The nationwide debate on corruption has been a heated one. One rare meeting point is the belief that India needs strong laws to punish the corrupt. Few seem to question this belief. Even as the tug of war over the Lokpal Bill continues, the Union cabinet approved three anti-graft bills on Tuesday covering the judiciary, protection to whistleblowers and a citizens’ charter.
Can Indian companies hope to stay out of all this? It seems unlikely. Prime Minister Manmohan Singh said in October that his government plans to criminalize bribe-giving by companies. A few of the opposition leaders participating in the protests at Jantar Mantar this month also suggested that companies could be brought under the proposed Lokpal.
A file photo of Prime Minister Manmohan Singh.
Two stringent models are the UK Bribery Act and the US Foreign Corruption Prevention Act (FCPA). The former is the newer and more stringent law, which punishes companies for even more transgressions for routine stuff such as getting a visa. The latter prohibits bribes to foreign public officials to further business interests.
Even Indian firms with a presence in the UK or US have to fall in line. In effect, some of India’s biggest companies are already covered by tough anti-corruption laws. Why should it then be a problem if they accept similar laws in their home country as well?
Indian industry should get involved in the inevitable debate in a constructive manner, rather than staying out of the debate and later getting hit with a poorly-framed law. Laws discouraging corporate corruption do not necessarily hurt the economy or competitiveness.
There are growing fears that stringent implementation of FCPA and Bribery Act might make foreign companies to shy away from doing business in India, where corruption is rampant. A study by audit and consulting firm KPMG found that a third of British and a quarter of American companies would not do business in corruption-prone countries to avoid the risk of being prosecuted. So, tough anti-corruption laws indirectly amount to de facto sanctions against certain countries that are highly corrupt. More than half of the top 10 FCPA fines assessed by the U.S. government were against foreign companies.
One proactive measure that Indian companies can take is to write anti-graft and whistleblower protection rules into their corporate governance codes. It could be a useful first step as well as a broader signal that the corporate sector is also worried about our national malaise.