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CSOs and Caesar’s Wife

November 6, 2011

The villains of the piece, with regard to corruption, have long been politicians and administrators, including the police. Newspapers revel in exposes about corrupt leaders and babus; TV channels enjoy playing prosecutor (and, often, judge); and movies have the mandatory corrupt politician in their plot. It is only recently that bribe-givers, particularly business organizations, are also in the limelight. High profile cases connected with mining and telecom have brought to the fore the active role of corporates, and whispers in the market-place have now become headlines in the media. Earlier, a financial fraud of massive proportions sent tremors through the corporate world, triggering many a discussion and report about corporate governance and ethics.

Issues related to corruption and fraud by the private sector have now turned the spotlight on governance in companies and led to new regulations, including strict norms – especially for companies listed on the stock exchanges – regarding Board composition, disclosures and transparency. Also, Ministry of Corporate Affairs has published voluntary guidelines, which raise the bar beyond what the law mandates. A new Companies Act is in the final stages of clearance and enactment; it seeks to strengthen various aspects of corporate governance. There is a lively debate about whether PPP projects should also be under the ambit of right to information. In fact, some would like the private sector too covered under RTI. All in all, there is much focus and regulatory activism aimed at enhancing accountability, transparency and honesty amongst companies.

At the same time, a Lok Pal will – almost certainly, one expects – come into existence in the near future, and will act on corruption in the government. A similar law is likely to ensure that the judiciary too is covered. These are welcome developments: while they are unlikely to end corruption, these could certainly help to curb it.

Apart from business, judiciary and government, there is now an increasingly important role being played by two other segments: media, and civil society. The former wields disproportionate power, because of its ability to set agendas, steer discussion and influence opinion. As in other sectors, there are those who are corrupt and others who are honest. The ills range from paid news and insider trading, to outright extortion and blackmail. Self-regulatory mechanisms are in place and seem to be making some impact; also, private media is subject to the same laws and voluntary guidelines as corporates in other sectors.

Civil society organizations (CSOs), in contrast to the segments mentioned earlier, have far less regulation. They are, of course, under the ambit of the Societies Act (or its equivalents, depending on their organizational form) and constrained by other applicable laws (e.g., on foreign donations). However, they are rarely – if ever – under the public scanner or in the media glare. As a result, one hears little about any corruption, fraud or malpractice amongst CSOs. While one explanation could be their innate honesty, few would attribute it to this. As in other fields, here too there are honest organizations run by selfless persons, and others who are there only to make money or seek undeserved fame by any means.

A recent high-profile case has highlighted ethical – if not legal – issues related to the operation and management of CSOs. Other attempts – many by motivated detractors – to defame CSOs or individuals connected with them, have raised doubts about their quality of governance. The laws relating to Societies and Trusts (under which most CSOs operate) are often archaic, with periodic tinkering making them generally worse. “Light touch” regulation is appropriate for this area; however, there is a need for safeguards, checks and balances, and transparency. At the same time, governmental control in any form is contrary to the very purpose of such organizations, and regulations like the new apparently draconian ones in Gujarat, are definitely undesirable.

One cause for the clouds of suspicion is that this new growth sector has attracted many people out to make a quick buck. The dedicated, do-good, stereotyped “jholawala” –  surviving on a pittance and commitment to a cause – yet exists, but has now been joined by those for whom CSOs are only a convenient mechanism to tap funds (mainly from government), and by socialites who are in CSOs for visibility or as an excuse for kitty parties. Some CSOs are but proxy marketing and public relations arms of the corporate that funds them, often with undeclared connections; others are used as a tool against corporate rivals; some are also being used as fronts by companies, political parties, and religious organizations. here are many that have become very important pillars of our democracy and do outstanding work. While some have excellent governance with well-defined procedures and systems, numerous CSOs have poor accounting practices and petty frauds are not uncommon. Unlike corporate Boards, there is no requirement for independent Directors, and few CSOs have the equivalent of an Audit Committee.

Clearly, there is need for some minimum standards of governance, especially since CSOs get substantial funding from the government, and many raise resources from the public. Therefore, mechanisms to ensure good governance and transparency, while safeguarding against financial improprieties and frauds, are necessary. Ideally, CSOs would themselves come up with a self-regulatory code, taking forward efforts like the Credibility Alliance. It is time for genuine CSOs to stimulate a debate on ethics, good governance and ways of enforcing standards of transparency and probity in this sector. To sustain credibility, CSOs – and their founders – must, like Caesar’s wife, be above suspicion.

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