)
Warren Buffet openly supports the democrats and his largest contribution of $30,800 was to the Democratic National Committee in 2011. Exxon Mobil Chairman & CEO Rex Tillerson on the other hand gave the same amount to the National Republican Senatorial Committee as did John Watson - CEO of Chevron who donated $400 lesser. A host of American CEOs, both in their personal capacity and through their companies make campaign donations. Their political affiliations are not kept secret and many American companies for that matter have long histories of supporting political campaigns of a particular party.
India Inc. on the other hand wants to keep its political affiliations clandestine. According to reports,Confederation of Indian Industry (Read here) has written to the government suggesting that section 182(3) of the new Companies law, that calls for full disclosure, including naming parties that have been given money to, must be altered. CII believes private industry is apprehensive that full disclosure may lead to a backlash from parties that are 'less generously funded' in what one executive quoted by the Economic Times called 'a volatile democracy of ours'.
In an environment where corporate India's reputation has been sullied by allegations of crony capitalism, is this demand inappropriate, and damaging to the new zeal for reform? Does it show India Inc's diffidence and incapability to operate in a set-up that's devoid of political favors or quid pro quo? The dependence on secretive big money for election spending has rampantly led to policies that have not favored public interest as has been perceptibly demonstrated by the Niira Radia tapes and the coal allocation scam. By further promoting opacity, is there an effort to perpetuate this system?
A university of Pennsylvania study suggests it might not entirely be India Inc's fault that they seek anonymity. In their research M. V. Rajeev Gowda and E. Sridharan argue that secrecy in political donations became an imperative for political parties because black money was so entrenched into the system and businesses had to deal with such a wide range of parties in power in the central and state governments post the re-legalization of corporate funding in 1985, that corporates found it difficult to come above board for the fear of facing the wrath of rivals that were not supported.
The study says here are two key drivers of corruption in India - one being the government's discretionary powers for allocation of resources and the other, flawed political funding and election expenditure laws which allow the government to misuse its discretionary powers. Corporates have benefitted hugely from both these lacunae, but are clearly suffering them as well, leading to lobby groups like CII making such demands.
"The key feature of the political-economic context is that, despite two decades of economic liberalization,
Indian businesses remain highly vulnerable to discretionary government actions at both central and state levels. The licensing powers of the central and state governments have been reduced over the years. But when it comes to starting, operating, or expanding a business, there are numerous points at which government permission is required at both central and state levels. Major examples include land acquisition and environmental clearances required to set up new plants. Our interviews with industry chief executive officers (CEOs) over the past few years (both before and after the 2009 national election) indicate that these have become pressure points for extorting payments from businesses. This is especially so in the mining and real estate development industries and also in large industrial projects" according to the study.
The real problem then is not India Inc's unwillingness to disclose their affiliations, but that too much discretion continues to be vested with the government, which can arm twist at will. This has perpetuated an electoral system which is largely run on black money derived from extortion.
Donations from corporate houses is a major and important source of income for political parties. The system of electoral trusts was introduced to bring in transparency to the process. But according to the Association of Democratic Reforms, details of donors who make donations is not available in the public domain, providing corporate entities the secrecy they desire to not disclose names. However the ADR analysis further reveals that known donors including electoral trusts account for only a fraction (just over 2%) of the total income of political parties as most of the income generated is from unknown' sources. Unknown, because under the current law parties are not obliged to reveal source if the donation falls in the below Rs 20,000 range. So a corporate wanting to extend support in lieu of favors can easily do so by making multiple donations under Rs 20,000.
It is an open secret that this has been happening for a long time. Industrialist Rahul Bajaj had openly hinted at a CII conference in 2011 that most political funding happened through black money generated from corporate houses. "Where does the political party gets its funds from? Come on, I've been in Parliament for four years. It's not cheques, it's not by small members. All money comes in through black money. Black money doesn't come from heaven" Bajaj was quoted as saying in the Economic Times which reported him as also saying that promoters indulged in diverting their company's illegal wealth into black money in the economy.
The new Companies Act has not come entirely into force yet, so it is still unclear whether the new recommendation by CII will be accepted. Alas, even if it is, it will do nothing to tackle the real issue of extortion led campaign funding that Bajaj spoke of.
CII should perhaps lobby harder to rid the system of that, even if it means industry suffers in the short run.
