Taking the bad boys out of biz

India had recently sought the expeditious extradition of business mogul Vijay Mallya and diamantaire Nirav Modi from the UK. The two economic offenders have been on the run from the law since 2016 and 2018, respectively, and had sought refuge in London after law enforcement authorities here had charged them with offences including money laundering, embezzlement, fraud, and corruption. They are part of India’s growing list of bad boy billionaires. There is jewellery tycoon Mehul Choksi, a prime suspect in the $1.8 bn fraud involving two employees of Punjab National Bank, who has since fled to the island nation of Antigua and Barbuda. Others like the Chairman of Sahara India Pariwar, Subrata Roy, ran afoul of SEBI and is yet to cough up to Rs 10,621 cr to meet its total liability. There is also Ramalinga Raju, former Chairman of Satyam Computers, an IT-industry darling during the 90s, which shut down in 2015, in the aftermath of Raju admitting to embezzling the firm of Rs 7,140 cr and resigning from its board in 2009. These instances are a reminder of systemic rot in the business landscape. Two years ago, EY conducted the Global Fraud Survey 2018, which said 40 pc respondents in India indicated widespread bribery and corruption in business. And 44 pc said practices including offering cash, personal gifts, as well as misrepresenting financial performance are acceptable for business survival. The notion of absolute power corrupting absolutely has been realised in the downfall of major corporations (such as Enron), or their frontmen like WeWork’s Adam Neumann (infamous for inculcating the company’s hard-drinking culture) and Nissan’s Carlos Ghosn (accused of embezzlement). These individuals offer examples that can help nations strengthen their policies vis-a-vis business practices. India has a precedent in Harshad Mehta, a stockbroker and point man of the 1992 securities scam, which caused a market crash, and wiping out Rs 1 lakh cr in market capitalisation. Following the scam, a major structural change was introduced through formation of NSE, which opened up the capital market nationally, as opposed to being limited to Mumbai. Post 1992, SEBI was formed to monitor the NSE and National Securities Depository. The RBI was also empowered in its roles in the financial market with monitoring the adequacy of banks. Last month, Union Minister of State for Personnel, Jitendra Singh said India was committed to the policy of zero tolerance against corruption and unaccounted money during the first ministerial meet of G-20 anticorruption working group. Singh referred to the Prevention of Corruption Act, 1988, amended after 30 years, which now includes provisions to deter bribes, by both individuals and corporate entities. More recently, the Fugitive Economic Offenders Act, 2018 empowers special courts (set up under the Prevention of Money Laundering Act, 2002) to confiscate properties and assets of economic offenders charged with offences entailing over Rs 100 cr and who evade prosecution by remaining in India. On the corporate front, there is room for improvement. A 2016 Deloitte study - How prepared is Corporate India to tackle fraud says while firms invested in tech, such as ERP platforms and data analytics tools to automate processes, over 50 per cent said they were yet to deploy this for fraud risk management measures, limiting themselves to business analysis for now. Going ahead, there’s no doubt better systems will be created, and regulatory practices will improve. However, the one lapse for which there is no immediate solution is integrity. After scams are unearthed, businessmen may promise to pay back their debts, but can one absolve them of participating in financial fraud and giving in to pressures from investors, government securities regulators, and exogenous market fluctuations? Character traits such as honesty, ethics, and accountability should lie at the heart of a responsible enterprise, and not retrofitted after the damage is done.