India’s Political Risks in 2014

A fortnight back Aam Admi Party’s (AAP) magnificent political debut in Delhi pulled the rug under the feet of seasoned politicians. Old established politicians with dynastic lineage are scanning the environment to see which young inexperienced common person will oust them from their plush leather chairs. The AAP victory is a game changer, injecting fresh blood in Indian democracy. The citizens, sick and tired of corruption are demanding good governance. With national elections coming up in May 2014, the political risks of the country are changing.

A.      AAP’s Applecart

Arvind Kejriwal - The New Hero

Arvind Kejriwal – The New Hero

Gen X arrived on the political arena and won the first battle. The victorious 28 AAP MLAs are 26-49 years old. They do not have a political background, family connections, or money. They are regular middle class people who took their first baby steps in activism in the Anna Hazare Anti-Corruption Movement.

AAPs symbol, the broom, stands for cleaning the corrupt system. In one stroke, it has swept the old political system and established rules. Within a week, anti-corruption Lok Pal Bill was passed with Congress spearheading the passage of the bill. The bill had been pending for over five decades. While Arvind Kejriwal and Prashant Bhushan were the brains behind the moment, Rahul Gandhi was quick to take the credit.

The AAP leader Arvind Kejriwal, by taking public referendum to form the government, out manoeuvred BJP and Congress. By announcing that AAP will participate in national elections, Kejriwal has become a national leader with mass appeal. With people demanding change and a corruption free government, AAPs is a significant threat to established parties.

From business perspective, in AAP governed states cronyism and corruption will decrease. However, the number of raids and investigations might increase. One is likely to see some high level prosecutions with the implementation of Lok Pal bill. Hence, it will pay to keep high business ethics, and reduce illicit money transactions and bribes.

B.     BJP’s Bandwagon

 BJP Prime Ministerial candidate, showed his leadership mettle in the state elections. BJP win in four of the five states clearly showed that the tide is in its favour.  Modi is riding on the propagated success of Gujarat Model, Hindu middle class and business support.

Narendra Modi - The Callenger

Narendra Modi – The Callenger

However, though Modi is projecting himself as an agent of change, Kejriwal is outshining him in that sphere. In addition, AAP voters come from all income groups, religions, and regions. Hence, Modi presently has a smaller pie of the vote bank.

BJP is also showing that it is unable to walk the talk of change. It is entering into alliances with candidates and parties with a criminal track record. Secondly, to connect the youth across India, it has started the project to build Sardar Patel statue by organizing runs and collecting iron pieces across India. It is trying to attack Kejriwal’s youth following obtained through social activism reputation by this initiative. The Gen Y does not connect with freedom fighters; it wants the current issues addressed.

Hence, it will be an interesting battle to watch. Businesses in BJP ruled states could expect some speedy action on pending proposals, a superficial reduction in corruption, and a significant focus on business growth. BJP isn’t positively aligned towards US; hence, some tensions are envisaged. Moreover, if it comes to power at national level it is expected to gun for Congress leaders and the corruption cases.

 C.      Congress’s Circus

COngress - In Better Times

Congress – In Better Times

In the state elections, the Congress politicians came out looking like a pack of jokers. The Congress hubris, corruption cases, and Rahul Gandhi’s ill preparedness to don the leadership mantle resulted in its downfall.

Suddenly, the Gandhis’ are putting on the activist’s cloak. In the Supreme Court ruling of LGBT cases, they were on the forefront fighting for LGBT rights. After letting US walk all over for last ten years, in Khobragade case, it is drawing blood. At the last moment, support to pass the bill for allowing politicians with criminal records to contest was withdrawn. An attempt to change image and control reputation damage in the last six months isn’t going to work.

The Congress Prime Ministerial candidate is still unknown. A feeler was sent out about Nandan Nilekani being the Prime Ministerial candidate. He might sail through with business tycoons, but will appear as a US supported candidate. The US governments attempt to play big brother’s role in Indian democracy doesn’t go down well with Indian voters. Rahul Gandhi isn’t a people’s magnet. He has not proved his leadership capabilities. Hence, Congress might be facing some dilemmas in selecting a candidate with national appeal. Finally, Prime Minister Manmohan Singh has called it a day and isn’t seeking a third term.

Congress most probably is going to take a beating. In the states it survives, corruption is going to continue and it is going to take a while for them to introduce good governance. Leaders are going to be scrambling for cover, as AAP and BJP are both interested in investigating them to get mileage. In the states it loses, a few projects permissions might be withdrawn or closed. These are the states where business sector will face maximum political risks.

Closing Thoughts

The ABC of Indian politics is changing. It will be enthralling and heart-warming to watch the 2014 elections. Indian democracy is finally coming of age and voters have tasted their power to overthrow established models. With multi-party environment and many more parties in the ring, the competition is going to be keen.

However, a few messages are clearly coming out. Those aligning with corrupt leaders or leaders with criminal records are going to lose the public backing. Political battle plans and strategies need to be redrawn, as the old isn’t going to work. Fighting on religion and caste won’t ensure victory. The parties manifesto focus must be on good governance, economic and business growth, corruption free environment and empowerment of the masses.  The economy is expected to pick up only after the elections near the last quarter of 2014. Hence, be prepared for a slow year in business.

Routine Activity Theory Implications on Increasing Crime Rate in Indian Society

Cohen and Folsen’s Routine Activity Theory of Crime, appeals to me at an intellectual level to understand the increasing rate of crime in Indian society. However, it contradicts my personal philosophy about human beings. The theory presumes that every human being basically has a criminal tendency and is capable of crime. I believe that human beings are inherently good and each human being irrespective of the crimes they have committed is capable of good deeds. Hence, I will try to discuss the theory without bias and balance the two opposing views. If I sound partial towards my philosophy, then forgive me from the goodness of your heart.

1.      Introduction

The theory was based on analysis of US crime data of 1947-1974. During this period the average income of families increased, number of people below poverty line decreased, education levels improved, and unemployment levels decreased. However, the rate of violent crime in urban areas   increased – rape (174%), assault (164%), robbery (263%) and homicide (188%).

The Indian urban society is showing similar trends since liberalization in 1990s. While growth, income, economy, facilities, education etc. has significantly improved in urban areas, the rate of crime has increased exponentially. Before, in 1960s and 1970s, others would ostracize a middle class person if he were publicly involved in criminal activity. Now, nearly every second person is involved in a corrupt and unethical activity openly. Though we blame it on deteriorating social values, this theory helps us understand why we compromise the values and participate in a crime.

2.      Concept

The theory states that “structural changes in routine activity patterns can influence crime rates by affecting the convergence in space and time of three minimal elements of direct contact predatory violations: (1) motivated offenders, (2) suitable targets, and (3) the absence of capable guardians against a violation”. Lack of any one of these reduces crime. However, the level of control exercised by the guardians has a direct impact on crime. Even if motivated offenders and suitable targets remain the same, if control reduces, crime increases. The theory states that income of the offender does not have any impact on his desire to commit crime and contradicts the popular notion that people with less income have a higher propensity to commit crime.

Source: Wikepedia

Now this can be understood in Indian context. The number of people living away from their traditional homeland has increased as more people are living in nuclear families or as singles in different cities. The change in social behavior has changed the routine activity of people as social controls of family and community have decreased. These aspects reduce the worry of motivated offenders on how their community will judge them if they participate in unethical behavior. Secondly, the same aspect makes suitable targets more vulnerable to crime as protective layers have reduced. Hence, due to this changing social structure, motivated offenders and suitable targets have both increased. With it, the corruption in law enforcement agencies has reduced control. The sum total of it all has increased the crime rates in Indian urban areas.

3.      Effect

Then the theory states that motivated offenders cooperate to strengthen their efficiency in criminal activities. On the other hand, the potential victims join hands to gain collective strength to protect themselves from the attack. The challenge becomes bigger for potential victims when high-net worth individuals undertake criminal activities. The potential victims risk of victimization increases.

From the Indian context, the driver for change in social values has been the thirst for money and power. The higher level of ambition for being powerful and materialistically successful has motivated people to break the traditional social norms and move towards corruption and crime. Previously, the lack of a good criminal justice system was compensated by strict controls from family and community. Now all the three guardians have decreased control and the value of rewards gained from criminal activity is high. The other factor to consider is that voluntary help groups and social support groups are less in India; hence, the potential victims do not get the desired protection. As Cohen said – “it is ironic that the very factors which increase an opportunity to enjoy the benefits of life may also increase the opportunities for predatory violations”. Crime has become the by-product of freedom and prosperity as it has enmeshed itself in routine activities of daily life in Indian urban society.

Closing Thoughts

My personal belief is that for every action, especially criminal or unethical activity, a person needs to ask whether they need to involve themselves in it. When one accepts rewards for the wrong reasons, one cannot avoid punishment for the wrong reasons also. Hence, why go for the wrong rewards in the first place; and if one has received them, why not return them? When one is in a financially strong position and survival does not depend on income from criminal activity, why not refuse to undertake that activity. No one can involve another in a criminal activity if the participants do not wish for any monetary benefits. Hence, to enjoy the benefits of life, say no to crime and unethical activities.

References:

Routine activity theory – Crime Prevention Division – By Cohen and Folsen

 

Satyagraha For Freedom From Corruption

Gandhi ji, in his book “History of Satyagraha in South Africa” narrates the coinage of the term Satyagraha and the journey of the movement. It is an amazing story of sacrifice, determination, and moral courage. Hence, I wondered whether we can use the concept to fight corruption in this century.

The irony is that Gandhi ji started the Satygraha movement in South Africa because Europeans passed unfavourable laws for Indians. They were scared of Indian traders and professionals taking a huge slice of the business, hence passed laws to restrict their liberty to live and trade freely. Greed was at the crux of it since there were plenty of natural resources in South Africa for Europeans, Blacks, and Indians. Now India is being destroyed by the greed of its leaders and public.

Gandhi ji’s story stands in stark contrast to the Anna Hazare led fight against corruption. Hazare’s was packaged as Gandhian inspired struggle but as results showed it was far from it. Hazare took the stance of my way and high way on the Lokpal Bill, whereas Gandhi ji believed in negotiation. Moreover, Hazare’s was a publicity driven exercise of a few fasts and he quickly distanced himself from it when he faced failure. Another aspect was that though thousands turned up in support at the initial stage, no one made use of that energy constructively and directed people to do something more than shout slogans on the streets. Hence, the euphoria disappeared after a short while, as the educated middle class needed an action plan to maintain their commitment.

It brings back to our understanding of Satyagraha. We generally confuse it with “passive resistance” and it was the same situation when Gandhi ji developed the concept a century back. Below are few points from the book:

1)      Satyagraha

Gandhi ji considered Satyagraha as a soul-force. The Satyagrahies never used physical force even when they had the capability for it. In Gandhi ji’s word – “Satyagraha is soul-force pure and simple, and whenever and to whatever extent there is room for the use of arms or physical force or brute force, there and to that extent is there so much less possibility for soul-force. These are purely antagonistic forces in my view, and I had full realization of this antagonism even at the time of the advent of Satyagraha

2)     Passive resistance

The term “passive resistance” originated in Europe as a weapon of the weak. It was generally used when other options of fighting were not available. It was a method used by people without voting rights, or lacking public support. The people were not averse to using arms for attaining their goals. But they did not go for it because they didn’t think they would succeed with it. Hence, passive resistance was more of a strategic manoeuvre than commitment to non-violence.

3)    Difference between the two

Gandhi ji described the fundamental difference in the concepts in the following paragraphs -

 “The power of suggestion is such that a man at last becomes what he believes himself to be. If we continue to believe ourselves and let others believe that we are weak and therefore offer passive resistance, our resistance will never make us strong, and at the earliest opportunity we will give up passive resistance as a weapon of the weak.

 On the other hand if we are satyagrahis and offer satyagraha believing ourselves to be strong, two clear consequences result from it. Fostering the idea of strength, we grow stronger and stronger every day. With the increase in our strength, our satyagraha too becomes more effective and we would never be casting about for an opportunity to give it up.

 Again, there is no scope for love in passive resistance; on the other hand, not only has hatred no place in satyagraha, but it is a positive breach of its ruling principle. While in passive resistance there is a scope for the use of  arms when a suitable occasion arrives, in satyagraha physical force is forbidden even in the most favourable circumstances. Passive resistance is often looked upon as a preparation for the use of force while satyagraha can never be utilized as such. Passive resistance may be offered side by side with the use of arms. Satyagraha and brute force, being each a negation of the other, can never go together.

 Satyagraha may be offered to one’s nearest and dearest; passive resistance can never be offered to them unless of course they have ceased to be dear and become an object of hatred to us.

 In passive resistance there is always present an idea of harassing the other party and there is a simultaneous readiness to undergo any hardships entailed upon us by such activity; while in satyagraha there is not the remotest idea of injuring the opponent. Satyagraha postulates the conquest of the adversary by suffering in one’s own person.”

 4)    Freedom From Corruption

Considering the above definition of Satyagraha and the differences highlighted by Gandhi ji, I haven’t seen very many noteworthy cases of mass movement of Satyagraha. Hazare’s movement just entailed short-term sacrifice and not a long-term struggle. When the public disappeared so did he.

The Satyagrahies courted prison and lived a simple life to fight for their cause. Hence, the question is that do we lack commitment and determination for long-term struggle to root out wrong habits. Is it possible and realistic to expect people to make these sacrifices in the present age of instant gratification. Can we expect Indian public to take a vow not to take or give bribes and kickbacks? Will it be expecting too much from the citizens to sacrifice a few luxuries. Will the public stay committed to the cause or leave it when it gets bored, to participate in the next novel thing.

We need to seriously think of eradicating corruption on this Independence Day. India has come a long way in one century but the corruption is eroding its sheen and destroying the country from within. We must not forget the sacrifices a whole generation of Indians made to ensure that the next generations live with freedom. Let us pledge to keep our souls free of greed.

Wishing all Indians a Very Happy Independence Day.

References:

History of Satyagraha in South Africa by M.K. Gandhi 

Power With The Powerless

Might is Right?

Might is Right?

Durga Shakti Nagpal honoured the goddess she is named after. The 29-year-old IAS officer is in eye of the storm as she took on the sand mafia in Utter Pradesh. It was said the political party got benefits from the sand mafia. The Chief Minister Akhilesh Yadav suspended her on the grounds that she ordered demolition of a mosque wall. Her actions could have created riots.

The Muslim community hasn’t taken kindly for being used as an excuse. They have denied any such action and stood by Durga, stating that she is a great officer. Punjab State Deputy Chief Minister Sukhbir Badal has invited her to join back her own state. He said that Punjab state appreciates honest officers and the government will stand behind them.

So why has Akilesh Yadav’s carefully planned manoeuvre to show his political might fallen flat. It is because he still has old school ideas of power. He literally inherited power from his father, and though young is still using old tactics based on incorrect assumptions.

1.      Witch Hunting is Not an Acceptable Game

The ancient tactic of using a woman as a sacrificial goat to quiet everyone by creating fear and terror is no longer working. The number of Indian women crusading against corruption and crime is increasing manifold. Women are clearly saying they don’t get weak kneed by power and money. They hold ground and fight back from a higher moral standing. They show the powerful in their true character. The public nowadays doesn’t support witch-hunts and stands by strong women. The educated public is capable of identifying the true heroes and leaders.

2.      Attempts to Divide & Rule on Race & Religion Backfire

Using religion and race to divide people and rule isn’t an effective strategy anymore. With a black half-Christian-half-Muslim man as American President, and a white Italian Catholic woman as party president of Indian congress, the message is clear. Race, gender, age, and colour don’t matter in leadership positions. People follow the leader with the best ideas and capability. Belonging to a certain community may not get any followers now from the educated masses.

3.      Absolutely Impossible to Curb Public Opinion

Technology and globalization has put everyone on an equal footing. Previously a few could control public opinion as they had the contacts and money to influence media. However, social media has given a voice to the public. The general population forms its own opinion. It has also made the old media houses more honest as they lose circulation with carefully planted stories and politically motivated views. With social media, anything can go viral; there are no safe zones to hide dirty deeds. The transparency makes corrupt powerless.

4.      Autocracies are Dead

The changing perceptions of power have made old strategies useless. Earlier leaders could say my way or highway. Some said my way and my way, they wouldn’t even allow a person to take the highway. However, autocracy is no longer a popular leadership style. In the last decade, the number of countries with autocratic regimes has decreased and democratic governments have increased. Business and political leaders need to show democratic and consensus building styles. Surveys show that autocratic leaders – business and political – are losing their jobs at a higher rate than democratic leaders. Hence, a display of muscle power in public domain shows the leader in poor light. Using dictatorship styles will get the dictators in soup rather than the targets.

Closing Thoughts

Power has shifted to the powerless. With the changing society, technology, and economic order, one is likely to see new forms of political power structures in governments and organizations. We are at the threshold of a new era of power dynamics. From a risk management perspective, any risk mitigation policies developed based on old power structures are likely to fail. Hence, risk managers need to look at leadership strategies and related risks from a different lens.

Here is to new beginnings with power in the hands of the people. We can hope the 21st century will bring glory to the masses. Finally, each person can say that wish to live their life on their own terms. I am dedicating to my readers one of my favorite songs – My Way by Frank Sinatra. It beautifully conveys the message.

India’s Failures In Disaster Management

Floods in North India have left over 70,000 people stranded and 550 dead. Loss to property will run in billions. The on-going rescue efforts are yielding results but very slowly.  The uncoordinated recovery response and efforts indicate lack of disaster management capabilities of the state.

India as a country does not have a properly implemented disaster management system. The Comptroller and Auditor General of India recent report - “Performance Audit Report on Disaster Management of India” highlights glaring deficiencies. Below are some of the key observations from the report. It is sufficient to make Indian citizens sleepless at night.

1.      An Introduction

India with its geo-climatic conditions, high density of population, socio-economic disparities,  politics and troubled relationship with neighboring countries, has high risk of natural and man-made disasters. In respect to natural disasters, it is vulnerable to forest fires, floods, droughts, earthquakes, tsunamis and cyclones. Man-made disaster risks are (1)war, bombing, terrorist attacks, and riots, (2) chemical, biological, radiological, and nuclear crises, (3) hijacks, train accidents, airplane crashes and shipwrecks, etc.

Government passed the Disaster Management (DM) Act in 2005. According to the act, National Disaster Management Authority (NDMA) was formed under the Prime Minister and the National Executive Committee (NEC) developed National Policy of Disaster Management, which was approved in 2009.

2.      Failure in Formation of Disaster Recovery Plan

Until mid-2012, the National Executive Committee (NEC) had not prepared India’s National Plan for Disaster Management. Surprisingly, though India has faced a major disaster each year since development of DM Act, NEC has not met after May 2008. The Working Group it formed in 2007 never met after that.

Then the buck was passed to Ministry of Home Affairs (MHA) to prepare a National Response Plan (NRP). It directed National Institute of Disaster Management (NIDM) to prepare the NRP. NIDM submitted a draft plan in April 2012, which was circulated by MHA to other departments.

The other two components of the National Plan for Disaster Management are National Mitigation Plan and National Capacity Building Plan. While the latter is still under preparation, some departments have submitted the mitigation plans.

Things are equally bad at State level. Just 14 states have submitted their State Disaster Management Plan.  The lackadaisical attitude shows government’s complete disregard towards national and human safety.

3.      Performance of National Disaster Management Authority

The CAG report states that – “So far, no major project taken by NDMA has seen completion. It was noticed that NDMA selected projects without proper groundwork, and as a result either the projects were abundant midway or were incomplete after a considerable period of time.”

The projects included earthquake vulnerability risk assessment, micro zonation of major cities, landslide risk assessment, national flood risk mitigation, national school safety program, mobile radiation detection system, national disaster communication system, etc. The natures of the projects indicate their criticality and importance for disaster management. Even the hazard maps for earthquakes, landslides, cyclone, tsunami and floods are incomplete or unavailable. Without these maps, the government is not even in a position to identify the high-risk areas.

The main reasons for delays in disaster management project planning are lack of committed groups, failure in communicating and coordinating with various ministries, shortage of staff and insufficient knowledge and expertise in these fields. Though funds were approved and allocated for various phases, things just haven’t got beyond conceptualization stage.

4.      Mis-utilization of Funds

Government constituted National Disaster Response Fund and State Disaster Response Fund to deal with the disasters. The government approved Rs 33,580.93 crores for State Disaster Response Funds for a period of five years – 2010-2015. The report indicates that Ministry of Home Affairs is not receiving appropriate information from states on utilization of funds. Audit findings reveal that some states have misutilized funds for expenditures that were not sanctioned for disaster management. There was in a few cases significant delay in releasing funds. Additionally, some States didn’t invest the funds thereby incurring huge interest losses. This shows financial indiscipline in states management of funds.

Secondly, a separate National Disaster Mitigation Fund was to be constituted for reconstruction and restoration activities after the disaster. However, this has not been done till date. The States were required to form State Disaster Mitigation Fund and District Disaster Mitigation Fund. Quite a few states haven’t created the funds. Uttarakhand, the state reeling from floods, has just a State Disaster Mitigation Fund.

The situation is so bad, that the National Disaster Response Reserve of Rs 250 crores to buy relief material (blankets, tents, etc.) was not operational until audit time.

5.      Disaster Management Communication

Department of Space commenced a Disaster Management Support programme in March 2003. The main seven projects started between 2003 to 2007 are incomplete till 2012. These are namely – National Disaster Management Informatics System, National Disaster Communication Network, Doppler Weather Radars, Satellite Based Network for Disaster Communication, Disaster Management Synthetic Aperture Radar, Airborne laser Terrain Mapping and Digital camera System and National Disaster for Emergency Management. Presently, if a disaster strikes and regular communication networks go down, there are no contingency methods available for communication to a disaster-hit area.

6.      National Disaster Response Force (NDRF)

Ten Central Armed Police Forces battalions were formed of 1149 posts each. 27% of the posts were vacant in May 2012. The NDRF personnel don’t have sufficient training, facilities, equipment, and residential accommodation. With these constraints, it is difficult to imagine that they can effectively manage disasters.

Till recently, they didn’t even have deployment guidelines. In a few instances, they were deployed during elections. In one instance, they reached the disaster site without food, water, or tents for themselves. The local authorities had to give the same.

Up to June 2012, just seven states have constituted State Disaster Response Force. Even the local Regional Response Centres are ill equipped.

The impact can be seen at the local fire services level also. As per the Thirteenth Finance Commission, deficiencies in fire services are alarming. 97.54% of the country doesn’t have fire stations, 96.28% doesn’t have fire-fighting personnel, and 80.04% doesn’t have fire fighting and rescue vehicles. Shortage of trained manpower, vehicles, and equipment plague the existing fire service centers.

Locally, the states do have not mobile hospitals and trained trauma management doctors. There are no real medical facilities available for Chemical, Biological, Radiological and Nuclear disasters at national level. This is seriously a pathetic state of affairs. Government bodies are showing no concern for human life.

Closing Thoughts

After reading the report, I realized that Indians have just one option at present – pray to God that disaster doesn’t strike in their region. The governments at national, state and district levels have shown a negligent attitude towards disaster management. This is a classic case – funds are available but nothing has been done to implement the plan. Indian citizens can check with the local politicians and government bodies to assess the level of preparedness for disaster management. If required, local bodies can be formed in different constituencies and societies to act as disaster management task force. As it is a question of citizen safety, public activism will help in developing adequate disaster management capabilities.

References:

CAG Report – Performance Audit Report on Disaster Management of India

 

Missing Men of Honor

royal disgrace

The Story of Disgrace

A wave of shame and disgrace washed over Indian Premier League’s (IPL) Rajasthan Royals team. Three players of the team – S Sreesanth, Ajit Chandila and Ankeet Chavan – were identified as part of the spot fixing racket. Eleven bookies were involved. Investigators have found some evidence connecting it to underworld don Dawood Ibrahim.

As per police disclosure Chavan was paid Rs.60 lakhs by the bookies, Sreesanth and Chandila got Rs.40 lakhs each. By the number of matches they have played they would have earned a few crores each. The bookies lured the players by throwing parties and providing female escorts.

It is shocking that players with such international repute and excellent career opportunities would take a criminal route to earn money. One wonders what they were thinking. Were they joyously throwing up their hands in the air and dancing with happiness. Did they think that for a few millions they would be breaking the hearts, trust and expectations of billions of people, starting with their family?

It is reported that Rahul Dravid, the captain of the team suspected something. He made Sreesanth sit a couple of matches and the team managers asked him to leave the team. How painful it must have been for Dravid, a man reputed for gentlemanly conduct.

This isn’t the first time followers hearts have been broken by their idols. It started with the political leaders. Now the cancer has spread through all facets of life. Indian politicians – Gandhi, Nehru, and Azad – were known for their impeccable behavior  Congress leaders fought for Indian independence. They spent years behind bars to fight for a cause. Now Indian politicians spend time behind bars for corruption and fraud. Instead of feeling shame or humiliation, they get back into public life with renewed vigor to mislead people and make money.  Over 30% of Indian politicians have a criminal track record.

The new breed, who have joined the infamous bandwagon are senior managers of Indian corporates. After Satyam and 2G telecom scam, their names appear frequently for being interrogated by CBI and spending time in jails.

Valuing Honor in Our Lives

So where has honor disappeared? Previously, the mark of distinction for a man was when people referred to him as – “he is an honorable man”.  Having a dishonorable reputation was disastrous socially and professionally. Now, honorable men among leaders can be counted on figure tips.

As a world civilization, we need honor back in our bloodstream. Without it, humanity will reach new levels of depravity. We require men and women to work dedicatedly to get it back for the sake of next generation, though it is a challenging task.

The cynics will say it is a pipe dream and point out various flaws. The idealists look at the times gone by and wish the same could somehow come back. The practical breed has learnt to work like an automaton to earn a living and look at nothing else.

So where do we get our heroes who will change the world for us?  The heroes have to pay a price. Lincoln, Gandhi and King – were all assassinated because they dared to bring about change. From the first step to the end of their journey they made personal sacrifices. They repeatedly saw failures, their hearts sank with despair and somehow they gathered their strength to walk on thorns again.

In the present world, who would wish to trade the high life, luxuries and comforts for a life full of dynamite?

But unless we do so, we are bestowing the next generation a dangerous life.

So our choice is between our generation and the next. Do we want to look that far ahead?

Closing Thoughts  

When we talk about change, our hackles rise. Even when it is obvious that we should change, we don’t want to. That is a human failing which 100% of us have. Our best excuse is that we can’t change the world, who would listen to us, how can all the people change? But if we study change, we just need 10% of the people to believe in our cause. That is, we need to influence just 1 in 10 people in our life. That doesn’t sound very difficult; all of us are capable of doing it. So why not give it a shot, and bring honor back in our lives. I leave you with words of Dorothy L. Sayers from Gaudy Night:

“If it ever occurs to people to value the honor of the mind equally with the honor of the body, we shall get a social revolution of a quite unparalleled sort.”

References:

IPL match fixing 

Human Rights Risk Management Process

Bangladesh Building Collapse

The fire in a nine-story factory building in Bangladesh killed 400 people. More than 600 people remain unaccounted for. It housed five garment factories that supplied to international brands – J.C. Penny, The Children’s Place, Dress Barn, Primark, Wal-Mart etc. The workers were asked to come to work even when cracks appeared in the building the previous day.

Bangladesh is the second largest exporter of clothes and the workers get the lowest compensations. Just around USD 37-40 per month. The question arises why are the multinational organizations not following the UN Guiding Principles for Human Rights protection. The reason is simple; they want to show higher and higher profits to the investors.

In Delhi, in Munirka one will find numerous small factories full of workers making export garments. A friend of mine also ran one. I had bought a few shirts from her at cost price ranging from Rs 300-500 (USD 6-10). In one international visit, I found the same shirts selling in range of USD 15-30. The fivefold increase in price was because of the brand tag attached to the shirt.

The multinational buyers push the prices down and some supplier gives a rock bottom price. The others are forced to match that price to get the business. End result is that basic facilities are not provided to the workers and they work at really low wages. Unknown workers are paying with their lives in developing countries to satisfy the growth targets set by CEOs to earn their bonuses and keep investors happy.  It is the dark side of capitalism which organizations want to hide.

In most companies, human rights risk management is not a focus area. The 2013 Global Risk Management Survey conducted by RIMS identified seven risks related to human resources among the top fifty risks. Though worker injury and harassment were included there was no specific emphasis on human rights risk management.

The risk management team can conduct annually or bi-annually a human rights risk management assessment. It requires attention not only from human resources perspective but from operational, financial, legal and reputational risks perspective. Any breach can result in huge losses.

Here are some of the steps mentioned in the UN Guiding Principles on Human Rights and guide “Investing the Right Way” issued by Institute of Human Rights and Business.

1.     Review the Human Rights Policy Statement

Human rights risk management is emerging as an important issue, especially with multinationals entering emerging markets and developing countries. They are expected to protect and respect rights of workers, communities and society. Investors can play a crucial role by influencing companies to promote human rights relating to gender equality, child labor, rights of indigenous people, land acquisition, mineral processing etc.

Hence, companies need to publish Human Rights Policy Statement on their websites. The UN Guiding Principle 16 states –

 “As the basis for embedding their responsibility to respect human rights, business enterprises should express their commitment to meet this responsibility through a statement of policy that:

(a) Is approved at the most senior level of the business enterprise;

(b) Is informed by relevant internal and/or external expertise;

(c) Stipulates the enterprise’s human rights expectations of personnel, business partners and other parties directly linked to its operations, products or services;

(d) Is publicly available and communicated internally and externally to all personnel, business partners and other relevant parties;

(e) Is reflected in operational policies and procedures necessary to embed it throughout the business enterprise.”

As a first step risk managers need to check whether the organization has a human rights policy statement and the above mentioned steps have been adhered to.

2.     Human Rights Impact Assessment

The second aspect of UN Guiding Principles is for companies to establish human rights due diligence processes. Guiding Principle 17 states:

 “In order to identify, prevent, mitigate and account for how they address their adverse human rights impacts, business enterprises should carry out human rights due diligence. The process should include assessing actual and potential human rights impacts, integrating and acting upon the findings, tracking responses, and communicating how impacts are addressed. Human rights due diligence:

(a) Should cover adverse human rights impacts that the business enterprise may cause or contribute to through its own activities, or which may be directly linked to its operations, products or services by its business relationships;

(b) Will vary in complexity with the size of the business enterprise, the risk of severe human rights impacts, and the nature and context of its operations;

(c) Should be on going, recognizing that the human rights risks may change over time as the business enterprise’s operations and operating context evolves.”

Human rights risk management is complex and challenging. If ignored, they can increase political risks and deteriorate relationships of the organization with the government. For example, Tata Motors wished to establish Nano manufacturing plant in Singur, West Bengal. The government allocated agriculture land using 1894 land acquisition rule, meant for public improvement projects, to take over 997 acres farmland. The farmers protested with help of activists and the then opposition leader Mamta Banerjee. Tata Motors moved out of West Bengal and established the factory in Gujarat. Multinationals looking for large tracts of land to establish factories are facing similar challenges in India.

Another aspect to look into is that scrap, waste disposal, sewage, environment pollution etc. from factories can impact food, water and health of local communities.

Decision needs to be taken whether investments should be made in countries or states with poor human rights record. In India, the Naxalite area is extremely conflict prone and business operations can have severe human rights impact.

Risk managers should evaluate the strategy and operations of the company from human rights, environmental, social and governance factors. The companies can face operational risks (project delays or cancellation), legal and regulatory risks (lawsuits and fines) and reputational risks (negative press coverage and brand damage). The impact assessment should be done from investors, customers, employees, society and supplier perspective. Identify business owners for the risks and devise appropriate risk mitigation plans to address adverse impact.

3.   Grievance Mechanisms

UN Guiding Principles state that victims of corporate related human rights abuse should have access to judicial or non-judicial remedies. Companies should provide some remedies themselves and cooperate in the remediation process.

UN Guiding Principle 29 states –

“To make it possible for grievances to be addressed early and remediated directly, business enterprises should establish or participate in effective operational-level grievance mechanisms for individuals and communities who may be adversely impacted.”

However, this isn’t followed by the companies in true spirit. “A Vigieo analysis of human rights records of 1500 companies listed in North America, Europe and Asia revealed that, in the previous three years, almost one in five had faced at least one allegation that it had abused or failed to respect human rights.”

Ideally the investors in the company should ensure that grievance mechanisms exist and address human rights issues. The transparency and disclosure of the same in annual reports would highlight the financial, legal and reputational risks. However, the investors don’t seem to be bothered by it.

See the case of Apple. It reported  Gross Profit Margin – 42.5%, Net Profit Margin – 26.7%, Revenue Per Employee – $ 2,149,835 and Net Revenue Per Employee – $ 573,255. It has 43000 employees in US and 20,000 outside US. However, Apple contractors hire an additional 700,000 people to engineer, build and assemble iPads, iPhones and Apple’s other products.

An Apple supplier in Taiwan, Foxconn was recently in the news for its workers attempting suicide. As per reportsWorkers are required to stand at fast-moving assembly lines for eight hours without a break and without talking. Workers, sharing sleeping accommodations with nine other workmates, often do not know each other’s names. They do not have much time to get to know each other. The basic starting pay of 900 RMB($130) a month – barely enough to live on – can be augmented to a more respectable 2,000RMB ($295) only by working 30 hours overtime a week.”

See the difference the company earns per employee and the payment made to the supplier’s employees. Apple shows profits at the expense of lives of Taiwanese workers.  The workers don’t have much of a grievance mechanism in China as the government stated that the suicides are within the normal suicide rate. Can Apple investors sacrifice some profit margin for safety and security of the contractual workers?

Another old example is the class action suit since 2001 on Wal-Mart Stores that involved 1.5 million current and former Wal-Mart female employees. It is the largest workplace bias case in US history.

 4.    Human Rights Reporting

 The biggest challenge is that most of the human rights abuses are not reported. The victims of human rights exploitation hold little power in comparison to the exploiters. They can hardly take up the might of powerful businesses when they are struggling to get basic food and shelter. Secondly, in the developing and emerging countries, corruption levels are generally high. Hence, media, law enforcement agencies etc. are bribed by the power players to silence the victims. However, with internet and social media, things are gradually changing. People have a voice and collectively they can fight.

UN Guiding Principle 21 lays out the requirement for companies to communicate human rights impact externally. It states -

 “In order to account for how they address their human rights impacts, business enterprises should be prepared to communicate this externally, particularly when concerns are raised by or on behalf of affected stakeholders. Business enterprises whose operations or operating contexts pose risks of severe human rights impacts should report formally on how they address them. In all instances, communications should:

(a) Be of a form and frequency that reflect an enterprise’s human rights impacts and that are accessible to its intended audiences;

(b) Provide information that is sufficient to evaluate the adequacy of an enterprise’s response to the particular human rights impact involved;

(c) In turn not pose risks to affected stakeholders, personnel or to legitimate requirements of commercial confidentiality.”

 As per the UN principles, the reports must cover appropriate qualitative and quantitative indicators, feedback from internal and external sources including affected stakeholders.

Risk managers can evaluate the reports and the reporting process to ensure that all risks are properly addressed. They should evaluate whether cautionary steps are taken and nothing is being done to exacerbate the situation. They should highlight severe or irreversible risks to the management to ensure appropriate decisions are taken.

Closing Thoughts

 Inequalities in income are the main cause of human rights abuse. The rich want to get richer at the expense of blood and sweat of the poor, and sometimes life. The diamond manufacturers and sellers took the right step to publish that they do not source blood diamonds. Since 2003, the Kimberley Process Certification Scheme (KPCS), supported by national and international legislation, has sought to certify the legitimate origin of uncut diamonds. Trade organizations – International Diamond Manufacturers Association (IDMA) and the World Federation of Diamond Bourses (WFDB) – representing virtually all significant processors and traders – have established a regimen of self-regulation.

Other industries, be it technology, electronics or textile manufacturers,  need to come out with similar steps to stop human rights abuse. The risk managers have a vital role to play in it. If we do not do anything, we are cheating this and the next generation of their right to live happily.

References:

  1.  Investing the Right Way – A Guide for Investors on Business and Human Rights – By Institute of Human Rights and Business
  2. Singur farmland-  Tata Motors conflict
  3. Apple financial ratios
  4. Foxconn Case Study
  5. Diamond industry sales clauses
  6. 2013 RIMS Global Risk Management Survey

 

Two Ethics Questions to Mr David Cameron

David Cameron recently visited India with a huge trade delegation to improve the bilateral relationships. Of course, with India’s growing power, world’s senior politicians and business heads are now coming to India every week. However, what made Mr Cameron’s visit remarkable were his two comments he made in respect to British colonial rule.

Though I generally keep away from commenting on political aspects, the hypocritical stance was just too amazing to ignore. Indians sometimes see this behaviour from whites in India. For instance, a British man recently said to me – “All Indians are slaves, we British are superior.” I have no idea on superiority or inferiority of any human race but Indians are definitely not slaves. Obviously, the deluded old chap lived in a different world. Point to note is, Roman traders introduced the concept of slaves to India, and Mughal rulers practiced slavery in India for the first time.

The British rule was an attempt of minority ruling the majority. That is only possible by fear and terror. While Indian rulers believed in servant leadership. British ruled the population in a significantly inhumane autocratic leadership style that Indians did not have much experience in dealing. That resulted in quite a few atrocities and it brings me back to Mr Cameron’s comments.

1.      Jallianwala Bagh Massacre

david cameronDavid Cameron, the British Prime Minister, visited Amritsar’s Jallianwala Bagh and laid a wreath at the memorial. Cameron considered the massacre “deeply shameful event in British history” but did not apologise for it. Before this, Queen Elizabeth had paid a visit to the same memorial in 1997 and laid a wreath. One is not sure what the British leaders are attempting to convey by these gestures.

Here is the historical perspective. On April 13, 1919, British troops opened fire on unarmed civilians, including women and children who were celebrating the Sikh festival Baisakhi at Jallianwala Bagh. The British estimated 379 dead and approximately 1100 wounded. Indian National Congress estimated 1000 dead and 1500 wounded.

The order was given by Brigadier-General Reginald E.H. Dyer. He was forced to retire from army, however was celebrated as a British hero. His actions were so twisted that when an Englishwoman, Miss Marcella Sherwood reported she had been molested on the streets of Amritsar, he issued an order requiring all Indians (men) using that street to crawl its length on their hands and knees. General Dyer said that – “Some Indians crawl face downwards in front of their gods. I wanted them to know that a British woman is as sacred as a Hindu god and therefore they have to crawl in front of her, too.” He was never punished for any of his actions nor was tried in court.

Under British rule, Indians suffered numerous inhumane acts. From the present day British leaders’ perspective, I would say that they cannot undo the past. Indians definitely are not waiting for an apology. However, using the gesture for political mileage, most probably to get Indian votes in Britain in the next election is a little bit too much to swallow.

The other aspects I find hypocritical are the double standards maintained. When Germans killed Jews, it was an inhumane act – “crime against humanity”. The Nazis were tried in Numerban trial and hanged for their war crimes during Second World War. Even until date, a list is maintained of the missing Nazi’s. American President Mr Franklin D. Roosevelt  and British Prime Minister Mr Winston Churchill, both were involved in the decision.

I absolutely agree that Hitler’s rule was atrocious. I have one observation – If atrocities are done on Americans and British it is a crime against humanity. If they do atrocities on people of other countries, then those people do not even deserve an apology.

How does one justify this stance on ethical standards?

2.      The Kohinoor Diamond

India requested David Cameron to return its Kohinoor Diamond and he responded“I certainly don’t believe in ‘returnism’, as it were. I don’t think that’s sensible.”

Kohinoor diamond was discovered in Karnataka mines and the first mention is in 13th century. It is one of the most well known diamonds in the world. Presently, it is set the in the British crown of Queen Elizabeth and is displayed in Tower of London.

The British acquired the diamond from India in 1850. Raja Ranjit Singh of Punjab owned the diamond and in his will bestowed it to Jagannath Puri temple. However, on his death in 1839 British administrators did not execute his will. In March 1849, British formally proclaimed Punjab as part of British Empire in India.  In terms of the treaty they mentioned that the “gem shall be surrendered to Queen of England”.  Lord Dalhousie treated it as spoil of war. He made the 13-year-old conquered prince Dulip Singh, to travel to England to present the diamond to the Queen.

India was a rich country when British arrived in the 17-century AD. They took away precious jewels from the kingdoms they captured. Most of them cannot be directly identified; however, Kohinoor is part of Indian heritage.

My question is – Is it ethical for a country to keep other countries national treasures? What if the roles were reversed? What would the world expect from India then?

Closing Thoughts

India is catching up with the developed countries and now ranks 9th in the world in respect to Gross Domestic Product. Indians are confident of doing better in the 21st century. Hence, they are not looking for rehashing history, as it can never be changed. Indian religions teach forgiveness as the greatest virtue. However, it does not mean Indians have forgotten the past and are gullible enough to be taken for a ride. Now as more world leaders visit India to take advantage of the large consumer market, they need to do far better. A new world order is establishing and India is in a position to choose the best partners.

References:

Does Change Obstruct Ethics?

The media regularly reports that organizations are paying huge fines for ethical breaches. Politicians, defence officers and CEOs are getting exposed in illicit sexual relationships. It appears that present day leaders don’t feel obligated to show professional and personal ethics. One is forced to contemplate did the world always lack ethical discipline? Alternatively, is it that the volatile and dynamic business and political environment has contributed to the decline in ethical values?

In my view, history has shown that during times of massive change in social and political environment ethical values fall. As the environment stabilizes, ethical behaviour increases. I will give you the reason why I think so. Before that let me share with you this beautiful verse from “The Lines of Experience” written by Je Tsongkhapa over 2000 years back.

Ethical discipline is the water to cleanse the stains of wrongdoing,

And the moonlight to cool the painful heat of the kleshas (disturbing/ angry thoughts),

It makes you stand out from the crowd like a great mountain.

By its force, you can tame all beings without intimidation.

Knowing this, great beings guard like their very eyes

The ethical discipline to which they are committed.

I, the yogi, have practised in this way.

You, who aspire to liberation, do the same!

1. Income Inequality

In the present day, corruption levels are so high that a person who stands up for ethics is considered an idealistic fool. Whistle blowers face high level of retaliation and social isolation. Instead of society valuing an ethical person, it stigmatizes the person. However, if you notice carefully, the corruption scams are bigger in the emerging markets than the developed world. Transparency International Corruption Index shows increasing corruption trend in the emerging countries and decreasing trend in the developed world. In the last decade, population of the emerging countries suddenly enjoyed a better standard of living of which they were deprived of earlier. Hence, the changing business environment has inclined them to pursue financial goals at the expense of everything else.

2. Gender Inequality

Look at the impact of change from another lens. Worldwide women are facing higher levels of physical and psychological violence from men. A recent survey showed that working women face twice the level of abuse than housewives. Why is that so? Reason being that working women are challenging the male domination and supremacy established for centuries. Previously, women were doing as they were told and the housewives are still doing so. However, the working women are torchbearers for change and demanding equality. Hence, they are paying the price. The bias is so clear. Half the world population consists of women and the organizations call hiring women a “gender diversity” initiative.

3. Social Inequality

If you look at racial, social and political equality movements, the picture is the same. The Arab world reported increased violence during  revolutions. In India, the under privileged and lower caste people face dire situations and prosecutions for demanding equality. Even seeing the American history, whites increased violence against blacks after abolition of slavery. Hence, even when the conflict is initially non-violent, violence increases when the existing world order is threatened. Those holding beneficial positions in the old order get combative to continue the status quo and compromise human rights. Corporate sector reflects the same problems. White males ruled the business world. Now women and men of different racial communities are challenging their established supremacy. Can we really expect competitive business leaders to give up a superior position without a fight for the goodness of humanity?

In all the three examples, I have highlighted the compromise of human values when social changes occur. Presently, the world population is facing change at all levels. Global economy is in recession, China is threatening US supremacy, emerging markets will become economic leaders, people revolutions has shaken autocratic rules in many countries, technology has connected the global population and women are taking important roles in society. With the political, social and economic dynamics changing the world, can we really expect higher level of ethical behavior in this decade?

Closing thoughts

Change brings conflict. Unfortunately, human psychology is such that a person holding a different opinion, from a mere opponent becomes a tough adversary to enemy number one whenever our self-interest is threatened. Hence, in this dynamic environment expecting high level of ethics from business leaders is somewhat unrealistic. We tend to isolate business and expect organizations to have higher level of ethical disciple than the society around them. When business is a subset of society, how can business leaders portray values different from society.

Until the new world order establishes, ethics and principles would be put on a back-burner.   This viewpoint is definitely not what the regulators wish to hear. What do you think?

Bharti Walmart India – Internal FCPA Investigation – Part II

The previous post raised more questions than gave answers. In light of the on-going investigation, it is difficult to predict results. However, I looked at the recently released FCPA Resource Guide to the U.S. Foreign Corrupt Practices Act by the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission. It sets some clear guidelines and mentions earlier cases with similar issues. It is a good read for Indian managers working in multinationals dealing with FCPA compliance requirements. I am sharing below some insights about the implications of the case.

1.      Liability of Indian Employees

As per reports, the CFO and the legal team were suspended during the course of the investigation. If the US Department of Justice decides to pursue a criminal case, these employees can be prosecuted.

Interestingly enough, the Indian managers consider their capability to bribe various government officials to get a job done as strength. One often hears them saying – “Oh, I have a contact; s/he will do the job for X amount of money. Don’t worry about the legal provisions, they can be circumvented.” Since one rarely hears any action being taken by regulators on the provisions of Prevention of Corruption Act of India, hardly anyone hesitates to take or accept a bribe.

However, Indian employees working in multinationals have to think twice about paying a bribe to get a job done. The FCPA guidelines are strict. It states – “The FCPA’s anti-bribery provisions can apply to conduct both inside and outside the United States. Issuers and domestic concerns—as well as their officers, directors, employees, agents, or stockholders—may be prosecuted for using the U.S. mails or any means or instrumentality of interstate commerce in furtherance of a corrupt payment to a foreign official.” Hence, even sending mails to US boss or colleague that involves a discussion of a bribe payment can make an Indian employee liable. Considering the provisions, the best policy for Indian employees is to keep their hands clean and follow the legal process diligently.

Another aspect to note is that a bribe does not need to be paid to hold an employee liable. The guidance note says – “Also, as long as the offer, promise, authorization, or payment is made corruptly, the actor need not know the identity of the recipient; the attempt is sufficient. Thus, an executive who authorizes others to pay “whoever you need to” in a foreign government to obtain a contract has violated the FCPA—even if no bribe is ultimately offered or paid.” Hence, Indian management and employees both can be prosecuted on this basis.

2.      Challenges for Licenses

With the opening of the retail sector, multinationals need to obtain various licenses to operate in India. The challenge is getting the licenses according to their business strategy and plan.

For instance, IKEA recently obtained from Foreign Investment Promotion Board (FIPB) to invest euros 1.5 billion to open 25 stores in India. However, IKEA was granted permission to open single brand stores for furniture only. It was denied permission to sell textiles, office supplies, food and drinks.

Now the question is, under these circumstances what options will the foreign investor consider? Will they agree to sell products according to permission? The permissions maybe denied for the most profitable lines of products. It may not make sense to sell products with low margins. Hence, they will have the difficult choice of either not entering the Indian market or attempt to influence the government agencies to grant permissions for selling other products. If the second option is chosen, there is a high probability of bribes being paid. More so, since Indian government officials know what will hurt the business venture of the foreign company, they might use denial tactics to coerce the organization into paying bribes. Hence, it is a vicious circle.

A LinkedIn member gave a useful suggestion to curb bribes in the licensing process. Rangarajan Gopalan, Investigator US Department of Homeland Securities in New Delhi,  suggested a single window concept for obtaining licenses in retail industry. If government implements the suggestion, the retail companies will not have to run around 32 different agencies to get licenses.

3.      Partner Liabilities  

In the event of the holding-subsidiary relationship or joint venture partnership, the Indian company can be charged jointly and/or separately.

The guidance note illustrated the implications with a previous case. For instance, “a four-company joint venture used two agents—a British lawyer and a Japanese trading company—to bribe Nigerian government officials in order to win a series of liquefied natural gas construction projects. Together, the four multi-national corporations and the Japanese trading company paid a combined $1.7 billion in civil and criminal sanctions for their decade-long bribery scheme. In addition, the subsidiary of one of the companies pleaded guilty and a number of individuals, including the British lawyer and the former CEO of one of the companies’ subsidiaries, received significant prison terms.”

Hence, if the US company is ignorant of the bribes being paid by Indian employees to conduct business, the Indian employees can face criminal charges and the Indian organization may have to pay hefty fines.

Closing Thoughts

The Indian organizations need to assess their FCPA compliance level and not take the issue lightly. The repercussions of ignoring the issue are huge. The legal and reputation risks can put the company to a great disadvantage. Moreover, the employees must follow the legal process rather than find ways to circumvent it.

 References: 

  1. FCPA Resource Guide to the U.S. Foreign Corrupt Practices Act by the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission.
  2. FIPB clears IKEA retail store plan