of finance, tourism and business in its own right. Yet, this has come with some costs. Mr Yew's party, the People's Action Party(PAP) has a dictatorial electoral hold in Singapore. And to a large extent, Mr Yew's approach towards the opposition has helped this iron hold. In the May-2011 General Elections, when a constituency Aljunied voted in the opposition,, Mr Yew said that the voters would 'repent' and that their locality would eventually become a slum. While he later apologized, those remarks exposed the depth of contempt he felt for the opposition. I draw this analogy with the present Lokpal bill morass in India. While perusing the Lokpal bill version of the Civil Society members, the overall tone and proposals struck me as patronizing and insulting. Sample a few of these proposals:-

1. The Lokpal Commission chairperson/members should have a history of fighting against corruption
2. The retiring members will have a role in selecting their successors
3. Even the Prime Minister/Executive is expected to accept without demur, the Lokpal resources demand etc. Yet, they expect total independence from the Government. 

I accept that the very need of the Lokpal has arisen because of the breakdown of other civilian institutions, and that only an independent institution answerable only to the President is likely to survive the test of time(Election Commission/RTI Commissioner etc). Also, the bill clearly aims to preempt the delay tactics which the bureaucrats are so well known for(like not notifying bills into law, filling up vacant positions late etc), and also aims to confer true powers and independence to the Lokpal. 

We need a strong yet 'moral' person to carry this out. Anna Hazare would probably make a good Lokpal, but there are certainly others out there more qualified in governance, with better track records. Also, history is filled with examples of initially well intentioned initiatives, which later degenerated. If we are unhappy with the quality of our legislators/bureaucrats, then the way forward is electoral reforms, criminal law reforms, justice delivery changes, policy framing etc. Leapfrogging them, is not a good suggestion because democracy works on the basis of representativeness. 'Unsuitable' representatives get elected(like criminals), so the solution is probably to impose eligibility restrictions then. 

As it stands today, the Lokpal will be a super body. While the threat of dismissal by the President always holds, the moral standing then may not permit such a thing(especially if the President is like minded)!. And this is quite risky.