Public Relations Republic
BY SUNITA NARAIN
me dare to predict how regulatory and corporate India will resolve IT
major Satyam’s scandal/saga. The government will stand tall, its arms
and branches spread out in never-ending enquiry, to provide tactical
cover. Some fall-guys might be found: now-disgraced chairman B Ramalinga
Raju could be sentenced, as could the auditing company official who
signed the accounts; but it takes time to prove guilt, so that they will
probably live a retired life in the comfort of their homes, out on bail.
Meanwhile, the media will bray for blood. Corporate India honchos,
particularly Satyam’s competitors, will jump out of TV screens,
express disgust and shock. But each will shrug the incident off as a
one-rogue affair and quickly put a lid on the issue. Soon, it will be
business as usual; that is, creative accountancy and cover-up by using
corporate image-fixers. The media, too, will fix itself. And Satyam will
not lead to change.
But why should I, an environmentalist, worry about corporate (mis)governance?
The reason is simple: it is clear corporate India, today working its way
to development, is doing so at the cost of the environment and the
livelihood of the poor. It is also clear such damage can be minimized if
industry works within a strict, vigilant and credible regulatory system.
In other words, industrial growth need not necessarily be destructive of
the environment. But this challenge of the balance can be managed only
if policy is public, regulatory institutions are made and kept strong,
and democracy deepened.
So what do we find behind this scam to see the ‘nature’ of the
cover-up? Satyam did everything by the best of global books and
principles. It had process-loaded internal systems and an army of
internal auditors. It had hired one of the world’s most reputable
external auditors, M/s Pricewaterhouse Coopers, to check and validate
its accounts. It had highly credible independent directors on its board,
to ensure best practice. Not surprisingly, the company received the
prestigious Golden Peacock Award in 2002, from a jury made up of the
world’s big and famous, for its work - believe it - on corporate
governance. In other words, it polished its image, in a world of
make-believers, to perfection.
This is the problem in today’s dominant system. It is about form, not
substance. It can work its shine because the agencies responsible for
credible action have been degraded, debilitated. It has madly backed the
expensive business of public relations, making the media, democracy’s
We need to crack this problem. Let us be clear, companies today hire the
biggest auditing companies and hi - fi consultants not because they want
the work done diligently but because the latter have the public image
and the public-relations wherewithal.
A few years ago, my colleagues, investigating the sale of carbon credits
under the Clean Development Mechanism (CDM), found the auditing agencies
hired to certify the project were indulging in nothing less than fraud.
They were simply cut - pasting parts of different reports, dealing with
different projects, to get their clients certified. The auditor, in this
case, happened to be the same Satyam - soiled agency, Price waterhouse
Coopers; equally acclaimed Ernst and Young were also involved.
When we published our findings, we indicted the CDM process more than
the auditors. The international community, in this case, has designed a
process in which the project proponent hires a consultant to do the
project design and the same company hires a validator agency to certify
the project report its own consultant prepares. The Bonn, Germany -
based CDM board authorizes a select number of validators it believes are
world class. It can ‘trust’ these processed reports, all of which
are paid for by the project proponent. In addition, the board has made
convoluted rules to determine which project can qualify its criterion
for ‘additionality’ - projects that are more than business as usual
in its books.
The obfuscation in the procedure makes it important to hire a big fish
certifier who knows the ropes. Result: a flourishing business for
creative carbon accountants. This adds to the transaction cost of
getting CDM projects cleared - the price is so high it excludes large
numbers of smaller companies and communities, who should actually be
doing projects to mitigate greenhouse gas emissions. The system is made
for complicity, profit and big business. But the form is perfect; who
cares about the substance.
The national system for environmental impact assessment (EIA), to
provide another example, is no different. There have been cases,
reported in this magazine again and again, of consultant companies
preparing fraudulent documents. But not a single agency has been
publicly blacklisted. Not one project proponent has been sent to prison
for fudging books to get clearance.
What encourages this system, fundamentally, is the lack of scrutiny.
What emboldens it, forever, is the lack of penalty for misdemeanour. But
this is not an accident. This is the result of deliberately changing the
nature of India’s democracy, by weakening institutions responsible for
oversight and regulation.
Perhaps this is about a changing phraseology; describing the democracy
that is being spawned in India. There exists ‘banana republics’; but
now there we need to add to our lexicon, the ‘Public Relations (PR)
democracy’ - where problems merely require the right kind of gloss.
Satyam is a crack in this system. But are we willing to prise it open?
When will we be?
Narain has been with the Centre for
Science and Environment from 1982. She is currently the director of the
Centre and the director of the Society for Environmental Communications
and publisher of the fortnightly magazine, Down
CENTRE FOR SCIENCE AND ENVIRONMENT]