Jan 11: Disclosure at Last?

January 11, 2014

http://in.news.yahoo.com/disclosure-at-last–061654557.html

Disclosure at Last?

In August 2013, the Ministry of Corporate Affairs published the
Companies Act, 2013, consolidating and amending the laws relating to
companies. The new Act contained a minor amendment requiring companies
to disclose the names of political parties that received contributions
from them. And thanks to a controversial letter issued recently from
the Confederation of Indian Industry (CII) that reportedly sought to
make this disclosure voluntary, at least a handful of newspaper
articles discussed the new norms

“Such a clause will put us in a discomfiting position vis à vis
political parties,” an unnamed executive is reported to have told The
Economic Times. The reason, according to the ET article, is that
“industry is apprehensive that full disclosure of political funding
beneficiaries, as required under the new Companies Act, may lead to
backlash from political parties that feel relatively less-generously
funded.”

If anything, the happenings of the last decade, replete as they have
been with multi-lakh crore scams, ought to have created the political
climate for a total ban on corporate contributions to political
parties. Instead, what we see is a meek tweak of the law requiring
disclosure of political beneficiaries. For a country grappling with
the largest experiment in democracy, debate on the role of
corporations in the democratic sphere has been sparse and pathetically
shallow. The media discussions in the wake of the recent amendment
don’t even question whether money given by corporations can be
considered as “contributions”, leave alone explore the extent to which
moneyed interests have encroached into our democratic spaces.

The phrase “corporate contributions” is a euphemism that seeks to hide
vested interests behind the benevolent cloak of charity, donation and
philanthropy. The objectives of such contributions have more to do
with furthering business interests than the donor’s love for democracy
or for this or that political party. Funding the party in power,
betting on the winning horse or likely winners before the election, is
an investment.

In a telling article on the subject, Frontline correspondent V
Venkatesan wrote: “The objectives of corporate funding of political
parties underwent a transformation following the policy of
liberalization…The emphasis has clearly shifted from seeking favors
from the government for securing licenses, permits and quotas, to
seeking protection from the entry of multinational corporations.
Emboldened by the perceived ‘irreversibility’ of the economic reform
process, which largely unshackled it from a regime of controls and
permits, organized industry has been sending signals to the parties
that its voice would have to be heard.”

Since the birth of corporations, people have warned that the
irrepressible corporate voice could eventually drown out the voices of
the people, that corporate interest would eventually come to be
equated with national interest. At the peak of the Tata controversy in
Singur, West Bengal, Anand Giridharadhas began an article in the New
York Times with the lead: “This country’sproject to build the world’s
cheapest car has driven into a quintessentially Indian ditch”
(emphasis added). The portrayal of peasants reluctant to part with
their land and the consequent political battles as the ‘quintessential
Indian ditch’ is worth noting. But the startling part is the manner in
which Tata Motors’ entirely commercial venture of producing a small
car has been portrayed as ‘this country’s’ national project.

The most unlikely and famous among soothsayers of this corporate
hijacking was the US president Abraham Lincoln. In a letter dated
November 21, 1864, Lincoln – formerly a lawyer for American railroad
corporations – wrote: “I see in the near future a crisis approaching
that unnerves me and causes me to tremble for the safety of my
country. As a result of the war, corporations have been enthroned and
an era of corruption in high places will follow, and the money power
of the country will endeavor to prolong its reign by working upon the
prejudices of the people until all wealth is aggregated in a few hands
and the Republic is destroyed.”

The first avatar of the Companies Act in India – the 1913 version –
had no provision relating to corporate donations. Neither did it have
any provision expressly barring such actions. The Companies Act, 1956,
however, did contain Section 293 that allowed companies to contribute
funds to charitable and other purposes. In 1958, the then-Chief
Justice of the Bombay High Court Justice M C Chagla delivered a
revealing verdict in Jayantilal Ranchhoddas Koticha … vs Tata Iron
And Steel Co. Ltd (TISCO). The case dealt with TISCO’s request for the
court’s endorsement of an amendment of their Memorandum of Association
to allow them to contribute to political party funds. The judgement is
worth reading in its entirety.

To bolster its case, TISCO pointed out that nine other recently
created companies had objects in their memoranda that permitted them
to contribute to political parties. TISCO’s lawyer argued – and
Justice Chagla accepted – that “in the competition which is an
inevitable feature of trade and commerce, these companies which can
subscribe to political funds of the Congress would be in a better
position vis-a-vis the Congress Government than the Tata Iron and
Steel Company if it is not permitted to contribute to funds of the
Congress.”

TISCO’s amendment was approved, but Justice Chagla pulled no punches
when it came to warning of the consequences of unfettered corporate
funding: “History of democracy has proved that in other countries,
democracy has been smothered by big business and money bags playing an
important part in the working of democratic institutions and it is the
duty not only of politicians, not only of citizens, but even of a
Court of law, to the extent that it has got the power, to prevent any
influence being exercised upon the voter which is an improper
influence or which may be looked at from any point of view as a
corrupt influence. The very basis of democracy is the voter and… and
it may be said that it is difficult to accept the position that the
integrity of the voter and of the representative is safeguarded if
large industrial concerns are permitted to contribute to political
funds to bring about a particular result.”

A similarly prescient Calcutta High Court warned that corporate entry
into such democratic spaces “will mark the advent and entry of the
voice of the big business in polities and in the political life of the
country.”

* * *

Now, more than half a century later, it would not be an exaggeration
to state that Big Business is entrenched in all our vital democratic
spaces. Laws are enacted, others changed, and some gutted in response
to corporate pressure. Unlike pressure from civil society, where
people starve to prove a point, corporations get their work done by
treating the people that matter to 5-star dinners at organized
roundtables and conferences.

In 2008, I was sitting in solidarity at Jantar Mantar with more than
60 Bhopal gas tragedy survivors. Most of them, including several who
were ailing due to gas exposure, had walked 800 km from Bhopal to New
Delhi to meet Prime Minister Manmohan Singh. This was the second march
for the survivors; they had met the prime minister two years ago after
a prolonged hunger strike. They had returned in 2008 because Dr Singh
had reneged on all the commitments he had made earlier.

We arrived in New Delhi in late February and pitched our pandal on a
Jantar Mantar sidewalk. Here, we remained – the elderly, children, men
and women – through the Delhi summer, the pre-monsoon dust storms and
the rains. Our prime minister did not refuse to meet us. He just
ignored us. Around the same time, Samajwadi Party leader Amar Singh
was raising a stink about levy of windfall profit tax on Mukesh
Ambani’s Reliance Industries Limited (RIL)_ and seeking the
intervention of the prime minister in resolving the tiff between the
sparring Ambani brothers. On July 14 – four and a half months since
the Bhopal survivors arrived in Delhi – an irate Mukesh flew in to
Delhi in his private jet and met the prime minister. The afternoon
news told us that Ambani would meet Principal Secretary TKA Nair at
4pm, Petroleum Minister Murli Deora at 5pm and Sonia Gandhi at 7pm
before flying home.

The Bhopalis never got to meet the Prime Minister that year. Today,
December 4th, marks the beginning of the 30th year since the Bhopal
disaster.

2008 was the year that Bhopalis began releasing extracts from the “PMO
files” – a dossier of painstakingly collated information unearthed
through Right to Information inspections of files held by the PMO on
the Bhopal tragedy. The files revealed how Dow Chemical CEO Andrew
Liveris had met Dr Singh in New York, and subsequently roped in Ratan
Tata, Finance Minister P Chidambaram, Congress spokesperson Abhishek
Manu Singhvi and Indian ambassador to the US Ronen Sen to lobby on
Dow’s behalf.

For all the talk about transparency and participation in governance,
it would be safe to say that these are the two things that bureaucrats
and politicians find petrifying. The industry’s take on transparency
and participation is curious. So, while CII has objected to the
mandatory disclosure of political recipients of corporate largesse, it
has insisted on transparency and its participation in the formation of
the rules and delegated legislation under the new Companies Act. The
government is sure to oblige.

After all, unlike the slogan shouting, hunger-striking, rasta-rokoing
unwashed masses, corporate lobbyists look good, smell good, drive
fancy cars and are ideologically and culturally acceptable to
bureaucrats, politicians and even many judges.

It is these ideological similarities that provide the traction
required to dismember laws that are protective of the rights of
working people, or the environmental rights of communities.

Take, for instance, the life of the Environmental Impact Assessment
Notification, 1994, which was issued to put in practice the commitment
made by India at the Rio earth summit. The notification legitimized
the right of communities to information about the impact of projects
in their localities and to participate in environmental
decision-making. In no time, the industry and government realized that
the law put too much power and information in the hands of citizens.
In place after place, environmentally destructive “development”
projects were being delayed and defeated unless public hearings were
stage-managed and controlled by gun-toting militia or police. In 2002,
the Govindarajan Committee on Investment Reforms identified
environmental laws in general, and the EIA Notification in particular,
as impediments to investments. The diagnosis for India’s ailing
economy was clear – democracy was the disease.

The 1994 Notification eventually gave way to the EIA Notification,
2006. In the lead-up to the publication of the draft EIA Notification,
2006, the Ministry of Environment and Forests held several rounds of
face-to-face consultations with various industry organizations. No
such meeting was held to consult civil society organizations or
representatives of local bodies. In fact, on 26 April, 2006, well
after the 60-day draft comments period was over, the PMO directly
intervened and directed the ministry to complete consultations with
major industry associations, including real estate lobby groups, auto
manufacturers and mining interests.

* * *

Election Commission figures reveal that between 2003 and 2007, the
Congress party received Rs 52 crore in declared contributions. Seventy
five percent of this (Rs 39 crore) was from companies and
organizations that would benefit from relaxed environmental
regulation. From mining companies, there was Rs 1.5 crore; from the
builder lobby Rs 2.4 crore and Rs 17 crore from the Tata Group,
followed closely by other corporate majors such as L&T, Ranbaxy,
Videocon, ITC, Lupin, GMR, Jindal Steel and Mahindra & Mahindra. Many
even hedged their bets by funding the BJP.

Corporate contributions to political parties threaten to capture
merely one (the legislature) of the four pillars of democracy. The
judiciary, the executive and a free press are the others. A recent
article in The Caravan about the rightward, pro-Reliance shift of the
Network 18 media group, the Radia tapes, and the Wikileaks exposé on
US intelligence agency Stratfor’s alleged links with Indian Express
editor-in-chief Shekhar Gupta, leave little doubt about the freeness
of “free press” in India.

Of the four pillars, the judiciary is arguably the only one that is
relatively less tainted by corporate influence. But only relatively,
and certainly not for lack of trying by corporate agents.

Judges who would cite codes of judicial propriety to avoid
participating in meetings organized by NGOs or civil society
organizations have shown little hesitation in gracing corporate
events. Industry lobby groups like the CII and FICCI conspire to
organize innocuous-sounding events – moot courts, roundtables and
workshops – where judicial officers are invited to engage with
critical and current legal issues.

Earlier this year, Justice Abhay Mahadeo Thipsay – a sitting judge of
the Bombay High Court – chaired a session on ‘Regulatory and
stakeholder engagement’ at the Nuclear Law Association’s second annual
conference. The association represents the interests of global
corporations looking to profit from the nuclear energy business. The
original agenda had the Chief Justice of the Bombay High Court
delivering the Presidential address. Thankfully, the name was dropped.
During the program, speakers were to talk about lessons for public
engagement post-Koodankulam. Justice Thipsay’s participation at this
meeting raises important questions. Would a sitting judge be allowed
to participate in a seminar, organized by fishermen protesting against
the Koodankulam plant, to discuss ways of preventing the NPCIL from
expanding the nuclear park? I presume not.

Curiously, while persistent agitations by fisherfolk and Adivasis
against corporate exploitation are baselessly branded as
foreign-funded, Maoist-infiltrated and anti-national, actual
foreign-funded corporate events that exert an illegitimate influence
on democracy are endorsed by all of its four pillars.

In 2011, Down to Earth reported that Microsoft and the Indian Music
Industry funded a roundtable conference held by FICCI for judges from
Maharashtra on intellectual property rights; judges handling piracy
cases were special invitees, and one of the sponsors added a condition
that Human Resources Minister Kapil Sibal should inaugurate the
session.

Even more insidious is the entry of the corporate agenda as an
academic exercise. While judges with some sense may avoid in-your-face
corporate events, they may find nothing wrong with attending an event
organized by a university or a law school.

In 2010, a number of eminent health activists and NGOs wrote to the
Minister of Commerce and Industry complaining about a “legal
education” program fronted by George Washington University (GWU) for
Indian lawyers and judges. The letter refers to a prominent university
faculty member saying, “…one of the goals of the India Project – the
objective of which was to create interactions between leading US,
European, Asian and Indian academics, industry leaders, lawyers,
judges and policymakers in the field of intellectual property – was to
work closely and cooperatively with Indian judges to ensure not just
enaction but enforcement of patent laws. Because it’s all fine to have
good laws but the important thing is to enforce them.”

GWU’s India program, which was pulled together by the US India
Business Council and the CII, was funded by pharma and software giants
including Novartis, Qualcomm and Microsoft. For good measure and
greater legitimacy, institutions such as the National Law University
were roped in as venues and local co-hosts. The event attracted judges
– unsuspecting, I hope – from the Supreme Court and Delhi High Court.

The NGO letter to the Minister of Commerce notes that “the moot court
problem placed before the judges related to enforcement of
intellectual property rights. This is an area of growing controversy
as developed countries like the US and EU and their multinational
pharmaceutical companies are pushing for greater enforcement – these
issues are before the courts in many cases (sub-judice) and it is of
great concern that judges of the Supreme Court and Delhi High Court
were presented with similar problems at a summit funded by
multinational pharmaceutical companies. It is evident that the Supreme
Court, the Delhi High Court, the Ministry of Law and Justice and the
Ministry of Commerce and Industry were not fully informed of who was
funding/co-organizing this summit.”

I’m not so sure that those in positions of power were not fully
informed of who was organizing the summit. The reason: Rather than
distancing themselves from the lobby group, the Indian government had
permitted GWU to cement stronger ties with the state-supported Indian
Institute of Technology-Kharagpur. The two institutes collaborated to
open an elite law institute in 2006 that “[uses] modern classroom
technology and dynamic teaching methods to produce lawyers equipped
with the knowledge and skills to handle sophisticated legal matters,
including complex commercial transactions and cases.” The institute is
called the Rajiv Gandhi Scholl of Intellectual Property Law.

The Superhuman Corporation

It is no accident that governments and even people tend to engage with
corporations as if they were persons. Some of the discussion that
followed the CII letter to the Ministry of Corporate Affairs hinted
that corporations may be averse to disclosing their political
affiliations for fear of backlash from shareholders or rival political
parties.

Such a surmise presupposes that a corporate entity itself can have a
political affiliation. Despite being a legal artifact, corporations
have been proactively projected by business lawyers and trade groups
as a being imbued with human qualities – capable of exhibiting
loyalty, patriotism, embarrassment, discomfiture and even social
responsibility. If free-market guru Milton Friedman were alive, he
would have ridiculed such a notion. Indeed, his take on corporate
social responsibility is astute: “There is one and only one social
responsibility of business – to use its resources and engage in
activities designed to increase its profits.”

Since the time that ‘corporate personhood’ was introduced into
American jurisprudence through a court reporter’s notings in the
margins of a US Supreme Court ruling in 1886, corporate lawyers have
steadily strengthened the notion of “personhood” to allow corporations
to enjoy all rights, including those reserved only for natural
persons. The 1886 ruling conferred on corporations the constitutional
right to equal protection under law provided under the 14th Amendment
to protect newly freed slaves. In a more recent and celebrated US case
called Citizens United vs. Federal Election Commission, the Supreme
Court in a 5-4 ruling gave Citizens United – a political action
committee promoted by the multibillionaire Koch Brothers – and other
corporations the right to free speech. A minority view of four judges,
however, held that First Amendment protection of free speech in the US
constitution applied only to individuals and not associations of
individuals.

Just two days ago, on December 2, 2013, corporate lawyers made another
significant advance. The US Supreme Court has agreed to hear a case
that will decide whether a corporation can have religious sentiments
and belief. The case was filed by the Baptist owners of Hobby Lobby –
a chain store – who claimed that the Obama administration’s health
care law mandating the provision of contraception for women violated
the Christian religious belief of the owners, and was therefore
unconstitutional. In July 2013, an Appeals court in Denver ruled for
the corporation.

In India, too, this culture – of treating corporations as important
citizens and allowing them entry into the most sacred democratic
spaces – has taken root. If the Aadhaar scheme, the brainchild of IT
entrepreneur Nandan Nilekani (who also happens to be its chief
beneficiary), is an example of business bypassing Parliament, there
are more examples of big business residing within the legislature.

In the revolving door between business and politics, the Rajya Sabha
has for long been the preferred wayside stop for Indian billionaires –
Rahul Bajaj; Finance Minister P. Chidambaram’s maternal uncle and
cement baron Dr MAM Ramasamy; Thermax’s Anu Aga; former Hindustan
Lever chairman Ashok Ganguly; Alchemist group founder and Tehelka’s
majority owner Kanwar Deep Singh; Vijay Mallya; and mine owner Anil
Lad are some of the prominent ones.

From being wary of foreign capitalists, Indian industrial houses are
also closing ranks with foreign MNCs to ask for a smaller government,
self-regulation and an increased profit share from delivery of
essential social services and commodities. The line separating
government and business is blurring even more.

What makes “corporate persons” particularly problematic for
democracies is that they are more than human. They have practically
all the rights that people do, without their vulnerabilities. Lord
Edward Thurlow of England is supposed to have said: “They have no soul
to save, and they have no body to incarcerate.”

This invulnerability, combined with their increasing influence over
all pillars of democracy, should make one wary of anything that
provides increased protection or space to the corporate being. Seen
from such a cautious vantage point, the question is not merely about
whether a corporation should disclose the names of its political
beneficiaries. Rather, the question is whether or not it is even
feasible for democracy and the corporation to co-exist.

Nityanand Jayaraman isa Chennai-based writer and social activist.

The Companies Act & Corporate Contributions

1913

Companies Act, 1913, enacted. Contained no reference to contributions
by businesses to political parties.

1956

Companies Act, 1956, enacted. Section 293 allowed contributions for
charity and other purposes. Other purposes were not defined and were
subsequently interpreted to also mean for political parties.

1957

Jayantilal Ranchhoddas Koticha … vs. Tata Iron And Steel Co. Ltd.

Justice Chagla allows TISCO to amend its Memorandum of Association to
include contributions to political parties, but warns of corporate
influence on democracy.

1960

Section 293A is introduced to the Companies Act. The amendment places
a ceiling on corporate donations at Rs 25,000 or 5 percent of average
net profit for past three years. Names of recipients to be disclosed.

1968

Companies Act (Amendment) Bill recommends an outright ban on corporate donations

1969

Corporate donations to political parties banned at the behest of
left-leaning and socialist parties. The ban was reportedly designed to
“cut the clout” of business houses by the Indira Gandhi government.
The Amendment observes, “Such contributions have a tendency to corrupt
political life and adversely affect healthy growth of democracy.”

Between 1966 and 1969, 75 companies paid Rs 187 lakhs, of which Rs 144
lakhs were paid to the Congress party. Of corporate contributions
received between 1962 and 1968, 34 percent were made by the Tatas and
Birlas.

1976

An effort to repeal the ban lapsed.

1978

High-powered expert committee to review the Companies Act, headed by
Delhi High Court judge and industry and trade union leaders.

The committee unanimously recommends continuing the ban on corporate
contributions.

1985

The Rajiv Gandhi government finally lifts the ban on political contributions.

License-raj scams begin to be replaced with foreign deal scams,
including big-ticket defense deals.

1993

CII makes a case for tax-deductible status for corporate contributions.

1996

Dawn of coalition politics with United Front forming the government in
New Delhi.

This new dawn also ended the culture of “contributing” to the major
players in the Centre. Contributors began funding major regional
parties at the state level, in addition to or even to the exclusion of
national parties.

1998

Indrajit Gupta Committee on Electoral Reforms strongly recommended
Board of Directors’ and shareholders’ approval, through AGM voting,
for political contributions.

1998

Lok Sabha elections. Tata Sons floats the “Electoral Trust”. Funds
collected were to be contributed to political parties in proportion to
their share in parliament before and after elections.

1998

Grasim Industries floats the General Electoral Trust. Unlike Tata’s
trust that is open to receiving funds from any company, the GET was
meant only for Birla group companies.

“Among the factors which the group considers while disbursing funds
among the political parties are suggestions from its Advisory Board,
and the overall business interests of the contributing companies in
each State.” (V Venkatesan writing in Frontline, 1999)

2003

Law amended to allow parties to accept any amount from Indian
companies and citizens. The donations received by political parties in
excess of Rs 20,000 to be annually reported by the treasurer of the
party both to the Election Commission as well as to the income tax
authorities, with details of contributors. No bar on cash
contributions. Income Tax Act amended providing for 100 percent tax
deduction.

The permit for cash contributions and the Rs 20,000 limit for
disclosure was a perfect loophole. Companies could give several
payments of less than Rs 20,000 in cash and avoid scrutiny. (Electoral
Trusts qualify for 100 percent tax exemption. The trust should
distribute at least 95 percent of its income for the objective it was
set up for.)

2013

Budget 2013-2014: The government facilitates the setting up of
“Electoral Trust” companies that qualify for 100 percent tax breaks.
Conditions apply. No cash contributions. Only cheque transactions.

Just so the beneficiary political party knows which company has funded
it, the government has offered Electoral Trust guidelines that would
allow companies to name the trust after their incorporated names.

2013

The Companies Act amended to include provision on disclosure of
political party beneficiaries of corporate contributions.