It is becoming increasingly clear that the brand of capitalism India is exporting does not pass muster in the West. Wipro and Megasoft have followed Satyam on to the World Bank’s blacklist for trying to win contracts by offering inducements to its staff. Most of us in India have a fair idea of how business is done in the sub-continent and our corruption threshold has climbed steadily since Independence. Fortunately, it has not in large parts of the world. Software companies, the arrowhead of India’s services exports, are realising this the hard way — none of the debarred companies felt the need to disclose the development to their shareholders till the multilateral institution made the information public. Remarkably short-sighted, considering information technology, with frontline companies growing 35 per cent a year, remains a fundamentally sound business to be in.
The silver lining in all this is the message is also going out to the rest of India Inc: age-old disregard for corporate governance is an anachronism in a globalising economy. If we have to do business with the rest of the world, we must do it by their rules, not ours. Truth be told, we have the rules too, it’s the umpiring that allows all those corners to be cut. Regulation through peer review, as with auditors, is routinely subverted. Statutory watchdogs are on the verge of losing the battle over antiquated systems. A law machine that grinds exceedingly slow. The venality of a political establishment sitting in on most decisions needed to run a business.
The reaction by Wipro and Megasoft that the World Bank deals were insignificant misses the wood for the trees. Investors, clients and employees across the globe are taking a closer look at Indian corporate governance after the Satyam debacle. Shrugging off “minor” instances of conflict of interest will feed simmering misgivings. The Wipro stock lost 9.3 per cent of its price a day after the news broke and the infotech index on the Bombay Stock Exchange shed 3.8 per cent. Our software tsars must, more than any other corporate chieftain, realise the immediate need for proactive disclosure. The first-mover advantage in the outsourcing game will eventually run out, corporate credibility built up during that period will linger.