Follow US model to fight corporate corruption

Published: 02nd June 2013 12:00 AM  |   Last Updated: 01st June 2013 09:30 AM   |  A+A-

The demand for strong whistleblowers protection legislation in India has recently received a fresh impetus following the exposure of the Ranbaxy fraud in the US. Dinesh Thakur, the whistleblower of Indian origin, would not have succeeded in India as people like him could only at best escalate their grievances up to the top brass of the firm.

Thakur, who was a director in Ranbaxy in 2003, claimed that senior company executives in India had ordered destruction of evidence when they were alerted to data fudging, misbranding and adulteration in drugs. After reporting the fraud to the management, Thakur quit Ranbaxy in 2005 but continued to help the US FDA for the next two years to expose the fraud and file a lawsuit to hold Ranbaxy accountable. Not only has Thakur netted $49 million of the $500 million that Ranbaxy has agreed to pay as part of the fraud settlement, but his regulatory oversight has ensured drug quality and safety which will benefit millions of patients. His example will hopefully act as a deterrent to other drug companies that are indifferent to standards.

Though the captains of Indian industry have maintained a sinister silence over the exposure, it has encouraged civil society organisations to renew their campaign for a stringent whistleblower protection regimen that follows the US pattern. Two reports last week by the United Nation’s Office on Drugs and Crime (UNODC) have given added momentum to the campaign. During its survey of Indian industry as well as law enforcement agencies on issues related to corporate corruption, the UNODC researchers found that most entities “were silent, reticent or cautious” in response to queries about corruption.

Though India has a law on public interest disclosure and protection of persons making the disclosures, it doesn’t apply to the private sector. Neither does the law define victimisation or offer any physical protection to the whistleblower or his relatives.

Two other areas where India has been found falling short on curbing graft in the private sector are bribery and ‘liability of legal persons’. The law only punishes the “natural person” who is in charge of the affairs of the legal entity, not the legal entity itself. The UN Convention Against Corruption that India ratified in 2011 stipulates imposition of effective criminal, civil or administrative liabilities on corporations in whose interest, corruption is committed.

The UN agencies’ observations are in tune with the observations of the Naresh Chandra Commission that  “unlike in many other countries, the need for strong and effective corporate governance in India does not emerge from financial crisis; it stems from increasing international competition resulting from the liberalisation or opening of economy, and several large scams”.

It is time that India strengthened its legal framework by the enacting a new law to include bribery in the private sector as a punishable offence. However, some of the essential ingredients of corporate corruption—the logical outcome of the encouragement of crony capitalism through arbitrary allocation of natural resources by government functionaries—must be put in place to ensure that anti-corruption laws are enforced in letter and spirit. These should include robust whistleblower support programmes and external audits, especially in larger companies; clear responsibility and accountability for integrity in top management; and codes of conduct for employees as integral part of contracts.

The Whistleblowers Bill that the government has prepared suffers from many infirmities. It should be strengthened to include citizens to expose wrongdoings in the government as well as the corporate sector. Merely passing a law to protect the whistleblower cannot be the solution. There must be provisions for acting even upon anonymous complaints if they are accompanied by adequate supporting documents revealing a prima facie case.

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