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Bhopal Blunders: Seek Systemic Solutions

July 10, 2010

Much has been written and spoken, following the recent court judgement in the case related to the Bhopal gas tragedy. For over a week, it was the flavour of the day or TV channels and in the print media. Now that the media frenzy is over, the time may be appropriate to look at some of the more basic issues, including corporate responsibility; the role of the business community; the governance system, at local, state and central level; and, finally, the judicial system.

In any industrial accident, even those caused by natural disasters, the company or organisation concerned must be held responsible. The organisation is expected to have in place fail-safe measures for all foreseeable contingencies, so the only exceptions should be for completely unexpected natural disasters and for self-caused accidents to oneself, consequent to a clear violation of prescribed safety norms or procedures. The liability is for courts to determine, but must not be capped ab initio, as in the proposed law on liability in the case of accidents in nuclear power plants. Also, no entity — owner, operator, or equipment supplier — should be exempt.

On such organisational liability, there would probably be broad consensus. The more difficult issue is about the responsibility of the Board including, particularly, the independent, non-executive directors (INEDs). While the Board has overall responsibility for the company, to what extent should it be held liable for an operational lapse which is unrelated to policy and not a direct consequence of any specific decision made by the Board? Though full-time Directors are expected to have knowledge about operational aspects too, what about INEDs? Holding Directors responsible for a lapse that is not due to policies or matters for which they do not have direct responsibility would be akin to making the Police Commissioner liable for an accident caused by reckless driving. It is, of course, the Commissioner’s responsibility to enforce laws that prevent reckless driving and work with experts to design road and traffic management systems that ensure safety. Also, to investigate accidents so as to bring to book the guilty, and to take steps to minimise future accidents. This analogy could usefully be applied to Board Directors. However, where accidents result from Board decisions (e.g., compromising safety while cutting costs or introducing unproven and unsafe processes, as seems to have been done in Bhopal), there is clearly a direct responsibility of those in the Board who knew of this. INEDs may not be aware of the compromises and, in such circumstances, it does not seem correct to equate the responsibility of the INEDs with that of full-time Directors. The recent tendency to do so, and pin liability on INEDs for any malfeasance by the company, will only lead to an exodus and a paucity of good INEDs.

The business community as a whole has a role here. Through industry associations, they need to stimulate an informed debate on the role and responsibility of different categories of Directors on the Board, as also of the company. Following the fraud in Satyam, efforts have been made to articulate guidelines for corporate governance. CII, NASSCOM and others have brought out reports on governance and ethics. The Ministry of Corporate Affairs too has enunciated guidelines. However, none of them have specifically outlined the moral and legal responsibilities of INEDs. Such a task needs to be undertaken by industry associations, with sufficient public debate and inputs, so as to evolve a joint government-industry document.

Another area in which associations need to take the initiative is on aspects related to safety and industrial accidents. A code of ethics needs to be formulated for this, going beyond the purely legal or regulatory, and including best practices from around the world. Clearly, this must address the interests of all stake-holders, particularly the local community. One of the tragic aspects of Bhopal is the apparent callousness with which the company treated the community living around the plant. In this regard, the reaction of associations, post-Bhopal — whether on the issue of Board and INED responsibility, or a safety code for industry — has been disappointing.

Governments — in the States and at the Centre – have an obviously crucial role: one which they played badly and even abdicated from, at times, in the Bhopal disaster. First, inefficiency or corruption seems to have paralysed the government machinery for monitoring and inspection (which, in the early 1980s, were a routine part of the industrial landscape as part of the “license-permit-quota” Raj). Second, no serious action is known to have been taken against these safety and other inspectors. Third, environmental monitoring by a government agency should have been a necessary part of permitting such a plant to operate. Fourth, how was such a potentially-dangerous chemical plant allowed in a city, and who in the civic agencies allowed more settlements to come up right around it? In addition, the laxity in prosecuting the case, the ridiculously low settlement agreed upon, the lethargic progress in paying compensation and taking care of the health issues, and the fact that the plant site has not been sanitised after a quarter-century: all these point to dismal governance by successive governments at the state and central level.

The judicial system has once again proven that it has ceased to live by its name — for, justice delayed is justice denied. It is used by the powerful only to delay — even thwart — justice. For the tens of thousands of innocent victims of Bhopal, the political-administrative-judicial combine is as much in the dock as the company itself. One wonders whether powerful political leaders, learned judges and highly-paid lawyers are unable or unwilling to repair an obviously broken system.

The patience of the people of India — often dubbed apathy — is legendary; but even that has limits. The epic tragedy of Bhopal would find some solace if it serves as a wake-up call, before it is too late, to carry out the most crying reform of all: a drastic overhaul of the whole justice system.

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