February 9, 2016
Doing the right thing, always! This is the motto of a firm of Company Secretaries, which sees Company Secretaries as governance professionals, not just compliance officers. The motto describes ‘Good governance’ – succinct, simple to understand.
The difficulty is not in understanding. It is in the implementation. In Marathi they say – kallta aahe pun valat nahi! Translating to English – I understand alright, but can’t act on it. In short, easier said than done!
Today, let’s discuss why good Governance can be difficult to implement. Governance usually means no shortcuts – and shortcuts are always easier to take than the right path. This is where the difficulty really arises. Also, at first sight, a number of very ‘valid’ reasons can exist for less-than-good governance in a company:
– The size of the problem
– The backlog of issues
– The lack of an appropriate culture
Often these reasons are inter-related. Because the company is large, a lot of care must be taken in a large number of areas. Because the number of areas is so large, and resources allocated for governance are limited (because governance is usually seen as a necessary evil rather than a good thing to do), poor governance incidents increase, creating a large backlog over time. The backlog has the insidious effect of creating a mind-set of poor governance. The longer this situation remains, the deeper the culture of poor governance takes root. The vicious cycle of sloth, inefficiency or neglect, becomes self-perpetuating.
On an occasion, the poor governance becomes noticeable to an external regulatory agency. They initiate an enquiry or a quasi-judicial proceeding. More often than not, it is possible to stave off deeper enquiry or close the proceeding by oiling the right palms. A few early ‘successes’ of this methodology convinces the team, and later the organization, that this is the ‘right’ way of dealing with such situations. Now, neglect is joined by overt crime. What was merely an error of omission, has now been compounded with the blunder of commission.
The path from here can lead to a situation like Satyam or Enron. In most organizations though, a small core of people will somehow pull it back, sometimes even from the proverbial brink.
How can a downward spiral be stopped and reversed? It may not be possible to become totally righteous in one grand gesture. That approach may threaten the company’s very existence. Satisficing, can be a good beginning for getting to ultimate satisfaction. Starting with small steps is often better than grandstanding.
In 1993, when Rudy Giuliani became Mayor of New York, a city reputed to be “out of control”. William Bratton was appointed Commissioner of Police and asked to implement the ‘Broken Windows theory (BWT)’ propounded by George Kelling in 1982. The theory makes two major claims: that targeting petty crime, will reduce the incidence of petty crime and low-level anti-social behavior. Resultantly, major crime will also be prevented. The police started catching and punishing miscreants who broke windows, or painted graffiti in the subway, or committed traffic violations. This did cut down small crimes significantly, releasing the police force to thereafter attack more heinous crimes. The trend of crime reduction continued for years after, according to a study done in 2001. Other studies inferred that the impact could also have been created by reduction in unemployment and other reasons. It is still largely felt that, BWT is worth implementing. I suggest BWT is usable for Governance.
Companies can begin by identifying the low hanging fruit – ensure timely compliance of say TDS, Professional Tax, SEBI filings, etc. The more things start getting streamlined, the easier it will become to tackle more serious lapses – even environmental disasters. Well begun may not be half done, but each good act will encourage people to do even better acts, going forward. Eventually, sufficient good acts could create ‘good governance’.
Wish, prayer, action, practice….