12 6 august 2018J
ustice in the field of business suffers a classic
affliction: rules for a few are framed by the many, and the
many who frame them are mostly clueless about what
the few do. no wonder viewpoints tend to clash: what’s
too harsh for ceOs looks too lenient to lawmakers (and people
at large); what’s plainly absurd to businessfolk is too complex
for the majority; and what’s unjust to those who know their
trade is okay in popular perception. What gets the go-by, alas, is
empathy. it was to address failures of this kind that John Rawls
(1921-2002) proposed his ‘original position’ test of fairness,
one that can plausibly be recast as a sort of Rawlsian Roulette:
imagine, for a moment, that everybody is to be spun around
and reborn randomly as somebody else; if this were to happen,
somehow, what kind of regime would you want?
even without the benefit of reincarnation as a business
bigshot, it’s easy to guess that indian laws that govern corporate
actions are obtuse, overly punitive and in need of reform. this,
after all, is a country where issuing a cheque that bounces could
land you in jail under the negotiable instruments Act of 1881
(just amended to grant payees interim compensation). What’s
in focus right now, however, is the indian companies Act of
2013, to review offences under which the Ministry of corporate
Affairs has set up an eminent panel of advisors who have been
asked to examine this law and suggest which violations ought
to qualify for lighter punishment. small offences could per-
haps be treated as civil misdeeds, best let off with a rap by way
of a fine. some of the bigger violations that attract prison terms
might also be dealt with better as penalty cases to be settled
by, say, the national company
Law tribunal, instead of being
dragged to courts as outright
crimes. the idea of this rejig,
according to the centre, is to free
up the judiciary for trials of a ‘se-
rious nature’. if it goes through,
it would also relieve corporate
honchos of the none-too-trivial
fear of being slapped with a legal
stigma that bars them from
being appointed directors of any
company in india.
Lawyers say there is plenty
that ends up afoul of the law
without mala fide intent under
performance pressure, minor
stuff that needs no litigation
to resolve. such infractions are
not difficult to identify; a new
director of a firm who finds himself in the dock for forgetting
to inform the other boards he’s on might have a valid reason
to feel aggrieved, for example, though it’s not clear if quite the
same could be said of one who fails to disclose an interest in
another company with which a deal is being done.
Far trickier to pinpoint for leniency are violations that are
explicitly jailable under the companies Act, especially those
that have a wide range of actions for which charges could be
levelled against executives. Fraud, of course, is the big one here.
it could put the guilty in prison from six months to ten years
and apply to anything from a declaration in an equity-issue
prospectus alleged to be ‘untrue or misleading’ (with the
added perplexity of ascertaining if it’s deliberate) to such
blatant deceptions as fudged accounts, disaster cover-ups,
illicit dealings disguised as legitimate, and worse.
that’s the grim end of it, and while it’s all very well to argue
that a typo should not put anyone at the mercy of a jailor, it’s
also why an easing of penal provisions across the board is
unlikely if this is about justice, not get-out-of-jail cards.
the most arbitrary of rules, ironically, could prove the
trickiest to revise. corporate funds for political parties, for
instance, are bound by a set of restrictions that appear well
intentioned but out of whack with the centre’s new policy
on electoral bonds. under the Act, no more than an annual
7.5 per cent of a firm’s average net profits over the past three
years can be given to a party, and that too only with board
approval and public disclosure. since electoral bonds allow
anonymous donations, how exactly the law squares with
these awaits clarity.
not all white-collar offences
are crimes—involving the
gross violation of someone
else’s rights. But offences, they
still are. And business integrity
counts. even if some aspects of
the law are eventually relaxed,
corporate self-governance can’t
afford to let its guard down.
Rawls is relevant here too. What
if you, as a majority owner, were
to suddenly find yourself with
nothing but a solitary share in
your company? Or none, for that
matter. Would every decision of
yours still be just as good?
What’s fair and what’s
foul should not vary by who
you are. nCorporate Crime and Punishment
B uSInESS BY ARESH SHIRALI
saurabh singh