UN report suggests incentives to improve corporate integrity

 

Incentives such as compensation for a company for losing business due to its rivals' unfair business practices can be considered to improve corporate integrity in India, a UN report has suggested.

The report, titled "India: Incentives for Corporates Integrity in Accordance with United Nations Convention Against Corruption", suggested that the country must ensure better and more regulated commercial practices followed by sectors to better corporate integrity.

The practices include "mechanisms to claim compensation in case another organisation has claimed business through unfair means," it said.

The report, prepared on the basis of responses from 150 respondents belonging to both law enforcement departments and private sector, said that firms could also be given, while strictly enforcing sanctions for non-compliance, preferred access to business opportunities.

"National recognition )may be given) through greater financial access to finance institutions, such as positive investor perceptions, rebates and favourable commercial conditions and industry chamber membership," it said.

The report also suggested that India must create a mechanism to ensure that shareholders can see the financial reports of the firms and seek explanations of profit and loss.

India mandates listed entities to share their financial statements with the stock exchange. However, approximately only 1,652 companies are listed on the National Stock Exchange out of 835,860.

There is also a provision under the Companies Bill 2012 to share financial statements with the Registrar of Companies.

"Under both these provisions, it is not clear whether shareholders are allowed access to these documents," it said.

The report also said companies beyond a certain size and scale must mandatorily have an anti-corruption department and a whistle blowing mechanism with the coverage of accountability extended to one of the members of the board of directors.

With respect to conflict of interest as applicable to public officials, stipulations could be put in place that besides employment, no other forms of engagement can exist between former government officials and private sector without explicit permission from concerned department authorities or until two years from the last date of government service, it said.