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Boards, scandals, investigation – Bangalore Business LitFest author dissects corporate governance and scams >
by Madanmohan Rao [September 10, 2024]
This weekend, the Bangalore Business Literature Festival (BBLF) will be kicking off its tenth edition at Catholic Club. As network partner for BBLF 2024, MXR.world is delighted to present its fourth preview article: a full-length interview on corporate governance, investigative reporting, and business scandals.
Other themes of BBLF 2024 include digital transformation, career planning, corporate governance, industry leadership, ESG roadmaps, urban habitat, and the startup ecosystem.
One of the outstanding sessions at the festival is an in-depth discussion on NPAs, Scams and the Future of Regulation. It features V Pattabhi Ram, co-author, The Great Bank Robbery. Here are edited excerpts from our chat with this courageous and outspoken author.
MXR: Where is India today in its journey of creating a fearless and investigative press?
V Pattabhi Ram:
Indian journalism has historically been fierce. However, today's story is different. With a few exceptions, most of the media is playing it safe, cuddling up with those in power, and calling others names. That’s the sad truth of a body that has done and can do better. Here’s a quick SWOT of the industry:
Strengths
India’s media is brilliantly diverse and is present in print, television, radio, and digital platforms across languages and regions. This is good for hard-hitting journalism, as seen in historic exposés like the Bofors scandal, which toppled a government, and the cricket betting exposé that showed cricketing gods had feet of clay. Recent reports on the Rafale deal stirred debates, reminding us of the importance of investigative journalism.
Weaknesses
Press freedom is definitely under siege, with journalists facing threats, harassment, and even violence. Our rating is low internationally. Furthermore, large business houses control mainstream media, raising concerns about editorial freedom. Digital media is disrupting traditional power structures, with influencers like Dhruv Rathee filling gaps left vacant by ad-driven outlets. Bottom line: The credibility of mainstream media isn’t high.
Opportunities
The digital revolution presents new opportunities for independent journalism. Anyone with a laptop and a desk, plus data that can be converted into information, can jump onto the bandwagon. Exploring alternative revenue models like subscriptions or crowdfunding will help maintain editorial independence.
Threats
Political and legal pressures, physical threats, and increasing censorship make it difficult for journalists to work fearlessly. Without a free and fair press, democracy will be in peril. In short, the environment today is hostile to investigative journalism, with a lack of fearless writers and an aggressive government tightening its grip.
MXR: What have been the highlights of your journey so far in the world of business writing?
V Pattabhi Ram:
I will focus on two of my recent books that can be considered business writing.
Tech Phoenix – Satyam's 100-Day Turnaround
Co-written with TN Manoharan and published by Rupa, this book provides an insider’s account of the dramatic 100 days during which a government-appointed board salvaged a storied company. The book was nominated for four Business Book Awards and has been widely acclaimed for its thriller-like narrative. It has since been translated into Telugu and Tamil.
The Great Bank Robbery (GBR)
Co-authored with Sabyasachee Dash, GBR is written in a novel-like style and explores 11 scams that shook the Indian banking sector. It’s told in the form of a chat between a great-grandfather with a banking background and his two great-grandsons. Aside from these, I write across genres, including fiction, non-fiction, biographies, self-help, and the like.
MXR: What do the Hindenburg-Adani-SEBI controversies tell us about the health of big business in India?
V Pattabhi Ram:
This story highlights the cracks in corporate governance and regulatory oversight. It ignited debates on transparency and accountability, identifying potential conflicts of interest and the role of independent directors. SEBI, India's market regulator, came under scrutiny, with delays and perceived inaction raising doubts about its ability to rein in powerful conglomerates. The role, or the absence of it, of the SEBI chief added questions that remained unanswered.
The market’s swift reaction, with Adani stocks first plunging and then playing catch-up, revealed the fragile nature of investor confidence. It also cast a shadow on the due diligence practices of institutional investors.
In short, somewhere along the line, it gave the impression that "everything goes" in India.
MXR: What are the most common myths and misconceptions that still persist today when it comes to business scandals?
V Pattabhi Ram:
Several thoughts surrounding business scandals are misleading.
Myth 1: Scandals are the work of one man.
Reality: The Satyam scandal (2009) began that way. But deeper research revealed systemic issues, with some executives and possibly auditors being complicit.
Myth 2: Regulators can catch all rogue acts.
Reality: The Nirav Modi-PNB scam (2018) shattered this belief. Despite stringent regulations, the fraud went undetected for years, exposing serious flaws in the oversight mechanisms. Mark it; even a checklist-based audit could have called the bluff.
Myth 3: Whistleblowers are always protected and celebrated.
Reality: Fat chance. Take Satyendra Dubey (2003). Dubey, who exposed corruption in the National Highways Authority of India, was murdered for his honesty, highlighting the lack of protection for whistleblowers and how political class turns a blind eye to it.
Myth 4: A scandal means doom for a company.
Reality: Again, no. Take Satyam. A resolute board and a committed workforce turned things around, showing that a scandal-hit company can survive and even thrive. A broken mirror can be reset.
Myth 5: Greed is the driving force behind scandals.
Reality: The Commonwealth Games scam (2010) demonstrates that while greed played a role, so did political ambition, power dynamics, and national prestige, making this a multifaceted crisis.
MXR: Many startups believe boards and governance frameworks should be implemented only when they become big. How should they follow core fundamentals in the early stages to avoid debacles later?
V Pattabhi Ram:
Startups should prioritise corporate governance frameworks and establish effective boards from the outset. Here’s why.
Governance Isn’t Just for Big Companies
Prevent Early Mistakes: Good governance helps sidestep costly errors early on. With clear policies, processes, and accountability in place, startups can avoid legal issues, money mismanagement, and ethical violations—all potential deal-breakers for growth.
Build Investor Confidence: Investors are attracted to startups that demonstrate strong governance, signalling stability, transparency, and a commitment to long-term success. Implementing governance early can attract better funding opportunities and set the stage for growth.
Implement a Board Early
Advisory and Oversight Role: Even a pure advisory board can bring valuable expertise and oversight. Board members offer strategic guidance, help navigate challenges, and hold management accountable, keeping the startup on course.
Balanced Decision-Making: Founders can have tunnel vision. A board provides a balanced perspective, challenging assumptions and ensuring decisions align with long-term sustainability.
Core Fundamentals to Establish Early
Clear Governance Policies: Establish basic policies for compliance, ethics, and conflict of interest. Document and communicate these to all stakeholders.
Transparent Financial Practices: Start with rigorous financial practices, including regular reporting, audits, and internal controls. Transparency builds trust.
Regular Board Meetings: Even if your board is small, schedule regular meetings to review progress, discuss strategy, and address concerns.
In short, good governance is foundational for any startup aiming for sustainable success. The sooner a startup embraces strong governance, the better equipped it will be to build lasting value.
MXR: How can industry, academia, and government collaborate to advance the corporate governance agenda?
V Pattabhi Ram:
Collaboration between industry, academia, and government is crucial to advance the corporate governance agenda.
Joint Research and Development
Collaborative Projects: Industry and academia can collaborate on research focused on current challenges in corporate governance. Government support through funding, data access, and facilitating partnerships can help.
Education and Training Programs
Collaborative Projects: Universities can partner with industry to create courses, certifications, and executive education programs tailored to the needs of future leaders.
Government Role: The government can fund these programs, offer scholarships, and incentivise companies to invest in governance education.
Policy Development and Regulatory Frameworks
Academic Input: Academics can provide evidence-based insights for corporate governance policies. Governments can involve them in policy advisory panels.
Industry Feedback: Industry leaders can offer practical feedback on proposed regulations, helping to craft compelling policies that uphold governance standards.
Public Awareness and Advocacy
Raising Awareness: Joint campaigns can raise public awareness about the importance of corporate governance through educational initiatives and public forums.
Advocacy for Reforms: Together, the trio can advocate for governance reforms at national levels, leveraging their collective influence to push for higher standards.
In sum, advancing corporate governance requires a collaborative effort across sectors to build a framework that ensures ethical, transparent, and accountable business practices.
MXR: When we meet again at BBLF next year, what would have changed in India's business story – and what may remain the same?
V Pattabhi Ram:
Here’s what I think may change in a year.
Digital Transformation and AI Integration: India’s digital transformation will accelerate, with more companies embracing AI, machine learning, and automation. AI will play powerful roles across healthcare, finance, and retail industries.
Sustainability and ESG Focus: Environmental, Social, and Governance factors will influence business strategies. Driven by pressure from investors, consumers, and regulators, companies will adopt sustainable practices and report on ESG metrics. Green finance will gain traction.
Startup Ecosystem Maturity: India’s startup ecosystem will mature, with more companies transitioning from unicorns to decacorns, achieving profitability, and exploring IPOs.
And here’s what I think may remain the same.
Structural Economic Challenges: Job creation will be tough, with issues like skill mismatches, underemployment, and the dominance of the informal sector persisting. Income inequality will remain significant, with wealth concentrated in pockets of urban areas.
Bureaucratic Hurdles: Regulatory complexity, delays, and compliance burdens will continue to affect smaller businesses. While India’s Ease of Doing Business ranking might improve, core issues like land acquisition and contract enforcement would remain serious hurdles.
Political and Economic Uncertainty: The government’s focus on reforms will continue, though political and economic uncertainty may persist. Consumer confidence will remain tied to income levels, inflation, and employment.
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