Survey says very few take legal action against corrupt employees as India stands 95th among 183 countries in corruption perception index.
If you think that post the 2009 Satyam scandal, Pricewaterhouse Coopers (PwC), the auditors of the firm, has lost clients, you are mistaken.
In fact, PwC added four more clients to its long list and this speaks volumes about corporate India’s stand against corruption.
As per the 2011 Corruption Perception Index (CPI) released by Transparency International, India is ranked 95th among 183 countries.
It scored less than in previous years — 3.1 on a scale of 0 to 10 where 0 stood for highly corrupt.
In the survey carried out by Ernst and Young titled ‘Fraud and corporate governance — changing paradigm in India’, at least 62% of companies said they relied on whistleblowers to detect theft and fraud.
This means even in cases where fraud has been detected, it has been more accidental than methodical.
A small percentage of firms said they take legal action against employee responsible for committing fraud. However, there is a large section that still shies away from taking any disciplinary action against employees responsible for fraud.
Lack of resolve
R Narayanaswamy, professor, finance and control, IIM-B, said but for a few, many companies have not taken a strong stand against fraud.
For instance, after the 2G scam, Reliance Communications till date has not bothered to mention even a single line on its annual report about the company’s legal stand. “Being a listed company, this is the least it could have done. It did not bother to explain anything to the public,” he said.
Narayanaswamy, who is working on a paper called ‘Corporate governance in India’, said he was surprised by the way the stock market reacted after the Satyam scandal. “It was in total contrast to what would have happened in the US. The companies audited by PwC did not experience any stock price fall despite the audit firm coming under the lens. However, when Enron, the natural gas pipeline company in the US, got involved in a scandal, its auditor lost big time in the market,” he said.
Companies shy away for fear of bad publicity, said Arpinder Singh, partner and national director, fraud investigation & dispute services, Ernst & Young. “When news gets published in the media, it’s the company which earns a bad name.
And more often than not, firms get dragged into the whole controversy. Hence, they prefer to stay out of the legal route,” added Singh.
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