Impact of Anna's movement on India Inc

Tue, 11 Oct Pre-Open

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Recently, India's anti-corruption crusade led by Anna Hazare received a huge nationwide response. The Lokpal Bill proposed by Anna Hazare has already had huge political ramifications. However, it appears that the movement may also have some unintended outcomes for India Inc. More importantly for companies that are dependent on government for their businesses.

After the recent mass movement, whistle-blowing could gain prominence amongst employees who are privy to illegal confidential information. While earlier they were a bit hesitant in voicing their opinion, the Anna movement may have re-instilled their faith in the system. These whistle-blowers could affect the business prospects seriously as new skeletons can get uprooted from the cupboard soon.

Secondly, corporate governance practices are likely to gain further importance. Companies with strong governance standards have always garnered a premium as compared to the ones with opaque practices. And in such an environment the importance on transparency has increased considerably. If not, the fund raising plans of the corporates may run into trouble impacting their long term growth prospects. Thus, the importance of disclosure standards is bound to increase amongst the corporates after the anti-corruption movement.

Over time, corporates may be lured to shift their focus from government businesses due to heightened political and bureaucratic interferences. The recent policy paralysis has also increased the risk perception towards businesses with government involvement. Infrastructure and mining are classic examples where the businesses have been suffering due to policy inaction. Unless the decision making process improves from the government side corporate interest in government oriented businesses would continue to wane.

Political ownership in businesses (can lead to a probe on disproportionate assets) is likely to reduce over time as it is easily traceable unlike other asset classes like real estate. Although the business ownership is camouflaged by creating layers of fictitious companies any significant probe into the matter can reveal the true ownership structure. This may jeopardize political aspirations of the parties. Hence, one can expect the political ownership in corporate entities to come down gradually.

It can be said that while Anna's movement was political in nature it did have an impact for corporate India by laying down a new foundation of ethics and corporate governance. Although it was by fear and not by choice.