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India Inc ready for business under Lokpal watch-Lubna Kably & Namrata Singh
-The Times of India


MUMBAI: After Parliament's assent to the Lokpal Bill, India Inc has engaged legal eagles and consultants to examine its ramifications. At first glance, it appears that nothing much changes for the corporate sector, which is governed by anti-corruption legislations such as the Indian Penal Code or The Prevention of Corruption Act. Besides, as business is now global, anti-corruption laws of other countries also apply.

Yet, with the bill a step away from becoming a law after the President gives his assent, companies feel there is a need to strengthen their anti-corruption mechanisms.

"Lokpal is a platform to receive complaints, initiate independent investigation and thus it gives greater teeth for prosecution under the Prevention of Corruption Act or other applicable Acts. Speedier investigations are expected to take place because of Lokpal's independence and superintendence over the investigation agency. Further, whistleblowers who are shy of approaching internal company channels now have an independent body to approach," explains Darshan Patel, executive director of PwC's forensic services practice.

The ambit of Lokpal is wide and it covers not just employees but also board of directors. "This wide ambit, plus other transparency measures require companies to take a relook at their existing mechanisms and ensure that their ethics compliance framework is updated to absorb this new law," says Sharad Abhyankar, partner at law firm Khaitan & Co.

In certain circumstances, consultants are advocating that a company set up a separate specialized anti-corruption compliance team. "Companies operating in sectors where interactions with government officials are significant - such as defence, mining, oil & gas, power, pharma, real estate, infrastructure - and also large conglomerates could benefit by setting up a specialized team," says Dinesh Anand, Forensic Services Practice Leader, PwC.

Most companies have comprehensive ethics policies in place and mechanisms under which employees can report any violation on which action can be taken. At Maruti Suzuki India, all decisions are taken through a 'ringi' system or multi-layer approval process to ensure complete transparency. Checks and balances are built into this system, according to S Y Siddiqui, COO, administration, Maruti Suzuki.

Maruti Suzuki considers corruption as a risk factor. "We will make a mitigation plan to study whether any new initiatives, training and investments may be required. This plan will be reviewed by the top management," said Siddiqui.

"Companies should focus on escalation in IT-enabled resource allocation to mitigate acts of corruption and undertake training sessions across all levels to create awareness about the company's anti-corruption policies. Companies need to cover solid ground on the communication front," says Shailesh Haribhakti, chairperson, DH Consultants.

While the top leadership's commitment to zero-tolerance to bribery and corruption is of paramount important, proper policies and procedures mitigate the risks of even a stray incident, which could have disastrous consequences on the company's reputation and penal consequences for the employees and directors.

"An anti-corruption compliance policy should have a broad coverage and include the entire workforce, including contract labour, temporary staff, agents representing the company, promoters and directors of the company and its subsidiaries," explains Abhyankar.

The policy should enlist the applicable laws and provide an inclusive list of restricted acts. These acts could include touch points of receiving or giving of bribes, gratifications, hospitality et al. Even contributions towards political activities or charitable causes should be permitted as per the prescribed policy, he adds.

"The whistle blowing mechanism is an integral part of an ethics and compliance framework in companies. Companies must have in place a system wherein employees and third parties can report violations, such as a whistleblower hotline," suggests, Patel

"We always had a system in place that ensures we get into partnerships and alliances with reputed parties only. Referrals play a part to a large extent; the reputation of the referee is at stake," said Arvind Agrawal, president, corporate development and HR, RPG Enterprises.

Spot audits where certain transactions come under the scanner without any prior intimation send a signal that the company is walking the talk. For instance, if a company is procuring a large contract, a spot audit could cover the entire process. Departments like sales, marketing, procurement and administration could be subject to such audits.

When it comes to an independent director's liability under the Lokpal bill, Haribhakti, who is an independent director on several boards, says: "Only in case of active misconduct on the part of independent directors, according to the Companies Act, can they be held responsible. However, independent directors should seek clarity on whether the company has in place a mechanism to prevent corruption."

So would a Lokpal eventually root out the bane of corruption? "There are two sides to a coin - on the positive side, the Lokpal Bill, when enacted, can stem corruption. Yet, this shouldn't lead to a decision paralysis. Only actual practice over time will indicate which way this is going," said Agrawal of RPG.